1933 Act Registration No. 333-51233
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [X] Post-Effective
Amendment No. Amendment No. 1
EVERGREEN MONEY MARKET TRUST
EVERGREEN MONEY MARKET FUND
EVERGREEN MUNICIPAL MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
[Exact Name of Registrant as Specified in Charter]
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)
Michael H. Koonce, Esq.
Keystone Investment Management Company
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)
Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective
<PAGE>
X immediately on filing pursuant to paragraph(b)
___ on ____ pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on __ pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(1)
___ on ____ pursuant to paragraph (a)(2) of Rule 485
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
EVERGREEN MONEY MARKET TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
1. Beginning of Registration Cross Reference Sheet; Cover
Statement and Outside Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Comparison of Fees and
Risk Factors Expenses; Summary; Comparison
of Investment Objectives and
Policies; Risks
4. Information About the Summary; Reasons for the
Transaction Reorganization; Comparative
Information on Shareholders'
Rights; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary; Risks;
Registrant Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary; Risks;
Company Being Acquired Comparison of Investment
Objective and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
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<PAGE>
7. Voting Information
Cover Page; Summary; Voting
Information Concerning the
Meeting
8. Interest of Certain Financial Statements and
Persons and Experts Experts; Legal Matters
9. Additional Information Inapplicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information Statement of Additional
About the Registrant Information of Evergreen Money
Market Trust dated June 1,
1998
13. Additional Information Statement of Additional
about the Company Being Information of CoreFunds, Inc.
Acquired dated November 1, 1997
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<PAGE>
14. Financial Statements
Financial Statements
dated January 31,
1998 of Evergreen
Money Market Fund,
Evergreen Municipal
Money Market Fund and
Evergreen Treasury
Money Market Fund;
Financial Statements
dated June 30, 1997
of CoreFunds, Inc.'s
Cash Reserve,
Treasury Reserve and
Tax-Free Reserve;
Financial Statements
dated December 31,
1997 for Cash
Reserve, Treasury
Reserve and Tax-Free
Reserve (unaudited);
Pro forma financial
statements
Item of Part C of Form N-14
Incorporated by Reference to
15. Indemnification Part A Caption - "Comparative
Information on Shareholders'
Rights - Liability and
Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
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<PAGE>
LOGO
COREFUNDS, INC.
CASH RESERVE
TREASURY RESERVE
TAX-EXEMPT RESERVE
530 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
June 1, 1998
Dear Shareholder,
As a result of the Merger of CoreStates Financial Corp with and into a
wholly-owned subsidiary of First Union Corporation effective April 30, 1998, I
am writing to shareholders of Cash Reserve, Treasury Reserve and Tax-Exempt
Reserve (the "Funds"), each a series of CoreFunds, Inc., to inform you of a
Special Shareholders' meeting to be held on July 17, 1998. Before that meeting,
I would like your vote on the important issues affecting your Fund as described
in the attached Prospectus/Proxy Statement.
The Prospectus/Proxy Statement includes two proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Cash Reserve, Treasury Reserve
and Tax-Free Reserve would be acquired by Evergreen Money Market Fund, Evergreen
Treasury Money Market Fund and Evergreen Municipal Money Market Fund,
respectively (each an "Acquiring Evergreen Fund") in exchange for either Class
A, Class B or Class Y shares of the Acquiring Evergreen Fund and the assumption
by the Acquiring Evergreen Fund of the identified liabilities of each Fund. You
will receive shares of the Acquiring Evergreen Fund having an aggregate net
asset value equal to the aggregate net asset value of your Fund shares. Details
about each Acquiring Evergreen Fund's investment objective, portfolio management
team, performance, etc. are contained in the attached Prospectus/Proxy
Statement. For federal income tax purposes, the transaction is a non-taxable
event for shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between your Fund and CoreStates Investment Advisers, Inc.,
your current investment adviser. It is anticipated that the Interim Investment
Advisory Agreement will be in effect from April 30, 1998, to the date the
reorganization is consummated (Scheduled for July 27, 1998).
Information relating to the Interim Investment Advisory Agreement is contained
in the attached Prospectus/Proxy Statement.
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<PAGE>
The Board of Directors has approved the proposals and recommends that you vote
FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to familiarize yourself with
the proposals. If you attend the meeting, you may vote your shares in person. If
you do not expect to attend the meeting, either complete, date, sign and return
the enclosed proxy card in the enclosed postage paid envelope or vote by calling
toll-free 1-800-733-8481 24 hours a day. Instructions on how to complete the
proxy card or vote by telephone are included immediately after the Notice of
Special Meeting.
If you have any questions about the proxy, please call our proxy solicitor,
Shareholder Communications Corporation at 800-733-8481 ext. 468. You may also
FAX your completed and signed proxy card to 800-733-1885. If we do not receive
your completed proxy card or your telephone vote after several weeks, you may be
contacted by Shareholder Communications Corporation, who will remind you to vote
your shares.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
Kevin P. Robins
Vice President
CoreFunds, Inc.
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<PAGE>
COREFUNDS, INC.
CASH RESERVE
TREASURY RESERVE
TAX-FREE RESERVE
530 EAST SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 17, 1998
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Cash Reserve, Treasury Reserve, Tax-Free Reserve (the "Funds"),
each a series of CoreFunds, Inc., will be held at the offices of the Evergreen
Funds, 26th Floor, 200 Berkeley Street, Boston, Massachusetts 02116, on July 17,
1998 at 2:00 p.m. for the following purposes:
1. To consider and act upon, for each Fund, the Agreement and Plan of
Reorganization (the "Plan") dated as of April 15, 1998, providing, as
applicable, for the acquisition of all of the assets of the Cash Reserve,
Treasury Reserve and Tax-Free Reserve by Evergreen Money Market Fund, Evergreen
Treasury Money Market Fund and Evergreen Municipal Money Market Fund,
respectively, each a series of Evergreen Money Market Trust, (each an "Acquiring
Evergreen Fund") in exchange for shares of its respective Acquiring Evergreen
Fund and the assumption by its respective Acquiring Evergreen Fund of the
identified liabilities of the Fund. Each Plan also provides for distribution of
the shares of the Acquiring Evergreen Fund to shareholders of the Fund in
liquidation and subsequent termination of the Fund. A vote in favor of the Plan
is a vote in favor of the liquidation and dissolution of the Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the Funds and CoreStates Investment Advisers, Inc.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
On behalf of the Funds, the Directors of CoreFunds, Inc. have fixed the
close of business on May 29, 1998 as the record date for the determination of
shareholders of the Funds entitled to notice of and to vote at the Meeting or
any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED WITHOUT DELAY TO SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors
James W. Jennings
Secretary
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<PAGE>
June 1, 1998
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<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears
in the Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
Registration on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual
signing the proxy card should be indicated unless it is reflected in
the form of Registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor
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<PAGE>
INSTRUCTIONS FOR TELEPHONE VOTING
To vote your proxy by telephone follow the four easy steps below. Or if you
prefer you may send back your signed proxy ballot in the postage paid envelope
provided.
1. Read the accompanying proxy information and ballot.
2. Identify the twelve-digit "CONTROL NO." in the middle portion of your ballot
on the left hand side. This control number is the key to casting your vote over
the telephone.
3. Dial 1-800-733-8481 ext. 468.
4. Follow the simple instructions.
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<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JUNE 1, 1998
Acquisition of Assets of
CASH RESERVE
TREASURY RESERVE
and
TAX-FREE RESERVE
each a series of
CoreFunds, Inc.
530 East Swedesford Road
Wayne, Pennsylvania 19087
By and in Exchange for Shares of
EVERGREEN MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
and
EVERGREEN MUNICIPAL MONEY MARKET FUND
each a series of
Evergreen Money Market Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
Cash Reserve, Tax-Free Reserve and Treasury Reserve (each a "CoreFund" and,
collectively, the "CoreFunds") in connection with proposed Agreements and Plans
of Reorganization (each a "Plan" and collectively, the "Plans") to be submitted
to shareholders of the CoreFunds for consideration at a Special Meeting of
Shareholders to be held on July 17, 1998 at 2:00 p.m. at the offices of the
Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston, Massachusetts, 02116,
and any adjournments thereof (the "Meeting"). Each Plan provides for all of the
assets of the CoreFunds to be acquired by the Evergreen Fund which it most
closely resembles in investment objective and policy in exchange for shares of
that Evergreen Fund and the assumption by that Evergreen Fund of the identified
liabilities of the CoreFund (hereinafter referred to individually as the
"Reorganization" and collectively, the "Reorganizations"). The Evergreen Funds
which most closely resemble the CoreFunds are as follows:
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<PAGE>
Evergreen Money Market CoreFunds Cash Reserve
Fund
Evergreen Municipal Money CoreFunds Tax-Free
Market Fund Reserve
Evergreen Treasury Money CoreFunds Treasury
Market Fund Reserve
Such Evergreen Funds are hereinafter referred to collectively as the "Evergreen
Money Funds." Each of the Evergreen Money Funds and the CoreFunds are sometimes
hereinafter referred to individually as a "Fund," and collectively they are
referred to as the "Funds."
Following each Reorganization, shares of the corresponding Evergreen
Money Fund will be distributed to shareholders in liquidation of each respective
CoreFund and each CoreFund will be terminated. Holders of Class B shares of
CoreFunds Cash Reserve will receive Class B shares of Evergreen Money Market
Fund. Holders of Class C shares of each CoreFund will receive Class A shares of
the corresponding Evergreen Money Fund, and holders of Class Y shares of each
CoreFund will receive Class Y shares of the corresponding Evergreen Money Fund.
Each such class of shares of each Evergreen Money Fund has substantially similar
Rule 12b-1 distribution-related fees, if any, as the shares of the respective
class of the corresponding CoreFund. In connection with Class A and Class Y
shares of each Evergreen Money Fund received by holders of Class C and Class Y
shares, respectively, of each CoreFund, no sales charges are imposed. In
addition, no contingent deferred sales charge ("CDSC") will be imposed on the
Class B shares of an Evergreen Money Fund received by holders of Class B shares
of a CoreFund in the Reorganization. As a result of each proposed
Reorganization, a shareholder of a CoreFund will receive that number of full and
fractional shares of the corresponding Evergreen Money Fund that have an
aggregate net asset value equal to the aggregate net asset value of such
shareholder's shares of the CoreFund. Each Reorganization is being structured as
a tax-free reorganization for federal income tax purposes.
Each Evergreen Money Fund is a separate series of Evergreen Money
Market Trust, an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The investment
objectives of the Evergreen Money Funds are:
Evergreen Money Market Fund seeks as high a level of current income as
is consistent with preserving capital and providing liquidity.
Evergreen Municipal Money Market Fund seeks as high a level of current
income exempt from federal income tax as is consistent with preserving
capital and providing liquidity.
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<PAGE>
Evergreen Treasury Money Market Fund seeks stability of principal while
earning current income.
The investment objective of each CoreFund is substantially similar to the
investment objective of its corresponding Evergreen Money Fund:
Cash Reserve seeks as high a level of current income as is consistent
with liquidity and relative stability of principal.
Tax-Free Reserve seeks as high a level of current interest income that
is exempt from federal income tax as is consistent with liquidity and
relative stability of principal.
Treasury Reserve seeks current interest income, liquidity and safety of
principal.
Each Fund invests in a diversified portfolio of money market instruments, and
each Fund is governed by and complies with rules published by the Securities and
Exchange Commission ("SEC") which impose certain quality, maturity and
diversification standards. Each Fund is managed to maintain a stable net asset
value of $1.00 per share.
Shareholders of each CoreFund are also being asked to approve an
Interim Investment Advisory Agreement (the "Interim Advisory Agreement") with
CoreStates Investment Advisers, Inc.("CSIA"), a subsidiary of First Union
Corporation ("First Union"), with the same terms and fees as the previous
advisory agreement between that CoreFund and CSIA. Each Interim Advisory
Agreement will be in effect for the period of time between April 30, 1998, the
date on which the merger of CoreStates Financial Corp with and into a
wholly-owned subsidiary of First Union was consummated, and the date of the
Reorganization (scheduled for on or about July 27, 1998).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Evergreen Money Funds
that shareholders of the CoreFunds should know before voting on the
Reorganizations. Certain relevant documents listed below, which have been filed
with the SEC, are incorporated in whole or in part by reference. A Statement of
Additional Information dated June 1, 1998, relating to this Prospectus/Proxy
Statement and the Reorganizations which includes the financial statements of
each of the Evergreen Money Funds dated August 31, 1997 and January 31, 1998,
and the financial statements of each of the CoreFunds dated June 30, 1997 and
December 31, 1997, has been filed with the SEC and is incorporated by reference
in its entirety into this Prospectus/Proxy Statement. A copy of such Statement
of Additional Information is available upon request and without charge by
writing to Evergreen Money Market Trust at 200 Berkeley Street, Boston,
Massachusetts 02116 or by calling toll-free 1-800-343-2898.
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<PAGE>
The two Prospectuses of the Evergreen Money Funds dated June 1, 1998
and the Annual Report of each Evergreen Money Fund for the five month period
ended January 31, 1998 are incorporated herein by reference in their entirety,
insofar as they relate to the Evergreen Money Funds only, and not to any other
fund described therein. The Prospectuses, which pertain (i) to Class A, Class B
and Class C shares, and (ii) to Class Y shares, differ only insofar as they
describe the separate distribution and shareholder servicing arrangements
applicable to the classes. Shareholders of each CoreFund will receive, with this
Prospectus/Proxy Statement, copies of the Prospectus pertaining to the class of
shares of the Evergreen Money Fund that they will receive as a result of the
consummation of the Reorganization. Additional information about the Evergreen
Money Funds is contained in the Statement of Additional Information of the same
date which has been filed with the SEC and which is available upon request and
without charge by writing to or calling the Evergreen Money Funds at the address
or telephone number listed in the preceding paragraph.
The two Prospectuses of the CoreFunds which pertain (i) to Class B and
Class C shares (Individual shares) and (ii) to Class Y shares (Institutional
shares) dated November 1, 1997, insofar as they relate to the CoreFunds only,
and not to any other funds described therein, are incorporated herein in their
entirety by reference. Copies of the Prospectuses, the related Statement of
Additional Information dated the same date, the Annual Report for the fiscal
year ended June 30, 1997 and the Semi-Annual Report for the six month period
ended December 31, 1997, are available upon request without charge by writing to
CoreFunds, Inc. at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling toll-free 1-800-355-2673.
Included as Exhibits A and B to this Prospectus/Proxy Statement are a
copy of the form of Plan and the Interim Advisory Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits
or obligations of any bank and are not insured or otherwise protected by the
U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency and involve investment risk, including
possible loss of
capital.
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<PAGE>
TABLE OF CONTENTS
Page
COMPARISON OF FEES AND EXPENSES.......................................8
SUMMARY ............................................................16
Proposed Plans of Reorganization .....16
Tax Consequences .....18
Investment Objectives and Policies of the Funds .....18
Comparative Performance Information for each Fund .....20
Management of the Funds .....22
Investment Advisers .....23
Administrators .....24
Distribution of Shares .....24
Purchase and Redemption Procedures .....27
Exchange Privileges .....27
Dividend Policy .....28
Risks .....29
REASONS FOR THE REORGANIZATIONS......................................31
Agreements and Plans of Reorganization .....34
Federal Income Tax Consequences .....36
Pro-forma Capitalization .....38
Shareholder Information .....42
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.....................45
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS......................49
Forms of Organization .....49
Capitalization .....50
Shareholder Liability .....50
Shareholder Meetings and Voting Rights .....51
Liquidation or Dissolution .....52
Liability and Indemnification of Trustees .....52
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT.................53
Introduction .....53
Comparison of the Interim Advisory Agreement
and the Previous Advisory Agreement .....54
Information About the CoreFunds' Investment Adviser .....55
ADDITIONAL INFORMATION...............................................56
VOTING INFORMATION CONCERNING THE MEETING............................57
FINANCIAL STATEMENTS AND EXPERTS.....................................60
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<PAGE>
LEGAL MATTERS........................................................61
OTHER BUSINESS.......................................................61
APPENDIX A...........................................................62
EXHIBIT A...........................................................A-1
EXHIBIT B...........................................................B-1
EXHIBIT C...........................................................C-1
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<PAGE>
COMPARISON OF FEES AND EXPENSES
The amounts for Class Y, Class A and Class B shares, as applicable, of
the Evergreen Money Funds set forth in the following tables and in the examples
are based on the expenses of each Evergreen Money Fund for the five month period
ended January 31, 1998. The amounts for Class Y, Class B and Class C shares, as
applicable, of the CoreFunds set forth in the following tables and in the
examples are based on the estimated expenses for each CoreFund for the fiscal
year ending June 30, 1998 as set forth in the current Prospectuses of the
CoreFunds. The pro forma amounts for Class Y, Class A and Class B shares of the
Evergreen Money Funds are based on what the combined expenses would have been
for each such Fund for the five month period ended January 31, 1998. All amounts
are adjusted for voluntary expense waivers.
The following tables show the shareholder transaction expenses and
annual fund operating expenses associated with an investment in the Class Y,
Class A and Class B shares, as applicable, of each Evergreen Money Fund, and, as
applicable, in the Class Y, Class B and Class C shares of each corresponding
CoreFund. Following each direct comparison is a table which shows the
shareholder transaction expenses and annual fund operating expenses for the
Evergreen Money Fund on a pro forma basis assuming consummation of the
Reorganization.
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<PAGE>
Comparison of Class Y, Class A and Class B Shares of Evergreen Money Market Fund
With Class Y, Class B and Class C Shares of CoreFunds Cash Reserve
<TABLE>
<CAPTION>
Evergreen Money Market CoreFunds Cash Reserve
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses Class Y Class A Class B Class Y Class B Class C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on None None None None None None
Purchases (as a percentage of
offering price)
Maximum Sales Load Imposed on None None None None None None
Reinvested Dividends (as a
percentage of offering price)
Contingent Deferred Sales Charge None None 5.00% in the None None(1) None
(as a percentage of original first year,
purchase price or redemption declining to
proceeds, whichever is lower) 1.00% in the
sixth year and
0.00%
thereafter
Annual Fund Operating Expenses
(as a percentage of average daily
net assets)
Management Fee (After Waiver) 0.46% 0.46% 0.46% 0.30% 0.30% 0.30%
(2)
12b-1 Fees (3) None 0.30% 1.00% None 1.00% 0.25%
Other Expenses (After Waiver) 0.13% 0.13% 0.13% 0.20% 0.20% 0.20%
----- ----- ----- ----- ----- -----
(4)
Annual Fund Operating Expenses 0.59% 0.89% 1.59% 0.50% 1.50% 0.75%
===== ===== ===== ===== ===== =====
(5)
</TABLE>
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<PAGE>
Evergreen Money Market Fund Pro Forma
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shareholder Transaction Expenses Class Y Class A Class B
Maximum Sales Load Imposed on Purchases (as a None None None
percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None
Dividends (as a percentage of offering price)
Contingent Deferred Sales Charge (as a percentage of None None 5.00% in the
original purchase price or redemption proceeds, first year,
whichever is lower) declining to
1.00% in the
sixth year and
0.00%
thereafter
Annual Fund Operating Expenses (as a percentage of
average daily net assets)
Management Fee 0.46% 0.46% 0.46%
12b-1 Fees (3) None 0.30% 1.00%
Other Expenses 0.11% 0.11% 0.11%
----- ----- -----
Annual Fund Operating Expenses (6) 0.57% 0.87% 1.57%
===== ===== =====
</TABLE>
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(1) No CDSC is imposed, except for Class B shares of CoreFunds Cash Reserve
which were received in an exchange from another CoreFunds Fund having a
CDSC. In such a case, the CDSC would be 5.00% in the first year,
declining to 1.00% in the fifth year and 0.00% thereafter.
(2) Absent voluntary waivers by its investment adviser, the Management Fee
for CoreFunds Cash Reserve would have been 0.40% of average net assets.
(3) Class A shares of Evergreen Money Market Fund can pay up to 0.75% of
average daily net assets as a 12b-1 fee. For the foreseeable future,
the Class A 12b-1 fees will be limited to 0.30% of average daily net
assets.
(4) Absent voluntary waivers by the administrator of the CoreFunds Cash
Reserve, its "Other Expenses" would have been 0.29% of average net
assets.
(5) Absent the waivers described above, the Annual Fund Operating Expenses
for CoreFunds Cash Reserve Class Y, Class B and Class C shares would
have been 0.69%, 1.69% and 0.94%, respectively, for the year ending
June 30, 1998.
(6) The investment adviser of Evergreen Money Market Fund has undertaken to
limit the Fund's Annual Operating Expenses for a period of at least two
years to 0.69%, 0.94% and 1.69% for Class Y, Class A and Class B
shares, respectively.
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<PAGE>
Comparison of Class Y and Class A Shares of Evergreen Municipal
Money Market Fund with Class Y and Class C shares of CoreFunds Tax-Free Reserve
<TABLE>
<CAPTION>
Evergreen Municipal CoreFunds Tax-Free
Money Market Reserve
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses Class Y Class A Class Y Class C
------- ------- ------- -------
Maximum Sales Load Imposed on Purchases (as a % of
offering price) None None None None
Maximum Sales Load Imposed on Reinvested Dividends (as of
% of offering price) None None None None
Contingent Deferred Sales Charge (as a % of original purchase
price or redemption proceeds, whichever is lower) None None None None
Annual Fund Operating Expenses (as a percentage of average
daily net assets)
Management Fee (After Waiver) (1) 0.50% 0.50% 0.30% 0.30%
12b-1 Fees. (2) None 0.30% None 0.25%
Other Expenses (After Waiver) (3) 0.08% 0.08% 0.20% 0.20%
----- ----- ----- -----
Annual Fund Operating Expenses (4) 0.58% 0.88% 0.50% 0.75%
===== ===== ===== =====
</TABLE>
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<PAGE>
Evergreen Municipal Money Market Fund Pro Forma
<TABLE>
<CAPTION>
<S> <C> <C>
Shareholder Transaction Expenses Class Y Class A
Maximum Sales Load Imposed on Purchases (as a percentage of None None
offering price)
Maximum Sales Load Imposed on Reinvested Dividends (as a None None
percentage of offering price)
Contingent Deferred Sales Charge (as a percentage of original None None
purchase price or redemption proceeds, whichever is lower)
Annual Fund Operating Expenses (as a percentage of average daily
net assets)
Management Fee 0.49% 0.49%
12b-1 Fees (2) None 0.30%
Other Expenses 0.08% 0.08%
----- -----
Annual Fund Operating Expenses (4) 0.57% 0.87%
===== =====
- --------------------------
</TABLE>
(1) Absent voluntary waivers by its investment adviser, the Management Fee
for CoreFunds Tax-Free Reserve would have been 0.40% of average net
assets.
(2) Class A shares of Evergreen Municipal Money Market Fund may pay up to
0.75% of average daily net assets as a 12b-1 fee. For the foreseeable
future, the Class A 12b-1 fees will be limited to 0.30% of average
daily net assets.
(3) Absent voluntary waivers by the administrator of CoreFunds Tax-Free
Reserve its "Other Expenses" would have been 0.29% of average net
assets.
(4) Absent the waivers described above, the Annual Fund Operating Expenses for
CoreFunds Tax-Free Reserve Class Y shares would have been 0.69% and for Class C
shares 0.94% for the year ending June 30, 1998. The investment adviser of
Evergreen Municipal Money Market Fund has voluntarily undertaken to reimburse
the Fund to the extent that its aggregate operating expenses exceed 1.00% of the
average net assets for any fiscal year. The investment adviser may cease these
voluntary waivers or reimbursements at any time. In addition, the investment
adviser of Evergreen Municipal Money Market Fund has undertaken to limit the
Fund's Annual Operating Expenses for a period of at least two years to 0.69% and
0.94% for Class Y and Class A shares, respectively.
-13-
<PAGE>
Comparison of Class Y and Class A Shares of
Evergreen Treasury Money Market Fund With
Class Y and Class C Shares of CoreFunds Treasury Reserve
<TABLE>
<CAPTION>
Evergreen Treasury Money
Market CoreFunds Treasury Reserve
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses Class Y Class A Class Y Class C
------- ------- ------- -------
Maximum Sales Load Imposed on None None None None
Purchases (as a percentage of offering
price)
Maximum Sales Load Imposed on None None None None
Reinvested Dividends (as a percentage of
offering price)
Contingent Deferred Sales Charge (as a None None None None
percentage of original purchase price or
redemption proceeds, whichever is lower)
Annual Fund Operating Expenses (as a
percentage of average daily net assets)
Management Fee (After Waiver) (1) 0.35% 0.35% 0.30% 0.30%
12b-1 Fees (2) None 0.30% None 0.25%
Other Expenses (After Waiver) (3) 0.08% 0.08% 0.21% 0.21%
----- ----- ----- -----
Annual Fund Operating Expenses (4) 0.43% 0.73% 0.51% 0.76%
===== ===== ===== =====
</TABLE>
-14-
<PAGE>
Evergreen Treasury Money Market Fund Pro Forma
<TABLE>
<CAPTION>
<S> <C> <C>
Shareholder Transaction Expenses
Class Y Class A
Maximum Sales Load Imposed on Purchases (as a None None
percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends (as None None
a percentage of offering price)
Contingent Deferred Sales Charge (as a percentage of None None
original purchase price or redemption proceeds, whichever is
lower)
Annual Fund Operating Expenses (as a percentage of
average daily net assets)
Management Fee 0.35% 0.35%
12b-1 Fees (2) None 0.30%
Other Expenses 0.08% 0.08%
----- -----
Annual Fund Operating Expenses (4) 0.43% 0.73%
====== =======
</TABLE>
- -----------------------------
(1) Absent voluntary waivers by its investment adviser, the Management Fee
for CoreFunds Treasury Reserve would have been 0.40% of average net
assets.
(2) Class A shares of Evergreen Treasury Money Market Fund may pay up to
0.75% of average daily net assets as a 12b-1 fee. For the foreseeable
future, the Class A 12b-1 fees will be limited to 0.30% of average
daily net assets.
(3) Absent voluntary waivers by the administrator of CoreFunds Treasury
Reserve, its "Other Expenses" would be 0.30% of average net assets.
(4) Absent the waivers described above, the Annual Fund Operating Expenses
for CoreFunds Treasury Reserve Class C shares would have been 0.95%,
and for Class Y shares 0.70% for the year ending June 30, 1998. The
investment adviser of Evergreen Treasury Money Market Fund has
voluntarily undertaken to reimburse the Fund for its expenses to the
extent that the Fund's annual operating expenses exceed 1.00% of the
average net assets for any fiscal year. The investment adviser may
cease these voluntary waivers or reimbursements at any time. In
addition, the investment adviser of Evergreen Treasury Money Market
Fund has undertaken to limit the Fund's Annual Operating Expenses for a
period of at least two years to 0.70% and 0.95% for Class Y and Class A
shares, respectively.
Examples. The following tables show for each Evergreen Money Fund and its
corresponding CoreFund, and for each Evergreen Money Fund pro forma, assuming
consummation of the
-15-
<PAGE>
Reorganizations, examples of the cumulative effect of shareholder transaction
expenses and annual fund operating expenses indicated above on a $1,000
investment in each class of shares for the periods specified, assuming (i) a 5%
annual return and (ii) redemption at the end of such period. In the case of
Evergreen Money Market Fund pro forma, the examples do not reflect the
imposition of a CDSC since Class B shares of Evergreen Money Market Fund
received in the Reorganization by shareholders of CoreFunds Cash Reserve will
not be subject to a CDSC.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Year Three Five Ten Years
Years Years
Evergreen Money Market Fund
Class Y $6 $19 $33 $74
Class A $9 $28 $49 $110
Class B (Assuming no redemption $16 $50 $87 $161
at end of period)
Class B (Assuming redemption at end of $66 $80 $107 $161
period)
CoreFunds Cash Reserve
Class Y $5 $16 $28 $63
Class B $15 $47 $82 $179
Class C $8 $24 $42 $93
Evergreen Money Market Fund Pro Forma
Class Y $6 $18 $32 $71
Class A $9 $28 $48 $107
Class B $16 $50 $86 $159
Evergreen Municipal Money Market Fund
Class Y $6 $19 $32 $73
Class A $9 $28 $49 $108
CoreFunds Tax-Free Reserve
Class Y $5 $16 $28 $63
Class C $8 $24 $42 $93
Evergreen Municipal Money Market Fund
Pro Forma
Class Y $6 $18 $32 $71
Class A $9 $28 $48 $107
Evergreen Treasury Money Market Fund
Class Y $4 $14 $24 $54
Class A $7 $23 $41 $91
CoreFunds Treasury Reserve
Class Y $5 $16 $29 $64
Class C $8 $24 $42 $94
Evergreen Treasury Money Market Fund
Pro Forma
Class Y $4 $14 $24 $54
Class A $7 $23 $41 $91
</TABLE>
The purpose of the foregoing examples is to assist CoreFunds
shareholders in understanding the various costs and expenses that an investor in
the Evergreen Money Funds as a result of the Reorganizations would bear directly
and indirectly, as compared with the various direct and indirect
-16-
<PAGE>
expenses currently borne by a shareholder in the CoreFunds. These examples
should not be considered a representation of past or future expenses or annual
return. Actual expenses may be greater or less than those shown.
-17-
<PAGE>
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Prospectuses of the Evergreen Money Funds dated June 1, 1998 and the
Prospectuses of the CoreFunds dated November 1, 1997 (which are incorporated
herein by reference), the Plans and the Interim Advisory Agreement, the forms of
which are attached to this Prospectus/Proxy Statement as Exhibits A and B,
respectively.
Proposed Plans of Reorganization
Each Plan provides for the transfer of all of the assets of the
CoreFund in exchange for shares of the corresponding Evergreen Money Fund and
the assumption by that Evergreen Money Fund of the identified liabilities of its
corresponding CoreFund. The identified liabilities consist only of those
liabilities reflected on the CoreFund's statement of assets and liabilities
determined immediately preceding the Reorganization. Each Plan also calls for
the distribution of shares of the Evergreen Money Fund to the shareholders of
its corresponding CoreFund in liquidation of that CoreFund as part of the
Reorganization. As a result of the Reorganization, the holders of Class B, Class
C and Class Y shares of each CoreFund will become the owners of the same number
of full and fractional Class B, Class A and Class Y shares, respectively, of the
corresponding Evergreen Money Fund as they owned of the CoreFund as of the close
of business immediately prior to the Reorganization. See "Reasons for the
Reorganizations - Agreements and Plans of Reorganization."
The Directors of CoreFunds, Inc., including the Directors who are not
"interested persons," as such term is defined in the 1940 Act (the "Independent
Directors"), have concluded that the Reorganization would be in the best
interests of shareholders of each CoreFund, and that the interests of the
shareholders of each CoreFund will not be diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the Directors have
submitted the Plans for the approval of the shareholders of the CoreFunds.
THE BOARD OF DIRECTORS OF COREFUNDS, INC.
RECOMMENDS APPROVAL BY SHAREHOLDERS OF EACH COREFUND
OF THE PLAN EFFECTING THE REORGANIZATION.
The Trustees of Evergreen Money Market Trust have also approved the
Plans and, accordingly, the participation by each Evergreen Money Fund in the
Reorganizations.
Approval of the Reorganization on the part of each CoreFund will
require the affirmative vote of a majority of each CoreFund's
-18-
<PAGE>
outstanding shares, with all classes voting together as a single
class at a Meeting at which a quorum of the CoreFund's shares is
present. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, is required to constitute a
quorum at the Meeting. See "Voting Information Concerning the
Meeting."
The merger of CoreStates Financial Corp ("CoreStates Financial") with
and into a wholly-owned subsidiary of First Union (the "Merger") has been
consummated and, as a result, by law the Merger terminated the investment
advisory agreement between CSIA and each of the CoreFunds. Prior to consummation
of the Merger, each CoreFund received an order from the SEC which
permitted the implementation, without formal shareholder approval, of a new
investment advisory agreement between the Fund and CSIA for a period of not more
than 150 days (September 27, 1998) beginning on the date of the closing of the
Merger and continuing through the date the Interim Advisory Agreement is
approved by the Fund's shareholders. The Interim Advisory Agreement has the same
terms and fees as the previous investment advisory agreement between that
CoreFund and CSIA. The Reorganizations are scheduled to take place on or about
July 27, 1998.
Approval of the Interim Advisory Agreement requires the affirmative
vote of (i) 67% or more of the shares of each CoreFund present in person or by
proxy at the Meeting, if holders of more than 50% of the shares of the CoreFund
outstanding on the record date are present, in person or by proxy, or (ii) more
than 50% of the outstanding shares of the CoreFund, whichever is less. See
"Voting Information Concerning the Meeting."
If the shareholders of a CoreFund do not vote to approve the
Reorganization, the Directors will consider other possible courses of action in
the best interests of the shareholders of that CoreFund.
Tax Consequences
Prior to or at the completion of a Reorganization, each CoreFund will
have received an opinion of Sullivan & Worcester LLP that the Reorganization has
been structured so that no gain or loss will be recognized by the Fund or its
shareholders for federal income tax purposes as a result of the receipt of
shares of the corresponding Evergreen Money Fund in the Reorganization. The
holding period and aggregate tax basis of shares of the Evergreen Money Fund
that are received by a CoreFund's shareholders will be the same as the holding
period and aggregate tax basis of shares of the CoreFund previously held by such
shareholders, provided that shares of the Fund are held as capital assets. In
addition, the holding period and tax basis of the assets of a CoreFund in the
hands of the corresponding Evergreen Money Fund as a result of the
Reorganization will be the same as in the hands of the CoreFund immediately
prior to the Reorganization, and no gain or loss will be recognized by the
Evergreen Money Fund upon the receipt of the assets of the CoreFund in exchange
for shares of the Evergreen Money Fund and the assumption by that Evergreen
Money Fund of the identified liabilities.
-19-
<PAGE>
Investment Objectives and Policies of the Funds
The investment objectives and policies of each Evergreen Money Fund and
the investment objectives and policies of its corresponding CoreFund are
substantially similar:
Evergreen Money Market Fund and CoreFunds Cash Reserve
The investment objective of Evergreen Money Market Fund is to achieve
as high a level of current income as is consistent with preserving capital and
providing liquidity. The Fund invests in securities determined to present
minimal credit risk and which are, at the time of acquisition, eligible
securities (securities in the two highest short-term rating categories by a
nationally recognized statistical rating organization ("NRSRO")) under Rule 2a-7
of the Investment Company Act of 1940, as amended (the "1940 Act"). Evergreen
Money Market Fund will also comply with the diversification requirements
prescribed by Rule 2a-7.
The investment objective of CoreFunds Cash Reserve is to provide as
high a level of current interest income as is consistent with liquidity and
relative stability of principal. The Fund invests in a diversified portfolio of
money market instruments rated in the highest rating category by an NRSRO. The
Fund also adheres to the other standards of Rule 2a-7.
Evergreen Municipal Money Market Fund and CoreFunds Tax-Free Reserve
The investment objective of Evergreen Municipal Money Market Fund is to
achieve as high a level of current income exempt from federal income tax as is
consistent with preserving capital and providing liquidity. The investment
objective of CoreFunds 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. Both Funds invest substantially all of their
assets in a diversified portfolio of short-term (i.e., with remaining maturities
not exceeding 397 days) debt obligations issued by states, territories and
possessions of the United States, by the District of Columbia, and by their
political subdivisions and duly constituted authorities, the interest from which
is exempt from federal income tax. Both Funds expect to qualify to pay
exempt-interest dividends to their shareholders. Evergreen Municipal Money
Market Fund may invest without limitation in obligations subject to the federal
alternative minimum tax, while at least 80% of CoreFunds Tax-Free Reserve's
investments will not be subject to the alternative minimum tax. Both Funds may
invest up to 20% of their total assets in taxable debt instruments.
Evergreen Treasury Money Market Fund and CoreFunds Treasury Reserve
The investment objective of Evergreen Treasury Money Market Fund is to
maintain stability of principal while earning current income. The Fund will
attempt to seek income only to the extent consistent with stability of
principal. The investment objective of CoreFunds Treasury Reserve is to provide
current income, liquidity and safety of principal. Each Fund invests primarily
in short-term U.S. Treasury obligations and in obligations which are backed as
to principal and interest by the full faith and credit of the U.S. government.
Each Fund adheres to the standards of Rule 2a-7, i.e., each will not purchase
any security with a remaining maturity of more than 397 days (although
securities subject to repurchase agreements and certain other securities may
bear longer maturities), and each
-20-
<PAGE>
manages its investments so that the dollar-weighted average maturity of its
portfolio is 90 days or less.
As a matter of investment strategy, the investment adviser of Evergreen
Treasury Money Market Fund intends to maintain a dollar-weighted average
maturity for the Fund of 60 days or less. See "Comparison of Investment
Objectives and Policies" below.
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return and yield are
contained in the respective Prospectuses and Statement of Additional Information
of the Funds. The following tables set forth the current yield and the effective
yield of the Class A, Class B and Class Y shares, as applicable, of each
Evergreen Money Fund and of the Class B, Class C and Class Y shares of the
corresponding CoreFund for the 7 day period ended March 31, 1998, the total
return of the Class A, Class B and Class Y shares, as applicable, of each
Evergreen Money Fund for the one, five and ten year periods ended March 31,
1998, the total return of the Class C and Class Y shares of each corresponding
CoreFund for the one and five year periods ended March 31, 1998 and the total
return of each such Class of the Evergreen Money Funds and the CoreFunds for the
period from inception through March 31, 1998.
The calculations of total return assume the reinvestment of all dividends and
capital gains distributions on the reinvestment date and the deduction of all
recurring expenses (including sales charges) that were charged to shareholders'
accounts. Those calculations also reflect waivers of advisory fees and
reimbursements and/or waivers of expenses; without such reimbursements and/or
waivers, the average annual total returns during the periods would have been
lower.
-21-
<PAGE>
<TABLE>
<CAPTION>
Current Yield Effective Yield
7 Days Ended 7 Days Ended
March 31, 1998 March 31, 1998
-------------- --------------
<S> <C> <C>
Evergreen Money Market Fund
Class Y shares 5.21% 5.35%
Class A shares 4.91% 5.03%
Class B shares 4.21% 4.30%
CoreFunds Cash Reserve
Class Y shares 5.18% 5.31%
Class C shares 4.93% 5.05%
Class B shares 4.18% 4.26%
Evergreen Municipal Money Market Fund
Class Y shares 3.48% 3.54%
Class A shares 3.19% 3.24%
CoreFunds Tax-Free Reserve
Class Y shares 3.20% 3.25%
Class C shares 2.90% 2.94%
Evergreen Treasury Money Market Fund
Class Y shares 5.22% 5.36%
Class A shares 4.92% 5.04%
CoreFunds Treasury Reserve
Class Y shares 5.10% 5.23%
Class C shares 4.85% 4.97%
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
1 Year 5 Years 10 Years From
Ended Ended Ended Inception To
March 31, March 31, March 31, March 31, Inception
1998 1998 1998 1998 Date
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Evergreen Money Market
Fund
Class Y shares 5.35% 4.78% 5.82% 5.87% 11/2/87
Class A shares 0.04% N/A N/A 3.51%
1/3/95
Class B shares (0.70)% N/A N/A 3.48% 1/26/95
CoreFunds Cash Reserve
Class Y shares 5.30% 4.63% 5.67% 5.85% 8/16 / 85
Class B shares N/A N/A N/A 4.30% 11/18/97
Class C shares 5.04% 4.37% N/A 4.29% 1/4/93
Evergreen Municipal
Money Market Fund
Class Y shares 3.51% 3.22% N/A 4.08% 11/2/88
Class A shares (1.70)% N/A N/A 1.68% 1/5/95
CoreFunds Tax-Free
Reserve
Class Y shares 3.21% 2.86% N/A 2.97% 4/16/91
Class C shares 2.94% 2.60% N/A 2.57% 1/4/93
Evergreen Treasury Money
Market Fund
Class Y shares 5.28% 4.73% N/A 4.63% 3/6/91
Class A shares (0.01)% 3.40% N/A 3.61% 3/6/91
CoreFunds Treasury
Reserve
Class Y shares 5.14% 4.52% N/A 5.42% 11/21/88
Class C shares 4.87% 4.26% N/A 4.18% 1/4/93
</TABLE>
Important information about each of the Evergreen Money Funds is also
contained in management's discussion of each Fund's performance, attached hereto
as Exhibit C. This information also appears in the most recent Annual Report of
each Fund.
Management of the Funds
The overall management of the Evergreen Money Funds and of the
CoreFunds is the responsibility of, and is supervised by, the Board of Trustees
of Evergreen Money Market Trust and the Board of Directors of CoreFunds, Inc.,
respectively.
Investment Advisers
-23-
<PAGE>
The investment adviser to Evergreen Money Market Fund and Evergreen
Municipal Money Market Fund is Evergreen Asset Management Corp. ("Evergreen
Asset"), an affiliate of First Union National Bank ("FUNB"). Evergreen Asset and
FUNB are subsidiaries of First Union, the sixth largest bank holding company in
the United States based on total assets as of September 30, 1997. The Capital
Management Group of FUNB and its affiliates manage the Evergreen family of
mutual funds with assets of approximately $46 billion as of March 31, 1998. For
"Management of the Funds - Investment Advisers" in the Prospectuses of the
Evergreen Money Funds.
Evergreen Asset manages investments, supervises the daily business
affairs and provides administrative services for Evergreen Money Market Fund and
Evergreen Municipal Money Market Fund, subject to the authority of the Trustees.
Evergreen Asset is entitled to receive from each Fund it manages an annual fee
equal to 0.50% of that Fund's average daily net assets up to $1 billion and
0.45% of the Fund's average daily net assets in excess of $1 billion.
The investment adviser to Evergreen Treasury Money Market Fund is the
Capital Management Group of FUNB. FUNB is entitled to receive from Evergreen
Treasury Money Market Fund an annual fee equal to 0.35% of the Fund's average
daily net assets.
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company, an indirect, wholly-owned subsidiary of First Union, which provides
that Lieber & Company's research department and staff will furnish Evergreen
Asset with information, investment recommendations, advice and assistance, and
will generally be available for consultation on the portfolio of Evergreen Money
Market Fund and Evergreen Municipal Money Market Fund. Lieber & Company will be
compensated by Evergreen Asset for its services, and there is no additional
charge to Evergreen Money Market Fund or to Evergreen Municipal Money Market
Fund for the services of Lieber & Company.
CSIA serves as the investment adviser for each CoreFund. As investment
adviser, CSIA has overall responsibility for portfolio management of each
CoreFund. For its services as investment adviser, CSIA is entitled to receive a
fee at an annual rate of 0.40% of each CoreFund's average daily net assets.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Evergreen Money Funds could
be adversely affected if the computer systems used by the Funds' investment
adviser and the Funds' other service providers do not properly process and
calculate date-related
-24-
<PAGE>
information and data from and after January 1, 2000. This is commonly know as
the "Year 2000 Problem". The Funds' investment adviser is taking steps to
address the Year 2000 Problem with respect to the computer systems that it uses
and to obtain assurances that comparable steps are being taken by the Funds'
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Funds.
Administrators
Evergreen Investment Services, Inc. ("EIS"), a wholly-owned subsidiary
of FUNB, serves as administrator to Evergreen Treasury Money Market Fund. As
administrator, EIS provides facilities, equipment and personnel to the Fund and
is entitled to receive an administration fee from the Fund based on the
aggregate average daily net assets of all the mutual funds advised by FUNB and
its affiliates, calculated in accordance with the following schedule: 0.050% on
the first $7 billion, 0.035% on the next $3 billion, 0.030% on the next $5
billion, 0.020% on the next $10 billion, 0.015% on the next $5 billion and
0.010% on assets in excess of $30 billion.
Evergreen Asset provides administrative services, facilities, equipment
and personnel to Evergreen Money Market Fund and to Evergreen Municipal Money
Market Fund for no additional fee.
SEI Fund Resources ("SEI") acts as the administrator for the CoreFunds
and provides each CoreFund with certain administrative personnel and services
including certain legal and accounting services. SEI is entitled to receive a
fee from each CoreFund for such services at the annual rate of 0.25% of the
Fund's average daily net assets. SEI will continue during the term of the
Interim Advisory Agreement as each CoreFund's administrator for the same
compensation as currently received.
Distribution of Shares
Each Evergreen Money Fund has entered into a distribution agreement
with Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services,
which distributes the Fund's shares directly or through broker-dealers, banks
(including FUNB), or other financial intermediaries. Evergreen Money Market Fund
offers five classes of shares: Class A, Class B, Class C, Class K (not currently
offered) and Class Y. Evergreen Municipal Money Market Fund and Evergreen
Treasury Money Market Fund each offer two classes of shares: Class A and Class
Y. Each class has different distribution arrangements and no class bears the
distribution expenses relating to the shares of the other class. (See
"Distribution- Related and Shareholder Servicing-Related Expenses" below.)
In each proposed Reorganization, Class Y shareholders of a CoreFund
will receive Class Y shares of the corresponding Evergreen Money Fund, Class C
shareholders of each CoreFund will receive Class A shares of the corresponding
Evergreen Money Fund and Class B shareholders of CoreFunds Cash Reserve will
receive Class B shares of Evergreen Money Market Fund. Except as described in
"Distribution-Related and Shareholder Servicing-Related Expenses" below, the
Class Y, Class A and Class B shares of the Evergreen Money Funds have
substantially similar arrangements with respect to the
-25-
<PAGE>
imposition of Rule 12b-1 distribution and service fees as do the Class Y, Class
C and Class B shares of the CoreFunds. Evergreen Money Fund shares acquired by
shareholders of the CoreFunds pursuant to each proposed Reorganization will not
be subject to any initial sales charge or CDSC as a result of the
Reorganization. The CDSC applicable to Class B shares of Evergreen Money Market
Fund will be waived in connection with Class B shares of Evergreen Money Market
Fund received in the Reorganization.
The following is a summary description of charges and fees for the
Class Y, Class A and Class B shares of the Evergreen Money Funds which will be
received by shareholders of CoreFunds in the Reorganizations. More detailed
descriptions of the distribution arrangements applicable to the classes of
shares are contained in the respective Evergreen Money Fund Prospectuses and the
CoreFunds Prospectuses and in each Fund's Statement of Additional Information.
Class Y Shares. Class Y shares are sold at net asset value without any
initial or deferred sales charge and are not subject to distribution-related
fees. Class Y shares are only available to (i) all shareholders of record in one
or more of the Evergreen family of funds for which Evergreen Asset serves as
investment adviser as of December 30, 1994, (ii) certain institutional investors
and (iii) investment advisory clients of FUNB, Evergreen Asset or their
affiliates. CoreFunds shareholders who receive an Evergreen Money Fund's Class Y
shares in the Reorganization and who wish to make subsequent purchases of that
Evergreen Money Fund shares will be able to purchase Class Y shares.
Class A Shares. Class A shares are sold at net asset value without any
initial sales charge or CDSC but, as indicated below, are subject to
distribution-related fees.
Class B Shares. Class B shares are sold without an initial sales charge
but are subject to a CDSC, which ranges from 5% to 1%, if shares are redeemed
during the first six years after the month of purchase. In addition, Class B
shares are subject to distribution- related fees and shareholder
servicing-related fees as described below. Class B shares of Evergreen Money
Market Fund issued in the Reorganization will automatically convert to Class A
shares in seven years after the month of purchase. For purposes of determining
when Class B shares issued in the Reorganization to shareholders of CoreFunds
Cash Reserve will convert to Class A shares, such shares will be deemed to have
been purchased as of the date Class B shares of CoreFunds Cash Reserve were
originally purchased.
Class B shares are subject to higher distribution-related fees than the
corresponding Class A shares (until they convert to Class A shares). The higher
fees mean a higher expense ratio, so Class B shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares of the Fund.
-26-
<PAGE>
Additional information regarding the classes of shares of each
Evergreen Money Fund is included in its respective Prospectuses and Statement of
Additional Information.
Distribution-Related and Shareholder Servicing-Related Expenses. Each
Evergreen Money Fund has adopted a Rule 12b-1 plan with respect to its Class A
shares under which the Class may pay for distribution-related expenses at an
annual rate which may not exceed 0.75% of average daily net assets attributable
to the Class. Payments with respect to Class A shares are currently limited to
0.30% of average daily net assets attributable to the Class. This amount may be
increased to the full plan rate for the Fund by the Trustees without shareholder
approval.
Each CoreFund has adopted a Rule 12b-1 plan with respect to its Class C
shares under which the Class may pay for distribution- related expenses at an
annual rate of 0.25% of average daily net assets attributable to the Class. The
CoreFunds have not adopted a Rule 12b-1 plan with respect to their Class Y
shares.
Each of Evergreen Money Market Fund and CoreFunds Cash Reserve has also
adopted a 12b-1 plan with respect to its Class B shares under which the Class
may pay for distribution-related and shareholder servicing-related expenses at
an annual rate which may not exceed 1.00% of average daily net assets
attributable to the Class.
The Class B Rule 12b-1 plans of each Fund provide that, of the total
1.00% 12b-1 fees, up to 0.25% may be for payment in respect of "shareholder
services." Consistent with the requirements of Rule 12b-1 and the applicable
rules of the National Association of Securities Dealers, Inc. ("NASD"),
following the Reorganization Evergreen Money Market Fund may make
distribution-related and shareholder servicing-related payments with respect to
CoreFunds Cash Reserve shares sold prior to the Reorganization including
payments to CoreFunds Cash Reserve's former underwriter.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectuses and Statement of Additional
Information. A Rule 12b-1 plan can only be adopted with shareholder approval.
Purchase and Redemption Procedures
Information concerning applicable sales charges and
distribution-related fees is provided above. Investments in the Funds are not
insured. The minimum initial purchase requirement for Evergreen Money Funds is
$1,000. The minimum initial purchase requirement for Class B, Class C and Class
Y shares of each CoreFund is $500, $500 and $1,000,000, respectively. There is
no minimum for subsequent purchases of shares of a Fund. Each Fund provides for
telephone, mail or wire redemption of shares at net asset value as next
determined after receipt of a redemption request on each day the New York
-27-
<PAGE>
Stock Exchange ("NYSE") is open for trading. Additional information concerning
purchases and redemptions of shares, including how each Fund's net asset value
is determined, is contained in the respective Prospectuses for each Fund. Each
Fund may involuntarily redeem shareholders' accounts that have less than $1,000
(for Evergreen Money Funds) and $500 (for CoreFunds) of invested funds. All
funds invested in each Fund are invested in full and fractional shares. The
Funds reserve the right to reject any purchase order.
Exchange Privileges
The CoreFunds currently permit holders of Class B and Class C shares to
exchange such shares for the same Class of shares of another mutual fund in the
CoreFunds, Inc. portfolio. Exchanges of Class Y shares are generally not
permitted. Holders of shares of a class of the Evergreen Money Funds generally
may exchange their shares for shares of the same class of any other Evergreen
fund. CoreFund shareholders will be receiving Class Y, Class A and Class B
shares of the Evergreen Money Funds in the Reorganizations and, accordingly,
with respect to shares of the Evergreen Money Funds received by CoreFunds
shareholders in the Reorganizations, the exchange privilege is limited to the
Class Y, Class A and Class B shares, as applicable, of other Evergreen funds.
Evergreen Money Funds limit exchanges to five per calendar year and three per
calendar quarter. No CDSC will be imposed in the event Class B shares are
exchanged for the same class of another Evergreen Fund. If Class A shares are
exchanged for Class A shares of another Evergreen Fund, a sales load will be
charged. An exchange which represents an initial investment in another Evergreen
fund must amount to at least $1,000. The current exchange privileges, and the
requirements and limitations attendant thereto, are described in each Fund's
respective Prospectuses and Statement of Additional Information.
Dividend Policy
Each Fund declares dividends daily and distributes its income dividends
monthly. Distributions of any net realized gains of a Fund will be made at least
annually. Shareholders generally begin to earn dividends on the first business
day after shares are purchased unless shares were not paid for, in which case
dividends are not earned until the next business day after payment is received.
Dividends and distributions are reinvested in additional shares of the same
class of the respective Fund, or paid in cash, as a shareholder has elected. See
the respective Prospectuses of each Fund for further information concerning
dividends and distributions.
After the Reorganization, shareholders of a CoreFund who have elected
to have their dividends and/or distributions reinvested will have dividends
and/or distributions received from the Evergreen Money Fund reinvested in shares
of that Evergreen Money Fund. Shareholders of a CoreFund who have elected to
receive dividends and/or distributions in cash will receive dividends and/or
distributions in cash after the Reorganization, although they may, after the
Reorganization, elect to have such dividends and/or distributions reinvested in
additional shares of the Evergreen Money Fund whose shares they received in
exchange for their CoreFund shares.
Each Evergreen Money Fund and CoreFund has qualified and intends to
continue to qualify to be treated as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). While so qualified, so
long as each Fund distributes all
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<PAGE>
of its net investment company taxable income and any net realized gains to
shareholders, it is expected that a Fund will not be required to pay any federal
income taxes on the amounts so distributed. A 4% nondeductible excise tax will
be imposed on amounts not distributed if a Fund does not meet certain
distribution requirements by the end of each calendar year.
Each Fund anticipates meeting such distribution requirements.
Risks
Since the investment objectives and policies of each Evergreen Money
Fund are substantially similar to those of its corresponding CoreFund, the risks
involved in investing in each Fund's shares are similar. All of the Funds follow
policies which are intended to result in the maintenance of a stable net asset
value of $1.00 per share, but there is no assurance that any Fund can do so on a
continuing basis. In addition, no assurance can be given that the Funds'
investment performances will be positive and that the Funds will meet their
investment objectives. For a discussion of the objectives and policies of each
Evergreen Money Fund and its corresponding CoreFund, see "Comparison of
Investment Objectives and Policies."
Evergreen Money Market Fund and CoreFunds Cash Reserve
An investment in either Fund may be subject, on a limited basis, to
interest rate risk and credit risk.
"Interest rate risk" is 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. Since Rule 2a-7
requires the Funds to purchase securities with a remaining maturity of 397 days
or less, and to maintain a dollar-weighted average portfolio maturity of 90 days
or less, the interest rate risk to which an investment in either Fund is exposed
is limited. Investors should recognize that, in periods of declining interest
rates, the yield of a Fund will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the yield of a Fund will
tend to be somewhat lower. Also when interest rates are falling, the inflow of
net new money to a Fund from the continuous sale of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the current yield of the Fund. In periods of
rising interest rates, the opposite can be expected to occur.
"Credit risk" is the possibility that an issuer will be unable to make
timely payments of either principal or interest. Although each Fund complies
with the quality standards set by Rule 2a-7, which are intended to minimize
credit risk, each Fund assumes some credit risk when it purchases securities
other than those issued or guaranteed by the U.S. Treasury, and both Funds
invest substantially all of their assets in non-Treasury obligations. CoreFunds
Cash Reserve invests only in obligations rated in the highest category by a
NRSRO. Evergreen Money Market Fund may invest in obligations rated in the two
highest categories. As a result the credit risk of the Evergreen Money Market
Fund may be somewhat greater than that of the CoreFunds Cash Reserve.
Evergreen Money Market Fund unlike CoreFunds Cash Reserve may invest in
bank certificates of deposit and bankers' acceptances payable in U.S. dollars
and issued by foreign banks. These investments involve risks that are different
from those attendant upon
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<PAGE>
an investment in domestic securities. These risks may include future unfavorable
political and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls, interest limitations, and other
governmental restrictions which might affect the payment of principal or
interest on the securities in the Fund's portfolio. Additionally, foreign banks
are subject to less extensive regulations and disclosure requirements than U.S.
banks and, accordingly, there may be less publicly available information about
such banks and greater risks associated with their obligations.
Evergreen Municipal Money Market Fund and CoreFunds Tax-Free Reserve
Both Funds purchase securities supported by credit enhancements from
financial institutions. Changes in the credit quality of these institutions
could adversely affect the Funds. Both Funds are subject to interest rate risk
and credit risk, which are discussed above with respect to Evergreen Money
Market Fund and CoreFunds Cash Reserve. In addition, municipal securities may be
adversely affected by local political and economic conditions and developments
within a state. For example, adverse conditions in a significant industry within
a state may from time to time have a correspondingly adverse effect on specific
issuers within that state or on anticipated revenue to the state itself;
conversely, an improving economic outlook for a significant industry may have a
positive effect on such issuers or revenues.
The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates.
Each Fund is permitted to make taxable temporary investments. Neither
Fund has a current intention of generating income subject to federal regular
income tax. However, certain temporary investments may generate income that is
subject to state taxes. Unlike CoreFunds Tax-Free Reserve with respect to 80% of
its assets, interest income from Evergreen Municipal Money Market Fund's
investments may be subject to the federal alternative minimum tax.
Evergreen Treasury Money Market Fund and CoreFunds Treasury Reserve
Although both Funds invest primarily in direct obligations of the U.S.
Treasury and in obligations the principal and interest of which are backed by
the full faith and credit of the U.S. government, an investment in each would
expose the investor to interest rate risk -- i.e. the potential for a decline in
the market value of a fixed income security due to rising interest rates. See
the discussion above with respect to Evergreen Money Market Fund and CoreFunds
Cash Reserve. As a matter of investment strategy, Evergreen Treasury Money
Market Fund attempts to maintain a dollar-weighted average maturity for the Fund
of 60 days or less, while CoreFunds Treasury Reserve has no comparable stated
strategy.
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<PAGE>
REASONS FOR THE REORGANIZATIONS
On November 18, 1997, First Union entered into an Agreement and Plan of
Merger with CoreStates Financial, which provided, among other things, for the
Merger of CoreStates Financial with and into a wholly-owned subsidiary of First
Union. The Merger was consummated on April 30, 1998. As a result of the Merger
it is expected that FUNB and its affiliates will succeed to the investment
advisory and administrative functions currently performed for the CoreFunds by
various units of CoreStates Financial and various unaffiliated parties. It is
also expected that CoreStates Financial and its subsidiaries will no longer,
upon completion of the Reorganizations and similar reorganizations of other
portfolios of CoreFunds, Inc., provide investment advisory or administrative
services to investment companies.
Based on information received from CSIA and FUNB, at a meeting held on
February 6, 1998, all of the Directors present including the Independent
Directors considered and approved the Reorganizations as in the best interests
of shareholders of each CoreFund and determined that the interests of existing
shareholders of each CoreFund will not be diluted as a result of the
transactions contemplated by the Reorganization. In addition, the Directors
approved the Interim Advisory Agreement with respect to each CoreFund.
As noted above, CoreStates Financial has merged with and into a
wholly-owned subsidiary of First Union. CoreStates Financial is the parent
company of CSIA, investment adviser to the mutual funds which comprise
CoreFunds, Inc. The Merger caused, as a matter of law, termination of the
investment advisory agreement between each series of CoreFunds, Inc. and CSIA
with respect to each CoreFund. CoreFunds, Inc. has received an order from the
SEC which permits CSIA to continue to act as the investment adviser to each
CoreFund, without shareholder approval, for a period of not more than 150 days
from the date the Merger was consummated (April 30, 1998) to the date of
shareholder approval of a new investment advisory agreement.
In approving the Plan, the Directors reviewed various factors about the
Funds and the proposed Reorganizations. There are substantial similarities
between the Evergreen Money Funds and the corresponding CoreFunds. Specifically,
each pair of Funds has substantially similar investment objectives and policies
and comparable risk profiles. See "Comparison of Investment Objectives and
Policies" below. At the same time, the Board of Directors evaluated the
potential economies of scale associated with larger mutual funds and concluded
that operational efficiencies may be achieved upon the combination of the
CoreFunds with the Evergreen Money Funds. As of December 31, 1997, the net
assets (in millions) of each Evergreen Money Fund and of the corresponding
CoreFund were approximately as follows: Evergreen Money Market Fund $3,360,
CoreFunds Cash Reserve $1,036; Evergreen Municipal Money Market Fund $874,
CoreFunds Tax-Free Reserve $165; Evergreen Treasury Money Market Fund $3,096,
CoreFunds Treasury Reserve $831.
In addition, assuming that an alternative to the Reorganizations would
be to propose that each CoreFund continue its existence and be separately
managed by FUNB or one of its affiliates, then each CoreFund would be offered
through common distribution channels with Evergreen Money Fund, a similar fund.
Each CoreFund would also have to
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<PAGE>
bear the cost of maintaining its separate existence. CSIA and FUNB believe that
the prospect of dividing the resources of the Evergreen mutual fund organization
between two similar funds could result in each Fund being disadvantaged due to
an inability to achieve optimum size, performance levels and greater economies
of scale. Accordingly, for the reasons noted above and recognizing that there
can be no assurance that any economies of scale or other benefits will be
realized, CSIA and FUNB believe that the proposed Reorganizations would be in
the best interests of each Fund and its shareholders.
The Board of Directors of CoreFunds, Inc. met and considered the
recommendation of CSIA and FUNB, and, in addition, considered among other
things, (i) the terms and conditions of the Reorganizations; (ii) whether the
Reorganizations would result in the dilution of shareholders' interests; (iii)
expense ratios, fees and expenses of the Evergreen Money Funds and the CoreFunds
and the agreement by the Evergreen Money Funds' investment adviser to limit the
Funds' annual operating expenses for a period of at least two years to the
current annual operating expenses (before waivers) of the CoreFunds; (iv) the
comparative performance records of each of the Funds; (v) compatibility of their
investment objectives and policies; (vi) the investment experience, expertise
and resources of FUNB; (vii) the service and distribution resources available to
the Evergreen funds and the broad array of investment alternatives available to
shareholders of the Evergreen funds; (viii) the personnel and financial
resources of First Union and its affiliates; (ix) the fact that FUNB will bear
the expenses incurred by the CoreFunds in connection with the Reorganizations;
(x) the fact that the Evergreen Money Funds will each assume the identified
liabilities of the corresponding CoreFund; and (xi) the expected federal income
tax consequences of the Reorganizations.
The Directors also considered the benefits to be derived by
shareholders of the CoreFunds from the sale of their assets to the Evergreen
Money Funds. In this regard, the Directors considered the potential benefits of
being associated with a larger entity and the economies of scale that could be
realized by the participation in such an entity by shareholders of each
CoreFund.
In addition, the Directors considered that there are alternatives
available to shareholders of each CoreFund, including the ability to redeem
their shares, as well as the option to vote against the Reorganizations.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith
under certain conditions. One condition is that for three years thereafter, at
least 75% of the board of directors of a surviving investment company are not
"interested persons" of the company's investment adviser or of the investment
adviser of the terminating investment company. Another condition is that no
"unfair burden" is imposed on the investment company as a result of the
understandings applicable thereto. The term "unfair burden" is considered under
the 1940 Act to include any arrangement during the two-year period after the
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person" of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company (other than fees
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<PAGE>
for bona fide principal underwriting services). FUNB advised CoreFunds, Inc.
that it intends to comply with conditions set forth in Section 15(f).
During their consideration of the Reorganizations the Directors met
with Fund counsel regarding the legal issues involved. The Trustees of Evergreen
Money Market Trust also concluded at a meeting on February 11, 1998 that the
proposed Reorganizations would be in the best interests of shareholders of the
Evergreen Money Funds and that the interests of the shareholders of the
Evergreen Money Funds would not be diluted as a result of the transactions
contemplated by the Reorganizations.
The Directors of CoreFunds, Inc. have voted to retain their ability to
make claims under their existing Directors and Officers Errors and Omissions
Liability Insurance Policy for a period of three years following the
consummation of the Reorganizations. CoreStates Financial and First Union have
agreed to take appropriate steps to insure that the cost of extending such
coverage will not be borne by the shareholders of the CoreFunds.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF THE COREFUNDS APPROVE
THE PROPOSED REORGANIZATIONS.
Agreements and Plans of Reorganization
The following summary is qualified in its entirety by reference to the
Plans, a form of which is attached hereto as Exhibit A.
Each Plan provides that, on or about July 27, 1998 or such other date
as may be agreed upon by the parties (the "Closing Date"), the Evergreen Money
Fund will acquire all of the assets of its corresponding CoreFund in exchange
for shares of the Evergreen Money Fund and the assumption by the Evergreen Money
Fund of the identified liabilities of the CoreFund whose assets are being
acquired. Prior to the Closing Date, each CoreFund will endeavor to discharge
all of its known liabilities and obligations. An Evergreen Money Fund will not
assume any liabilities or obligations of a CoreFund other than those reflected
in an unaudited statement of assets and liabilities of the CoreFund prepared as
of the close of regular trading on the NYSE, currently 4:00 p.m. Eastern time,
on the business day immediately prior to the Closing Date. The number of full
and fractional shares of each class of the Evergreen Money Fund to be received
by the shareholders of the corresponding CoreFund will be determined by
multiplying the respective outstanding class of shares of the CoreFund by a
factor which shall be computed by dividing the net asset value per share of the
respective class of shares of the CoreFund by the net asset value per share of
the respective class of shares of the Evergreen Money Fund. Such computations
will take place as of the close of regular trading on the NYSE on the business
day immediately prior to the Closing Date. The net asset value per share of each
class will be determined by dividing assets, less liabilities, in each case
attributable to the respective class, by the total number of outstanding shares.
Since the net asset value of each share is anticipated to be $1.00, the number
of full and fractional shares of each class of the Evergreen Money Fund to be
received is anticipated to be the same as the number of full and fractional
shares of the corresponding class of the CoreFund held by a shareholder
immediately prior to the Reorganization.
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<PAGE>
State Street Bank and Trust Company, the custodian for the Evergreen
Money Funds, will compute the value of each Fund's respective portfolio
securities. The method of valuation employed will be consistent with the
procedures set forth in the Prospectuses and Statement of Additional Information
of the Evergreen Money Funds, Rule 22c-1 under the 1940 Act, and with the
interpretations of such Rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, each CoreFund will have declared a
dividend or dividends and distribution or distributions which, together with all
previous dividends and distributions, shall have the effect of distributing to
the Fund's shareholders (in shares of the Fund, or in cash, as the shareholder
has previously elected) all of the Fund's net investment company taxable income
for the taxable period ending on the Closing Date (computed without regard to
any deduction for dividends paid) and all of its net capital gains realized in
all taxable periods ending on the Closing Date (after reductions for any capital
loss carryforward).
As soon after the Closing Date as conveniently practicable, each
CoreFund will liquidate and distribute pro rata to shareholders of record as of
the close of business on the Closing Date the full and fractional shares of the
Evergreen Money Fund received by it. Such liquidation and distribution will be
accomplished by the establishment of accounts in the names of the CoreFund's
shareholders on the Evergreen Money Fund's share records of its transfer agent.
Each account will represent the respective pro rata number of full and
fractional shares of the Evergreen Money Fund due to the CoreFund's
shareholders. All issued and outstanding shares of each CoreFund, including
those represented by certificates, will be canceled. The shares of each
Evergreen Money Fund to be issued will have no preemptive or conversion rights.
After these distributions and the winding up of its affairs, each CoreFund will
be terminated. In connection with such termination, CoreFunds, Inc. will file
with the SEC an application for termination as a registered investment company.
The consummation of each Reorganization is subject to the conditions
set forth in the Plan, including approval by each CoreFund's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel, including opinions with respect to those matters referred to in
"Federal Income Tax Consequences" below. Notwithstanding approval by a
CoreFund's shareholders, the Plan may be terminated as to it (a) by the mutual
agreement of the parties; or (b) at or prior to the Closing Date by either party
(i) because of a breach by the other party of any representation, warranty, or
agreement contained therein to be performed at or prior to the Closing Date if
not cured within 30 days, or (ii) because a condition to the obligation of the
terminating party has not been met and it reasonably appears that it cannot be
met.
The expenses of each CoreFund in connection with the Reorganization
(including the cost of any proxy soliciting agent) will be borne by FUNB whether
or not the Reorganization is consummated. No portion of such expenses will be
borne directly or indirectly by a CoreFund or its shareholders.
If the Reorganization is not approved by shareholders of a CoreFund,
the Board of Directors of CoreFunds, Inc. will consider other possible courses
of action in the best interests of those shareholders.
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<PAGE>
Federal Income Tax Consequences
Each Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of the Reorganization, each CoreFund will receive an
opinion of Sullivan & Worcester LLP to the effect that, on the basis of the
existing provisions of the Code, U.S. Treasury regulations issued thereunder,
current administrative rules, pronouncements and court decisions, for federal
income tax purposes, upon consummation of the Reorganization:
(1) The transfer of all of the assets of the CoreFund solely in
exchange for shares of the Evergreen Money Fund and the assumption by the
Evergreen Money Fund of the identified liabilities, followed by the distribution
of the Evergreen Money Fund's shares by the CoreFund in dissolution and
liquidation of the CoreFund, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and the Evergreen Money Fund and
the CoreFund will each be a "party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) No gain or loss will be recognized by the CoreFund on the transfer
of all of its assets to the Evergreen Money Fund solely in exchange for the
Evergreen Money Fund's shares and the assumption by the Evergreen Money Fund of
the identified liabilities of the CoreFund or upon the distribution of the
Evergreen Money Fund's shares to the CoreFund's shareholders in exchange for
their shares of the CoreFund;
(3) The tax basis of the assets transferred will be the same to the
Evergreen Money Fund as the tax basis of such assets to the CoreFund immediately
prior to the Reorganization, and the holding period of such assets in the hands
of the Evergreen Money Fund will include the period during which the assets were
held by the CoreFund;
(4) No gain or loss will be recognized by the Evergreen Money Fund upon
the receipt of the assets from the CoreFund solely in exchange for the shares of
the Evergreen Money Fund and the assumption by the Evergreen Money Fund of the
identified liabilities of the CoreFund;
(5) No gain or loss will be recognized by the CoreFund's shareholders
upon the issuance of the shares of the Evergreen Money Fund to them, provided
they receive solely such shares (including fractional shares) in exchange for
their shares of the CoreFund; and
(6) The aggregate tax basis of the shares of the Evergreen Money Fund,
including any fractional shares, received by each of the shareholders of the
CoreFund pursuant to the Reorganization will be the same as the aggregate tax
basis of the shares of the CoreFund held by such shareholder immediately prior
to the Reorganization, and the holding period of the shares of the Evergreen
Money Fund, including fractional shares, received by each such shareholder will
include the period during which the shares of the CoreFund exchanged therefor
were held by such shareholder (provided that the shares of the CoreFund were
held as a capital asset on the date of the Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of the CoreFund would
recognize a taxable gain or loss
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<PAGE>
equal to the difference between his or her tax basis in his or her Fund shares
and the fair market value of the Evergreen Money Fund shares he or she received.
Shareholders of each CoreFund should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. It is not anticipated that the securities of the combined
portfolio will be sold in significant amounts in order to comply with the
policies and investment practices of the Evergreen Money Fund. Since the
foregoing discussion relates only to the federal income tax consequences of the
Reorganizations, shareholders of the CoreFunds should also consult their tax
advisers as to the state and local tax consequences, if any, of the
Reorganizations.
Capital loss carryforwards of each CoreFund will be available to the
corresponding Evergreen Money Fund to offset capital gains recognized after the
Reorganization, subject to limitations imposed by the Code. These limitations
provide generally that the amount of loss carryforward which may be used in any
year following the closing is an amount equal to the value of all of the
outstanding stock of the CoreFund immediately prior to the Reorganization,
multiplied by a long-term tax-exempt bond rate determined monthly by the
Internal Revenue Service. The rate for February, 1998 was 5.23%. A capital loss
carryforward may generally be used without any limit to offset gains recognized
on sale of assets transferred by the CoreFund to the Evergreen Money Fund
pursuant to the Reorganization, to the extent of the excess of the value of any
such asset on the Closing Date over its tax basis.
Pro-forma Capitalization
The following tables set forth the capitalizations of the Evergreen
Money Funds and the CoreFunds as of December 31, 1997, and the capitalization of
the Evergreen Money Funds on a pro forma basis as of that date, giving effect to
the proposed acquisitions of assets at net asset value. The pro forma data
reflects an expected exchange ratio of one Class Y share, one Class A share and
one Class B share of each Evergreen Money Fund issued for each Class Y, Class C
and Class B share, respectively, of the corresponding CoreFund.
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<PAGE>
<TABLE>
<CAPTION>
Capitalization of CoreFunds Cash Reserve,
Evergreen Money Market Fund
and
Evergreen Money Market Fund (Pro Forma)
<S> <C> <C> <C>
Evergreen Money
Market (After
Reorgani-
CoreFunds Cash Evergreen Money zation)
Reserve Market
Net Assets (in
millions)
Class A N/A $2,824,628,101
$2,744,915,931
Class B $20,833,189 $20,913,233
$80,044
Class C $2,062,588 $2,062,588
$79,712,170
Class K N/A $185,962 $185,962
Class Y $592,340,494 $1,548,708,511
----------- -------------
$956,368,017
Total Net Assets . $3,360,338,164 $4,396,498,395
================= ============== ==============
$1,036,160,231
Net Asset Value
Per Share
Class A N/A $1.00 $1.00
Class B $1.00 $1.00 $1.00
Class C $1.00 $1.00 $1.00
Class K N/A $1.00 $1.00
Class Y $1.00 $1.00 $1.00
Shares
Outstanding
Class A N/A 2,745,010,754 2,824,289,180
Class B 80,044 20,835,894 20,915,938
Class C 79,278,426 2,063,863 2,063,863
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<PAGE>
Evergreen Money
Market (After
Reorgani-
CoreFunds Cash Evergreen Money zation)
Reserve Market
Class K N/A 185,958 185,958
Class Y 956,501,408 592,896,184
------------- ------------- 1,549,397,592
-------------
All Classes 1,035,859,878 3,360,992,653
4,396,852,531
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Capitalization of CoreFunds Tax-Free Reserve,
Evergreen Municipal Money Market Fund
and
Evergreen Municipal Money Market Fund (Pro Forma)
<S> <C> <C> <C>
Evergreen
Municipal Money
Market (After
CoreFunds Tax- Evergreen Reorgani-
Free Reserve Municipal Money zation)
Market
Net Assets (in
millions)
Class A..................... N/A $580,641,403 $
593,036,582
Class C..................... $ 12,395,179 $ NA NA
Class Y..................... $152,822,271 $293,282,276 $
------------ ----------- -----------------
446,104,547
Total Net $165,217,450 $873,923,679 $1,039,141,129
============ ============ ==============
Assets
...............
Net Asset Value Per
Share
Class A..................... N/A $1.00 $1.00
Class C..................... $1.00 N/A N/A
Class Y..................... $1.00 $1.00 $1.00
Shares Outstanding
Class A..................... N/A 580,747,356 593,122,006
Class C.................... 12,374,650 N/A N/A
Class Y..................... 152,872,746 293,376,594 446,249,340
----------- ----------- -------------
All Classes 165,247,396 874,123,950 1,039,371,346
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Capitalization of CoreFunds Treasury Reserve,
Evergreen Treasury Money Market Fund
and
Evergreen Treasury Money Market Fund (Pro Forma)
<S> <C> <C> <C>
Evergreen
Treasury Money
Market (After
CoreFunds Evergreen Treasury Reorgani-
Treasury Reserve Money Market zation)
Net Assets (in
millions)
Class A..................... N/A $ $2,599,016,352
2,574,603,608
Class C..................... NA NA
$24,412,744
Class Y..................... $521,486,321 $1,328,341,694
--------------- ----------- --------------
$806,855,373
Total Net Assets . $3,096,089,929 $3,927,358,046
================= ============== ==============
$831,268,117
Net Asset Value Per
Share
Class A..................... N/A $1.00 $1.00
Class C..................... $1.00 N/A N/A
Class Y..................... $1.00 $1.00 $1.00
Shares Outstanding
Class A..................... N/A 2,574,577,166 2,598,869,784
Class C..................... 24,292,618 N/A N/A
Class Y..................... 806,957,000 521,479,670 1,328,436,670
----------- ------------- -------------
All Classes 831,249,618 3,096,056,836 3,927,306,454
</TABLE>
The tables set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganizations; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the Reorganizations.
-40-
<PAGE>
Shareholder Information
As of May 29, 1998 (the "Record Date"), the following number of each
Class of shares of beneficial interest of each CoreFund was outstanding:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CoreFunds CoreFunds CoreFunds
Class of Shares Cash Reserve Tax-Free Reserve Treasury Reserve
Class Y........ 804,270,996 140,082,976 685,672,649
Class B........ 93,613 0 0
Class C........ 17,145,372 28,076,349
----------- ---------------- ---------------
84,568,
583
All Classes.... 888,993,192 157,228,348 713,748,998
</TABLE>
As of March 31, 1998, the officers and Directors of CoreFunds, Inc.
beneficially owned as a group less than 1% of the outstanding shares of each
CoreFund. To CoreFunds, Inc.'s knowledge, the following persons owned
beneficially or of record more than 5% of a CoreFund's total outstanding shares
as of March 31, 1998:
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Percentage of Percentage of
Shares of Class Shares of Class
Before After
Name and Address CoreFund Class No. of Shares Reorganization Reorganization
Patterson & Co. Cash Y 1,000,393,217 95.42% 54.15%
Attn: Jim Quinlan Reserve
P.O. Box 7618
FC9-1-17
Philadelphia, PA 19101-
7618
CoreStates Bank NA Cash B 6,940 6.37% 0.03%
Cust. for the IRA of Reserve
Frank E. Rebel
210 Asbury Broadway
Rd.
Asbury, NJ 08802-1003
CoreState Bank Cust. of Cash B 18,278 16.76% 0.07%
the IRA of Frank Reserve
Anthony Manone Sr.
232 Yankee Rd. Lot 5
Quakertown, PA 18951-
5334
Carl J. Zweigle Cash B 10,034 9.20% 0.04%
Maureen T. Zweigle JT Reserve
TEN
233 Tall Pines Dr.
Sewell, NJ 08080-1115
Peter Gati Cust. Cash B 17,612 16.15% 0.07%
Christopher Gati UTMA Reserve
- - NJ
1151 S. 10th St.
S. Plainfield, NJ 07080-
1605
Franklin Mills Cash B 6,692 6.14% 0.02%
807 East Turner St. Apt. Reserve
#2
Allentown, PA 18103-
2173
Benjamin Quinones Cash B 8,835 8.10% 0.03%
31 Washington St. Reserve
P.O. Box 286
Port Norris, NJ 08349-
0286
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<PAGE>
Percentage of Percentage of
Shares of Class Shares of Class
Before After
Name and Address CoreFund Class No. of Shares Reorganization Reorganization
Peter Gati Cust. Cash B 17,523 16.07% 0.07%
Matthew Carl Gati Reserve
UTMA - NJ
1151 S. 10th St.
S. Plainfield, NJ 07080-
1605
Jane M. Hills Cash B 15,265 14.00% 0.06%
1335 Penbroke Dr. Reserve
West Chester, PA
19380-3933
Raymond Dweck Cash C 4,770,598 5.12% 0.14%
Dorothy Dweck Reserve
c/o Buseck Barger Bleil
& Co.
1640 W. 8th St.
Erie, PA 16505-5042
Patterson & Co. Tax-Free Y 142,238,049 96.31% 24.70%
Attn: Jim Quinlan Reserve
P.O. Box 7618
FC9-1-17
Philadelphia, pa 19101-
7618
Thomas C. Mackey Tax-Free C 3,181,481 15.13% 0.40%
Loretta C. Mackey Reserve
9 Applewood Drive
Hopewell, NY 08525-
2117
Patterson & Co. Treasury Y 630,197,393 89.90% 49.51%
Attn: Jim Quinlan Reserve
P.O. Box 7618
FC9-1-17
Philadelphia, pa
19101-7618
Patterson & Co. Treasury C 4,671,272 16.99% 0.16%
Attn: Jim Quinlan Reserve
P.O. Box 7618
FC9-1-17
Philadelphia, pa
19101-7618
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<PAGE>
Percentage of Percentage of
Shares of Class Shares of Class
Before After
Name and Address CoreFund Class No. of Shares Reorganization Reorganization
Philadelphia Health Treasury C 2,823,839 10.27% 0.10%
Management Corp. Reserve
260 S. Broad St.
20th Floor
Philadelphia, PA
19102-5021
Bruce E. Toll Treasury C 5,632,806 20.49% 0.20%
3103 Philmont Ave. Reserve
Huntingdon Valley, PA
19006-4298
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective Prospectuses and Statement of
Additional Information of the Funds. The investment objective, policies and
restrictions of each of the Evergreen Money Funds can be found in the
Prospectuses of the Evergreen Money Funds under the caption "Description of the
Funds - Investment Objectives and Policies." The Evergreen Money Funds'
Prospectuses also offer an additional fund advised by FUNB or its affiliates.
This additional fund is not involved in the Reorganizations, its investment
objectives and policies are not discussed in this Prospectus/Proxy Statement,
and its shares are not offered hereby. The investment objective, policies and
restrictions of each CoreFund can be found in the Prospectuses of the CoreFunds
under the caption "Information on the Funds." Unlike the investment objective of
each CoreFund, which is fundamental, the investment objective of each Evergreen
Money Fund is non-fundamental and can be changed by the Board of Trustees
without shareholder approval.
Evergreen Money Market Fund/CoreFunds Cash Reserve
The investment objective of Evergreen Money Market Fund is to achieve
as high a level of current income as is consistent with preserving capital and
providing liquidity. The investment objective of CoreFunds Cash Reserve is
substantially similar: to provide as high a level of current interest income as
is consistent with liquidity and relative stability of principal. Each Fund
invests in high quality money market instruments, which are determined to be of
eligible quality under SEC rules and to present minimal credit risk. Under SEC
rules, eligible securities include First Tier Securities (i.e., securities rated
in the highest short-term rating category) and Second Tier Securities (i.e.,
securities which are otherwise eligible but not in the First Tier). The rules
prohibit each Fund from holding more than 5% of its assets in Second Tier
Securities.
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<PAGE>
Within the permitted investments of each Fund are:
1. Marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities, including issues of the U. S. Treasury, such
as bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an act of Congress.
Some of these securities are supported by the full faith and credit of the U.S.
government, others are supported by the right of the issuer to borrow from the
U.S. Treasury, and still others are supported only by the credit of the agency
or instrumentality that issued them.
2. Commercial paper, including variable amount master demand notes,
that is rated in one of the two highest (for CoreFunds Cash Reserve, only the
highest) short-term ratings categories by any two of Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service ("Moody's") or any other NRSRO (or by
a single NRSRO if only one has assigned a rating). Evergreen Money Market Fund
will not invest more than 10% of its total assets, at the time of the investment
in question, in variable amount master demand notes; CoreFunds Cash Reserve has
no similar restriction.
3. Corporate debt securities and bank obligations that are rated in one
of the two highest (for CoreFunds Cash Reserve, only the highest) short-term
rating categories by any two of S&P, Moody's and any other NRSRO (or by a single
NRSRO if only one has assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 397 days or
less) that (a) is comparable in priority and security to the unrated securities
and (b) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by any domestic or foreign company which has an outstanding
long-term debt issue rated in the two highest (for CoreFunds Cash Reserve, only
the highest) ratings categories by any NRSRO and determined by the investment
adviser to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the investment adviser to be of comparable
quality.
7. Evergreen Money Market Fund may invest up to 30% of its total assets
in bank certificates of deposit and bankers' acceptances payable in U.S. dollars
and issued by foreign banks (including U.S. branches of foreign banks) or by
foreign branches of U.S. banks. CoreFunds Cash Reserve may invest in "bank
obligations" without limitation, but such permitted investments include only
obligations in domestic branches of U.S. banks.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statement of Additional
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectuses and Statement of Additional Information of
each Fund.
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<PAGE>
Evergreen Municipal Money Market Fund/CoreFunds Tax-Free Reserve
The investment objective of Evergreen Municipal Money Market Fund is to
achieve as high a level of current income exempt from federal income tax as is
consistent with preserving capital and providing liquidity. The investment
objective of CoreFunds Tax-Free Reserve is substantially similar: to provide
investors with current interest income that is exempt from federal income taxes
as is consistent with liquidity and relative stability of principal. Both Funds
maintain a dollar-weighted average portfolio maturity of ninety days. Both Funds
will seek to achieve their objectives by investing substantially all of their
assets in a diversified portfolio of short-term (i.e., with remaining maturities
not exceeding 397 days) debt obligations issued by states, territories and
possession of the U.S. and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from federal income tax.
At least 80% of the annual interest income of Evergreen Municipal Money
Market Fund will be exempt from federal income tax. The Fund may invest without
limitation in obligations subject to the alternative minimum tax. At least 80%
of the investments of CoreFunds Tax-Free Reserve will be in obligations exempt
from federal income tax (including the alternative minimum tax).
Evergreen Municipal Money Market Fund may temporarily invest up to 20%
of its net assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of sale of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities, (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may invest more than 20% of its total assets
in taxable securities for defensive purposes. The Fund may invest for defensive
purposes during periods when the Fund's assets available for investment exceed
available suitable tax-exempt securities.
CoreFunds Tax-Free Reserve may invest up to 20% of its total assets in
taxable debt securities for defensive purposes or when sufficient tax-exempt
securities considered appropriate by the Fund's investment adviser are not
available for purchase.
Both Funds invest in municipal securities which are determined to be of
eligible quality under SEC rules and to present minimal credit risk. Municipal
securities in which the Funds may invest include: (1) municipal securities that
are rated in one of the two highest (for CoreFunds Tax-Free Reserve, only the
highest) short-term rating categories by any two of S&P or Moody's or any other
NRSRO (or by a single rating agency if only one of these agencies has assigned a
rating); (2) municipal securities that are issued by an issuer that has
outstanding a class of short-term instruments that (A) is comparable in priority
and security to such instruments, and (B) meets the rating requirements above;
and (3) bonds with a remaining maturity of 397 days or less that are rated no
lower than one of the two highest (for CoreFunds Tax-Free Reserve, only the
highest) long-term rating categories by any NRSRO and determined by the
investment adviser to be of comparable quality.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statement of Additional
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<PAGE>
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectuses and Statement of Additional Information of
each Fund.
Evergreen Treasury Money Market Fund/CoreFunds Treasury Reserve
The investment objective of Evergreen Treasury Money Market Fund is to
maintain stability of principal while earning current income. The Fund will
attempt to seek income only to the extent consistent with stability of principal
and, therefore, investments will only be made in short-term U.S. Treasury
obligations and obligations with an average dollar-weighted maturity of 90 days
or less. As a matter of investment strategy, the Fund's investment adviser
intends to maintain a dollar-weighted average maturity for the Fund of 60 days
or less.
The short-term U.S. Treasury obligations in which the Fund invests are
issued by the U.S. government and are fully guaranteed as to principal and
interest by the United States. Such securities will have a maturity date that is
397 days or less from the date of acquisition unless they are purchased under an
agreement that provides for repurchase of the securities from the Fund within
397 days from the date of acquisition.
The Fund may also retain Fund assets in cash.
The investment objective of CoreFunds Treasury Reserve is to provide
current interest income, liquidity and safety of principal. The Fund pursues its
investment objective by investing exclusively in short-term U.S. Treasury
securities, STRIPS relating to U.S. Treasury securities (with an average
dollar-weighted maturity of 90 days or less) and repurchase agreements involving
these obligations.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statement of Additional
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectuses and Statement of Additional Information of
each Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen Money Market Trust and CoreFunds, Inc. are open-end
management investment companies registered with the SEC under the 1940 Act,
which continuously offer shares to the public. Evergreen Money Market Trust is
organized as a Delaware business trust and is governed by its Declaration of
Trust, By-Laws and a Board of Trustees. CoreFunds, Inc. is organized as a
Maryland corporation and is governed by its Articles of Incorporation, By-Laws
and a Board of Directors. Each entity is also governed by applicable Delaware,
Maryland and federal law. Each Evergreen Money Fund is a series of Evergreen
Money Market Trust and each CoreFund is a series of CoreFunds, Inc.
-47-
<PAGE>
Capitalization
The beneficial interests in each Evergreen Money Fund are represented
by an unlimited number of transferable shares of beneficial interest, $.001 par
value per share. The authorized shares of CoreFunds, Inc. consist of 30 billion
shares of common stock, par value $.001 per share, of which 1 billion are
classified as Class Y shares, 1 billion are classified as Class B shares and 1
billion are classified as Class C shares of CoreFunds Cash Reserve, 250 million
are classified as Class Y shares and 250 million are classified as Class C
shares of CoreFunds Tax-Free Reserve, and 1.25 billion are classified as Class Y
shares and 1.25 billion are classified as Class C shares of CoreFunds Treasury
Reserve. Evergreen Money Market Trust's Declaration of Trust and CoreFunds,
Inc.'s Articles of Incorporation permit the Trustees or Directors, respectively,
to allocate shares into an unlimited number of series, and classes thereof, with
rights determined by the Trustees or Directors, respectively, all without
shareholder approval. Fractional shares may be issued by any Fund. Each Fund's
shares represent equal proportionate interests in the assets belonging to the
Funds. Shareholders of each Fund are entitled to receive dividends and other
amounts as determined by the Trustees or Directors. Shareholders of each Fund
vote separately, by class, as to matters, such as approval of or amendments to
Rule 12b-1 distribution plans, that affect only their particular class and by
Fund as to matters, such as approval of or amendments to investment advisory
agreements or proposed reorganizations, that affect only their particular Fund.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in any other state. As a result, to
the extent that Evergreen Money Market Trust or a shareholder is subject to the
jurisdiction of courts in those states, it is possible that a court may not
apply Delaware law, and may thereby subject shareholders of Evergreen Money
Market Trust to liability. To guard against this risk, the Declaration of Trust
of Evergreen Money Market Trust (a) provides that any written obligation of the
Trust may contain a statement that such obligation may only be enforced against
the assets of the Trust or the particular series in question and the obligation
is not binding upon the shareholders of the Trust; however, the omission of such
a disclaimer will not operate to create personal liability for any shareholder;
and (b) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Accordingly, the risk
of a shareholder of Evergreen Money Market Trust incurring financial loss beyond
that shareholder's investment because of shareholder liability is limited to
circumstances in which: (i) the court refuses to apply Delaware law; (ii) no
contractual limitation of liability was in effect; and (iii) the Trust itself is
unable to meet its obligations. In light of Delaware law, the nature of the
Trust's business, and the nature of its assets, the risk of personal liability
to a shareholder of Evergreen Money Market Trust is remote.
Under Maryland law, shareholders of a CoreFund have no personal
liability as such for the acts or obligations of the Fund or CoreFunds, Inc., as
the case may be.
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<PAGE>
Shareholder Meetings and Voting Rights
Neither Evergreen Money Market Trust on behalf of the Evergreen Money
Funds nor CoreFunds, Inc. on behalf of the CoreFunds is required to hold annual
meetings of shareholders. However, a meeting of shareholders for the purpose of
voting upon the question of removal of a Trustee or Director must be called when
requested in writing by the holders of at least 10% of the outstanding shares of
Evergreen Money Market Trust or CoreFunds, Inc. In addition, each is required to
call a meeting of shareholders for the purpose of electing Trustees or Directors
if, at any time, less than a majority of the Trustees or Directors then holding
office were elected by shareholders. Neither Evergreen Money Market Trust nor
CoreFunds, Inc. currently intends to hold regular shareholder meetings and
neither entity permits cumulative voting. Except when a larger quorum is
required by applicable law, with respect to the Evergreen Money Funds,
twenty-five percent (25%) of the outstanding shares entitled to vote, and with
respect to the CoreFunds, a majority of the outstanding shares entitled to vote
constitutes a quorum for consideration of such matter. For the Evergreen Money
Funds, a majority of the votes cast and entitled to vote, and for the CoreFunds,
a majority of the outstanding shares, is sufficient to act on a matter (unless
otherwise specifically required by the applicable governing documents or other
law, including the 1940 Act).
Under the Declaration of Trust of Evergreen Money Market Trust, each
share of each Evergreen Money Fund will be entitled to one vote for each dollar
of net asset value applicable to each share. Under the voting provisions
governing the CoreFunds, each share is entitled to one vote. Over time, the net
asset values of the mutual funds which are each a series of CoreFunds, Inc. have
changed in relation to one another and are expected to continue to do so in the
future. Because of the divergence in net asset values, a given dollar investment
in a fund with a lower net asset value will purchase more shares, and under a
CoreFund's voting provisions, have more votes, than the same investment in a
fund with a higher net asset value. Under the Declaration of Trust of Evergreen
Money Market Trust, voting power is related to the dollar value of the
shareholders' investment rather than to the number of shares held.
Liquidation or Dissolution
In the event of the liquidation of an Evergreen Money Fund or a
CoreFund, the shareholders are entitled to receive, when and as declared by the
Trustees or Directors, respectively, the excess of the assets belonging to such
Fund or attributable to the class over the liabilities belonging to the Fund or
attributable to the class. In either case, the assets so distributable to
shareholders of the Fund will be distributed among the shareholders in
proportion to the number of shares of a class of the Fund held by them and
recorded on the books of the Fund.
Liability and Indemnification of Trustees
The By-Laws of CoreFunds, Inc. provide that a present or former
Director or officer is entitled to indemnification to the full extent
permissible under the laws of the State of Maryland and the 1940 Act against
liabilities and expenses with respect to claims related to his or her position
with CoreFunds, Inc., provided that no
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<PAGE>
indemnification shall be provided to a Director or officer against any liability
to CoreFunds, Inc. or any shareholder by reasons of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Under the Declaration of Trust of Evergreen Money Market Trust, a
Trustee is liable to the Trust and its shareholders only for such Trustee's own
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the Trustee
(i) did not act in good faith in the reasonable belief that such Trustee's
action was in or not opposed to the best interests of the Trust; (ii) had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
such Trustee's duties; and (iii) in a criminal proceeding, had reasonable cause
to believe that such Trustee's conduct was unlawful (collectively, "disabling
conduct"). A determination that the Trustee did not engage in disabling conduct
and is, therefore, entitled to indemnification may be based upon the outcome of
a court action or administrative proceeding or by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding or (b) an independent legal counsel in a
written opinion. The Trust may also advance money for such litigation expenses
provided that the Trustee undertakes to repay the Trust if his or her conduct is
later determined to preclude indemnification and certain other conditions are
met.
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of Evergreen Money Market Trust, Articles
of Incorporation of CoreFunds, Inc., By-Laws, Delaware and Maryland law and is
not a complete description of those documents or law. Shareholders should refer
to the provisions of such Declaration of Trust, Articles of Incorporation ,
By-Laws, Delaware and Maryland law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Directors of CoreFunds, Inc. recommends that shareholders of each
CoreFund approve the Interim Advisory Agreement. The Merger became effective on
April 30, 1998. Pursuant to an order received from the SEC all fees payable
under the Interim Advisory Agreement will be placed in escrow and paid to CSIA
if shareholders approve the contract within 150 days of its effective date. The
Interim Advisory Agreement will remain in effect until the earlier of the
Closing Date for each Reorganization or two years from its effective date. The
terms of the Interim Advisory Agreement are essentially the same as the Previous
Advisory Agreement (as defined below). The only difference between the Previous
Advisory Agreement and the Interim Advisory Agreement, if approved by
shareholders, is the length of time each Agreement is in effect. A description
of the Interim Advisory Agreement pursuant to which CSIA continues as investment
adviser to the CoreFunds, as well as the services to be provided by CSIA
pursuant thereto, is set forth below under "Advisory Services." The
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<PAGE>
description of the Interim Advisory Agreement in this Prospectus/Proxy Statement
is qualified in its entirety by reference to the Interim Advisory Agreement,
attached hereto as Exhibit B.
CSIA, a Pennsylvania corporation, is an indirect wholly-owned
subsidiary of First Union. CSIA's address is 1500 Market Street, Philadelphia,
Pennsylvania 19102. Prior to the effective date of the Merger, CSIA served as
investment adviser to each CoreFund pursuant to an Investment Advisory Agreement
dated April 12, 1996. The Investment Advisory Agreement for each of the
CoreFunds is referred to as the "Previous Advisory Agreement." At a meeting of
the Board of Directors of CoreFunds, Inc. held on February 6, 1998, the
Directors, including a majority of the Independent Directors, approved the
Interim Advisory Agreement for each CoreFund.
The Directors authorized CoreFunds, Inc., on behalf of each CoreFund,
to enter into the Interim Advisory Agreement with CSIA. Such Agreement became
effective on April 30, 1998. If the Interim Advisory Agreement for a CoreFund is
not approved by the shareholders of that Fund, the Directors will consider
appropriate actions to be taken with respect to that CoreFund's investment
advisory arrangements at that time. The Previous Advisory Agreement for each
CoreFund was last approved by the Directors, including a majority of the
Independent Directors, on June 5, 1997.
Comparison of the Interim Advisory Agreement and the Previous Advisory Agreement
Advisory Services. The management and advisory services to be provided
by CSIA under the Interim Advisory Agreement are identical to those currently
provided by CSIA under the Previous Advisory Agreement. Under the Previous
Advisory Agreement and Interim Advisory Agreement, CSIA manages the investment
portfolio of each CoreFund, makes decisions about and places orders for all
purchases and sales of the Fund's securities, and maintains certain records
relating to these purchases and sales.
Fees. The investment advisory fees for each CoreFund under the Previous Advisory
Agreement and the Interim Advisory Agreement are identical. See "Summary -
Investment Advisers."
Payment of Expenses and Transaction Charges. Under the Previous
Advisory Agreement, CSIA was required to pay all expenses incurred by it in
connection with its activities under the Agreement other than the cost of
securities (including brokerage commissions, if any) purchased for each CoreFund
and the cost of obtaining market quotations of portfolio securities held by the
Fund.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement provided that
CSIA was not liable for any error of judgment or mistake of law or for any loss
suffered by each CoreFund in connection with the performance of the Agreement,
except a loss resulting
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<PAGE>
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 CSIA in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Agreement.
The Interim Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by vote of a majority of the outstanding
voting securities of a CoreFund (as defined in the 1940 Act) or by a vote of a
majority of CoreFunds, Inc.'s entire Board of Directors on 60 days' written
notice to CSIA or by CSIA on 60 days' written notice to CoreFunds, Inc. Also,
the Interim Advisory Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act).
The Previous Advisory Agreement contained identical provisions as to
termination and assignment.
Information About the CoreFunds' Investment Adviser
CSIA, a registered investment adviser, manages, in addition to each
CoreFund, other funds of CoreFunds, Inc. The name and address of each executive
officer and director of CSIA is set forth in Appendix A to this Prospectus/Proxy
Statement.
Pursuant to the Previous Advisory Agreement with each CoreFund, during
the fiscal years ended June 30, 1997, 1996 and 1995, CSIA received management
fees from each CoreFund, and voluntarily waived other management fees which it
had earned. The following table lists the fees paid by each CoreFund with
respect to each fiscal year, and the fees so waived.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CoreFund Management Fees Paid Management Fees Waived
1997 1996 1995 1997 1996 1995
Cash Reserve $2,569,922 $1,196,254 $971,784 $1,236,846 $1,522,489
$1,825,668
Tax-Free Reserve $358,201 $208,997 $172,635 $135,897 $134,575 $219,739
Treasury Reserve $2,613,273 $1,694,725 $1,039,138 $993,819 $1,101,807 $1,322,599
</TABLE>
CSIA is currently waiving a portion of its management fee. See "Comparison of
Fees and Expenses." CoreStates Bank, N.A. acts without charge as custodian for
each CoreFund.
The Board of Directors considered the Interim Advisory Agreement as
part of its overall approval of the Plans. The Board of Directors considered,
among other things, the factors set forth above in "Reasons for the
Reorganizations." The Board of Directors also considered the fact that there
were no material differences between the terms of the Interim Advisory Agreement
and the terms of the Previous Advisory Agreement.
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<PAGE>
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND
THAT THE SHAREHOLDERS OF EACH COREFUND
APPROVE THE INTERIM ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
Evergreen Money Funds. Information concerning the operation and
management of the Evergreen Money Funds is incorporated herein by reference from
the Prospectuses dated June 1, 1998, copies of which are enclosed, and Statement
of Additional Information of the same date. A copy of such Statement of
Additional Information is available upon request and without charge by writing
to Evergreen Money Market Trust at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-343-2898.
CoreFunds. Information about each CoreFund is included in its current
Prospectuses dated November 1, 1997 and in the Statement of Additional
Information of the same date, that have been filed with the SEC, all of which
are incorporated herein by reference. Copies of the Prospectuses and Statement
of Additional Information are available upon request and without charge by
writing to CoreFunds, Inc. at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800- 355-2673.
The Evergreen Money Funds and the CoreFunds are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material, and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048.
The SEC maintains a Web site (http://www.sec.gov) that contains each
Fund's Statement of Additional Information and other material incorporated by
reference herein together with other information regarding the Evergreen Money
Funds and the CoreFunds.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Directors of CoreFunds, Inc. to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m., July 17, 1998, at the
offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston,
Massachusetts 02116, and at any adjournments thereof. This Prospectus/Proxy
Statement, along with a Notice of the Meeting and a proxy card, is first being
mailed to shareholders of each CoreFund on or about June 8, 1998. Only
shareholders of record as of the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
The holders of a majority of the outstanding shares at the close of business on
the Record Date present in person or represented by proxy will constitute a
quorum for the Meeting. If the enclosed form of proxy is properly executed
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and returned in time to be voted at the Meeting, the proxies named therein will
vote the shares represented by the proxy in accordance with the instructions
marked thereon. Unmarked proxies will be voted FOR the proposed Reorganization,
FOR the Interim Advisory Agreement and FOR any other matters deemed appropriate.
Proxies that reflect abstentions and "broker non-votes" (i.e., shares held by
brokers or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote or (ii) the broker or nominee
does not have discretionary voting power on a particular matter) will be counted
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will have the effect of being counted as votes against
the Plan and the Interim Advisory Agreement which must be approved by a
percentage of the shares present at the Meeting or a majority of the outstanding
voting securities. A proxy may be revoked at any time on or before the Meeting
by written notice to the Secretary of CoreFunds, Inc. at the address set forth
on the cover of this Prospectus/Proxy Statement. Unless revoked, all valid
proxies will be voted in accordance with the specifications thereon or, in the
absence of such specifications, FOR approval of the Plan and the Reorganization
contemplated thereby and FOR approval of the Interim Advisory Agreement.
Approval of a Plan will require the affirmative vote of a majority of
the outstanding shares of each CoreFund, with all classes voting together as a
single class at the Meeting at which a quorum of the CoreFund's shares is
present. Approval of the Interim Advisory Agreement will require the affirmative
vote of (i) 67% or more of the outstanding voting securities present at the
Meeting if holders of more than 50% of the outstanding voting securities are
present, in person or by proxy, at the Meeting, or (ii) more than 50% of the
outstanding voting securities, whichever is less, with all classes voting
together as one class. Each full share outstanding is entitled to one vote and
each fractional share outstanding is entitled to a proportionate share of one
vote.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal solicitations
conducted by officers and employees of FUNB or CSIA, their affiliates or other
representatives of the CoreFunds (who will not be paid for their soliciting
activities). Shareholder Communications Corporation ("SCC") and its agents have
been engaged by the CoreFunds to assist in soliciting proxies, and may call
shareholders to ask if they would be willing to authorize SCC to execute a proxy
on their behalf authorizing the voting of their shares in accordance with the
instructions given over the telephone by the shareholders. In addition,
shareholders may call SCC at 1-800-733-8481 extension 468 between the hours of
9:00 a.m. and 11:00 p.m. Eastern time in order to initiate the processing of
their votes by telephone. SCC will utilize a telephone vote solicitation
procedure designed to authenticate the shareholder's identity by asking the
shareholder to provide his or her social security number (in the case of an
individual) or taxpayer identification number (in the case of an entity). The
shareholder's telephone instructions will be implemented in a proxy executed by
SCC and a confirmation will be sent to the shareholder to ensure that the vote
has been authorized in accordance with the shareholder's instructions. Although
a shareholder's vote may be solicited and cast in this manner, each shareholder
will receive a copy of this Prospectus/Proxy Statement and may vote by mail
using the enclosed proxy card. Each CoreFund believes that this telephonic
voting system complies with applicable law and has reviewed an opinion of
counsel to that effect.
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If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement, vote by telephone, vote by
fax or attend in person. Any proxy given by you is revocable.
In the event that sufficient votes to approve a Reorganization are not
received by July 17, 1998, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Maryland law or the Articles of Incorporation of
CoreFunds, Inc. to demand payment for, or an appraisal of, his or her shares.
However, shareholders should be aware that each Reorganization as proposed is
not expected to result in recognition of gain or loss to shareholders for
federal income tax purposes and that, if the Reorganization is consummated,
shareholders will be free to redeem the shares of the Evergreen Money Fund which
they receive in the transaction at their then-current net asset value. Shares of
each CoreFund may be redeemed at any time prior to the consummation of the
Reorganization. Shareholders of each CoreFund may wish to consult their tax
advisers as to any differing consequences of redeeming CoreFund shares prior to
the Reorganization or exchanging such shares in the Reorganization.
The CoreFunds do not hold annual shareholder meetings. If a
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of CoreFunds, Inc.
at the address set forth on the cover of this Prospectus/Proxy Statement such
that they will be received by a CoreFund in a reasonable period of time prior to
any such meeting.
The votes of the shareholders of the Evergreen Money Funds are not
being solicited by this Prospectus/Proxy Statement and are not required to carry
out the Reorganizations.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise each CoreFund whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Evergreen Money Market Fund and of
Evergreen Municipal Money Market Fund as of January 31, 1998 and the financial
statements and financial highlights for the periods indicated therein, have been
incorporated by
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reference herein and in the Registration Statement in reliance upon the report
of Price Waterhouse LLP, independent accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The Annual Report of Evergreen Treasury Money Market Fund as of
January 31, 1998 and the financial statements and financial highlights for the
periods indicated therein, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements and financial highlights of each CoreFund
incorporated in this Prospectus/Proxy Statement by reference from the Annual
Report of CoreFunds, Inc. for the year ended June 30, 1997, have been audited by
Ernst & Young LLP, independent auditors, as stated in their report, which is
incorporated herein by reference and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
Evergreen Money Funds will be passed upon by Sullivan & Worcester LLP,
Washington, D.C.
OTHER BUSINESS
The Directors of CoreFunds, Inc. do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
THE DIRECTORS OF COREFUNDS, INC. RECOMMEND APPROVAL OF EACH PLAN AND
THE INTERIM ADVISORY AGREEMENT, AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO
THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF EACH PLAN AND THE INTERIM
ADVISORY AGREEMENT.
June 1, 1998
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APPENDIX A
The names and addresses of the principal executive officers and directors of
CoreStates Investment Advisers, Inc. are as follows:
OFFICERS:
Name Address
- ---- -------
David C. Francis, Chief Investment First Union National Bank
Officer 201 South College Street
Charlotte, North Carolina 28288-1195
L. Robert Cheshire, Vice President First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
John E. Gray, Vice President First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
Dillon S. Harris, Jr., Vice President First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
J. Kellie Allen, Vice President First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
DIRECTORS:
Name Address
- ---- -------
Donald A. McMullen First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
William M. Ennis First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
William D. Munn First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1195
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EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 15th day of April, 1998, by and between Evergreen Money Market Trust, a
Delaware business trust, with its principal place of business at 200 Berkeley
Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its Evergreen
[Name of Fund] series (the "Acquiring Fund"), and CoreFunds, Inc., a Maryland
corporation, with its principal place of business at 530 East Swedesford Road,
Wayne, Pennsylvania 19087 ("CoreFunds"), with respect to its [Name of Fund]
series (the "Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Class A[, Class B] and
Class Y shares of beneficial interest, $.001 par value per share, of the
Acquiring Fund (the "Acquiring Fund Shares"); (ii) the assumption by the
Acquiring Fund of the identified liabilities of the Selling Fund; and (iii) the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest or shares of common stock, as the case may be;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of the identified liabilities of the Selling Fund by the Acquiring
Fund on the terms and conditions hereinafter set forth are in the best interests
of the Acquiring Fund's shareholders;
WHEREAS, based on the information furnished by CoreStates Investment
Advisers, Inc. and First Union National Bank, the Directors of CoreFunds have
determined that the Selling Fund
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should exchange all of its assets and the identified liabilities for Acquiring
Fund Shares and that the interests of the existing shareholders of the Selling
Fund will not be diluted as a result of the transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of each such class of the Selling Fund by the net
asset value per share of the corresponding class of Acquiring Fund Shares
computed in the manner and as of the time and date set forth in paragraph 2.2;
and (ii) to assume the identified liabilities of the Selling Fund, as set forth
in paragraph 1.3. Such transactions shall take place at the closing provided for
in paragraph 3.1 (the "Closing Date").
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the
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securities, if any, on the Selling Fund's list referred to in the second
sentence of this paragraph that do not conform to the Acquiring Fund's
investment objectives, policies, and restrictions. The Selling Fund will, within
a reasonable period of time prior to the Closing Date, furnish the Acquiring
Fund with a list of its portfolio securities and other investments. In the event
that the Selling Fund holds any investments that the Acquiring Fund may not
hold, the Selling Fund, if requested by the Acquiring Fund, will dispose of such
securities prior to the Closing Date. In addition, if it is determined that the
Selling Fund and the Acquiring Fund portfolios, when aggregated, would contain
investments exceeding certain percentage limitations imposed upon the Acquiring
Fund with respect to such investments, the Selling Fund if requested by the
Acquiring Fund will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
Notwithstanding the foregoing, nothing herein will require the Selling Fund to
dispose of any investments or securities if, in the reasonable judgment of the
Selling Fund, such disposition would adversely affect the tax-free nature of the
Reorganization or would violate the Selling Fund's fiduciary duty to its
shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
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determined as of the close of business on the Valuation Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1; and (b) the Selling Fund will thereupon proceed to dissolve as
set forth in paragraph 1.8 below. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Selling Fund on the books of the Acquiring Fund to open accounts
on the share records of the Acquiring Fund in the names of the Selling Fund
Shareholders and representing the respective pro rata number of the Acquiring
Fund Shares due such shareholders. All issued and outstanding shares of the
Selling Fund will simultaneously be canceled on the books of the Selling Fund.
The Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the combined Prospectus
and Proxy Statement on Form N-14 to be distributed to shareholders of the
Selling Fund as described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectuses and statement of additional information or
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such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of [Class
B,] Class C and Class Y shares of the Selling Fund will receive [Class B,] Class
A and Class Y shares, respectively, of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about July 27, 1998 or such other date as the parties may agree to in writing
(the "Closing Date"). All acts taking place at the Closing shall be deemed to
take place simultaneously immediately prior to the opening of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 9:00
a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. CoreStates Bank, N.A., as custodian for
the Selling Fund (the "Custodian"), shall deliver at the Closing a certificate
of an authorized officer stating that (a) the Selling Fund's portfolio
securities, cash, and any other assets shall have been delivered in proper form
to the Acquiring Fund on the Closing Date; and (b) all necessary taxes including
all applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities by the Selling Fund.
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3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund as of the Closing Date, shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver or
cause Evergreen Service Company, its transfer agent, to issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of CoreFunds or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents
and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland.
(b) The Selling Fund is a separate investment series of a
Maryland corporation that is registered as an investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), is in
full force and effect.
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the
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Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the
rules and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of CoreFunds' Articles of Incorporation or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected in the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The financial statements of the Selling Fund at December
31, 1997 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since December 31, 1997 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise
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disclosed to and accepted by the Acquiring Fund. For the purposes of this
subparagraph (h), a decline in the net asset value of the Selling Fund shall not
constitute a material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
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(n) The information to be furnished by the Selling Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) The Prospectus and Proxy Statement of the Selling Fund to
be included in the Registration Statement (as defined in paragraph 5.7)(other
than information therein that relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring
Fund represents and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
(c) The current prospectuses and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the
Selling Fund and accepted by the Selling Fund, no litigation,
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administrative proceeding or investigation of or before any court or
governmental body is presently pending or to its knowledge threatened against
the Acquiring Fund or any of its properties or assets, which, if adversely
determined, would materially and adversely affect its financial condition and
the conduct of its business or the ability of the Acquiring Fund to carry out
the transactions contemplated by this Agreement. The Acquiring Fund knows of no
facts that might form the basis for the institution of such proceedings and is
not a party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(f) The financial statements of the Acquiring Fund at January
31, 1998 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Selling Fund) fairly reflect the financial condition of the Acquiring
Fund as of such date, and there are no known contingent liabilities of the
Acquiring Fund as of such date not disclosed therein.
(g) Since January 31, 1998 there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is
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there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(n) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) to be included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being
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understood that such ordinary course of business will include customary
dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. CoreFunds will call a meeting of the
Selling Fund Shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions contemplated
herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by [Name of
Accountant] and certified by CoreFunds' President and Treasurer.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The
Selling Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus, which
will include the proxy statement, referred to in paragraph 4.1(o)
(the "Prospectus and Proxy Statement"), all to be included in a
Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the 1940 Act in connection with the meeting of the Selling Fund
Shareholders to consider approval of this Agreement and the
transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. As promptly as
practicable, but in any case within sixty days after the Closing
Date, the Acquiring Fund and the Selling Fund shall cause [Name
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of Accountant] to issue a letter addressed to the Acquiring Fund and the Selling
Fund, in form and substance satisfactory to the Funds, setting forth the federal
income tax implications relating to capital loss carryforwards (if any) of the
Selling Fund and the related impact, if any, of the proposed transfer of all of
the assets of the Selling Fund to the Acquiring Fund and the ultimate
dissolution of the Selling Fund, upon the shareholders of the Selling Fund.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated as of the Closing Date, to
such effect and as to such other matters as the Selling Fund shall reasonably
request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the
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Selling Fund, is a valid and binding obligation of the Acquiring Fund
enforceable against the Acquiring Fund in accordance with its terms, subject as
to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights generally and to general equity
principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement, to such counsel's knowledge,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Acquiring Fund is
a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
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(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (g) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Trust's officers
and other representatives of the Acquiring Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquiring Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of CoreFunds and the Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Sullivan & Worcester
LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger between First Union Corporation and CoreStates Financial
Corp shall be completed prior to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
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The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by CoreFunds'
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquiring Fund shall
reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of CoreFunds.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Morgan, Lewis & Bockius LLP, counsel to the Selling Fund, in a form
satisfactory to the Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland and has the power to own all of its properties and
assets and to carry on its business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Maryland corporation registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
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(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Maryland is required for consummation by the Selling Fund
of the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of CoreFunds' Articles of Incorporation or By-laws, or any provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree to which the Selling
Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
government proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
(i) Assuming that a consideration therefor of not less than
the net asset value thereof has been paid, and assuming that such shares were
issued in accordance with the terms of the Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
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Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Selling Fund at which
the contents of the Prospectus and Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (f) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of CoreFunds' officers and
other representatives of the Selling Fund), no facts have come to their
attention that lead them to believe that the Prospectus and Proxy Statement as
of its date, as of the date of the Selling Fund Shareholders' meeting, and as of
the Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Selling Fund
or necessary, in the light of the circumstances under which they were made, to
make the statements therein regarding the Selling Fund not misleading. Such
opinion may state that they do not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to the Acquiring Fund, contained in the Prospectus and
Proxy Statement or Registration Statement, and that such opinion is solely for
the benefit of the Trust and the Acquiring Fund.
Such opinion shall contain such other assumptions and limitations as
shall be in the opinion of Morgan, Lewis & Bockius LLP appropriate to render the
opinions expressed therein, and shall indicate, with respect to matters of
Maryland law, that as Morgan, Lewis & Bockius LLP are not admitted to the bar of
Maryland, such opinions are based either upon the review of published statutes,
cases and rules and regulations of the State of Maryland or upon an opinion of
Maryland counsel.
In this paragraph 7.3, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
7.4 The merger between First Union Corporation and CoreStates Financial
Corp shall be completed prior to the Closing Date.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its
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option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of CoreFunds' Articles of
Incorporation and By-Laws and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Selling Fund Shareholders all of the Selling Fund's net investment
company taxable income for all taxable periods ending on or prior to the Closing
Date (computed without regard to any deduction for dividends paid) and all of
its net capital gains realized in all taxable periods ending on or prior to the
Closing Date (after reduction for any capital loss carryforward).
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8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Acquiring Fund and the Selling Fund substantially
to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund Shares to the Selling Fund in dissolution and liquidation of the
Selling Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund will each
be a "party to a reorganization" within the meaning of Section 368(b) of the
Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
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Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from [Name of Accountant] a
letter addressed to the Acquiring Fund, in form and substance satisfactory to
the Acquiring Fund, to the effect that:
(a) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of any unaudited pro forma financial statements included in the Registration
Statement and Prospectus and Proxy Statement, and inquiries of appropriate
officials of CoreFunds responsible for financial and accounting matters, nothing
came to their attention that caused them to believe that such unaudited pro
forma financial statements do not comply as to form in all material respects
with the applicable accounting requirement of the 1933 Act and the published
rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus and Proxy Statement has
been obtained from and is consistent with the accounting records of the Selling
Fund; and
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the pro forma financial
statements that are included in the Registration Statement and Prospectus and
Proxy Statement were prepared based on the valuation of the Selling Fund's
assets in accordance with the Trust's Declaration of Trust and the Acquiring
Fund's then current prospectuses and statement of additional information
pursuant to procedures customarily utilized by the Acquiring Fund in valuing its
own assets;
(d) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by Selling Fund's
management and were found to be mathematically correct.
In addition, the Acquiring Fund shall have received from [Name of
Accountant] a letter addressed to the Acquiring Fund
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dated on the Closing Date, in form and substance satisfactory to the Acquiring
Fund, to the effect, that on the basis of limited procedures agreed upon by the
Acquiring Fund (but not an examination in accordance with generally accepted
auditing standards), the calculation of net asset value per share of the Selling
Fund as of the Valuation Date was determined in accordance with generally
accepted accounting practices and the portfolio valuation practices of the
Acquiring Fund.
8.8 The Selling Fund shall have received from [Name of Accountant] a
letter addressed to the Selling Fund, in form and substance satisfactory to the
Selling Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of any
unaudited pro forma financial statements included in the Registration Statement
and Prospectus and Proxy Statement, and inquiries of appropriate officials of
the Trust responsible for financial and accounting matters, nothing came to
their attention that caused them to believe that such unaudited pro forma
financial statements do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder;
(c) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(d) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratio appearing in the Registration Statement and Prospectus and Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
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<PAGE>
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank ("FUNB"). Such
expenses include, without limitation, (a) expenses incurred in connection with
the entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing of the Prospectus and
Proxy Statement to such shareholders; (d) postage; (e) printing; (f) accounting
fees; (g) legal fees; and (h) solicitation costs of the transaction.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own federal and
state registration fees. In the event that the merger of First Union Corporation
and CoreStates Financial Corp is not completed, this Agreement shall terminate.
In such event, all expenses of the transactions contemplated by this Agreement
incurred by the Acquiring Fund will be borne by FUNB and all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund will be
borne by CoreStates Investment Advisers, Inc.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
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<PAGE>
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, CoreFunds, the respective Trustees,
Directors or officers, to the other party or its Trustees, Directors or
officers, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by the Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Selling Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Selling Fund, shall
be governed and construed in accordance with the laws of the State of Maryland,
without giving effect to the conflicts of laws provisions thereof.
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<PAGE>
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
trust property of the Acquiring Fund, as provided in the Declaration of Trust of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust on behalf of the Acquiring Fund and signed by
authorized officers of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of the
Acquiring Fund as provided in the Declaration of Trust of the Trust.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN MONEY MARKET TRUST
ON BEHALF OF EVERGREEN
[NAME OF FUND]
By:
Name:
Title:
COREFUNDS, INC.
ON BEHALF OF [NAME OF FUND]
By:
Name:
Title:
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<PAGE>
EXHIBIT B
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 30, 1998 between COREFUNDS, INC., a Maryland
corporation (hereinafter the "Company"), and CORESTATES INVESTMENT ADVISERS,
INC., a Pennsylvania corporation (hereinafter the "Investment Adviser").
WHEREAS, the Company is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate classes representing shares in separate portfolios of securities and
other assets; and
WHEREAS, the Company desires to retain the Investment Adviser to
furnish investment advisory services to the Company and its portfolios, and the
Investment Adviser is willing to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Investment Adviser to
act as investment adviser to the portfolios of the Company for the period and on
the terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Company has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
a. the Company's Articles of Incorporation, as filed with the Secretary
of State of Maryland on September 11, 1984, and all amendments thereto (such
Articles, as presently in effect and as they shall from time to time be amended
or supplemented, are herein called the "Articles of Incorporation");
b. the Company's By-Laws and amendments thereto (such ByLaws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
c. resolutions of the Company's Board of Directors authorizing the
appointment of the Investment Adviser and approving this Agreement;
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<PAGE>
d. the Company's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission on September 11,
1984 and all amendments thereto;
e. the Company's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") (File No. 2-93214) and under the
1940 Act as filed with the Securities and Exchange Commission and all amendments
thereto; and
f. the Company's most recent Prospectuses and Statement of Additional
Information (such Prospectuses and Statement of Additional Information, as
presently in effect and all amendments and supplements thereto, are herein
called the "Prospectuses").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Company's Board of
Directors, the Investment Adviser will provide a continuous investment program
for each portfolio of the Company, including investment guidelines and
management with respect to all securities and investments and cash equivalents
held by the existing portfolios and such other portfolios (hereinafter
collectively, the "Portfolios") offered by the Company and identified by the
Company as appropriate. The Investment Adviser will determine from time to time
what securities and other investments will be purchased, retained, or sold by
the Company. The Investment Adviser will provide the services under this
Agreement in accordance with the Company's investment objective, policies, and
restrictions as stated in the Prospectuses and resolutions of the Company's
Board of Directors.
The Investment Adviser further agrees that it:
a. will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition conduct its activities
under this Agreement in accordance with any regulations of the Comptroller of
the Currency pertaining to the investment advisory activities of national banks;
b. will not make loans to any person to purchase or carry the Company's
shares or make loans to the Company;
c. will place orders pursuant to its investment determinations for the
Company on behalf of its Portfolios either directly with the issuer or with any
broker or dealer. In placing orders with brokers and dealers the primary
consideration of the Investment Adviser will be the prompt execution of orders
in an effective manner at the most favorable price. Subject to this
consideration, brokers or dealers who
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<PAGE>
provide supplemental research to the Investment Adviser may receive orders for
transactions with the Company. In no instance will portfolio securities be
purchased from or sold to CoreStates Financial Corp or any affiliated person of
either the Company or CoreStates Financial Corp;
d. will maintain all books and records with respect to the Company's
portfolio securities transactions and will furnish the Company's Board of
Directors such periodic and special reports as the Board may request;
e. will treat confidentially and as proprietary information of the
Company all records and other information relative to the Company and prior,
present, or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company;
f. will provide to the Company and the Company's other service
providers, at such intervals as may be reasonably requested by the Company,
information relating to (i) the performance of services by the Investment
Adviser hereunder, and (ii) market quotations of portfolio securities held by
the Company on behalf of its Portfolios;
g. will direct and use its best efforts to cause the broker or dealer
involved in any portfolio transaction with the Company to send a written
confirmation of such transaction to the Company's Custodian and Transfer Agent;
and
h. will not purchase shares of the Company for itself or for accounts
with respect to which it is exercising sole investment discretion in connection
with such transactions.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Company are the property of the Company and further agrees
to surrender promptly to the Company any of such records upon the Company's
request. The Investment Adviser further agrees to preserve for
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<PAGE>
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Company and the cost of obtaining market
quotations of portfolio securities held by the Company.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, effective as of the date of this Agreement, the
Company will pay the Investment Adviser and the Investment Adviser will accept
as full compensation for services rendered to the Portfolios therefor, the fees
detailed in Appendix A attached to this Agreement; provided, however, that if
the total expenses borne by any Portfolio of the Company in any fiscal year of
the Company exceeds any expense limitations imposed by applicable state
securities laws or regulations, the Investment Adviser will reimburse the
Portfolio for a portion of such excess equal to the amount of such excess times
the ratio of the fees otherwise payable to the Investment Adviser hereunder to
the aggregate fees otherwise payable to the Investment Adviser hereunder and SEI
Fund Resources pursuant to an Administration Agreement between it and the
Company. The Investment Adviser's obligation to reimburse the Company on behalf
of its Portfolios hereunder is limited in any fiscal year of the Company to the
amount of the Investment Adviser's fee hereunder for such fiscal year; provided,
however, that notwithstanding the foregoing, the Investment Adviser shall
reimburse the Company for such excess regardless of the fees paid to it to the
extent that the securities laws or regulations of any state having jurisdiction
over the Company so require. Any such expense reimbursements will be estimated
daily and reconciled and paid on a monthly basis.
8. Use of Investment Adviser's Name and Logo. The Company agrees that
it shall furnish to the Investment Adviser, prior to any use or distribution
thereof, copies of all prospectuses, statements of additional information, proxy
statements, reports to shareholders, sales literature, advertisements, and other
material prepared for distribution to shareholders of the Portfolios of the
Company or to the public, which in any way refer to or describe the Investment
Adviser or which include any trade names, trademarks, or logos of the Investment
Adviser or any affiliate of the Investment Adviser. The Company further agrees
that it shall not use or distribute any such material if the Investment Adviser
reasonably objects in writing to such use or distribution within ten business
days after the date such
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<PAGE>
material is furnished to the Investment Adviser. The provisions
of this section shall survive the termination of this Agreement.
9. Limitation of Liability. The Investment Adviser 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 performance of this Agreement, 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 the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
10. Duration and Termination. This Agreement will become effective for
each Portfolio as of the date first above written. Subject to the provisions for
termination as provided herein, this Agreement shall remain in effect for each
Portfolio until the earlier of the Closing Date defined in the Agreement and
Plan of Reorganization dated as of April 15, 1998 with respect to each Portfolio
or for two years from the date first above written and from year to year
thereafter, provided such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Company's Board of
Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Company's Board of Directors or by vote
of a majority of the Portfolio's outstanding voting securities. Notwithstanding
the foregoing, this Agreement may be terminated at any time on sixty days
written notice, without the payment of any penalty, by the Company (by vote of
the Board of Directors or by vote of a majority of the Portfolio's outstanding
voting securities) or by the Investment Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
11. Name Protection After Termination. In the event this Agreement is
terminated by either party or upon written notice from the Investment Adviser at
any time, the Company hereby agrees that it will eliminate from its corporate
name any references to the name "CoreFunds." The Company shall have the
nonexclusive use of the name "CoreFunds" in whole or in part so long as this
Agreement is effective or until such notice is given.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or
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<PAGE>
termination is sought. No amendment of this Agreement shall be effective until
approved by vote of a majority of the Portfolio's outstanding voting securities.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Pennsylvania law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
COREFUNDS, INC.
By ____________________________
CORESTATES INVESTMENT ADVISERS, INC.
By ____________________________
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<PAGE>
APPENDIX A
Portfolio Advisory Fee as a
Percentage of average
daily net assets
Growth Equity Fund .75%
Core Equity Fund .74%
Special Equity Fund 1.50%
Equity Index Fund .40%
International Growth Fund .80%
Balanced Fund .70%
Short-Intermediate Bond Fund .50%
Bond Fund .74%
Short Term Income Fund .74%
Government Income Fund .50%
Intermediate Municipal Bond Fund .50%
Pennsylvania Municipal Bond Fund .50%
New Jersey Municipal Bond Fund .50%
Global Bond Fund .60%
Cash Reserve .40%
Treasury Reserve .40%
Tax-Free Reserve .40%
Elite Cash Reserve .20%
Elite Government Reserve .20%
Elite Treasury Reserve .20%
Elite Tax-Free Reserve .20%
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<PAGE>
Exhibit C
EVERGREEN
Money Market Fund
Fund at a Glance as of January 31, 1998
PORTFOLIO COMPOSITION
(as a percentage of portfolio assets)
[PIE CHART OF PORTFOLIO COMPOSITION APPEARS HERE]
Portfolio
Management
----------
[PHOTO OF KELLIE ALLEN APPEARS HERE]
KELLIE ALLEN
Vice President
Capital Management Group
Tenure: December 1, 1997
[PHOTO OF BRYAN K. WHITE APPEARS HERE]
BRYAN K. WHITE
Assistant Vice President
Capital Management Group
Tenure: December 1, 1997
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
CLASS A CLASS B Class C Class Y
Inception Date 1/4/95 1/26/95 8/1/97 11/2/87
<S> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS*
- - ---------------------------------------------------------------------------------------------------
One year with sales charge N/A (0.73)% -- N/A
- - ---------------------------------------------------------------------------------------------------
One year w/o sales charge 5.00% 4.27% -- 5.32%
- - ---------------------------------------------------------------------------------------------------
3 years 3.40% 3.43% -- 5.40%
- - ---------------------------------------------------------------------------------------------------
5 years -- -- 4.71%
- - ---------------------------------------------------------------------------------------------------
10 years -- -- -- 5.85%
- - ---------------------------------------------------------------------------------------------------
Since Inception 3.44% 3.43% 2.30% 5.88%
- - ---------------------------------------------------------------------------------------------------
Maximum Sales Charge N/A 5.00% 1.00% N/A
CDSC CDSC
- - ---------------------------------------------------------------------------------------------------
7-DAY ANNUALIZED YIELD 4.95% 4.24% 4.24% 5.24%
- - ---------------------------------------------------------------------------------------------------
30-DAY ANNUALIZED YIELD 5.00% 4.29% 4.29% 5.29%
- - ---------------------------------------------------------------------------------------------------
</TABLE>
*Adjusted for maximum applicable sales charge
ANNUALIZED 7-DAY YIELD
[FLOW CHART OF ANNUALIZED 7-DAY YIELD APPEARS HERE]
TOTAL NET ASSETS:$3,546,681,561
AVERAGE MATURITY: 57 days
<PAGE>
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
C-1
<PAGE>
EVERGREEN
Municipal Money Market Fund
Fund at a Glance as of January 31, 1998
PORTFOLIO COMPOSITION
(as a percentage of portfolio assets)
[PIE CHART OF PORTFOLIO COMPOSITION APPEARS HERE]
Portfolio
Management
----------
[PHOTO OF STEPHEN C. SHACHAT APPEARS HERE]
STEPHEN C. SHACHAT
Vice President
Evergreen Asset
Management Corp.
Tenure: November 2, 1988
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
CLASS A CLASS Y
Inception Date 1/5/95 11/2/88
<S> <C> <C>
AVERAGE ANNUAL RETURNS
1 year 3.18% 3.46%
3 years 3.24% 3.54%
5 years -- 3.19%
Since Inception 3.24% 4.10%
7-DAY ANNUALIZED YIELD 3.05% 3.35%
30-DAY ANNUALIZED YIELD 3.04% 3.34%
</TABLE>
[FLOW CHART OF ANNUALIZED 7-DAY YIELD APPEARS HERE]
TOTAL NET ASSETS:$1,057,811,694
AVERAGE MATURITY: 54 days
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
C-2
<PAGE>
EVERGREEN
Treasury Money Market Fund
Fund at a Glance as of January 31, 1998
<PAGE>
PORTFOLIO COMPOSITION
(as a percentage of portfolio assets)
[PIE CHART OF PORTFOLIO COMPOSITION APPEARS HERE]
Portfolio
Management
----------
[PHOTO OF KELLIE ALLEN APPEARS HERE]
KELLIE ALLEN
Vice President
Capital Management Group
Tenure: March 3, 1991
[PHOTO OF BRYAN K. WHITE APPEARS HERE]
BRYAN K. WHITE
Assistant Vice President
Capital Management Group
Tenure: December 31, 1997
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
CLASS A CLASS Y
Inception Date 3/6/91 3/6/91
<S> <C> <C>
AVERAGE ANNUAL RETURNS
1 year 4.92% 5.23%
3 years 5.03% 5.34%
5 years 4.35% 4.66%
Since Inception 4.31% 4.61%
7-DAY ANNUALIZED YIELD 4.43% 5.23%
30-DAY ANNUALIZED YIELD 4.89% 5.19%
</TABLE>
[FLOW CHART OF ANNUALIZED 7-DAY YIELD APPEARS HERE]
TOTAL NET ASSETS:$3,187,904,612
AVERAGE MATURITY: 40 days
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
C-3
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
CASH RESERVE
TREASURY RESERVE
TAX-FREE RESERVE
Series of
COREFUNDS, INC.
530 East Swedesford Road
Wayne, Pennsylvania 19087
(800) 355-2673
By and In Exchange For Shares of
EVERGREEN MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
EVERGREEN MUNICIPAL MONEY MARKET FUND
Series of
EVERGREEN MONEY MARKET TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Cash Reserve , Treasury
Reserve and Tax- Free Reserve (each a "CoreFunds Money Market Fund" and
together, the "CoreFunds Money Market Funds"), series of CoreFunds, Inc., to
Evergreen Money Market Fund, Evergreen Treasury Money Market Fund, and Evergreen
Municipal Money Market Fund, respectively (each an "Evergreen Money Market Fund"
and together, the "Evergreen Money Market Funds") series of Evergreen Money
Market Trust, in exchange for Class A shares (to be issued to holders of Class C
shares of a CoreFunds Money Market Fund), Class B shares (to be issued to
holders of Class B shares of CoreFunds Money Market Fund) and Class Y shares (to
be issued to holders of Class Y shares of a CoreFunds Money Market Fund) of
beneficial interest, $.001 par value per share, of each corresponding Evergreen
Money Market Fund, consists of this cover page and the following described
documents, each of which is attached hereto and incorporated by reference
herein:
(1) The Statement of Additional Information of the Evergreen Money
Market Funds dated June 1, 1998;
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<PAGE>
(2) The Statement of Additional Information of the CoreFunds Money
Market Funds dated November 1, 1997;
(3) Annual Report of the Evergreen Money Market Funds dated
January 31, 1998;
(4) Annual Report of the CoreFunds Money Market Funds dated June
30, 1997;
(5) Semi-Annual Report of the CoreFunds Money Market Funds for the
six month period ended December 31, 1997; and
(6) Pro Forma Combining Financial Statements (unaudited) dated
January 31, 1998 and Pro Forma Combining Statements of
Operations dated August 31, 1997 of Evergreen Money Market
Fund, Evergreen Treasury Money Market Fund and Evergreen
Municipal Money Market Fund.
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of the Evergreen Money Market Funds and the CoreFunds Money Market
Funds dated June 1, 1998. A copy of the Prospectus/Proxy Statement may be
obtained without charge by calling or writing to the Evergreen Money Market
Funds or the CoreFunds Money Market Funds at the telephone numbers or addresses
set forth above.
The date of this Statement of Additional Information is June 1, 1998.
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<PAGE>
EVERGREEN MONEY MARKET TRUST
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1998
EVERGREEN MONEY MARKET FUND ("MONEY FUND")
EVERGREEN MUNICIPAL MONEY MARKET FUND ("MUNICIPAL FUND")
EVERGREEN PENNSYLVANIA MUNICIPAL MONEY MARKET FUND ("PENNSYLVANIA FUND")
EVERGREEN TREASURY MONEY MARKET FUND ("TREASURY FUND")
(EACH A "FUND"; TOGETHER, THE "FUNDS")
EACH FUND IS A SERIES OF AN OPEN-END MANAGEMENT INVESTMENT COMPANY KNOWN AS
EVERGREEN MONEY MARKET TRUST (THE "TRUST").
This Statement of Additional Information ("SAI") pertains to all
classes of shares of the Funds listed above. It is not a prospectus and should
be read in conjunction with the prospectuses dated June 1, 1998 for the Fund in
which you are making or contemplating an investment. The Funds are offered
through two separate prospectuses: one offering Class A shares of each Fund and
Class B and Class C shares of Evergreen Money Market Fund and one offering Class
Y shares of each Fund. You may obtain any of these prospectuses from Evergreen
Distributor, Inc.
22814
<PAGE>
TABLE OF CONTENTS
FUND INVESTMENTS......................................................3
General Information..........................................3
Fundamental Policies.........................................5
Investment Guidelines........................................6
MANAGEMENT OF THE TRUST...............................................7
PRINCIPAL HOLDERS OF FUND SHARES.....................................10
INVESTMENT ADVISORY AND OTHER SERVICES...............................13
Investment Advisers.........................................13
Investment Advisory Agreements..............................13
Distributor.................................................14
Distribution Plans and Agreements...........................14
Additional Service Providers................................15
BROKERAGE............................................................16
Selection of Brokers........................................16
Brokerage Commissions.......................................16
General Brokerage Policies..................................17
TRUST ORGANIZATION...................................................17
Form of Organization........................................17
Description of Shares.......................................17
Voting Rights...............................................17
Limitation of Trustees' Liability...........................18
PURCHASE, REDEMPTION AND PRICING OF SHARES...........................18
How the Funds Offer Shares to the Public....................18
Purchase Alternatives.......................................18
Contingent Deferred Sales Charge............................19
Waiver of CDSCs.............................................19
Exchanges...................................................20
Calculation of Net Asset Value Per Share ("NAV")............20
Valuation of Portfolio Securities...........................20
Shareholder Services........................................21
PRINCIPAL UNDERWRITER................................................21
ADDITIONAL TAX INFORMATION...........................................22
Requirements for Qualification as a Regulated
Investment Company...................................22
Taxes on the Sale or Exchange of Fund Shares................22
Taxes on Distributions......................................23
Special Tax Considerations for Municipal Fund and
Pennsylvania Fund....................................23
Other Tax Considerations....................................24
EXPENSES.............................................................24
Advisory Fees...............................................25
Distribution Fees...........................................26
Brokerage Commissions.......................................26
PERFORMANCE..........................................................26
Current, Effective and Tax-Equivalent Yields................26
ADDITIONAL INFORMATION...............................................28
FINANCIAL STATEMENTS.................................................28
APPENDIX A...........................................................A-1
APPENDIX B...........................................................B-1
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<PAGE>
FUND INVESTMENTS
GENERAL INFORMATION
The investment objective of each Fund and a description of the
securities in which each Fund may invest is set forth in each Fund's prospectus.
The following expands upon the discussion in the prospectuses regarding certain
investments of the Funds.
Municipal Securities (Municipal Fund, Pennsylvania Fund)
The Fund will invest in municipal securities determined to present
minimal credit risk and which are, at the time of acquisition, eligible
securities pursuant to Rule 2a-7 under the Investment Company Act of 1940 (the
"1940 Act"), as amended. The Fund will also comply with the diversification
requirements prescribed by Rule 2a-7. The Fund, under normal circumstances,
invests its assets so that at least 80% of its annual interest income is exempt
from federal income tax other than the alternative minimum tax.
For the purpose of certain requirements under the 1940 Act and each
Fund's various investment restrictions, identification of the "issuer" of a
municipal security depends on the terms and conditions of the security. When the
assets and revenues of a political subdivision are separate from those of the
government which created the subdivision and the security is backed only by the
assets and revenues of the subdivision, the subdivision would be deemed to be
the sole issuer. Similarly, in the case of an industrial development bond, if
that bond is backed only by the assets and revenues of the non-governmental
user, then the non-governmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity guarantees
the security, the guarantee would be considered a separate security and would be
treated as an issue of the government or other agency.
Municipal bonds may be categorized as "general obligation" or "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are secured by the net revenue derived from a particular facility or group of
facilities or, in some cases, the proceeds of a special excise tax or other
specific revenue source, but not by the general taxing power. Industrial
development bonds are, in most cases, revenue bonds and do not generally carry
the pledge of the credit of the issuing municipality or public authority.
Municipal Notes
Municipal notes include, but are not limited to, tax anticipation
notes, bond anticipation notes, revenue anticipation notes, construction loan
notes and project notes. Notes sold as interim financing in anticipation of
collection of taxes, a bond sale or receipt of other revenue are usually general
obligations of the issuer. Project notes are issued by local housing authorities
to finance urban renewal and public housing projects and are secured by the full
faith and credit of the U.S. government.
Municipal Commercial Paper
Municipal commercial paper is issued to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term debt. It
is paid from the general revenues of the issuer or refinanced with additional
issuances of commercial paper or long-term debt.
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<PAGE>
Municipal Leases
Municipal leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchases or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. These types of municipal leases may be considered illiquid
and subject to the 10% limitation on investments in illiquid securities set
forth under "Investment Guidelines" contained herein. The Board of Trustees of
the Trust under which each Fund operates may adopt guidelines and delegate to
the Adviser (as defined below) the daily function of determining and monitoring
the liquidity of municipal leases. In making such determination, the Board and
the Adviser may consider such factors as the frequency of trades for the
obligations, the number of dealers willing to purchase or sell the obligations,
the number of other potential buyers and the nature of the marketplace for the
obligations, including the time needed to dispose of the obligations and the
method of soliciting offers. If the Board determines that any municipal leases
are illiquid, such leases will be subject to the 10% limitation on investments
in illiquid securities.
For purposes of diversification under the 1940 Act, the identification
of the issuer of municipal obligations depends on the terms and conditions of
the obligation. If the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from those of the
government creating the subdivision and the obligation is backed only by the
assets and revenues of the subdivision, such subdivision would be regarded as
the sole issuer. Similarly, in the case of an industrial development bond, if
the bond is backed only by the assets and revenues of the non-governmental user,
the non-governmental user would be deemed to be the sole issuer. If in either
case the creating government or another entity guarantees an obligation, the
guarantee would be considered a separate security and be treated as an issue of
such government or entity.
As described in each Fund's prospectus, each Fund may, under limited
circumstances, elect to invest in certain taxable securities and repurchase
agreements with respect to those securities. A Fund will enter into repurchase
agreements only with broker-dealers, domestic banks or recognized financial
institutions which, in the opinion of the Fund's Adviser, present minimal credit
risks. In the event of default by the seller under a repurchase agreement, a
Fund may have problems in exercising its rights to the underlying securities and
may incur costs and experience time delays in connection with the disposition of
such securities. The Fund's Adviser will monitor the value of the underlying
security at the time the transaction is entered into and at all times during the
term of the repurchase agreement to ensure that the value of the security always
equals or exceeds the agreed upon repurchase price. Repurchase agreements may be
considered to be loans under the 1940 Act, collateralized by the underlying
securities.
Securities With Put Rights (Or "Stand-by Commitments")
When a Fund purchases municipal obligations it may obtain the right to
resell them, or "put" them, to the seller (a broker-dealer or bank) at an
agreed-upon price within a specific period prior to
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<PAGE>
their maturity date. The Fund does not limit the percentage of its assets that
may be invested in securities with put rights.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Fund's acquisition cost of the securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during the period the
securities were owned by the Fund. Absent unusual circumstances, each Fund
values the underlying securities at their amortized cost. Accordingly, the
amount payable by a broker-dealer or bank during the time a put is exercisable
will be substantially the same as the value of the underlying securities.
FUNDAMENTAL POLICIES
The Funds have adopted the fundamental investment restrictions set
forth below which may not be changed without the vote of a majority of each
Fund's outstanding shares, as defined in the 1940 Act. Unless otherwise stated,
all references to the assets of a Fund are in terms of current market value.
Diversification
Each Fund, except Pennsylvania Fund which is nondiversified, may not
make any investment that is inconsistent with its classification as a
diversified investment company under the 1940 Act.
Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in a particular industry (other than securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities or, in
the case of Money Fund, domestic bank money instruments).
Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as each Fund may be deemed an underwriter in connection with the
disposition of its portfolio securities.
Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, each Fund may invest in (a) securities that
are directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
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<PAGE>
Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities except to the extent that each Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law, and without registering as a
commodity pool operator under the Commodity Exchange Act.
Loans to Other Persons
Each Fund may not make loans to other persons, except that the Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
Federally Tax Exempt Securities
Municipal Fund and Pennsylvania Fund will, during periods of normal
market conditions, invest their assets in accordance with applicable guidelines
issued by the Securities and Exchange Commission ("SEC") or its staff concerning
investment in tax-exempt securities for funds with the words "tax-exempt,"
"tax-free," or "municipal" in their names.
INVESTMENT GUIDELINES
Unlike the Fundamental Policies above, to the extent permitted by law,
the following guidelines may be changed by the Trust's Board of Trustees without
shareholder approval. Unless otherwise stated, all references to the assets of a
Fund are in terms of current market value.
Diversification
To remain classified as a diversified investment company under the 1940
Act, each Fund, except Pennsylvania Fund, must conform with the following: With
respect to 75% of its total assets, a diversified investment company may not
invest more than 5% of its total assets, determined at market or other fair
value at the time of purchase, in the securities of any one issuer, or invest in
more than 10% of the outstanding voting securities of any one issuer, determined
at the time of purchase. These limitations do not apply to investments in
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
As a nondiversified investment company, Pennsylvania Fund is not
subject to the limitations imposed on diversified investment companies under the
1940 Act, but it must meet other diversification requirements as a regulated
investment company (a "RIC") under Subchapter M of the Internal Revenue Code of
1986 (the "Code"). Under the Code, a RIC is permitted to invest 50% of its total
assets in two issuers (i.e., 25% each); the remaining 50% of its total assets
must be diversified according to the 5% and 10% limits described above.
Borrowings
Each Fund may borrow money from banks or enter into reverse repurchase
agreements in an amount up to one third of its total assets. Each Fund may also
borrow an additional 5% of its total assets from banks or others. Each Fund may
borrow only as a temporary measure for extraordinary or emergency purposes. Each
Fund will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights. Each Fund may
obtain such
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<PAGE>
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. Each Fund may purchase securities on margin to the
extent permitted by applicable law.
Concentration
For purposes of the investment restriction on concentration, the phrase
"securities of issuers primarily engaged in any particular industry" includes
industrial development bonds from the same facility or similar types of
facilities. Otherwise, each Fund may invest more than 25% of its assets in
industrial development bonds. Also, governmental issuers are not considered to
be members of an industry for concentration purposes.
Illiquid And Restricted Securities
Each Fund may not invest more than 10% of its net assets in securities
that are illiquid. A security is illiquid when a Fund cannot dispose of it in
the ordinary course of business within seven days at approximately the value at
which the Fund has the investment on its books.
Each Fund, except for Treasury Fund, may invest in "restricted"
securities, i.e., securities subject to restrictions on resale under federal
securities laws. Rule 144A under the Securities Act of 1933 allows certain
restricted securities to be traded freely among qualified institutional
investors. Since Rule 144A securities may have limited markets, the Board of
Trustees will determine whether such securities should be considered illiquid
for the purpose of determining a Fund's compliance with the limit on illiquid
securities indicated above. In determining the liquidity of Rule 144A
securities, the Trustees will consider: (1) the frequency of trades and quotes
for the security; (2) the number of dealers willing to purchase or sell the
security and the number of other potential buyers; (3) dealer undertakings to
make a market in the security; and (4) the nature of the security and the nature
of the marketplace trades.
Investment in Other Investment Companies
Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not: (1) own more
than 3% of the outstanding voting stock of another investment company; (2)
invest more than 5% of its assets in any single investment company; and (3)
invest more than 10% of its assets in investment companies. However, each Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
Short Sales
Each Fund may not make short sales of securities or maintain a short
position unless, at all times when a short position is open, it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. Each Fund may
effect a short sale in connection with an underwriting in which a Fund is a
participant.
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and their
principal occupations and
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<PAGE>
some of their affiliations over the last five years. Unless otherwise indicated,
the address for each Trustee and officer is 200 Berkeley Street, Boston,
Massachusetts 02116. Each Trustee is also a Trustee of each of the other Trusts
in the Evergreen Fund complex, other than Evergreen Variable Trust of which
Messrs. Howell, Salton and Scofield are the only Trustees.
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
<S> <C> <C>
LAURENCE B. ASHKIN TRUSTEE REAL ESTATE DEVELOPER AND CONSTRUCTION
(DOB: 2/2/28) CONSULTANT; AND PRESIDENT OF CENTRUM EQUITIES
AND CENTRUM PROPERTIES, INC.
CHARLES A. AUSTIN III TRUSTEE INVESTMENT COUNSELOR TO APPLETON PARTNERS,
(DOB: 10/23/34) INC.; AND FORMER MANAGING DIRECTOR, SEAWARD
MANAGEMENT CORPORATION (INVESTMENT ADVICE).
K. DUN GIFFORD TRUSTEE TRUSTEE, TREASURER AND CHAIRMAN OF THE FINANCE
(DOB: 10/12/38) COMMITTEE, CAMBRIDGE COLLEGE; CHAIRMAN
EMERITUS AND DIRECTOR, AMERICAN INSTITUTE OF
FOOD AND WINE; CHAIRMAN AND PRESIDENT, OLDWAYS
PRESERVATION AND EXCHANGE TRUST (EDUCATION);
FORMER CHAIRMAN OF THE BOARD, DIRECTOR, AND
EXECUTIVE VICE PRESIDENT, THE LONDON HARNESS
COMPANY; FORMER MANAGING PARTNER, ROSCOMMON
CAPITAL CORP.; FORMER CHIEF EXECUTIVE OFFICER,
GIFFORD GIFTS OF FINE FOODS; FORMER CHAIRMAN,
GIFFORD, DRESCHER & ASSOCIATES (ENVIRONMENTAL
CONSULTING); AND FORMER DIRECTOR, KEYSTONE
INVESTMENTS, INC.
JAMES S. HOWELL CHAIRMAN OF THE BOARD FORMER CHAIRMAN OF THE DISTRIBUTION
(DOB: 8/13/24) OF TRUSTEES FOUNDATION FOR THE CAROLINAS; AND FORMER VICE
PRESIDENT OF LANCE INC. (FOOD MANUFACTURING).
LEROY KEITH, JR. TRUSTEE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
(DOB: 2/14/29) OFFICER, CARSON PRODUCTS COMPANY; DIRECTOR
OF PHOENIX TOTAL RETURN FUND AND EQUIFAX
INC.; TRUSTEE OF PHOENIX SERIES FUND, PHOENIX
MULTI-PORTFOLIO FUND, AND THE PHOENIX BIG
EDGE SERIES FUND; AND FORMER PRESIDENT,
MOREHOUSE COLLEGE.
GERALD M. MCDONNELL TRUSTEE SALES REPRESENTATIVE WITH NUCOR-YAMOTO, INC.
(DOB: 7/14/39) (STEEL PRODUCER)
THOMAS L. MCVERRY TRUSTEE FORMER VICE PRESIDENT AND DIRECTOR OF REXHAM
(DOB: 8/2/39) CORPORATION; AND FORMER DIRECTOR OF CAROLINA
COOPERATIVE FEDERAL CREDIT UNION.
WILLIAM WALT PETTIT TRUSTEE PARTNER IN THE LAW FIRM OF WILLIAM WALT PETTIT,
(DOB: 8/26/55) P.A.
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<PAGE>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATION FOR LAST FIVE YEARS
DAVID M. RICHARDSON TRUSTEE VICE CHAIR AND FORMER EXECUTIVE VICE
(DOB: 9/14/41) PRESIDENT, DHR INTERNATIONAL, INC. (EXECUTIVE
RECRUITMENT); FORMER SENIOR VICE PRESIDENT,
BOYDEN INTERNATIONAL INC. (EXECUTIVE
RECRUITMENT); AND DIRECTOR, COMMERCE AND
INDUSTRY ASSOCIATION OF NEW JERSEY, 411
INTERNATIONAL, INC., AND J&M CUMMING PAPER
CO.
RUSSELL A. SALTON, III MD TRUSTEE MEDICAL DIRECTOR, U.S. HEALTH CARE/AETNA
(DOB: 6/2/47) HEALTH SERVICES; FORMER MANAGED HEALTH CARE
CONSULTANT; AND FORMER PRESIDENT, PRIMARY
PHYSICIAN CARE.
MICHAEL S. SCOFIELD TRUSTEE ATTORNEY, LAW OFFICES OF MICHAEL S. SCOFIELD.
(DOB: 2/20/43)
RICHARD J. SHIMA TRUSTEE FORMER CHAIRMAN, ENVIRONMENTAL WARRANTY, INC.
(DOB: 8/11/39) (INSURANCE AGENCY); EXECUTIVE CONSULTANT,
DRAKE BEAM MORIN, INC. (EXECUTIVE
OUTPLACEMENT); DIRECTOR OF CONNECTICUT NATURAL
GAS CORPORATION, HARTFORD HOSPITAL, OLD STATE
HOUSE ASSOCIATION, MIDDLESEX MUTUAL ASSURANCE
COMPANY, AND ENHANCE FINANCIAL SERVICES, INC.;
CHAIRMAN, BOARD OF TRUSTEES, HARTFORD GRADUATE
CENTER; TRUSTEE, GREATER HARTFORD YMCA; FORMER
DIRECTOR, VICE CHAIRMAN AND CHIEF INVESTMENT
OFFICER, THE TRAVELERS CORPORATION; FORMER
TRUSTEE, KINGSWOOD-OXFORD SCHOOL; AND FORMER
MANAGING DIRECTOR AND CONSULTANT, RUSSELL
MILLER, INC.
WILLIAM J. TOMKO* PRESIDENT AND TREASURER SENIOR VICE PRESIDENT AND OPERATIONS
(DOB: 8/30/58) EXECUTIVE, BISYS FUND SERVICES.
NIMISH S. BHATT* VICE PRESIDENT AND VICE PRESIDENT, TAX, BISYS FUND SERVICES;
(DOB: 6/6/63) ASSISTANT TREASURER FORMER ASSISTANT VICE PRESIDENT, EVERGREEN
ASSET MANAGEMENT CORP./FIRST UNION BANK;
FORMER SENIOR TAX CONSULTANT/ACTING
MANAGER, INVESTMENT COMPANIES GROUP, PRICE
WATERHOUSE LLP, NEW YORK.
BRYAN HAFT* VICE PRESIDENT TEAM LEADER, FUND ADMINISTRATION, BISYS
(DOB: 1/23/65) FUND SERVICES.
D'RAY MOORE* SECRETARY SENIOR VICE PRESIDENT AND OPERATIONS
(DOB: 3/30/59) EXECUTIVE, BISYS FUND SERVICES.
</TABLE>
*ADDRESS: BISYS FUND SERVICES, 3435 STELZER ROAD, COLUMBUS, OHIO 43219-8001
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<PAGE>
PRINCIPAL HOLDERS OF FUND SHARES
As of the date of this SAI, the officers and Trustees of the Trust
owned as a group less than 1% of the outstanding Class A, Class B, Class C or
Class Y shares, as applicable, of any Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a Class of a
Fund's outstanding shares as of April 30, 1998.
MONEY FUND / CLASS A
FUNB 74.229%
Attn: Cap Finance Gl
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union Brokerage Services 9.649%
Money Market Omnibus Account
CP 13-NC1167
301 S. College St.
Charlotte, NC 28202-6000
MONEY FUND / CLASS B
None
MONEY FUND / CLASS C
State Street Bk and Tr Co Cust 9.240%
Rollover IRA FBO
Mark Loveland
2701 Westheimer Rd. #12H
Houston, TX 77098-1238
State Street BK & Tr Co Cust 7.693%
Mark S. Matlock MD
2817 Mc Clelland Blvd #125
Joplin, MO 64804-1630
Susanna L. Moran 6.712%
126 E. Wing St. #326
Arlington Hts., IL 60004-6064
Sue K. Isbell 6.132%
2226 Potomac #1
Houston, TX 77057-2941
Jack Douglas Perry 5.322%
Asset Mgmt. Account
13806 Boudreaux Estates Dr.
Tomball, TX 77275-7212
<PAGE>
MONEY FUND / CLASS Y
First Union National Bank 47.888%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd Flr
Charlotte, NC 29202-1911
Pitcairn Trust Company 13.090%
One Pitcairn Place
Jenkintown, PA 19046-3531
MUNICIPAL FUND / CLASS A
FUNB 79.108%
Attn: Cap Finance Gl
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union Brokerage Services 11.214%
Money Market Omnibus Account
CP13-NC1167
301 S. College St.
Charlotte, NC 28202-6000
MUNICIPAL FUND / CLASS Y
First Union National Bank 15.581%
Trust Accounts
Attn: Ginny Batten
11th Fl CMG-151
301 S. Tryon St.
Charlotte, NC 28288
Pitcairn Trust Company 12.857%
One Pitcairn Place
Jenkintown, PA 19046-3531
Evergreen Tax-Exempt Money 7.032%
Market "Y" Shr Fund Reinvest A/C
C/O FUNB For Customers
One First Union Center
301 South College St.
Charlotte, NC 28202-6000
TREASURY FUND / CLASS A
FUNB 64.611%
Attn: Cap Finance Gl
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union National Bank 20.890%
Trust Accounts
Attn: Ginny Batten
11th Fl CMG-151
301 S. Tryon St.
Charlotte, NC 28202-1910
<PAGE>
First Union Brokerage Services 5.248%
Money Market Omnibus Account
CP13-NC1167
301 S. College St.
Charlotte, NC 28202-6000
TREASURY FUND / CLASS Y
First Union National Bank 89.307%
Trust Accounts
Attn: Ginny Batten
11th Fl CMG-151
301 S. Tryon St.
Charlotte, NC 28202-1910
Evergreen Money Market 7.625%
"Y" Fund Reinvest A/C
C/O FUNB For Customers
One First Union Center
301 South College St.
Charlotte, NC 28202-6000
PENNSYLVANIA FUND / CLASS A
FUNB 90.137%
Attn: Cap Finance Gl
230 S. Tryon St.
Charlotte, NC 28202-3215
First Union Brokerage Services 8.393%
Money Market Omnibus Account
CP13-NC1167
301 S. College St.
Charlotte, NC 28202-6000
PENNSYLVANIA FUND / CLASS Y
First Union National Bank 89.307%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
401 S. Tryon St. 3rd flr.
Charlotte, NC 28202-1911
Agnes C. Kim 7.846%
760 Conshohocken State Rd.
Gladwyne, PA 19035-1416
Johnathan B. Detwiler 7.761%
P.O. Box 69
Phoenixville, PA 19460-0069
First Union Brokerage Services 6.123%
Money Market Omnibus Account
CP13-NC1167
301 S. College St.
Charlotte, NC 28202-6000
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISERS
The investment adviser to each Fund (the "Adviser") is a subsidiary of
First Union Corporation ("First Union"), a bank holding company headquartered at
301 South College Street, Charlotte, North Carolina 28288-0630. First Union and
its subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. Each Adviser is supervised by the Board
of Trustees.
The Adviser to Treasury Fund and Pennsylvania Fund is the Capital
Management Group of First Union National Bank ("FUNB"), 201 South College
Street, Charlotte, North Carolina 28288-0630. FUNB is entitled to receive from
Treasury Fund an annual fee of 0.35% of the Fund's average daily net assets.
FUNB is entitled to receive from Pennsylvania Fund an annual fee of 0.40% of the
Fund's average daily net assets up to $500 million, 0.36% of the next $500
million of assets, 0.32% of assets in excess of $1 billion but not exceeding
$1.5 billion, and 0.28% of assets in excess of $1.5 billion.
The Adviser to Money Fund and Municipal Fund is Evergreen Asset
Management Corp. ("Evergreen Asset"), 2500 Westchester Avenue, Purchase, New
York 10577. Each Fund pays the Adviser a fee based on a percentage of each
Fund's average daily net assets on an annual basis. The fee is 0.50% of the
first $1 billion and 0.45% of amounts over $1 billion. Under an agreement with
the Adviser, Lieber & Company serves as subadviser to Money Fund and Municipal
Fund at no additional cost to either Fund. Lieber and Company, a subsidiary of
First Union, is located at 2500 Westchester Avenue, Purchase, New York 10577.
INVESTMENT ADVISORY AGREEMENTS
On behalf of each of its Funds, the Trust has entered into an
investment advisory agreement with each Adviser (the "Advisory Agreements").
Under the Advisory Agreements, and subject to the supervision of the Trust's
Board of Trustees, each Adviser furnishes to the appropriate Fund investment
advisory, management and administrative services, office facilities, and
equipment in connection with its services for managing the investment and
reinvestment of the Fund's assets. The Adviser pays for all of the expenses
incurred in connection with the provision of its services. Each Fund pays for
all charges and expenses, other than those specifically referred to as being
borne by the Adviser, including, but not limited to: (1) custodian charges and
expenses; (2) bookkeeping and auditors' charges and expenses; (3) transfer agent
charges and expenses; (4) fees and expenses of Independent Trustees (Trustees
who are not interested persons of a Fund, as defined in the 1940 Act); (5)
brokerage commissions, brokers' fees and expenses; (6) issue and transfer taxes;
(7) costs and expenses under the Distribution Plan (as applicable); (8) taxes
and trust fees payable to governmental agencies; (9) the cost of share
certificates; (10) fees and expenses of the registration and qualification of
such Fund and its shares with the SEC or under state or other securities laws;
(11) expenses of preparing, printing and mailing prospectuses, SAIs, notices,
reports and proxy materials to shareholders of the Fund; (12) expenses of
shareholders' and Trustees' meetings; (13) charges and expenses of legal counsel
for the Fund and for the Independent Trustees of the Trust on matters relating
to such Fund; (14) charges and expenses of filing annual and other reports with
the SEC and other authorities; and (15) all extraordinary charges and expenses
of such Fund.
Each Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of
each Fund's outstanding shares. In either case, the terms of the Advisory
Agreement and continuance thereof must be approved by the vote of a majority of
the Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory
<PAGE>
Agreements may be terminated, without penalty, on 60 days' written notice by the
Trust's Board of Trustees or by a vote of a majority of outstanding shares. Each
Advisory Agreement will terminate automatically upon its "assignment" as that
term is defined in the 1940 Act.
Transactions among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 under the 1940
Act ("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit a Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union is an investment adviser. The Rule 17a-7 Procedures also allow the Funds
to buy or sell securities from other advisory clients for whom a subsidiary of
First Union is an investment adviser. The Funds may engage in such transactions
if they are equitable to each participant and consistent with each participant's
investment objective.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Funds
through broker-dealers and other financial representatives. Its address is 125
West 55th Street, New York, NY 10019.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution fees are accrued daily and paid monthly on Class A shares
of each Fund, and Class B and Class C shares of Money Fund. The fees are charged
as Class expenses, as accrued. The distribution fees attributable to the Class B
shares and Class C shares are designed to permit an investor to purchase such
shares through broker-dealers without the assessment of a front-end sales
charge, and, in the case of Class C shares, without the assessment of a
contingent deferred sales charge after the first year following the month of
purchase, while at the same time permitting the Distributor to compensate
broker-dealers in connection with the sale of such shares. In this regard, the
purpose and function of the combined contingent deferred sales charge and
distribution services fee on Class B shares and Class C shares are the same as
those of the front-end sales charge and distribution fee with respect to the
Class A shares in that in each case the sales charge and/or distribution fee
provide for the financing of the distribution of the Fund's shares.
The National Association of Securities Dealers, Inc. ("NASD") limits
the amount that a mutual fund may pay annually in distribution costs for sale of
its shares and shareholder service fees. The NASD limits annual expenditures to
1.00% of the aggregate average daily net asset value of its shares, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder service fees. The NASD also limits the aggregate amount that the
Fund may pay for such distribution costs to 6.25% of gross share sales since the
inception of the distribution plan, plus interest at the prime rate plus 1.00%
on such amounts remaining unpaid from time to time.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to its Class A shares, as well as Class B and Class C shares
in the case of Money Fund (each a "Plan" and collectively, the "Plans"), the
Treasurer of each Fund reports the amounts expended under the Plans and the
purposes for which such expenditures were made to the Trustees of the Trust for
their review on a quarterly basis. Also, each Plan provides that the selection
and nomination of the Independent Trustees are committed to the discretion of
such Independent Trustees then in office.
Each Adviser may from time to time and from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to the Distributor; the latter may in turn pay part or all
of such compensation to brokers or other persons for their distribution
assistance.
<PAGE>
Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Trust or by vote
of the holders of a majority of the outstanding voting securities of that Class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A shares, as well as
Class B and Class C shares in the case of Money Fund. The Plans are designed to
(i) stimulate brokers to provide distribution and administrative support
services to each Fund and holders of such Class A, Class B, and Class C shares
and (ii) stimulate administrators to render administrative support services to
the Fund and holders of such Class A, Class B and Class C shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to, providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding such
Class A, Class B and Class C shares; assisting clients in changing dividend
options, account designations, and addresses; and providing such other services
as the Fund reasonably requests for its Class A, Class B and Class C shares, as
applicable.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of the Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. Any Plan or Distribution
Agreement may be terminated (i) by a Fund without penalty at any time by a
majority vote of the holders of the outstanding voting securities of the Fund,
voting separately by Class or by a majority vote of the Independent Trustees, or
(ii) by the Distributor. To terminate any Distribution Agreement, any party must
give the other parties 60 days' written notice; to terminate a Plan only, the
Fund need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment.
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
the Treasury Fund and Pennsylvania Fund, subject to the supervision and control
of the Trust's Board of Trustees. EIS provides the Funds with facilities,
equipment and personnel and is entitled to receive a fee based on the aggregate
average daily net assets of the Fund at a rate based on the total assets of all
mutual funds
<PAGE>
advised by First Union subsidiaries. The fee paid to EIS is calculated in
accordance with the following schedule: 0.050% on the first $7 billion; 0.035%
on the next $3 billion; 0.030% on the next $5 billion; 0.020% on the next $10
billion; 0.015% on the next $5 billion and 0.010% on assets in excess of $30
billion.
EIS also provides facilities, equipment and personnel to Money Fund and
Municipal Fund on behalf of Evergreen Asset.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union
Corporation, is the Funds' transfer agent. The transfer agent issues and redeems
shares, pays dividends and performs other duties in connection with the
maintenance of shareholder accounts. The transfer agent's address is 200
Berkeley Street, Boston, Massachusetts 02116.
Independent Auditors/Accountants
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110,
audits the financial statements of Treasury Fund and Pennsylvania Fund.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, audits the financial statements of Money Fund and Municipal Fund.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of each Fund's securities and cash and performs other related
duties. The custodian's address is P.O. Box 9021, Boston, Massachusetts
02205-9827.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its
address is 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
BROKERAGE
SELECTION OF BROKERS
In effecting transactions in portfolio securities for each Fund, the
Adviser seeks the best execution of orders at the most favorable prices. The
Adviser determines whether a broker has provided each Fund with best execution
and price in the execution of a securities transaction by evaluating, among
other things, the broker's ability to execute large or potentially difficult
transactions, and the financial strength and stability of the broker.
BROKERAGE COMMISSIONS
Each Fund expects to buy and sell its fixed-income securities through
principal transactions, that is, directly from the issuer or from an underwriter
or market maker for the securities. Generally, a Fund will not pay brokerage
commissions for such purchases. Usually, when a Fund buys a security from
<PAGE>
an underwriter, the purchase price will include an underwriting commission or
concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down. When a Fund executes transactions in the over-the-counter market, it
will deal with primary market makers unless more favorable prices are otherwise
obtainable.
GENERAL BROKERAGE POLICIES
The Adviser makes investment decisions for each Fund independently from
those of its other clients. It may frequently develop, however, that the Adviser
will make the same investment decision for more than one client. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more of its clients
are engaged in the purchase or sale of the same security, the Adviser will
allocate the transactions according to a formula that is equitable to each of
its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of a Fund's securities, each Fund believes that in
other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Funds may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.
The Board of Trustees periodically reviews each Fund's brokerage policy.
Because of the possibility of further regulatory developments affecting the
securities exchanges and brokerage practices generally, the Board of Trustees
may change, modify or eliminate any of the foregoing practices.
TRUST ORGANIZATION
FORM OF ORGANIZATION
Each Fund is a series of an open-end management investment company,
known as Evergreen Money Market Trust (the "Trust"). The Trust was formed as a
Delaware business trust on September 18, 1997 (the "Declaration of Trust"). A
copy of the Declaration of Trust is on file at the SEC as an exhibit to the
Trust's Registration Statement, of which this SAI is a part. This summary is
qualified in its entirety by reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and Classes of shares. Each share of
each Fund represents an equal proportionate interest with each other share of
that series and/or Class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or Class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of net asset value applicable to such share. Shares generally vote together as
one Class on all matters. Classes of shares of each Fund have equal voting
rights. No amendment may be made to the Declaration of Trust that adversely
affects any Class of shares without the
<PAGE>
approval of a majority of the votes applicable to the shares of that Class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes applicable to shares voting for the election of Trustees
can elect 100% of the Trustees to be elected at a meeting and, in such event,
the holders of the remaining shares voting will not be able to elect any
Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
PURCHASE, REDEMPTION AND PRICING OF SHARES
HOW THE FUNDS OFFER SHARES TO THE PUBLIC
You may buy shares of a Fund through the Distributor, broker-dealers
that have entered into special agreements with the Distributor or certain other
financial institutions. Each Fund offers two Classes of shares, except Money
Fund which offers four Classes, that differ primarily with respect to sales
charges and distribution fees. Depending upon the Class of shares, you will pay
an initial sales charge when you buy a Fund's shares, a contingent deferred
sales charge (a "CDSC") when you redeem a Fund's shares or no sales charges at
all.
PURCHASE ALTERNATIVES
Class A Shares
Each Fund offers Class A shares at net asset value without an initial
sales charge. However, certain broker-dealers and other financial institutions
may impose a fee in connection with Class A purchases of the Funds.
Class B Shares
Money Fund offers Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Fund will charge a CDSC on
shares you redeem within 72 months after the month of purchase, in accordance
with the following schedule:
REDEMPTION TIMING CDSC RATE
Month of purchase and the first twelve-month period following
the month of purchase...........................................5.00%
Second twelve-month period following the month of purchase...............4.00%
Third twelve-month period following the month of purchase................3.00%
Fourth twelve-month period following the month of purchase...............3.00%
Fifth twelve-month period following the month of purchase................2.00%
Sixth twelve-month period following the month of purchase................1.00%
Thereafter...............................................................0.00%
<PAGE>
Class B shares that have been outstanding for seven years after the month of
purchase will automatically convert to Class A shares without the imposition of
a front-end sales charge or exchange fee. (Holders of Class B share certificates
must return their certificates to ESC to effect such a conversion.)
Class C Shares
Money Fund offers Class C shares only through broker-dealers who have
entered into special distribution agreements with the Distributor. Class C
shares are offered at net asset value without an initial sales charge. With
certain exceptions, however, a CDSC of 1.00% will be charged on shares you
redeem within 12 months after the month of purchase. (See "Contingent Deferred
Sales Charge" below.)
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by
Evergreen Asset, (2) certain institutional investors and (3) investment advisory
clients of CMG, Evergreen Asset or their affiliates. Class Y shares are offered
at net asset value without a front-end or back-end sales charge and do not bear
any Rule 12b-1 distribution expenses.
CONTINGENT DEFERRED SALES CHARGE
Money Fund charges a CDSC as reimbursement for certain expenses, such
as commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its Class B and Class C shares (see "Distribution Plans and
Agreements"). If imposed, the CDSC is deducted from the redemption proceeds you
would otherwise receive. The CDSC is a percentage of the lesser of (1) the net
asset value of the shares at the time of redemption or (2) the shareholder's
original net cost for such shares. Upon request for redemption, to keep the CDSC
a shareholder must pay as low as possible, a Fund will first seek to redeem
shares not subject to the CDSC and/or shares held the longest, in that order.
The CDSC on any redemption is, to the extent permitted by the National
Association of Securities Dealers, Inc. ("NASD"), paid to the Distributor or its
predecessor.
WAIVER OF CDSCs
Money Fund does not impose a CDSC when you redeem Class B and Class C
shares which represent:
1. an increase in the share value above the net cost of such
shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died
or become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the
<PAGE>
Employee Retirement Income Security Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 591/2 years old;
6. shares in an account that the Fund has closed because the
account has an aggregate net asset value of less than $1,000;
7. an automatic withdrawal under an Systematic Income Plan of up
to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of return of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
EXCHANGES
Investors may exchange shares of a Fund for shares of the same Class of
any other Evergreen fund, as described under the section entitled "Exchanges" in
a Fund's prospectus. Before you make an exchange, you should read the prospectus
of the Evergreen fund into which you want to exchange. The Trust's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
CALCULATION OF NET ASSET VALUE PER SHARE ("NAV")
Each Fund computes its NAV twice daily on Monday through Friday, as
described in the prospectus. A Fund will not compute its NAV on the day the
following legal holidays are observed: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The NAV of each Fund is calculated by dividing the value of a Fund's
net assets attributable to that Class by all of the shares issued for that
Class.
VALUATION OF PORTFOLIO SECURITIES
The securities in a Fund's portfolio are valued on an amortized cost
basis. Under this method of valuation, a security is intially valued at its
acquisition cost, and thereafter a constant straight-line amortization of any
discount or premium is assumed each day regardless of the impact of fluctuating
interest rates on the market value of the security. The market value of the
obligations in a Fund's portfolio can be expected to vary inversely to changes
in prevailing rates. As a result, the market value of the obligations in a
Fund's portfolio may vary from the value determined using the amortized cost
method. Securities which are not rated are normally valued on the basis of
valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. Other assets and securities for which
no quotations are readily available are valued at the fair value as determined
<PAGE>
in good faith by the Trustees.
SHAREHOLDER SERVICES
As described in the prospectus, a shareholder may elect to receive his
or her dividends and capital gains distributions in cash instead of shares.
However, ESC will automatically convert a shareholder's distribution option so
that the shareholder reinvests all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. The Funds will hold the returned distribution or redemption proceeds in
a non interest-bearing account in the shareholder's name until the shareholder
updates his or her address. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with
respect to each Class of each Fund. The Trust has entered into a Principal
Underwriting Agreement ("Underwriting Agreement") with the Distributor with
respect to each Class of each Fund. The Distributor is a subsidiary of The BISYS
Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and SAI. All orders are subject to acceptance by the Trust and the Trust
reserves the right, in its sole discretion, to reject any order received. Under
the Underwriting Agreement, the Trust is not liable to anyone for failure to
accept any order.
The Distributor has agreed that it will, in all respects, duly comply
with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its assignment, as defined in the 1940 Act.
<PAGE>
From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
ADDITIONAL TAX INFORMATION
REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to a RIC under Subchapter M of the Code.
(Such qualification does not involve supervision of management or investment
practices or policies by the Internal Revenue Service.) In order to qualify as a
RIC, a Fund must, among other things, (i) derive at least 90% of its gross
income from dividends, interest, payments with respect to proceeds from
securities loans, gains from the sale or other disposition of securities or
foreign currencies and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities; (ii) derive less than 30% of its gross income from the sale or other
disposition of securities, options, futures or forward contracts (other than
those on foreign currencies), or foreign currencies (or options, futures or
forward contracts thereon) that are not directly related to the RIC's principal
business of investing in securities (or options and futures with respect
thereto) held for less than three months (this requirement is repealed for Fund
fiscal years beginning after August 5, 1997); and (iii) diversify its holdings
so that, at the end of each quarter of its taxable year, (a) at least 50% of the
market value of a Fund's total assets is represented by cash, U.S. government
securities and other securities limited in respect of any one issuer, to an
amount not greater than 5% of a Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
government securities and securities of other regulated investment companies).
By so qualifying, a Fund is not subject to federal income tax if it timely
distributes its investment company taxable income and any net realized capital
gains. A 4% nondeductible excise tax will be imposed on a Fund to the extent it
does not meet certain distribution requirements by the end of each calendar
year. Each Fund anticipates meeting such distribution requirements.
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES
Upon a sale or exchange of Fund shares, a shareholder may realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Also, a shareholder must treat as long-term
capital gains or losses any capital gains or losses on Fund shares held for more
than one year. Capital gain on assets held for more than eighteen months is
generally subject to a maximum federal income tax rate of 20% for an individual.
The maximum capital gains tax rate for capital assets held by an individual for
more than twelve months but not more than eighteen months is generally 28%.
Generally, the Code will not allow a shareholder to realize a loss on shares he
or she has sold or exchanged and replaced within a sixty-one-day period
beginning thirty days before and ending thirty days after he or she sold or
exchanged the shares. The Code will not allow a shareholder to realize a loss on
the sale of Fund shares held by the shareholder for six months or less to the
extent the shareholder received exempt-interest dividends on such shares.
Moreover, the Code will treat a shareholder's loss on shares held for six months
or less as a long-term capital loss to the extent the shareholder received
distributions of net capital gains on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup
<PAGE>
withholding requirement on dividends, distributions of capital gains and
redemption proceeds paid to them by the Fund. If the withholding provisions are
applicable, any such dividends or capital gain distributions to these
shareholders, whether taken in cash or reinvested in additional shares, and any
redemption proceeds will be reduced by the amounts required to be withheld.
Investors may wish to consult their own tax advisers about the applicability of
the backup withholding provisions.
TAXES ON DISTRIBUTIONS
Distributions will be taxable to shareholders whether made in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share of a Fund on the
reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net investment income plus net realized
short-term capital gains, if any). Since none of a Fund's income will consist of
corporate dividends, no distributions will qualify for the 70% corporate
dividends received deduction.
From time to time, each Fund will distribute the excess of its net
long-term capital gains over its short-term capital losses to shareholders. For
federal tax purposes, shareholders must include such distributions when
calculating their long-term capital gains. Each Fund will inform its
shareholders of the portion if any of a long-term capital gain distribution
which is subject to tax at the maximum 28% rate and the portion if any of a
long-term capital gain distribution which is subject to tax at the maximum 20%
rate. Distributions of long-term capital gains are taxable as such to a
shareholder, no matter how long the shareholder has held the shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
SPECIAL TAX CONSIDERATIONS FOR MUNICIPAL FUND AND PENNSYLVANIA FUND
Each Fund expects that substantially all of its dividends will be
"exempt-interest dividends," which should be treated as excludable from federal
gross income. In order to pay exempt-interest dividends, at least 50% of the
value of the Fund's assets must consist of federally tax-exempt obligations at
the close of each quarter. An exempt-interest dividend is any dividend or part
thereof (other than a capital gain dividend) paid by the Fund with respect to
its net federally excludable municipal obligation interest and designated as an
exempt-interest dividend in a written notice mailed to each shareholder not
later than 60 days after the close of its taxable year. The percentage of the
total dividends paid by a Fund with respect to any taxable year that qualifies
as exempt-interest dividends will be the same for all shareholders of the Fund
receiving dividends with respect to such year. If a shareholder receives an
exempt-interest dividend with respect to any share and such share has been held
for six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the exempt-interest dividend amount.
Any shareholder of a Fund who may be a "substantial user" of a facility
financed with an issue of tax-exempt obligations or a "related person" to such a
user should consult his tax adviser concerning his qualification to receive
exempt-interest dividends should the Fund hold obligations financing such
facility.
Under regulations to be promulgated, to the extent attributable to
interest paid on certain private activity bonds, a Fund's exempt-interest
dividends, while otherwise tax-exempt, will be treated as a tax preference item
for alternative minimum tax purposes. Corporate shareholders should also be
aware that the receipt of exempt-interest dividends could subject them to
alternative minimum tax under the provisions
<PAGE>
of Section 56(g) of the Code (relating to "adjusted current earnings").
Under particularly unusual circumstances, such as when a Fund is in a
prolonged defensive investment position, it is possible that no portion of a
Fund's distributions of income to its shareholders for a fiscal year would be
exempt from federal income tax. The Funds do not presently anticipate, however,
that such unusual circumstances will occur.
Each Fund intends to distribute its net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital gains.
Each Fund will designate capital gains distributions as such by a written notice
mailed to each shareholder no later than 60 days after the close of the Fund's
taxable year. If a shareholder receives a capital gain dividend and holds his or
her shares for six months or less, then any allowable loss on disposition of
such shares will be treated as a long-term capital loss to the extent of such
capital gain dividend.
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of a Fund will not be deductible for federal income tax
purposes to the extent of the portion of the interest expense relating to
exempt-interest dividends. Such portion is determined by multiplying the total
amount of interest paid or accrued on the indebtedness by a fraction, the
numerator of which is the exempt-interest dividends received by a shareholder in
his taxable year and the denominator of which is the sum of the exempt-interest
dividends and the taxable distributions out of the Fund's investment income and
long-term capital gains received by the shareholder.
OTHER TAX CONSIDERATIONS
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax-exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisers regarding specific questions
relating to federal, state and local tax consequences of investing in shares of
a Fund. Each shareholder who is not a U.S. person should consult his or her tax
adviser regarding the U.S. and foreign tax consequences of ownership of shares
of a Fund, including the possibility that such a shareholder may be subject to a
U.S. withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
EXPENSES
Trustee Compensation
Listed below is the compensation paid to Trustees for the fiscal year
ended January 31, 1998.
COMPENSATION FROM TRUST
TRUSTEE COMPENSATION FROM TRUST AND FUND COMPLEX
Laurence B. Ashkin $ 8,096.00 $ 75,667.00
Charles A. Austin III $ 879.00 $ 46,385.00
K. Dun Gifford $ 839.00 $ 42,277.00
<PAGE>
James S. Howell $ 21,159.00 $117,523.00
Leroy Keith Jr. $ 839.00 $ 42,277.00
Gerald M. McDonnell $ 17,972.00 $103,067.00
Thomas L. McVerry $ 18,796.00 $104,705.00
William Walt Pettit $ 17,899.00 $100,303.00
David M. Richardson $ 839.00 $ 45,969.00
Russell A. Salton, III $ 18,275.00 $105,497.00
Michael S. Scofield $ 18,403 .00 $ 70,079.00
Richard J. Shima $ 9,740.00 $70,079.00
ADVISORY FEES
The table below shows amounts the Adviser was entitled to receive from
each Fund as well as the amounts waived by the Advisers for the fiscal year or
period indicated. For more information, see "Investment Advisory and Other
Services."
ADVISORY FEES WAIVERS
============================================= ================ =============
FIVE MONTHS ENDED JAN. 31, 1998
- --------------------------------------------- ================ =============
Money Fund $6,801,389 $0
Municipal Fund $2,155,943 $0
Pennsylvania Fund $111,425 $17,363
Treasury Fund $4,446,822 $0
- ---------------------------------------------
FISCAL YEAR ENDED AUG. 31, 1997
- --------------------------------------------- -------------------------------
Money Fund $13,092,396 $1,482,584
Municipal Fund $5,695,367 $183,559
Pennsylvania Fund $275,516 $62,049
Treasury Fund $10,831,288 $132,244
- --------------------------------------------- ---------------- -------------
FISCAL YEAR ENDED AUG. 31, 1996
- ---------------------------------------------- ------------------------------
Money Fund $8,346,173 $2,427,423
Municipal Fund $5,540,924 $1,243,131
Pennsylvania Fund (1) $148,591 $79,856
Treasury Fund $8,857,503 $2,109,068
============================================= ================ =============
(1) For fiscal period March 1 to August 31, 1996.
<PAGE>
DISTRIBUTION FEES
Pursuant to each Fund's Distribution Plan, the following amounts were
deducted from the net assets of each Fund's shares for the fiscal period ended
January 31, 1998. For more information, see "Distribution Plans and Agreements."
DISTRIBUTION FEES
===========================================================================
CLASS A CLASS B CLASS C CLASS K (1)
- -------------------- -------------- ----------- ------------- -------------
Money Fund $3,594,206 $88,649 $15,098 $244
Municipal Fund $833,863 N/A N/A N/A
Pennsylvania Fund $43,990 (a) N/A N/A N/A
Treasury Fund $3,142,342 N/A N/A N/A
- --------------------
(1) Class K shares no longer offered as of January 16, 1998.
(a) Of this amount, $29,326 was waived by the Distributor.
BROKERAGE COMMISSIONS
The Funds paid no brokerage commissions during the fiscal year or
period ended January 31, 1998, August 31, 1997 and August 31, 1996.
PERFORMANCE
CURRENT, EFFECTIVE AND TAX-EQUIVALENT YIELDS
Each Fund may quote a "current yield" or "effective yield" from time to
time. The current yield is an annualized yield based on the actual total return
for a seven-day period. The effective yield is an annualized yield based on a
compounding of the current yield. These yields are each computed by first
determining the net change in account value for a hypothetical account having a
share balance of one share at the beginning of a seven-day period (shown as
"beginning account value" in the formula below), excluding capital changes. The
net change in account value will generally equal the total dividends declared
with respect to the account. The yields are then computed as follows:
Current Yield = BEGINNING ACCOUNT VALUE X 365/7
Effective Yield = [(1 + TOTAL DIVIDEND FOR 7 DAYS) 365/7]-1
Yield fluctuations may reflect changes in a Fund's net investment
income. Portfolio changes resulting from net purchases or net redemptions of the
Fund's shares may also affect the yield. Accordingly, a Fund's yield may vary
from day to day. The yield stated for a particular past period is not
necessarily representative of its future yield. Since each Fund uses the
amortized cost method of net asset value computation, it does not anticipate any
change in yield resulting from unrealized gains or losses or unrealized
appreciation or depreciation not reflected in the yield computation, or change
in net asset value during the period used for computing yield. If any of these
conditions should occur, yield quotations would be suspended. A Fund's yield is
not guaranteed,
<PAGE>
and the principal is not insured.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of (1) the kind and quality of the instruments a Fund holds, (2)
portfolio maturity, (3) operating expenses and (4) market conditions.
In periods of declining interest rates, yields will tend to be somewhat
higher than prevailing market rates. In periods of rising interest rates, yields
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a Fund from the continuous sale of its shares will
likely be invested in instruments producing lower yields than the balance of the
Fund's investments, thereby reducing the current yield of the Fund. In periods
of rising interest rates, the opposite can be expected to occur.
For Municipal Fund and Pennsylvania Fund, a tax-equivalent yield is
calculated, reflecting the rate an investor would need to earn from a fully
taxable investment to equal the yield the Fund would provide after federal
taxes. The following formula is used:
Tax-Equivalent Yield = EFFECTIVE YIELD
----------------------------
1 - FEDERAL TAX RATE
Below are the yields of each Fund for the seven-day period ended
January 31, 1998. With respect to the tax-equivalent yield of the Municipal
Fund, a federal tax rate of 36% is assumed, and for Pennsylvania Fund, a
combined federal and state tax rate of 37.8% is assumed.
CURRENT YIELD EFFECTIVE YIELD TAX EQUIVALENT YIELD
MONEY FUND
Class A 4.95% 5.07% N/A
Class B 4.24% 4.33% N/A
Class C 4.24% 4.33% N/A
Class Y 5.24% 5.38% N/A
MUNICIPAL FUND
Class A 3.05% 3.10% 4.84%
Class Y 3.35% 3.41% 5.32%
TREASURY FUND
Class A 4.43% 4.53% N/A
Class Y 5.23% 5.32% N/A
<PAGE>
CURRENT YIELD EFFECTIVE YIELD TAX EQUIVALENT YIELD
PENNSYLVANIA FUND
Class A 2.91% 2.95% 4.75%
Class Y 3.01% 3.05% 4.91%
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, each
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in a Fund's prospectus,
SAI or in supplemental sales literature issued by such Fund or the Distributor,
and no person is entitled to rely on any information or representation not
contained therein.
Each Fund's prospectus and SAI omit certain information contained in
the Trust's registration statement, which you may obtain for a fee from the SEC
in Washington, D.C.
FINANCIAL STATEMENTS
The audited financial statements of the Funds and the Independent
Auditors' reports thereon are hereby incorporated by reference to each Fund's
Annual Report. You may obtain a copy of the Annual Report without charge by
writing to ESC, P.O. Box 2121, Boston, Massachusetts 02106-2121, or by calling
ESC toll-free at 1-800-343-2898.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group ("S&P").
An S&P corporate or municipal bond rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment of credit worthiness may take into consideration obligors such as
guarantors, insurers or lessees. The debt rating is not a recommendation to
purchase, sell or hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished to S&P by the
issuer or obtained by S&P from other sources it considers reliable. S&P does not
perform any audit in connection with the ratings and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
due to other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor to
make timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay any principal.
AA - Debt rated AA also qualifies as high quality debt obligations. Capacity to
pay interest and repay principal is very strong and in the majority of instances
it differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits 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.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation.
BB indicates the lowest 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.
<PAGE>
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which 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 rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to default, and
is dependent upon 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 is also
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 that
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.
C1 - The rating C1 is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. It is used when interest payments or
principal payments are not made on a due date even if the applicable grace
period has not expired, unless S&P believes that such payments will be made
during such grace periods; it will also be used upon a filing of a bankruptcy
petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit quality,
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.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. Debt obligations of issuers
outside the United States and its territories are rated on the same basis as
domestic corporate and municipal issues. The ratings measure the
creditworthiness of the obligor but do not take into account currency exchange
and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA, AA, A and BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. ("Moody's").
A brief description of the applicable Moody's rating symbols and their
meanings follows:
<PAGE>
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
edge". 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 fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered 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. Some bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. NOTE: Bonds within the above
categories which possess the strongest investment attributes are designated by
the symbol "1" following the rating.
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 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 a 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 to 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.
Duff & Phelps, Inc.: AAA - highest credit quality, with negligible risk factors;
AA -- high credit quality, with strong protection factors and modest risk, which
may vary very slightly from time to time because of economic conditions; A -
average credit quality with adequate protection factors, but with greater and
more variable risk factors in periods of economic stress. The indicators "+" and
"-" to the AA and A categories indicate the relative position of credit within
those rating categories.
Fitch IBCA: AAA - highest credit quality, with an exceptionally strong ability
to pay interest and repay principal; AA - very high credit quality, with very
strong ability to pay interest and repay principal; A - high credit quality,
considered strong as regards principal and interest protection, but may be more
vulnerable to adverse changes in economic conditions and circumstances. The
indicators "+" and "-"
<PAGE>
to the AA, A and BBB categories indicate the relative position of credit within
those rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.) Note rating symbols
are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and municipal
short-term obligations will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of major
importance in bond risk are of lesser importance over the short run. Rating
symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security elements are
accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
COMMERCIAL PAPER RATINGS
Moody's: Commercial paper rated "Prime" carries the smallest degree of
investment risk. The modifiers 1, 2, and 3 are used to denote relative strength
within this highest classification.
S&P: "A" is the highest commercial paper rating category utilized by S&P, which
uses the numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps,
<PAGE>
which uses + or - to denote relative strength within this classification. Duff 2
represents good certainty of timely payment, with minimal risk factors. Duff 3
represents satisfactory protection factors, with risk factors larger and subject
to more variation.
Fitch Investors Service L.P.: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having the strongest degree of assurance for
timely payment; F-1 -- very strong, with only a slightly less degree of
assurance for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
<PAGE>
APPENDIX B
SPECIAL CONSIDERATIONS RELATING TO
INVESTMENT IN PENNSYLVANIA ISSUERS
General
The Commonwealth of Pennsylvania, the fifth most populous state,
historically has been identified as a heavy industry state, although that
reputation has changed with the decline of the coal, steel and railroad
industries and the resulting diversification of the Commonwealth's industrial
composition. The major new sources of growth are in the service sector,
including trade, medical and health services, educational and financial
institutions. Manufacturing has fallen behind both the service sector and the
trade sector as a source of employment in Pennsylvania. The Commonwealth is the
headquarters for 58 major corporations. Pennsylvania's average annual
unemployment rate since 1990 has generally not been more than one percent
greater or lesser than the nation's annual average unemployment rate. The
seasonally adjusted unemployment rate for Pennsylvania for March, 1997 was 5.1%
and for the United States for March, 1997 was 5.2%. The population of
Pennsylvania, 12,056 million people in 1996 according to the U.S. Bureau of the
Census, represents an increase from the 1987 estimate of 11,811 million. Per
capita income in Pennsylvania for 1995 of $23,558 was higher than the per capita
income of the United States of $23,208. The Commonwealth's General Fund, which
receives all tax receipts and most other revenues and through which debt service
on all general obligations of the Commonwealth is made, closed fiscal years
ended June 30, 1994, June 30, 1995 and June 30, 1996 with positive fund balances
of $892,940, $688,304 and $635,182, respectively.
Debt
The Commonwealth may incur debt to rehabilitate areas affected by
disaster, debt approved by the electorate, debt for certain capital projects
(for projects such as highways, public improvements, transportation assistance,
flood control, redevelopment assistance, site development and industrial
development) and tax anticipation debt payable in the fiscal year of issuance.
The Commonwealth had outstanding general obligation debt of $5,054 million at
June 30, 1996. The Commonwealth is not permitted to fund deficits between fiscal
years with any form of debt. All year-end deficit balances must be funded within
the succeeding fiscal year's budget. At March 11, 1996, all outstanding general
obligation bonds of the Commonwealth were rated AA- by Standard & Poor's Ratings
Group and A-1 by Moody's Investors Service, Inc. (see Appendix A). There can be
no assurance that these ratings will remain in effect in the future. Over the
five-year period ending June 30, 2001, the Commonwealth has projected that it
will issue notes and bonds totaling $2,325 million and retire bonded debt in the
principal amount of $2,239 million.
Certain agencies created by the Commonwealth have statutory
authorization to incur debt for which Commonwealth appropriations to pay debt
service thereon are not required. As of December 31, 1996, total combined debt
outstanding for these agencies was $8,356 million. The debt of these agencies is
supported by assets of, or revenues derived from, the various projects financed
and is not an obligation of the Commonwealth. Some of these agencies, however,
are indirectly dependent on Commonwealth appropriations. The only obligations of
agencies in the Commonwealth that bear a moral obligation of the Commonwealth
are those issued by the Pennsylvania Housing Finance Agency ("PHFA"), a
state-created agency which provides housing for lower and moderate income
families, and The Hospitals and Higher Education Facilities Authority of
Philadelphia (the "Hospital Authority"), an agency created by the City of
Philadelphia to acquire and prepare various sites for use as intermediate
B-1
<PAGE>
care facilities for the mentally retarded.
Local Government Debt
Numerous local government units in Pennsylvania issue general
obligation (i.e., backed by taxing power) debt, including counties, cities,
boroughs, townships and school districts. School district obligations are
supported indirectly by the Commonwealth. The issuance of non-electoral general
obligation debt is limited by constitutional and statutory provisions. Electoral
debt, i.e., that approved by the voters, is unlimited. In addition, local
government units and municipal and other authorities may issue revenue
obligations that are supported by the revenues generated from particular
projects or enterprises. Examples include municipal authorities (frequently
operating water and sewer systems), municipal authorities formed to issue
obligations benefitting hospitals and educational institutions, and industrial
development authorities, whose obligations benefit industrial or commercial
occupants. In some cases, sewer or water revenue obligations are guaranteed by
taxing bodies and have the credit characteristics of general obligation debt.
Litigation
Pennsylvania is currently involved in certain litigation where adverse
decisions could have an adverse impact on its ability to pay debt service. For
example, in BABY NEAL V. COMMONWEALTH, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. COUNTY OF
ALLEGHENY V. COMMONWEALTH OF PENNSYLVANIA involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In PENNSYLVANIA ASSOCIATION OF RURAL AND SMALL SCHOOLS V.
CASEY, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
Other Factors
The performance of the obligations which are held by Pennsylvania Fund
and issued by the Commonwealth, its agencies, subdivisions and instrumentalities
are in part tied to state-wide, regional and local conditions within the
Commonwealth and to the creditworthiness of certain non-Commonwealth related
obligors, depending upon the Pennsylvania Fund's portfolio mix at any given
time. Adverse changes to the state-wide, regional or local economies or changes
in government may adversely affect the creditworthiness of the Commonwealth, its
agencies and municipalities, and certain other non-government related obligors
of Pennsylvania tax-free obligations (e.g., a university, a hospital or a
corporate obligor). The City of Philadelphia, for example, experienced severe
financial problems which impaired its ability to borrow money and adversely
affected the ratings of its obligations and their marketability. Conversely,
some obligations held by the Fund will be almost exclusively dependent on the
creditworthiness of one underlying obligor, such as a project occupant or
provider of credit or liquidity support.
<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.
B-2
<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
<PAGE>
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-3
<PAGE>
INVESTMENT POLICIES
IN GENERAL
<PAGE>
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-4
<PAGE>
<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-5
<PAGE>
- SHORT TERM INCOME FUND -
- SHORT-INTERMEDIATE BOND FUND -
- GOVERNMENT INCOME FUND -
<PAGE>
- 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-6
<PAGE>
<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.
B-7
<PAGE>
<PAGE>
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.
<PAGE>
B-8
<PAGE>
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
<PAGE>
of these Funds could be incorrect in their assessment of the direction of stock
prices.
B-9
<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.
<PAGE>
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
B-10
<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:
<PAGE>
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-11
<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
<PAGE>
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,
B-12
<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
<PAGE>
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-13
<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
<PAGE>
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.
B-14
<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
<PAGE>
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.
B-15
<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.
<PAGE>
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
B-16
<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.
<PAGE>
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-17
<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
<PAGE>
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-18
<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
<PAGE>
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-19
<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
<PAGE>
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-20
<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
<PAGE>
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-21
<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
<PAGE>
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-22
<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>
FUND Class Average Annual Total Return
--------------------------------------------------------------------
ONE YEAR Five Year Ten Year Since
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%
Balanced Fund Y 16.44% ** ** 12.01%
A without Load 16.15% ** ** 11.56%
B-23
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FUND Class Average Annual Total Return
--------------------------------------------------------------------
ONE YEAR Five Year Ten Year Since
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%
** Not in operation during that period
</TABLE>
B-24
<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
<PAGE>
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.
FUND Class Current Yield Effective Yield Tax-Equivalent Yield
Treasury Reserve Y 5.01% 5.13% N/A
C 4.76% 4.87% N/A
B-25
<PAGE>
FUND Class Current Yield Effective Yield Tax-Equivalent Yield
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%
- 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]
<PAGE>
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-26
<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
<PAGE>
- - ----------------------------- ----------------------------- ------------------ -----------------------
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-27
<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
<PAGE>
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-28
<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.
<PAGE>
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-29
<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
<PAGE>
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-30
<PAGE>
DESCRIPTION OF SHARES
<PAGE>
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-31
<PAGE>
<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-32
<PAGE>
<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-33
<PAGE>
CAROL ROONEY (5/8/64) - CONTROLLER, TREASURER, AND ASSISTANT SECRETARY
<PAGE>
- 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>
- -
- ----------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C> <C>
(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
- -
- ----------------------------------------------------------------------------------------------------------
- ---------
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
<PAGE>
- 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-34
<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
<PAGE>
the following investment advisory fees to CoreStates Advisers:
<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
</TABLE>
B-35
<PAGE>
<TABLE>
<CAPTION>
FUND ADVISORY FEES PAID ADVISORY FEES WAIVED
1995 1996 1997 1995 1996 1997
======================================================== ===========================================================
<S> <C> <C> <C> <C> <C> <C>
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
<PAGE>
Tower, 22nd Floor, Ft. Lauderdale, Florida 33396.
B-36
<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)
* Aberdeen became a sub-adviser to the International Growth Fund on April 14, 1996.
</TABLE>
<PAGE>
B-37
<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
<PAGE>
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-38
<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
<PAGE>
B-39
<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-40
<PAGE>
<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
B-41
<PAGE>
FUND ADMINISTRATIVE FEES PAID ADMINISTRATIVE FEES WAIVED
- - --------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
<PAGE>
----------------------------- -----------------------------------------------------------
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
======================================================== ===========================================================
* Not in operation during period.
** The Elite Government Reserve was not in operation during this period.
</TABLE>
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>
FUND AGGREGATE SALES CHARGE PAYABLE TO
DISTRIBUTOR AMOUNT RETAINED BY DISTRIBUTOR
- - --------------------------------------------------------------------------------------------------------------------
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 1710 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
B-42
<PAGE>
FUND AGGREGATE SALES CHARGE PAYABLE TO
DISTRIBUTOR AMOUNT RETAINED BY DISTRIBUTOR
- - --------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1995 1996 1997
--------------------------------------------------------------------------------
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
<PAGE>
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-43
<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>
<PAGE>
FUND AMOUNT FEE AMOUNT PAID TO SALES PRINTING
OTHER
RECEIVED 3RD PARTIES BY EXPENSES COSTS
THE DISTRIBUTOR
<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-44
<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 -
<PAGE>
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. <TABLE> <CAPTION>
FUND OWNER AMOUNT OF RECORD PERCENT
OF TOTAL
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
B-45
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
<PAGE>
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
B-46
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
<PAGE>
B-47
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
B-48
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
<PAGE>
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
B-49
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
B-50
<PAGE>
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
B-51
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
<PAGE>
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
B-52
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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
B-53
<PAGE>
FUND OWNER AMOUNT OF RECORD PERCENT OF TOTAL
OWNERSHIP SHARES OUTSTANDING
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%
<PAGE>
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-54
<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.
<PAGE>
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-55
<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.
<PAGE>
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-56
<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.
<PAGE>
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
but may vary slightly from AA- time to time because of economic
conditions.
A+ Protection factors are average but adequate. However, risk factors
are more variable and A- greater in periods of economic stress.
BBB+ Below average protection factors but still considered sufficient for
prudent investment. BBB- Considerable variability in risk during
economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
due. Present or
BB prospective financial protection factors fluctuate according to
industry conditions or company fortunes.
B-57
<PAGE>
BB- Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not
be met when due.
B Financial protection factors will fluctuate widely according to
economic cycles, industry B- 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
<PAGE>
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-58
<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
bonds are extremely speculative and DD, should be valued on the basis
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.
<PAGE>
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-59
<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.)
<PAGE>
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-60
<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
<PAGE>
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-61
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders ........................... 1
Evergreen Money Market Fund
Fund at a Glance .............................. 2
Evergreen Municipal Money Market
Fund
Fund at a Glance .............................. 3
Evergreen Pennsylvania Municipal
Money Market Fund
Fund at a Glance .............................. 4
Evergreen Treasury Money Market
Fund
Fund at a Glance .............................. 5
Financial Highlights
Evergreen Money Market Fund ................... 6
Evergreen Municipal Money Market Fund ......... 9
Evergreen Pennsylvania Municipal Money
Market Fund ................................ 11
Evergreen Treasury Money Market Fund .......... 12
</TABLE>
<TABLE>
<S> <C>
Schedule of Investments
Evergreen Money Market Fund ................... 13
Evergreen Municipal Money Market Fund ......... 16
Evergreen Pennsylvania Municipal Money
Market Fund ................................ 23
Evergreen Treasury Money Market Fund .......... 26
Statements of Assets and Liabilities ............. 27
Statements of Operations -
Five Months Ended January 31, 1998 and
Year Ended August 31, 1997 ................. 28
Statements of Changes in Net Assets -
Five Months Ended January 31, 1998 ............ 29
Statements of Changes in Net Assets -
Prior Fiscal Periods .......................... 30
Combined Notes to Financial
Statements ....................................... 32
Report of Independent Accountants:
Price Waterhouse LLP ............................. 40
Independent Auditors' Report:
KPMG Peat Marwick LLP ............................ 41
Additional Information ........................... 42
</TABLE>
- --------------------------------------------------------------------------------
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies
with more than $45 billion in assets under management.
With 85 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products
and services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
<TABLE>
<S> <C>
Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
</TABLE>
Evergreen Funds Distributor, Inc.
<PAGE>
Letter to Shareholders
March 1998
[Photograph appears here of Dear Shareholders:
William M. Ennis]
Money market funds, as a group, have the most
conservative objectives and strategies of all
mutual funds. While shareholders invest in
money market funds for a variety of purposes,
one of the principal uses of these funds is as
a relatively safe haven in times of
William M. Ennis uncertainty. The Evergreen
Managing Director Money Market Funds performed that role well
during this report's fiscal period, which ended on January 31, 1998.1 The funds
provided a stable alternative to stock-oriented investments, which went through
a sometimes-bumpy market. At the same time, declines in interest rates cut into
the dividends that the money funds could provide.
The Market Environment
During the fiscal year, the continued moderate-growth economy, with low
inflation and declining interest rates, generally rewarded fixed-income
investors. Long-term and intermediate-term bond prices tended to rise as
interest rates declined.
For equity investors, the reassuring stock market of the previous months
changed and began showing periodic flashes of volatility. This volatility was
linked to anxieties about the effects of the Asian financial crisis on the
American economy, in general, and on the earnings of multi-national companies
and technology companies, in particular.
The Standard and Poor's 500 Index, the most widely used barometer for the
performance of the U.S. stock market, had a healthy return of 26.9% for the
twelve months ended January 31, 1998, but at a cost of dramatic fluctuations
from month to month.
A Conservative Investment
Market analysts are divided about whether the stock market will resume its
sustained strong upward momentum. In such an uncertain market environment, many
financial advisors and investors believe it makes sense to have at least part
of one's investment portfolio in a relatively safe alternative, such as a money
market fund. The exact allocation should depend on factors such as how soon
investors will need their money, how old they are, and what long-term
objectives they have.
At Evergreen Funds, we are committed to providing a strong array of funds with
complementary objectives and strategies to help investors and their financial
advisors assemble personal portfolios that make sense for their needs and risk
tolerances. We recommend shareholders periodically review their portfolios with
professional investment advisors to make sure their allocations continue to be
in line with their financial plans. We can assist by providing the information
you need about Evergreen Funds. If you have any questions about the funds in
this report or other Evergreen Funds, we encourage you to consult your
financial advisor or call us at 1-800-343-2898.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
- ---------
1 The Funds' fiscal year ends were changed from August 31 to January 31. The
next report you receive will be in September for the semiannual period ending
July 31, 1998.
1
<PAGE>
EVERGREEN
Money Market Fund
Fund at a Glance as of January 31, 1998
PORTFOLIO COMPOSITION
----------------------------
(as a percentage of portfolio assets)
[Pie Chart appears below with the following percentages]
Commercial Paper-54.7%
Corp. Note/Bonds-17.3%
Certificates of Deposit-16.4%
Other-6.8%
U.S. Government and Agencies-3.2%
Bankers' Acceptance-1.6%
Portfolio
Management
- --------------------
[Photograph appears here of Kellie Allen with the following caption]
Kellie Allen
Vice President
Capital Management Group
Tenure: December 1, 1997
[Photograph appears here of Bryan K. White with the following caption]
Bryan K. White
Assistant Vice President
Capital Management Group
Tenure: December 1, 1997
----------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
<S> <C> <C> <C> <C>
Inception Date 1/4/95 1/26/95 8/1/97 11/2/87
Average Annual Returns*
One year with sales charge N/A -0.73% - N/A
One year w/o sales charge 5.00% 4.27% - 5.32%
3 years 3.40% 3.43% - 5.40%
5 years - - 4.71%
10 years - - - 5.85%
Since Inception 3.44% 3.43% 2.30% 5.88%
Maximum Sales Charge N/A 5.00% 1.00% N/A
CDSC CDSC
7-day annualized yield 4.95% 4.24% 4.24% 5.24%
30-day annualized yield 5.00% 4.29% 4.29% 5.29%
</TABLE>
*Adjusted for maximum applicable sales charge
----------------------------------------
ANNUALIZED 7-DAY YIELD
[Line Graph appears here with the following plot points]
Class A Shares Class B Shares Class C Shares Class Y Shares
2/97 4.87 4.17 5.17
4/97 4.88 4.18 5.2
6/97 4.94 4.24 5.26
8/97 4.91 4.21 4.21 5.21
10/97 4.86 4.16 4.16 5.16
12/97 4.96 4.27 4.27 5.29
1/98 4.95 4.24 4.24 5.24
Total Net Assets: $3,546,681,561
Average Maturity: 57 days
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
2
<PAGE>
EVERGREEN
Municipal Money Market Fund
Fund at a Glance as of January 31, 1998
PORTFOLIO COMPOSITION
----------------------------
(as a percentage of portfolio assets)
[Pie chart appears here with the following percentages]
Variable Rate Demand Notes-69.9%
Put Bonds-24.3%
Commercial Paper and Bonds-5.3%
Anticipation Notes-0.5%
Portfolio
Management
--------------------
[Photograph appears here of Stephen C. Shachat with the following Caption]
Stephen C. Shachat
Vice President
Evergreen Asset
Management Corp.
Tenure: November 2, 1988
----------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class Y
<S> <C> <C>
Inception Date 1/5/95 11/2/88
Average Annual Returns
1 year 3.18% 3.46%
3 years 3.24% 3.54%
5 years - 3.19%
Since Inception 3.24% 4.10%
7-day annualized yield 3.05% 3.35%
30-day annualized yield 3.04% 3.34%
</TABLE>
----------------------------------------
ANNUALIZED 7-DAY YIELD
[Line graph appears here with the following plot points]
Class A Shares Class Y Shares
2/97 2.92 3.22
4/97 3.65 3.96
6/97 3.55 3.85
8/97 2.89 3.19
10/97 3.08 3.39
12/97 3.46 3.77
1/98 3.05 3.35
Total Net Assets: $1,057,811,694
Average Maturity: 54 days
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
3
<PAGE>
EVERGREEN
Pennsylvania Municipal Money Market Fund
Fund at a Glance as of January 31, 1998
PORTFOLIO COMPOSITION
----------------------------
(as a percentage of portfolio assets)
[Pie chart appears here with the following percentages]
Variable Rate Notes-76.0%
Revenue and General
Obligation Bonds-13.7%
General Market Notes-5.8%
Put or Option Tender Bonds-4.5%
Portfolio
Management
--------------------
[Photograph appears here of Diane Beaver with the following caption]
Diane Beaver
Assistant Vice President
Capital Management Group
Tenure: January 22, 1996
----------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class Y
<S> <C> <C>
Inception Date 8/22/95 8/15/91
Average Annual Returns
1 year 3.12% 3.23%
3 years - 3.31%
5 years - 2.94%
Since Inception 3.12% 3.00%
7-day annualized yield 2.91% 3.01%
30-day annualized yield 2.94% 3.04%
</TABLE>
----------------------------------------
ANNUALIZED 7-DAY YIELD
Class A Shares Class Y Shares
2/97 3.05 2.98
4/97 3.39 3.49
6/97 3.38 3.48
8/97 3.02 3.12
10/97 3.15 3.25
12/97 3.32 3.43
1/98 2.91 3.01
Total Net Assets: $70,391,852
Average Maturity: 40 days
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
4
<PAGE>
EVERGREEN
Treasury Money Market Fund
Fund at a Glance as of January 31, 1998
PORTFOLIO COMPOSITION
----------------------------
(as a percentage of portfolio assets)
[Pie chart appears here with the following percentages]
Repurchase Agreements-81.0%
U.S. Treasury Notes-18.6%
Mutual Fund Shares-0.4%
Portfolio
Management
- --------------------
[Phograph of Kellie Allen appears here with the following caption]
Kellie Allen
Vice President
Capital Management Group
Tenure: March 3, 1991
[Photograph of Bryan K. White appears here with the following caption]
Bryan K. White
Assistant Vice President
Capital Management Group
Tenure: December 31, 1997
----------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class Y
<S> <C> <C>
Inception Date 3/6/91 3/6/91
Average Annual Returns
1 year 4.92% 5.23%
3 years 5.03% 5.34%
5 years 4.35% 4.66%
Since Inception 4.31% 4.61%
7-day annualized yield 4.43% 5.23%
30-day annualized yield 4.89% 5.19%
</TABLE>
----------------------------------------
ANNUALIZED 7-DAY YIELD
[Line graph appears here with the following plot points]
Class A Shares Class Y Shares
2/97 4.68 4.98
4/97 4.79 5.09
6/97 4.82 5.14
8/97 4.81 5.11
10/97 4.92 5.22
12/97 5.01 5.31
1/98 4.43 5.23
Total Net Assets: $3,187,904,612
Average Maturity: 40 days
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable NAV of $1.00 per share. Yields will fluctuate. Past performance is no
guarantee of future results.
5
<PAGE>
EVERGREEN
Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended August 31,
January 4, 1995
Five Months (Commencement of
Ended Class Operations) to
January 31, 1998 (b) 1997 1996 August 31, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== =========
Net investment income 0.02 0.05 0.05 0.03
Less distributions to shareholders from net investment
income ( 0.02) ( 0.05) ( 0.05) ( 0.03)
---------- --------- --------- ----------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ==========
Total return 2.08% 4.95% 5.05% 3.53%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.89%(a) 0.79% 0.75% 0.81%(a)
Total expenses excluding indirectly paid expenses 0.89%(a) 0.79% - -
Total expenses excluding waivers and/or reimbursements 0.89%(a) 0.88% 0.89% 1.02%(a)
Net investment income 4.91%(a) 4.87% 4.86% 5.26%(a)
Net assets end of period (millions) $ 2,910 $ 2,803 $ 1,755 $ 685
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31,
January 26, 1995
Five Months (Commencement of
Ended Class Operations) to
January 31, 1998 (b) 1997 1996 August 31, 1995
<S> <C> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== =========
Net investment income 0.02 0.04 0.04 0.03
Less distributions to shareholders from net investment
income ( 0.02) ( 0.04) ( 0.04) ( 0.03)
---------- --------- --------- ----------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ==========
Total return (c) 1.78% 4.22% 4.31% 2.78%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.59%(a) 1.49% 1.45% 1.51%(a)
Total expenses excluding indirectly paid expenses 1.59%(a) 1.49% - -
Total expenses excluding waivers and/or reimbursements 1.59%(a) 1.55% 1.59% 2.39%(a)
Net investment income 4.22%(a) 4.16% 4.18% 4.54%(a)
Net assets end of period (millions) $ 25 $ 23 $ 10 $ 8
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from August 31 to January 31.
(c) Excluding applicable sales charges.
See Combined Notes to Financial Statements.
6
<PAGE>
EVERGREEN
Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
August 1, 1997
Five Months (Commencement of
Ended Class Operations) to
January 31, 1998 (d) August 31, 1997
<S> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 1.00 $ 1.00
========= ==========
Net investment income 0.02 0.00 (c)
Less distributions to shareholders from net investment income ( 0.02) ( 0.00)(c)
---------- ----------
Net asset value end of period $ 1.00 $ 1.00
========== ==========
Total return (b) 1.78% 0.37%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.59%(a) 1.67%(a)
Total expenses excluding indirectly paid expenses 1.59%(a) 1.66%(a)
Total expenses excluding waivers and/or reimbursements 1.59%(a) 1.69%(a)
Net investment income 4.20%(a) 4.42%(a)
Net assets end of period (millions) $ 2 $ 5
</TABLE>
<TABLE>
<CAPTION>
August 1, 1997
Period (Commencement of
Ended Operations) to
January 16, 1998 (e) August 31, 1997
<S> <C> <C>
CLASS K SHARES
Net asset value beginning of period $ 1.00 $ 1.00
========= ==========
Net investment income 0.02 0.00 (c)
Less distributions to shareholders from net investment income ( 0.02) ( 0.00)(c)
---------- ----------
Net asset value end of period $ 1.00 $ 1.00
========== ==========
Total return (b) 2.08% 0.38%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.89%(a) 0.88%(a)
Total expenses excluding indirectly paid expenses 0.89%(a) 0.87%(a)
Total expenses excluding waivers and/or reimbursements 0.89%(a) 0.91%(a)
Net investment income 4.91%(a) 4.90%(a)
Net assets end of period (thousands) $ 0 $ 105
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Represents an amount less than $0.01 per share.
(d) The Fund changed its fiscal year end from August 31 to January 31.
(e) Class K shares were converted to Class B shares on January 16, 1998.
See Combined Notes to Financial Statements.
7
<PAGE>
EVERGREEN
Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended August 31,
Ten Months
Five Months Ended
Ended August 31,
January 31, 1998 (c) 1997 1996 1995 1994 (b)
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Net investment income 0.02 0.05 0.05 0.05 0.03
Less distributions to shareholders from net
investment income ( 0.02) ( 0.05) ( 0.05) ( 0.05) ( 0.03)
--------- --------- --------- --------- ---------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total return 2.21% 5.27% 5.36% 5.38% 2.92%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.59%(a) 0.48% 0.45% 0.53% 0.32%(a)
Total expenses excluding indirectly paid
expenses 0.59%(a) 0.48% - - -
Total expenses excluding waivers and/or
reimbursements 0.59%(a) 0.54% 0.59% 0.73% 0.71%(a)
Net investment income 5.22%(a) 5.13% 5.16% 5.26% 3.46%(a)
Net assets end of period (millions) $ 610 $ 635 $ 671 $ 283 $ 273
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
November 2, 1987
(Commencement of
Class Operations) to
1993 1992 1991 1990 1989 October 31, 1988
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Net investment income 0.03 0.04 0.07 0.08 0.09 0.07
Less distributions to shareholders
from net investment income ( 0.03) ( 0.04) ( 0.07) ( 0.08) ( 0.09) ( 0.07)
--------- --------- --------- --------- --------- ---------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total return 3.23% 4.23% 6.73% 8.40% 9.39% 7.37%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.39% 0.36% 0.30% 0.35% 0.38% 0.43%(a)
Total expenses excluding
indirectly paid expenses - - - - - -
Total expenses excluding waivers
and/or reimbursements 0.71% 0.72% 0.70% 0.69% 0.75% 0.93%(a)
Net investment income 3.19% 4.18% 6.53% 8.08% 9.42% 7.26%(a)
Net assets end of period
(millions) $ 299 $ 358 $ 438 $ 458 $ 408 $ 161
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from October 31 to August 31.
(c) The Fund changed its fiscal year end from August 31 to January 31.
See Combined Notes to Financial Statements.
8
<PAGE>
EVERGREEN
Municipal Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Five Months
Ended
January 31, 1998 (b)
<S> <C>
CLASS A SHARES
Net asset value beginning of period $ 1.00
==========
Net investment income 0.01
Less distributions to shareholders from net investment income ( 0.01)
-----------
Net asset value end of period $ 1.00
===========
Total return 1.34%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.88%(a)
Total expenses excluding indirectly paid expenses 0.88%(a)
Total expenses excluding waivers and reimbursments 0.88%(a)
Net investment income 3.18%(a)
Net assets end of period (millions) $ 672
<CAPTION>
January 5, 1995
(Commencement of
Year Ended August 31, Class Operations) to
1997 1996 August 31, 1995
<S> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00
======== ======== ==========
Net investment income 0.03 0.03 0.02
Less distributions to shareholders from net investment income ( 0.03) ( 0.03) ( 0.02)
--------- --------- -----------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00
========= ========= ===========
Total return 3.13% 3.22% 2.24%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.83% 0.79% 0.78%(a)
Total expenses excluding indirectly paid expenses 0.83% - -
Total expenses excluding waivers and reimbursments 0.86% 0.90% 0.90%(a)
Net investment income 3.09% 3.14% 3.28%(a)
Net assets end of period (millions) $ 667 $ 661 $ 555
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from August 31 to January 31.
See Combined Notes to Financial Statements.
9
<PAGE>
EVERGREEN
Municipal Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Five Months
Ended
January 31, 1998 (b)
<S> <C>
CLASS Y SHARES
Net asset value beginning of period $ 1.00
=========
Net investment income 0.01
Less distributions to shareholders from net investment income ( 0.01)
----------
Net asset value end of period $ 1.00
==========
Total return 1.47%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.58%(a)
Total expenses excluding indirectly paid expenses 0.58%(a)
Total expenses excluding waivers and reimbursments 0.58%(a)
Net investment income 3.46%(a)
Net assets end of period (millions) $ 386
<CAPTION>
Year Ended August 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Net investment income 0.03 0.03 0.04 0.02
Less distributions to shareholders from net investment income ( 0.03) ( 0.03) ( 0.04) ( 0.02)
-------- -------- -------- --------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return 3.44% 3.53% 3.59% 2.50%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.53% 0.49% 0.50% 0.34%
Total expenses excluding indirectly paid expenses 0.53% - - -
Total expenses excluding waivers and reimbursments 0.55% 0.60% 0.63% 0.64%
Net investment income 3.37% 3.44% 3.53% 2.47%
Net assets end of period (millions) $ 378 $ 617 $ 421 $ 402
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31,
1993 1992 1991 1990
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Net investment income 0.03 0.04 0.05 0.06
Less distributions to shareholders from net investment income ( 0.03) ( 0.04) ( 0.05) ( 0.06)
-------- -------- -------- --------
Net asset value end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return 2.61% 3.73% 5.46% 6.15%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.34% 0.32% 0.28% 0.31%
Total expenses excluding indirectly paid expenses - - - -
Total expenses excluding waivers and reimbursments 0.63% 0.63% 0.66% 0.71%
Net investment income 2.58% 3.72% 5.23% 5.94%
Net assets end of period (millions) $ 401 $ 417 $ 510 $ 311
<CAPTION>
November 2, 1988
(Commencement of
Class Operations) to
August 31, 1989
<S> <C>
CLASS Y SHARES
Net asset value beginning of period $ 1.00
=========
Net investment income 0.05
Less distributions to shareholders from net investment income ( 0.05)
----------
Net asset value end of period $ 1.00
==========
Total return 5.51%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.24%(a)
Total expenses excluding indirectly paid expenses -
Total expenses excluding waivers and reimbursments 0.79%(a)
Net investment income 6.77%(a)
Net assets end of period (millions) $ 109
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from August 31 to January 31.
See Combined Notes to Financial Statements.
10
<PAGE>
EVERGREEN
Pennsylvania Municipal Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Five Months
Ended Year Ended
January 31, 1998 (c) August 31, 1997
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 1.00 $ 1.00
========= ========
Net investment income 0.01 0.03
Less distributions to shareholders from net investment income ( 0.01) ( 0.03)
---------- ---------
Net asset value end of period $ 1.00 $ 1.00
========== =========
Total return 1.34% 3.05%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.61%(a) 0.60%
Total expenses excluding indirectly paid expenses 0.61%(a) 0.60%
Total expenses excluding waivers and/or reimbursements 0.87%(a) 0.89%
Net investment income 3.15%(a) 3.01%
Net assets end of period (millions) $ 37 $ 36
<CAPTION>
August 22, 1995
Six Months (Commencement of
Ended Class Operations) to
August 31, 1996 (b) February 29, 1996
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 1.00 $ 1.00
========= =========
Net investment income 0.01 0.02
Less distributions to shareholders from net investment income ( 0.01) ( 0.02)
---------- ----------
Net asset value end of period $ 1.00 $ 1.00
========== ==========
Total return 1.49% 1.72%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.55%(a) 0.47%(a)
Total expenses excluding indirectly paid expenses - -
Total expenses excluding waivers and/or reimbursements 0.96%(a) 1.08%(a)
Net investment income 2.97%(a) 3.14%(a)
Net assets end of period (millions) $ 22 $ 4
</TABLE>
<TABLE>
<CAPTION>
Five Months Six Months
Ended Year Ended Ended
January 31, 1998 (c) August 31, 1997 August 31, 1996 (b)
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00
========= ======== =========
Net investment
income 0.01 0.03 0.01
Less distributions to
shareholders from
net investment
income ( 0.01) ( 0.03) ( 0.01)
---------- --------- ----------
Net asset value end
of period $ 1.00 $ 1.00 $ 1.00
========== ========= ==========
Total return 1.38% 3.15% 1.51%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.51%(a) 0.50% 0.50%(a)
Total expenses
excluding
indirectly paid
expenses 0.51%(a) 0.50% -
Total expenses
excluding waivers
and/or
reimbursements 0.58%(a) 0.60% 0.66%(a)
Net investment
income 3.26%(a) 3.10% 2.92%(a)
Net assets end of
period (millions) $ 33 $ 32 $ 48
<CAPTION>
August 15, 1991
(Commencement of
Year Ended February 28, Class Operations) to
1996 1995 1994 1993 February 29, 1992
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ==========
Net investment
income 0.03 0.03 0.02 0.03 0.02
Less distributions to
shareholders from
net investment
income ( 0.03) ( 0.03) ( 0.02) ( 0.03) ( 0.02)
-------- -------- -------- -------- -----------
Net asset value end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ===========
Total return 3.55% 2.81% 2.10% 2.68% 2.20%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.37% 0.33% 0.47% 0.35% 0.19%(a)
Total expenses
excluding
indirectly paid
expenses - - - - -
Total expenses
excluding waivers
and/or
reimbursements 0.73% 1.05% 1.26% 1.07% 0.77%(a)
Net investment
income 3.42% 3.09% 2.10% 2.62% 3.90%(a)
Net assets end of
period (millions) $ 83 $ 44 $ 14 $ 16 $ 21
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from February 29 to August 31.
(c) The Fund changed its fiscal year end from August 31 to January 31.
See Combined Notes to Financial Statements.
11
<PAGE>
EVERGREEN
Treasury Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended August 31,
Five Months
Ended
January 31, 1998 (c) 1997 1996
<S> <C> <C> <C>
CLASS A SHARES
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00
========= ======= =======
Net investment
income 0.02 0.05 0.05
Less distributions to
shareholders from
net investment
income ( 0.02) ( 0.05) ( 0.05)
---------- ------- -------
Net asset value end
of period $ 1.00 $ 1.00 $ 1.00
========== ======= =======
Total return 2.07% 4.82% 4.98%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.73%(a) 0.72% 0.69%
Total expenses
excluding
indirectly paid
expenses 0.73%(a) 0.72% -
Total expenses
excluding
waivers and
reimbursments 0.73%(a) 0.72% 0.77%
Net investment
income 4.89%(a) 4.73% 4.76%
Net assets end of
period (millions) $ 2,616 $2,485 $2,608
<CAPTION>
March 6, 1991
Eight Months (Commencement of
Ended Year Ended December 31, Class Operations) to
August 31, 1995 (b) 1994 1993 1992 December 31, 1991
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======= ======= ======= ==========
Net investment
income 0.03 0.04 0.03 0.03 0.04
Less distributions to
shareholders from
net investment
income ( 0.03) ( 0.04) ( 0.03) ( 0.03) ( 0.04)
----------- -------- -------- -------- -----------
Net asset value end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======== ======== ======== ===========
Total return 3.58% 3.75% 2.73% 3.36% 4.46%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.63%(a) 0.50% 0.48% 0.48% 0.47%(a)
Total expenses
excluding
indirectly paid
expenses - - - - -
Total expenses
excluding
waivers and
reimbursments 0.79%(a) 0.78% 0.82% 0.82% 1.08%(a)
Net investment
income 5.30%(a) 3.91% 2.70% 3.22% 4.95%(a)
Net assets end of
period (millions) $ 1,178 $ 755 $ 261 $ 209 $ 100
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31,
Five Months
Ended
January 31, 1998 (c) 1997 1996
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00
========= ======= =======
Net investment
income 0.02 0.05 0.05
Less distributions to
shareholders from
net investment
income ( 0.02) ( 0.05) ( 0.05)
---------- -------- --------
Net asset value end
of period $ 1.00 $ 1.00 $ 1.00
========== ======== ========
Total return 2.20% 5.14% 5.29%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.43%(a) 0.42% 0.39%
Total expenses
excluding
indirectly paid
expenses 0.43%(a) 0.42% -
Total expenses
excluding
waivers and
reimbursments 0.43%(a) 0.43% 0.47%
Net investment
income 5.19%(a) 5.02% 5.12%
Net assets end of
period (millions) $ 572 $ 547 $ 760
<CAPTION>
March 6, 1991
Eight Months (Commencement of
Ended Year Ended December 31, Class Operations) to
August 31, 1995 (b) 1994 1993 1992 December 31, 1991
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======= ======= ======= ==========
Net investment
income 0.04 0.04 0.03 0.04 0.05
Less distributions to
shareholders from
net investment
income ( 0.04) ( 0.04) ( 0.03) ( 0.04) ( 0.05)
----------- -------- -------- -------- -----------
Net asset value end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======== ======== ======== ===========
Total return 3.78% 4.06% 3.04% 3.67% 4.66%
Ratios/Supplemental
Data
Ratios to average net
assets
Total expenses 0.33%(a) 0.20% 0.18% 0.17% 0.20%(a)
Total expenses
excluding
indirectly paid
expenses - - - - -
Total expenses
excluding
waivers and
reimbursments 0.49%(a) 0.48% 0.52% 0.52% 0.52%(a)
Net investment
income 5.60%(a) 3.78% 3.00% 3.61% 5.53%(a)
Net assets end of
period (millions) $ 277 $ 163 $ 366 $ 286 $ 265
</TABLE>
(a) Annualized.
(b) The Fund changed its fiscal year end from December 31 to August 31.
(c) The Fund changed its fiscal year end from August 31 to January 31.
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
Money Market Fund
Schedule of Investments
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
BANKERS' ACCEPTANCES-YANKEE & EURO DOLLAR - 1.6%
$ 10,000,000 Fuji Bank Limited (New York),
5.62%, 2/2/98 ...................... $ 9,998,439
28,650,000 Industrial Bank Of Japan Ltd.,
5.68%, 4/17/98 ..................... 28,310,975
19,700,000 Sanwa Bank Limited,
6.00%, 2/17/98 ..................... 19,647,466
-----------
Total Bankers' Acceptances-Yankee &
Euro Dollar (cost $57,956,880) ..... 57,956,880
-----------
CERTIFICATES OF DEPOSIT - 16.4%
50,000,000 Bank Of Nova Scotia,
5.81%, 8/5/98 ...................... 49,992,722
Bank Of Tokyo Mitsubishi:
50,000,000 6.02%, 5/18/98 ................... 50,001,429
50,000,000 6.18%, 2/5/98 .................... 50,002,533
50,000,000 Banque National de Paris (New York),
5.90%, 11/12/98 .................... 50,000,000
Bayerische Vereinsbank AG (New York):
25,000,000 5.92%, 10/5/98 ................... 25,000,000
25,000,000 6.15%, 5/11/98 ................... 25,000,000
50,000,000 Credit Suisse First Boston, Inc.,
Floating Rate Certificates of Deposit,
5.70%, 12/14/98 .................... 50,000,000
5,000,000 Deutsche Bank AG,
5.91%, 3/17/98 ..................... 4,999,827
National Bank Of Canada (New York):
50,000,000 5.93%, 9/14/ 98 .................. 49,985,273
50,000,000 6.00%, 6/26/98 ................... 50,000,000
25,000,000 Norinchukin Bank (New York),
5.82%, 3/4/98 ...................... 25,000,209
1,000,000 Rabobank Nederland N.V.,
5.99%, 3/24/98 ..................... 999,709
Societe Generale (New York):
25,000,000 5.66%, 2/23/98 ................... 25,000,000
25,000,000 5.97%, 9/15/98 ................... 25,015,021
50,000,000 Standard Chartered Bank,
5.95%, 10/19/98 .................... 49,996,596
50,000,000 Svenska Handlesbanken, Inc.,
5.96%, 8/13/98 ..................... 49,989,892
===========
Total Certificates of Deposit
(cost $580,983,211) ................ 580,983,211
===========
COMMERCIAL PAPER * - 54.8%
Asset-Backed - 0.7%
25,000,000 Standard Credit Card Master Trust I,
5.50%, 2/19/98 ..................... 24,931,250
-----------
Automotive Equipment &
Manufacturing - 1.5%
29,450,000 Daimler-Benz North America Corp.,
5.55%, 4/1/98 ...................... 29,182,128
25,000,000 Hertz Corp.,
5.58%, 2/6/98 ...................... 24,980,625
-----------
54,162,753
-----------
Banks - 2.9%
25,000,000 Bankers Trust Co.,
6.15%, 5/28/98 ..................... 24,999,242
25,000,000 BCI Funding Corp.,
5.71%, 2/11/98 ..................... 24,960,347
30,000,000 NationsBank Corp.,
5.52%, 2/10/98 ..................... 29,958,600
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
COMMERCIAL PAPER * - continued
Banks - continued
$25,000,000 Sumitomo Bank Capital Markets, Inc.,
5.82%, 2/4/98 ...................... $24,987,875
-----------
104,906,064
-----------
Brokers - 1.4%
49,455,000 Goldman Sachs Group,
5.60%, 2/2/98 49,447,307
-----------
Business Equipment & Services - 0.5%
18,500,000 JLUS Funding Corp.,
(LOC: Norinchukin Bank)
6.03%, 2/12/98 ..................... 18,465,914
===========
Diversified Companies - 0.3%
10,000,000 Finova Capital Corp.,
5.70%, 2/2/98 ...................... 9,998,417
-----------
Finance - 42.8%
19,000,000 Amsterdam Funding Corp.,
5.78%, 2/9/98 ...................... 18,975,596
47,460,000 Anchor Funding Corp.,
5.65%, 2/11/98 ..................... 47,385,514
50,000,000 Apex Funding Corp., (LOC: Bank of
Tokyo-Mitsubishi Ltd.),
5.72%, 4/6/98 ...................... 49,491,556
Atlas Funding Corp., (LOC: Dai-Ichi
Kangyo Bank Ltd.):
45,000,000 5.80%, 2/18/98 ................... 44,876,750
30,000,000 5.86%, 2/17/98 ................... 29,921,867
26,275,000 5.90%, 2/11/98 ................... 26,231,938
Banner Receivables Corp.,
(LOC Republic Bank):
30,000,000 5.58%, 2/11/98 ................... 29,953,500
19,040,000 5.70%, 2/5/98 .................... 19,027,941
Broadway Capital Corp.:
25,000,000 5.52%, 2/20/98 ................... 24,927,167
9,200,000 6.35%, 2/2/98 .................... 9,198,377
50,000,000 Budget Funding Corp.,
5.50%, 2/24/98 ..................... 49,824,305
50,000,000 Clipper Receivables Corp.,
5.49%, 2/18/98 ..................... 49,870,375
38,418,000 FP Funding Corp.,
(LOC: The Bank of Tokyo-Mitsubishi
Ltd.),
5.80%, 2/6/98 ...................... 38,387,052
35,000,000 5.58%, 2/19/98 ................... 34,902,350
20,819,000 5.60%, 2/18/98 ................... 20,763,945
35,000,000 5.65%, 2/5/98 .................... 34,978,028
20,064,000 5.77%, 2/3/98 .................... 20,057,569
35,619,000 5.77%, 2/4/98 .................... 35,601,873
GTE Funding, Inc.:
25,000,000 5.55%, 2/3/98 .................... 24,992,291
49,640,000 5.75%, 2/11/98 ................... 49,560,714
20,100,000 Lexington Parker Capital Corp.,
5.48%, 2/6/98 ...................... 20,084,702
35,450,000 Madison Funding, Inc.,
5.55%, 2/19/98 ..................... 35,351,626
50,000,000 Mont Blanc Capital Corp.,
5.51%, 3/5/98 ...................... 49,755,111
</TABLE>
13
<PAGE>
EVERGREEN
Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
COMMERCIAL PAPER * - continued
Finance - continued
$25,682,000 Monte Rosa Capital Corp.,
5.48%, 3/5/98 ..................... $ 25,556,900
Old Line Funding Corp.,
(LOC: Dai-Ichi Kangyo Bank, Ltd.):
25,121,000 5.50%, 2/23/98 .................. 25,036,565
22,289,000 5.52%, 2/17/98 .................. 22,234,318
50,000,000 Orix America, Inc.,
(LOC: Norinchukin Bank)
5.83%, 10/23/98 ................... 50,000,000
Sanwa Business Credit Corp.,
(LOC: Fuji Bank Ltd.):
35,000,000 5.60%, 2/17/98 .................. 34,912,889
30,000,000 5.65%, 2/3/98 ................... 29,990,583
Seven Hills Funding Corp.:
100,000,000 5.67%, 2/2/98 ................... 99,984,250
50,000,000 5.75%, 2/2/98 ................... 49,992,014
30,717,000 Strategic Asset Funding Corp.,
(Series A, Years 1&2)
5.80%, 2/9/98 ..................... 30,677,409
Tri-Lateral Capital (USA), Inc.,
(LOC: Industrial Bank of Japan Ltd.):
50,000,000 5.55%, 2/5/98 ................... 49,969,167
50,000,000 5.70%, 2/2/98 ................... 49,992,083
50,000,000 6.00%, 2/20/98 .................. 49,841,667
35,000,000 WCP Funding, Inc.,
5.47%, 3/17/98 .................... 34,766,006
23,572,000 Windmill Funding Corp.,
5.50%, 2/23/98 .................... 23,492,772
Wood Street Funding Corp.,
(LOC: Royal Bank of Canada):
35,138,000 5.50%, 2/3/98 .................... 35,127,263
25,081,000 5.50%, 2/12/98 .................. 25,038,850
Working Capital Management
Co. L.P.,
75,000,000 5.85%, 2/2/98 .................... 74,987,812
(LOC: Industrial Bank of Japan Ltd.)
42,230,000 5.65%, 2/13/98 .................. 42,150,467
-------------
1,517,871,162
-------------
Industrial Specialty Products &
Services - 1.3%
46,821,000 Thames Asset Global Securitization,
5.48%, 4/20/98 .................... 46,265,078
-------------
Insurance - 1.6%
25,500,000 ING America Insurance HL,
5.73%, 3/4/98 ..................... 25,374,179
30,000,000 Safeco Credit Company, Inc.,
5.70%, 2/9/98 ..................... 29,962,000
-------------
55,336,179
-------------
Other - 0.9%
32,500,000 Fingerhut Owner Trust,
5.48%, 2/20/98 .................... 32,406,003
-------------
Telecommunication Services &
Equipment - 0.9%
30,600,000 GTE Corp.,
5.55%, 2/9/98 ..................... 30,562,260
-------------
Total Commercial Paper
(cost $1,944,352,387) ............. 1,944,352,387
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE NOTES - 17.4%
Abbey National PLC, Treasury
Services, MTN:
$25,000,000 5.72%, 1/29/99 .................. $ 25,000,000
25,000,000 6.19%, 4/7/98 ................... 24,997,151
25,000,000 BankBoston,
5.90%, 8/7/98 ..................... 25,000,000
25,000,000 BankBoston, Medium Senior Notes,
5.74%, 4/21/98 .................... 25,000,000
15,000,000 Beneficial Corp. MTN,
6.09%, 5/28/98 .................... 15,016,089
70,000,000 Bravo Trust Series,
5.65%, 10/15/98, (a) .............. 70,000,365
4,500,000 Gesmundo & Associates, Inc.,
(LOC: First of America Bank N.A.)
5.60%, VRDN ....................... 4,500,000
20,000,000 Heller Financial, Inc.,
9.38%, 3/15/98 .................... 20,069,387
8,300,000 Houlihan Brothers,
(LOC: First of America Bank N.A.)
5.60%, VRDN ....................... 8,300,000
5,000,000 KBL Capital Fund Inc.,
(LOC: First of America Bank N.A.)
5.60%, VRDN ....................... 5,000,000
13,260,000 LAM Funding LLC,
(LOC: First of America Bank N.A.)
5.60%, VRDN ....................... 13,260,000
Lehman Brothers Holdings, Inc.:
40,000,000 5.65%, 1/13/99 .................. 40,000,000
1,819,000 5.75%, 11/15/98 ................. 1,814,453
5,000,000 5.97%, 8/10/98 .................. 5,007,494
10,000,000 6.84%, 9/25/98 .................. 10,047,040
19,464,000 (Eff. Yield 5.84%)
0.00%, 5/16/98 .................... 19,136,019
30,000,000 5.74%, 1/13/99 .................. 30,000,000
14,000,000 Manitoba Province (Canada),
9.50%, 9/15/98 .................... 14,291,042
75,000,000 Morgan Guaranty Trust Co. (New York),
5.93%, 8/31/98 .................... 75,008,140
13,000,000 Morgan Stanley Dean Witter
Discover & Co.,
5.69%, 2/12/98 .................... 13,000,530
50,000,000 Morgan Stanley Dean Witter
Discover & Co., FRN,
5.91%, 6/16/98 .................... 50,000,000
5,000,000 Northern Trust Co. Bank, MTN,
5.96%, 6/17/98 .................... 5,000,500
25,000,000 PHH Corp., MTN,
5.69%, 2/25/98 .................... 24,997,622
15,000,000 Salomon, Inc.,
6.16%, 2/13/98 .................... 15,036,090
26,000,000 Salomon, Inc., MTN,
7.76%, 5/11/98 .................... 26,150,402
50,000,000 Sigma Finance Corp., MTN,
6.00%, 9/16/98 .................... 50,000,000
-------------
Total Corporate Notes
(cost $615,632,324) ............... 615,632,324
-------------
FUNDING AGREEMENT - 2.8%
(cost $100,000,000)
100,000,000 General American, Cash Manager Plus,
6.14%, 2/1/98 ..................... 100,000,000
-------------
</TABLE>
14
<PAGE>
EVERGREEN
Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
TAXABLE MUNICIPALS - 2.6%
$ 5,900,000 Brittany Acres,
6.22%, VRDN ............. $ 5,900,000
84,500,000 Macon Trust Pooled Variable
Certificates,
5.96%, VRDN (a) ......... 84,500,000
------------
Total Taxable Municipals
(cost $90,400,000) ...... 90,400,000
------------
GOVERNMENT AGENCY BONDS & NOTES - 3.2%
Federal Home Loan Bank:
5,000,000 5.88%, 2/26/98 ......... 5,000,000
30,000,000 6.00%, 12/30/98 ........ 30,000,000
5,000,000 Federal National Mortgage
Assn.,
5.44%, 2/13/98 .......... 5,000,000
75,000,000 Federal National Mortgage
Assn. MTN,
5.60%, 2/4/98 ........... 74,979,051
------------
Total Government Agency
Bonds &
Notes (cost $114,979,051) 114,979,051
------------
REPURCHASE AGREEMENT - 1.4%
(cost $49,533,111)
49,533,111 Dresdner Bank AG,
5.57%, dated 01/30/98, due
2/2/98,
maturity value $49,556,103(b) 49,533,111
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
MUTUAL FUND SHARES - 0.0% (cost $1,234,968)
1,234,968 Federated Prime Value Obligation Fund. $ 1,234,968
==============
Total Investments
(cost $3,555,071,932) ..... 100.2% 3,555,071,932
Other Assets and
Liabilities - Net ......... ( 0.2) (8,390,371)
----- --------------
Net Assets - .............. 100.0% $3,546,681,561
===== ==============
</TABLE>
Summary of Abbreviations:
FRN Floating Rate Note
LOC Letter of Credit
MTN Medium Term Note
VRDN Variable Rate Demand Note
(a) Securities may be sold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act
of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(b) Collateralized by $42,125,000 U.S. Treasury Notes, 6.125%, due 3/31/98,
and $7,105,000 U.S. Treasury Notes, 7.50%, due 10/31/99; total value
including accrued interest $50,525,658.
* Rates listed represent yield to maturity.
Variable Rate Demand Notes are payable on demand on no more than seven calendar
days notice given by the Fund to the issuer or other parties not affiliated
with the issuer. Interest rates are determined and reset by the issuer daily,
weekly, or monthly depending upon the terms of the security. Interest rates
presented for these securities are those in effect at January 31, 1998.
See Combined Notes to Financial Statements
15
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - 99.5%
Alabama - 5.7%
Alabama IDA-IDRB:
$2,150,000 Air-Dro Cylinders, Inc.,
(LOC: Fleet Bank, N.A.),
3.85%, VRDN ...................... $2,150,000
3,470,000 Automation Technologies Ind. Inc.,
(LOC: Columbus Bank & Trust Co.),
3.85%, VRDN ...................... 3,470,000
Commercial Development Authority
of the City of Birmingham RB:
1,035,000 Avondale Comm. Park, Phase II,
(LOC: Amsouth Bank, N.A.),
3.85%, VRDN ...................... 1,035,000
625,000 Southside Business Ctr.,
(LOC: Amsouth Bank, N.A),
3.85%, VRDN ...................... 625,000
1,500,000 Florence, Alabama IDRB, Die Tech
Inc. Project,
(LOC: Southtrust Bank of Alabama),
3.88%, VRDN ...................... 1,500,000
1,400,000 Guntersville, Alabama IDB-IDRB, KSG
Realty Inc. Project,
(LOC: National Bank of Canada),
3.88%, VRDN ...................... 1,400,000
2,955,000 IDB of Mobile County RB, Sherman
Intl. Corp., Ser. 1994A,
(LOC: Columbus Bank & Trust Co.),
3.85%, VRDN ...................... 2,955,000
14,000,000 Jefferson County, Alabama Sewer
Revenue, Susquehanna Structured
Products,
(LIQ: Chase Manhattan Bank & Ins.
by FGIC),
3.75%, VRDN ...................... 14,000,000
9,060,000 Mobile, Alabama IDB, International
Paper Company Project, Ser.
1983A, ARB,
(Gtd. by International Paper Co.),
4.00%, 11/16/98 .................. 9,060,000
18,790,000 Mobile, Alabama PCRB, International
Paper Company Project, ARB,
(Gtd. by International Paper Co.),
3.85%, 4/15/98 ................... 18,790,000
5,200,000 Phenix City, Alabama Environmental
IDRB, Mead Coated Board Project,
(LOC: Sumitomo Bank),
4.00%, VRDN ...................... 5,200,000
==========
60,185,000
==========
Alaska - 1.8%
18,820,000 Alaska State Dept. Admin. COP,
Puttable Floating Option Tax Exempt
Receipts, Ser. PT-94,
(LIQ: Cr. Suisse & Ins. by Capital
Mkt. Assurance),
3.75%, VRDN ...................... 18,820,000
==========
Arizona - 0.0%
200,000 Maricopa County IDA, McLane Co.,
Inc., Ser. 1984,
(LOC: Wachovia Bank of Georgia),
3.95%, VRDN ...................... 200,000
==========
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Arkansas - 0.3%
$3,655,000 Magnolia, Arkansas IDRB, American
Fuel Cell Project,
(LOC: Credit Comml de France),
4.10%, VRDN ...................... $3,655,000
==========
California - 8.8%
6,600,000 California State RAN, 1997 Trust
Receipts Ser. 23,
(LOC: Bank of New York),
4.00%, VRDN ...................... 6,600,000
4,250,000 City of Paramount MHRB, Century
Place Apt., Ser. 1989A,
(LOC: Heller Financial Inc.),
4.05%, VRDN ...................... 4,250,000
1,900,000 Glenn County IDA-PCRB, Land
O'Lakes, Inc., Ser. 1995,
(LOC: Sanwa Bank, Ltd.),
4.40%, VRDN ...................... 1,900,000
5,000,000 Los Angeles, California MHRB,
Channel Gateway Apartments,
Ser. 89B,
(LOC: Fuji Bank Ltd.),
4.20%, VRDN ...................... 5,000,000
6,440,000 Los Angeles, California Municipal
Improvement Corp. COP, Equipment
and Real Property Acquisition
Program, ARB,
4.50%, 10/1/98 ................... 6,460,564
1,100,000 Ontario, California, IDA-RB,
Erenberg Brothers Project
Ser.1988A, Issue I,
(LOC: Tokai Bank, Ltd.),
4.50%, VRDN ...................... 1,100,000
Orange County, California, Apartment
Development, ARB:
(LOC: Tokai Bank Ltd.):
5,000,000 Villas Aliento Project, Issue R,
4.35%, 8/15/98 ................... 5,000,000
12,200,000 Villas De La Paz, Issue O,
4.35%, 8/15/98 ................... 12,200,000
Pitney Bowes Credit Corp. Leasetops
Trusts:
24,424,645 Bart Telesystem Lease,
(LOC: ABN-Amro Bank, N.V.),
3.70%, VRDN (a) .................. 24,424,645
12,930,099 San Diego Regl. Comm. Sys.
Lease, Ser. 1996A,
(LOC: Landesbank Hessen &
Gtd. by Pitney Bowes),
3.70%, VRDN (a) .................. 12,930,099
4,400,000 Sacramento County, California MHRB,
River Terrace Apts. Project, Ser. C,
(LOC: Dai-Ichi Kangyo Bank),
4.15%, VRDN ...................... 4,400,000
9,300,000 San Diego, California Public
Facilities Financing, Puttable
Floating Option Tax Exempt Receipts
Part 1010,
(LIQ: Merrill Lynch & Ins. by FGIC),
3.55%, VRDN ...................... 9,300,000
==========
93,565,308
==========
</TABLE>
16
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Colorado - 1.2%
$2,500,000 Adams County IDRB, Yellow Freight
Systems, Inc., Ser. 1983,
(LOC: Union Bank of Switzerland),
3.95%, VRDN ...................... $2,500,000
4,760,000 Colorado HFA RB MERLOTS, Ser. C,
ARB,
(LOC: CoreStates Bank, N.A.),
4.10%, 2/1/98 .................... 4,760,000
2,900,000 Dove Valley Metropolitan District
Arapahoe County GO, Ser. 1996C,
ARB,
(LOC: Dai-Ichi Kangyo Bank, Ltd.),
4.25%, 11/1/98 ................... 2,900,000
2,680,000 Parkview Metropolitan District,
Arapahoe County GO, Ser. 1993,
(LOC: Colorado National Bank),
3.75%, VRDN ...................... 2,680,000
==========
12,840,000
==========
Delaware - 0.5%
3,000,000 Delaware EDA-IDRB, Arlon, Inc.,
Ser. 1989,
(LOC: Bank of America, IL),
3.90%, VRDN ...................... 3,000,000
380,000 Delaware Housing Authority RB
MERLOTS, Ser. G, ARB,
(LIQ: CoreStates Bank & Ins. by FSA)
4.15%, 3/1/98 (a) ................ 380,000
2,480,000 New Castle County EDRB, Toys R Us
Inc. Project,
(LOC: Bankers Trust Co., NY),
3.60%, VRDN ...................... 2,480,000
==========
5,860,000
==========
District of Columbia - 1.0%
5,120,000 District of Columbia GO RB,
Puttable Floating Option Tax Exempt
Receipts, Ser. PA-64, Ser. 1993C,
(LIQ: Merrill Lynch & Ins. by FGIC),
3.80%, VRDN ...................... 5,120,000
500,000 District of Columbia GO, Series A,
(Ins. by AMBAC)
7.25%, 6/1/98 .................... 505,187
4,500,000 District of Columbia HFA SFHRB,
Ser. 97, ARB,
(COLL: GNMA),
4.05%, 9/1/98 .................... 4,500,000
==========
10,125,187
==========
Florida - 1.9%
6,835,000 Orange County Florida Health
Facilities Authority MSTR, SAK 11,
(LIQ: Credit Suisse First Boston &
Ins. by AMBAC),
3.75%, VRDN ...................... 6,835,000
2,800,000 Orange County HFA MHRB, Oakwood
Project 1985, Ser. E,
(LOC: Fleet Bank, N.A.),
4.00%, 10/1/98 ................... 2,800,000
5,875,000 Palm Beach County School Board,
MSTR Ser. 1996B,
(LIQ: Norwest Bank, MN & Ins. by
AMBAC),
3.70%, VRDN ...................... 5,875,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Florida - continued
$ 955,000 Palm Beach Housing Project RB,
Meridian Housing, Ser. 1985,
(LOC: Union Bank of California,
N.A.),
4.25%, VRDN ...................... $ 955,000
3,900,000 Tampa Florida Capital Improvement
Program RB, Puttable Floating Trust
Receipts PT-96,
(LOC: Merrill Lynch),
3.75%, VRDN ...................... 3,900,000
==========
20,365,000
==========
Georgia - 3.7%
1,000,000 Albany Dougherty County Hospital
RB, Merck & Co.Project, Ser. 1984A,
(Gtd. by Merck & Co.),
3.95%, VRDN ...................... 1,000,000
5,000,000 Albany Dougherty Payroll, Ser.
1982A, Merck & Co. Project,
(Gtd. by Merck & Co.),
3.70%, VRDN ...................... 5,000,000
1,000,000 Cherokee County, Georgia EDA IDR,
Piolax Corporation Project,
(LOC: Industrial Bank of Japan),
4.00%, VRDN ...................... 1,000,000
2,200,000 Columbus Housing Authority MHRB
RRB, Quail Ridge Project, Ser. 1988,
(LOC: Columbus Bank & Trust Co.),
3.90%, VRDN ...................... 2,200,000
10,980,000 De Kalb County, Georgia MHRB, Stone
Mountains Apts. Puttable Floating
Option Tax Exempt Receipts, PA-213,
(LOC: Merrill Lynch),
3.75%, VRDN ...................... 10,980,000
Georgia Municipal Electric
Authority Power Revenue MSTR:
(LIQ: Credit Suisse First Boston &
Ins. by MBIA):
8,000,000 SAK14,
3.75%, VRDN ...................... 8,000,000
5,040,000 SAK15,
3.75%, VRDN ...................... 5,040,000
6,000,000 Polk County Development Authority
RB, Kimoto Tech. Inc., Ser. 1985,
(LOC: Indl. Bank of Japan, Ltd.),
3.95%, VRDN ...................... 6,000,000
==========
39,220,000
==========
Illinois - 16.4%
13,311,000 ABN Amro Chicago Corporation
Leasetop COP, Master Trust I,
Ser. 1997-1,
(LOC: LaSalle National Bank),
3.70%, VRDN (a) .................. 13,311,000
2,820,000 Arlington Heights, Illinois MHRB
RRB, Dunton Tower Apts. Project,
(LOC: Heller Financial, Inc.),
4.30%, VRDN ...................... 2,820,000
1,700,000 Chicago IDR, Federal Marine
Terminal Project,
(LOC: Canadian Imperial Bank of
Commerce),
3.95%, VRDN ...................... 1,700,000
</TABLE>
17
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Illinois - continued
$25,000,000 Chicago, Illinois Sales Tax
Revenue, Susquehanna Structured
Products, MSTR SSP-9,
(LIQ: Chase Manhattan Bank & Ins.
by FGIC),
3.75%, VRDN ........................... $25,000,000
9,595,000 City of Aurora MHRB, Fox Valley
Village Apts., Ser. 1993,
(LOC: Sumitomo Bank, Ltd.),
4.25%, VRDN ........................... 9,595,000
2,900,000 City of Chicago GO, MSTR SAK-13,
Ser. 1995A-2,
(LIQ: Credit Suisse First Boston &
Ins. by AMBAC),
3.75%, VRDN ........................... 2,900,000
1,000,000 City of Peoria IDR, PMP
Fermentation Products, Inc.,
(LOC: Sanwa Bank, Ltd.),
4.15%, VRDN ........................... 1,000,000
6,500,000 City of Peoria Solid Waste Disposal
RB, PMP Fermentation Products Inc.,
Ser. 1996,
(LOC: Sanwa Bank, Ltd.),
4.15%, VRDN ........................... 6,500,000
5,900,000 City of West Chicago IDRB, Acme
Printing Inc., Ser. 1989,
(LOC: Bank of Tokyo-Mitsubishi, Ltd.),
3.98%, VRDN ........................... 5,900,000
3,500,000 Illinois Development Finance
Authority EDRB, MTI Corp.,
(LOC: Indl. Bank of Japan, Ltd.),
4.20%, VRDN ........................... 3,500,000
3,500,000 Illinois Development Finance
Limited Obligation Revenue, Decatur
Mental Health Center Project,
(LOC: First Bank of America,
Illinois),
3.70%, VRDN ........................... 3,500,000
Oakbrook Terrace, Illinois MHRB,
Renaissance Project, ARB:
(LOC: Trinity Funding Corp. and Ins.
by FGIC):
35,000,000 Ser. A Subseries II,
4.95%, 11/3/98 ........................ 35,000,000
29,000,000 Ser. A Subseries III,
4.95%, 11/3/98 ........................ 29,000,000
1,850,000 Skokie, Illinois EDRB, Skokie
Fashion Square Project,
(LOC: LaSalle National Bank),
3.83%, VRDN ........................... 1,850,000
16,640,000 Village of Hazel Crest Retirement
Center RB, Waterford Estates
Project, Ser. 1992A,
(LOC: Sumitomo Bank Ltd.),
4.35%, VRDN ........................... 16,640,000
15,210,000 Village of Vernon Hills MHRB RRB,
Hawthorn Lakes Project, Ser. 1991,
(LIQ: Fuji Bank, Ltd. & Ins. by FSA),
4.35%, VRDN ........................... 15,210,000
===========
173,426,000
===========
Indiana - 1.2%
6,500,000 Avilla, Indiana EDRB, Pent
Assemblies Inc., Ser. 1996, ARB,
(LOC: Fort Wayne National Bank),
4.35%, VRDN ........................... 6,500,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Indiana - continued
$ 2,180,000 City of Fort Wayne PCRB, General
Motors Corporation,
(Gtd. by General Motors Corporation),
3.90%, VRDN ........................... $ 2,180,000
2,000,000 City of South Bend MHRB, Maple Lane
Assn., Ser. 1987,
(LOC: FHLB of Indianapolis),
3.80%, VRDN ........................... 2,000,000
775,000 Decatur Industrial EDA-RB,
Silberline Mfg. Co. Inc.,
(LOC: CoreStates Bank N.A.),
4.20%, 6/1/98 ......................... 775,000
1,000,000 Muncie, Indiana Delaware County
COP, Delaware Building Corporation,
(Ins. by AMBAC),
8.10%, 2/1/98 ......................... 1,000,000
===========
12,455,000
===========
Iowa - 1.1%
2,800,000 Algona, Iowa IDR, George A. Hormel
and Co.,
(LOC: Sumitomo Bank Ltd.),
4.00%, VRDN ........................... 2,800,000
City of Council Bluffs RB Catholic
Healthcare Corp. (LOC: Fuji Bank,
Ltd.), :
6,810,000 Mercy Hospital Project, Ser. 1985,
3.90%, 4/1/98 ......................... 6,810,000
2,170,000 Mercy Medical Project,
3.90%, 4/1/98 ......................... 2,170,000
===========
11,780,000
===========
Kansas - 0.4%
1,800,000 City of Praire Village MHRB, J.C.
Nichol's Co., Ser. 1985,
(Gtd. by Principal Mutual Life Ins. Co.),
4.15%, VRDN ........................... 1,800,000
City of Salina, Kansas, RB, Salina
Central Mall Limited:
(LOC: Boatmen's Bank of St. Louis):
1,105,000 Dillard's Project,
3.70%, VRDN ........................... 1,105,000
1,200,000 Penney's Project,
3.70%, VRDN ........................... 1,200,000
===========
4,105,000
===========
Kentucky - 1.9%
20,300,000 County of Ohio PCRB, Big Rivers
Electric Corp., Ser. 1985,
(LOC: Chemical Bank),
4.20%, VRDN ........................... 20,300,000
===========
Louisiana - 1.6%
3,400,000 Bastrop, Louisiana, IDB-PCRB,
International Paper Project, ARB,
(Gtd. by International Paper),
3.85%, 4/15/98 ........................ 3,400,000
3,060,000 IDB of the Parish of Bossier, Inc.,
H. J. Wilson Co., Inc., Ser. 1982,
ARB,
(LOC: Canadian Imperial Bank of
Commerce),
4.05%, 12/1/98 ........................ 3,060,000
</TABLE>
18
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Louisiana - continued
$10,000,000 Natchitoches Parish Louisiana MHRB,
Trust Joist Corp.,
(LOC: Bank of Tokyo-Mitsubishi),
4.00%, VRDN .......................... $10,000,000
===========
16,460,000
===========
Maine - 0.3%
3,685,000 Jay Maine Solid Waste Disposal RB,
International Paper Project, ARB,
(Gtd. by International Paper),
4.20%, 6/1/98 ........................ 3,685,000
===========
Maryland - 0.8%
8,271,000 Howard County, Maryland MHRB,
Broken Land Parkway Project,
Puttable Floating Option Tax Exempt
Receipts, PA-212,
(LOC: Merrill Lynch),
3.75%, VRDN .......................... 8,271,000
===========
Massachusetts - 0.2%
MIFA,
(LOC: BankBoston):
400,000 Copley Pharmaceutical, Inc. Project,
4.50%, VRDN .......................... 400,000
590,000 Kryptonite Issue, Ser. 1990,
4.25%, 9/1/98 ........................ 590,152
MIFA IDRB:
415,000 Leavy Realty & Jencoat Metal Inc.
Project, Ser. 1994,
(LOC: BankBoston),
4.25%, VRDN .......................... 415,000
700,000 Portland Causeway Realty, Ser. 1988,
(LOC: Citibank, N.A.),
4.25%, VRDN .......................... 700,000
===========
2,105,152
===========
Michigan - 0.9%
6,000,000 Michigan State Jobs Development
Authority PCRB, Mazda Motor Mfg.
USA Corp.,
(LOC: Sumitomo Bank),
4.08%, VRDN .......................... 6,000,000
3,985,000 Sault Ste. Marie Tribe Building
Authority RB, Ser. 1996A, ARB,
(LOC: First of America Bank, N.A.),
4.33%, 6/1/98 ........................ 3,985,000
===========
9,985,000
===========
Minnesota - 3.7%
2,800,000 City of Robbinsdale IDRB, Unicare
Homes, Inc., Ser. 1984,
(LOC: Banque Paribas),
3.75%, VRDN .......................... 2,800,000
4,420,000 Dakota & Washington Counties Hsg. &
Redev. Auth., ARB, MERLOTS Ser. J,
(LOC: CoreStates Bank, N.A.),
4.15%, 3/1/98 ........................ 4,420,000
4,220,000 Minneapolis GO, Sports Arena, MSTR
Ser. 1996A,
(LIQ: Norwest Bank, MN),
3.70%, VRDN .......................... 4,220,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Minnesota - continued
$ 765,000 Minneapolis/ Saint Paul Hsg. Fin. Board
SFHRB, Minneapolis/Saint Paul
Family Hsg. Prog., Phase VI, ARB,
(COLL: GNMA),
4.00%, 2/1/98 ........................ $ 765,000
1,510,000 Richfield Independent School Dist. #280,
MSTR Ser. 1994P,
(LIQ: First Bank, N.A. & Ins. by FGIC),
3.70%, VRDN .......................... 1,510,000
750,000 Southern Minnesota Muni. Pwr. Agy.
Supply System, MSTR Ser. 1996I,
(LIQ: Norwest Bank, MN & Ins. by
FGIC),
3.70%, VRDN .......................... 750,000
1,000,000 Spring Lake Park I.S.D. No. 16, MSTR
Ser. 1996G,
(LIQ: Norwest Bank, MN & Ins. by
MBIA),
3.70%, VRDN .......................... 1,000,000
24,200,000 St. Louis Park Healthcare Facility RB
Floating Trust Certificates,
(LIQ: Norwest Bank, MN & Ins. by
AMBAC),
3.70%, VRDN .......................... 24,200,000
===========
39,665,000
===========
Missouri - 0.4%
4,240,000 Missouri State Development Finance
Board IDRB, Cook Composites &
Polymers Co., Ser. 1994,
(LOC: Societe Generale),
3.90%, VRDN .......................... 4,240,000
===========
Montana - 0.1%
660,000 Butte Silver Bow City & County, Copper
City Association, Ser. 1988,
(LOC: Bank of America, N.T. & S.A.),
3.80%, VRDN .......................... 660,000
===========
New Jersey - 0.5%
5,000,000 Essex County, New Jersey BAN, Ser. A,
ARB,
4.25%, 8/7/98 ........................ 5,007,634
===========
New Mexico - 0.5%
4,855,000 County of Sandoval MHRB, Arrowhead
Ridge Apts., Ser. 1996, ARB,
(Ins. by FGIC),
4.65%, 3/2/98 ........................ 4,855,000
===========
New York - 10.3%
Battery Park City Hsg. Auth. RB, Marina
Towers Tender Corp.:
(LOC: Sumitomo Bank Ltd.):
8,560,000 Ser. A,
4.55%, VRDN .......................... 8,560,000
7,765,000 Ser. B,
4.55%, VRDN .......................... 7,765,000
</TABLE>
19
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
New York - continued
$4,000,000 New York State Medical Care Facilities
Finance Agency RB, Floating Rate
Receipts Part 100,
(LIQ: Credit Suisse First Boston &
Ins. by FHA),
3.95%, VRDN ........................... $ 4,000,000
6,500,000 New York State Thruway Auth., Local
Highway and Bridge Service
Contract, Puttable Floating Option Tax
Exempt Receipts, PA-172,
(LOC: Merrill Lynch),
3.75%, VRDN (a) ....................... 6,500,000
10,400,000 New York State Thruway Auth., RB,
MSTR SG-119,
(LOC: Societe Generale),
4.00%, VRDN ........................... 10,400,000
New York, New York, GO, Puttable
Floating Option Tax Exempt Receipts,
(LOC: Merrill Lynch):
12,495,000 PA-147 Ser. L,
3.75%, VRDN ........................... 12,495,000
20,105,000 PA-148 Ser. L,
3.75%, VRDN ........................... 20,105,000
3,395,000 PA-228 Ser 1998 C,
3.80%, VRDN ........................... 3,395,000
10,200,000 New York, New York, GO RAN, 1997
Trust Receipts, Ser. 26,
(LOC: Bank of New York),
3.80%, VRDN ........................... 10,200,000
25,000,000 Onondaga County Solid Waste
Disposal, Solvay Paperboard II L.P.,
(LOC: Bear Stearns Capital Markets),
4.10%, 11/1/98 ........................ 25,000,000
===========
108,420,000
===========
North Carolina - 3.8%
4,000,000 Cabarrus County, Indl. Fac. PCRB, Oiles
America Corp., Ser. 1989,
(LOC: Indl. Bank of Japan, Ltd., NY),
4.15%, VRDN ........................... 4,000,000
2,600,000 Halifax County, Indl. Fac.,
Westmoreland Project,
(LOC: Credit Suisse First Boston),
3.80%, VRDN ........................... 2,600,000
33,250,000 Wake County, Indl. Fac. PCRB, Carolina
Power & Light Co.,Ser. 85C,
(LOC: Sumitomo Bank),
4.05%, VRDN ........................... 33,250,000
===========
39,850,000
===========
Ohio - 0.3%
3,000,000 Ohio Hsg. Fin. Agy. MHRB, 10
Wilmington Place Project, Ser. 1991B,
(LIQ: Fuji Bank, Ltd. & Ins. by FSA),
4.35%, VRDN ........................... 3,000,000
===========
Oregon - 0.4%
Oregon EDRB Series CLVI, ARB,
(LOC: UnionBank of California, N.A.):
1,830,000 Pacific Coast Seafoods Co.,
3.95%, VRDN ........................... 1,830,000
1,130,000 Pacific Oyster Co.,
3.95%, VRDN ........................... 1,130,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Oregon - continued
$1,200,000 Oregon State EDRB, Georgia Pacific
Corp. 95A Project,
(LOC: Deutsche
Genossenschaftsbank),
3.85%, VRDN ........................... $ 1,200,000
===========
4,160,000
===========
Pennsylvania - 1.6%
2,300,000 Chartiers Valley, Pennsylvania Industrial
& Commercial Development
Authority, William Penn Place Project,
(LOC: CoreStates Bank, N.A.),
4.00%, VRDN ........................... 2,300,000
10,000,000 City of Philadelphia Water & Waste
Water RB, MSTR #11, ARB,
(LIQ: Bear Stearns & Ins. by FGIC),
4.15%, 6/4/98 (a) ..................... 10,000,000
500,000 Elk County IDA-IDRB, Stackpole Corp.
Project, Ser. 1989,
(LOC: Fleet Bank, N.A.),
4.25%, VRDN ........................... 500,000
650,000 Lawrence County, Pennsylvania
IDA-PCRB, Calgon Carbon, Ser. 1983A,
(Gtd. by Merck & Co.),
3.95%, VRDN ........................... 650,000
3,065,000 Westmoreland County, IDA-IDRB,
White Consolidated Indl., Inc., ARB,
(LOC: Bank of Nova Scotia),
4.18%, 6/1/98 ......................... 3,065,000
===========
16,515,000
===========
South Carolina - 2.7%
16,030,000 Georgetown County PCRB,
International Paper Project, ARB,
(Gtd. by International Paper),
4.00%, 9/1/98 ......................... 16,030,000
8,770,000 Lexington Combined Water and Sewer
Systems RB, Puttable Floating Option
Tax Exempt Receipts, PA-177,
(LIQ: Merrill Lynch & Ins. by Asset
Guaranty Corp.),
3.75%, VRDN ........................... 8,770,000
South Carolina Jobs EDA-EDRB:
550,000 Ridge Pallets Inc., Ser. B,
(LOC: Credit Coml. de France),
4.00%, VRDN ........................... 550,000
2,700,000 Roller Bearing Co., Ser. 1994A,
(LOC: Heller Financial Inc.),
4.33%, VRDN ........................... 2,700,000
750,000 Tuttle Co., Inc., Ser. A,
(LOC: NationsBank N.A.),
4.00%, VRDN ........................... 750,000
===========
28,800,000
===========
South Dakota - 0.5%
5,175,000 City of Rapid EDRB, Civic Center Assoc.,
(LOC: Citibank N.A.),
3.88%, VRDN ........................... 5,175,000
===========
Tennessee - 5.1%
2,500,000 Bristol IDB, Robinette Company,
(LOC: First American National Bank),
3.90%, VRDN ........................... 2,500,000
</TABLE>
20
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Tennessee - continued
$3,200,000 IDB of the City Chattanooga RRB,
Radisson Read House, Ser. 1995,
(LOC: Heller Financial Inc.),
4.30%, VRDN ........................ $3,200,000
4,400,000 Jackson, TN, Health and Educational
Housing Facility, Union University
Project,
(LOC: First American National Bank),
3.75%, VRDN ........................ 4,400,000
5,000,000 Maryville, TN, IDB of Education, RB,
Maryville College,
(LOC: First American National Bank),
3.75%, VRDN ........................ 5,000,000
Metro Govt. of Nashville and Davidson
County IDB:
8,995,000 Beechwood Terrace Apts. Project,
Ser. 1989,
(LOC: Sumitomo Bank Ltd.),
4.65%, VRDN ........................ 8,995,000
700,000 Wellington IV Assn. Project, RRB,
(LOC: First Bank, N.A.),
3.95%, VRDN ........................ 700,000
6,710,000 Metro Govt. of Nashville and Davidson
County IDB MHRB, Graybrook Apts.,
Ser. 1989,
(LOC: Sumitomo Bank Ltd.),
4.65%, VRDN ........................ 6,710,000
5,000,000 Morristown, TN, IDB-IDRB, Camvac
International Inc., Ser. 1983,
(LOC: ABN Amro Bank),
3.83%, VRDN ........................ 5,000,000
700,000 Shelby County, TN, Health Educational
and Housing Facility Board MHRB,
99 Tower Place Project,
(LOC: Boatmen's Bank),
4.10%, VRDN ........................ 700,000
9,285,000 Smyrna Housing Assn. MHRB, Imperial
Gardens Apts. Project, Ser. 1989,
(LOC: Sumitomo Bank Ltd.),
4.65%, VRDN ........................ 9,285,000
8,000,000 Wilson County, TN, IDRB, Knight
Leasing Company,
(LOC: First American National Bank),
3.90%, VRDN ........................ 8,000,000
==========
54,490,000
==========
Texas - 3.3%
12,500,000 Houston, TX, Water and Sewer Systems
RB MSTR, Susquehanna Structured
Products, SSP- 11,
(LIQ: Chase Manhattan Bank & Ins.
by FGIC),
3.75%, VRDN ........................ 12,500,000
6,805,000 NCNB Pooled Tax-Exempt Trust COP,
Ser. 1990B,
(LOC: NationsBank of Texas),
4.25%, VRDN ........................ 6,805,000
4,380,000 Tarrant County Housing Finance Corp.
MHRB RRB, Lincoln Meadows
Project, Ser. 1988, ARB,
(Surety Bond: Continental Casualty
Corp.),
4.10%, 12/1/98 ..................... 4,380,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Texas - continued
Texas State Public Finance Authority
Building RB, General Services
Commission Project
(LIQ: Citibank, N.A. & Ins. by AMBAC):
$4,595,000 PCRB-2,
3.68%, VRDN ........................ $4,595,000
6,535,000 PCRB-3,
3.68%, VRDN ........................ 6,535,000
==========
34,815,000
==========
Utah - 4.4%
2,600,000 Summitt County IDRB, Hornes' Kimball
Junction L.P., Ser. 1985,
(LOC: West One Bank, Idaho),
3.95%, VRDN ........................ 2,600,000
Tooele County Hazardous Waste
Treatment RB, Union Pacific Corp.,
Ser. A, TECP,
(Gtd. by Union Pacific Corp.):
10,000,000 4.25%, 2/24/98 .................... 10,000,000
7,500,000 4.25%, 2/25/98 .................... 7,500,000
10,000,000 4.25%, 2/26/98 .................... 10,000,000
10,000,000 4.25%, 4/28/98 .................... 10,000,000
6,290,000 4.30%, 2/23/98 .................... 6,290,000
==========
46,390,000
==========
Virginia - 1.1%
2,500,000 Henrico County IDA-RB, San -J,
(LOC: Tokai Bank, Ltd.),
4.20%, VRDN ........................ 2,500,000
7,700,000 Richmond, VA Housing Authority
MHRB, Puttable Floating Option Tax
Exempt Receipts, PA-214,
(LOC: Merrill Lynch),
3.75%, VRDN ........................ 7,700,000
1,000,000 Rockingham County IDA-PCRB,
Merck & Co. Project, 1982 Ser. A,
(Gtd. by Merck & Co.)
3.70%, VRDN ........................ 1,000,000
==========
11,200,000
==========
Washington - 1.2%
2,200,000 Klickitat County Public Corp. RB,
Mercer Ranches, Ser. 1996,
(LOC: U.S. Bank of Washington, N.A.),
3.85%, VRDN ........................ 2,200,000
2,000,000 Pierce County Economic Development
Corp., McFarland Cascade,
(LOC: U.S. Bank of Washington, N.A.),
3.85%, VRDN ........................ 2,000,000
Pilchuck Public Development Corp. IDRB
(LOC: U.S. Bank of Washington, N.A.):
1,318,000 Canyon Park Assn., Lot 12,
3.70%, VRDN ........................ 1,318,000
966,000 Hillside Assn., Lot 6,
3.70%, VRDN ........................ 966,000
1,218,000 Omni Assn., Lot 7,
3.70%, VRDN ........................ 1,218,000
2,015,000 Washington State Community
Economic Revitalization Bonds,
(LOC: Industrial Bank of Japan),
3.95%, VRDN ........................ 2,015,000
</TABLE>
21
<PAGE>
EVERGREEN
Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL BONDS - continued
Washington - continued
Washington State Public Power Supply,
Ser. 1998A:
$ 455,000 Nuclear Project #1,
4.50%, 7/1/98 ..................... $ 455,917
1,155,000 Nuclear Project #2,
4.50%, 7/1/98 ..................... 1,157,326
550,000 Nuclear Project #3,
4.50%, 7/1/98 ..................... 551,088
1,070,000 Nuclear Project #4,
4.50%, 7/1/98 ..................... 1,072,155
==============
12,953,486
==============
Other - 9.9%
5,900,000 Capital Investors Tax Exempt Fund
L.P.,
Ser. 1996-2,
(LOC: Swiss Bank Corp.),
4.20%, VRDN ....................... 5,900,000
913,996 Koch Financial Corp., Tax Exempt
Lease
Certificates, Ser. 1997-1 ClA,
4.10%, 5/6/98 (a) ................. 913,996
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL BONDS - continued
Other - continued
Merrill Lynch, Inc., Putable Floating
Option Tax Exempt Receipts:
$56,200,000 Municipal Securities Pooled Trust,
(Ins. by MBIA),
3.90%, VRDN ....................... $ 56,200,000
6,755,000 PPT-5, (LIQ: Credit Suisse & Ins. by
FHA)
4.00%, 8/13/98 .................... 6,755,000
4,455,000 PPT-4, (Ins. by MBIA & FHA),
4.10%, VRDN ....................... 4,455,000
2,265,000 PPT-5, (LIQ: Bay Hypotheken & Ins.
by AMBAC),
3.80%, VRDN ....................... 2,265,000
18,850,000 PPT-6, (LOC: Credit Suisse),
4.08%, VRDN ....................... 18,850,000
9,600,000 PPT-7, (Ins. by FHA),
4.00%, VRDN ....................... 9,600,000
==============
104,938,996
==============
Total Investments
(cost $1,052,542,763)..... 99.5% 1,052,542,763
Other Assets and
Liabilities - Net ........ 0.5 5,268,931
===== ==============
Net Assets - ............. 100.0% $1,057,811,694
===== ==============
</TABLE>
(a) Securities that may be sold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
Adjustable Rate Bonds are putable back to the issuer or other parties not
affiliated with the issuer at par on the interest reset dates. Interest rates
are determined and set by the issuer quarterly, semi-annually or annually
depending upon the terms of the security. Interest rates and reset dates
presented for these securities are those in effect at January 31, 1998.
Variable Rate Demand Notes are payable on demand on no more than seven calendar
days notice given by the Fund to the issuer or other parties not affiliated
with the issuer. Interest rates are determined and reset by the issuer daily,
weekly, or monthly depending upon the terms of the security. Interest rates
presented for these securities are those in effect at January 31, 1998.
Certain obligations held in the portfolio have credit enhancements or liquidity
features that may, under certain circumstances, provide for repayment of
principal and interest on the obligation upon demand date, interest rate reset
date or final maturity. These enhancements include: letters of credit;
liquidity guarantees; standby bond purchase agreements; tender option purchase
agreements, and third party insurance (i.e. AMBAC, FGIC and MBIA). Adjustable
rate bonds and variable rate demand notes held in the portfolio may be
considered derivative securities within the standards imposed by the Securities
and Exchange Commission under Rule 2a-7 which were designed to minimize both
credit and market risk.
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
ARB Adjustable Rate Bond
BAN Bond Anticipation Note
COLL Collateral
COP Certificates of Participation
EDA Economic Development Authority
EDRB Economic Development Revenue Bond
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FSA Financial Security Assurance Inc.
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IDA Industrial Development Authority
IDB Industrial Development Board
IDRB Industrial Development Revenue Bond
LIQ Liquidity Provider
LOC Letter of Credit
MIFA Massachusetts Industrial Finance Authority
MBIA Municipal Bond Investors Assurance Corp.
MERLOTS Municipal Exempt Receipts Liquidity Option Tender
MHRB Multifamily Housing Revenue Bond
MSTR Municipal Securities Trust Receipt
PCRB Pollution Control Revenue Bond
PPT Pooled Puttable Trust
RAN Revenue Anticipation Note
RB Revenue Bonds
RRB Refunding Revenue Bond
SSP Susquehanna Structure Product
SAK Sakura Trust
SFHRB Single Family Housing Revenue Bond
TECP Tax Exempt Commercial Paper
VRDN Variable Rate Demand Note
See Combined Notes to Financial Statements.
22
<PAGE>
EVERGREEN
Pennsylvania Municipal Money Market Fund
Schedule of Investments
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - 97.9%
Pennsylvania - 96.4%
$ 700,000 Allegheny County Hospital
Catholic Health System East
Development Auth. RB:
3.80%, 11/15/98 .................... $ 700,000
800,000 Allegheny Health Ed. & Resh.,
Series A-ACES,
(LOC: PNC Bank),
3.50%, VRDN ........................ 800,000
1,100,000 Allegheny Health Ed. & Resh.,
Series C-ACES,
(LOC: PNC Bank),
3.50%, VRDN ........................ 1,100,000
2,000,000 Presbyterian Health Center,
Series A,
(Ins. by MBIA),
3.50%, VRDN ........................ 2,000,000
1,000,000 St. Francis Health Center
Systems,
(LOC: First National Bank of Chicago),
3.60%, VRDN ........................ 1,000,000
Allegheny County IDA Environmental
Resource RB, U.S. Steel Corp.,TECP,
(LOC: Long-Term Credit Bank of
Japan):
1,100,000 3.45%, 4/6/98 ..................... 1,100,000
1,000,000 3.55%, 3/11/98 .................... 1,000,000
Allegheny County IDR:
1,005,000 3.55%, VRDN ....................... 1,005,000
1,750,000 3.60%, VRDN ....................... 1,750,000
1,000,000 Beaver County IDA, BASF Corp.
Project,
3.70%, VRDN ....................... 1,000,000
Beaver County IDA PCRB,
(LOC: Swiss Bank):
1,000,000 3.50%, 2/10/98 .................... 1,000,000
1,000,000 3.60%, 2/18/98 .................... 1,000,000
1,000,000 Beaver County PCRB,
(LOC: Toronto Dominion Bank),
3.80%, 12/1/98 ..................... 2,000,000
200,000 Bucks County, Series A,
5.60%, 3/1/98 ..................... 200,253
2,000,000 Dauphin County General Authority
RB, Education And Health Loan
Program, (Ins. by AMBAC),
3.55%, VRDN ........................ 2,000,000
500,000 Delaware County IDA PCRB, British
Petroleum Exploration and Oil,
3.65%, VRDN ........................ 500,000
1,000,000 Delaware Valley Registered Finance
RB, Series B, (LOC: Credit Suisse
First Boston),
3.55%, VRDN ........................ 1,000,000
320,000 Derry Township GO Bonds,
(Ins. by MBIA),
3.85%, 9/15/98 ..................... 320,000
480,000 Easton Area Joint Sewer Auth.,
Series A, (Ins. by FSA),
4.00%, 12/1/98 ..................... 480,568
Emmaus General Auth. RB:
1,300,000 Subseries B-16,
(Irrevocable LOC: Kredietbank
N.V.),
3.60%, VRDN ........................ 1,300,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Pennsylvania - continued
Emmaus General Auth. RB (continued):
$2,000,000 Subseries C-15,
(LOC: Kredietbank N.V.),
3.60%, VRDN ........................ $2,000,000
1,000,000 Subseries F-11,
(LOC: Canadian Imperial Bank
of Commerce),
3.60%, VRDN ........................ 1,000,000
3,000,000 Franconia Township IDA, Ashers
Chocolates Project, Series A,
(LOC: Mellon Bank),
3.70%, VRDN ........................ 3,000,000
1,600,000 Harrisburg Auth. Lease Revenue,
Green County Prison Project,
(Ins. by FSA),
5.90%, 6/1/98 ...................... 1,609,959
2,000,000 Harrisburg Auth. RB, Pool Financing
Fund,
(SPA: Anchor National Life Insurance
Co.),
3.60%, VRDN ........................ 2,000,000
2,000,000 Indiana County IDA,
(LOC: Union Bank of Switzerland),
3.55%, VRDN ........................ 2,000,000
1,000,000 Lackwanna County,
(LOC: Merrill Lynch) ,
3.65%, VRDN (a) .................... 1,000,000
500,000 Lancaster School District GO Bonds,
(Ins. by FGIC),
4.00%, 2/15/98 ..................... 500,027
1,100,000 Lehigh County General Purpose Auth.
RB, Lehigh Valley Hospital, Series A,
(Ins. by AMBAC),
3.65%, VRDN ........................ 1,100,000
1,000,000 New Castle Area Hospital Auth. RB,
Jameson Memorial Hospital,
(Ins. by FSA),
3.50%, VRDN ........................ 1,000,000
2,455,000 Northampton County Higher Education
Auth., Putable Floating Tax-Exempt
Receipts, PA 176,
(Ins. by MBIA),
3.65%, VRDN (a) .................... 2,455,000
1,000,000 Pennsylvania Energy Development
Auth. RB, B&W Ebensburg Project,
(LOC: Swiss Bank),
3.60%, VRDN ........................ 1,000,000
3,000,000 Pennsylvania Higher Education
Facilities Auth. RB, Allegheny
College Project,
(LOC: Mellon Bank) ,
3.55%, VRDN ........................ 3,000,000
Pennsylvania Housing Finance
Agency:
1,000,000 Putable Floating Tax-Exempt
Receipts PT-119A,
(LOC: Credit Suisse First Boston),
3.65%, VRDN (a) .................... 1,000,000
2,000,000 Putable Floating Tax-Exempt
Receipts PT-119B,
(SPA: Credit Suisse First Boston),
3.65%, VRDN (a) .................... 2,000,000
</TABLE>
23
<PAGE>
EVERGREEN
Pennsylvania Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Pennsylvania - continued
$ 2,000,000 Pennsylvania State Higher Education
Assistance Agency, Student Loan
Rev., Series A,
(LOC: SLMA),
3.55%, VRDN (a) ....................... $2,000,000
1,445,000 Pennsylvania State Higher Education
Revenue, Series O,
(Ins. by AMBAC),
5.75%, 6/15/98 ........................ 1,455,205
Philadelphia Airport RB:
1,400,000 Floater, Series 11,
(Ins. by MBIA),
3.60%, VRDN (a) ....................... 1,400,000
2,000,000 Municipal Securities Trust
Receipts SG 118,
(Ins. by FGIC),
3.65%, VRDN (a) ....................... 2,000,000
1,000,000 Philadelphia School District TRANS,
(LOC: Commerzbank A.G.),
4.50%, 6/30/98 ........................ 1,002,409
2,000,000 Philadelphia TRANS GO,
Series A,
4.50%, 6/30/98 ........................ 2,003,924
3,000,000 Pittsburgh Floating Rate Receipts, SG 71,
(Ins. by FGIC),
3.60%, VRDN (a) ....................... 3,000,000
500,000 Schuylkill County IDA, Northeastern
Power, Series B,
(SPA: Credit Local de France),
3.75%, VRDN ........................... 500,000
2,200,000 Schuylkill County IDA Resource
Recovery RB, Gilberton Power Project,
(LOC: Mellon Bank),
3.60%, VRDN .......................... 2,200,000
650,000 South Western School District York
County,
(Ins. by FGIC),
5.00%, 6/15/98 ........................ 652,680
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - continued
Pennsylvania - continued
$ 1,500,000 St. Mary Hospital Auth., Bucks County,
Catholic Health Services,
(LOC: Morgan Guaranty Trust),
3.50%, VRDN ........................... $1,500,000
1,000,000 Temple University of Commonwealth
Systems of Pennsylvania,
4.75%, 5/18/98 ........................ 1,002,373
2,000,000 Titusville Area School District,
Putable Floating Tax-Exempt
Receipts PA-191,
3.65%, VRDN (a) ....................... 2,000,000
1,250,000 York County Solid Waste And Refuse
Auth. RB, County Guaranteed,
(Ins. by FGIC),
4.75%, 12/1/98 ........................ 1,259,258
==========
67,896,656
==========
Puerto Rico - 1.5%
1,000,000 Puerto Rico Public Buildings Auth.,
Series J,
7.25%, 7/1/98 ......................... 1,025,061
==========
Total Municipal Bonds (cost $68,921,717). 68,921,717
==========
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C> <C>
MUTUAL FUND SHARES - 2.6%
(cost $1,805,000)
Pennsylvania - 2.6%
1,805,000 Federated Pennsylvania Municipal
Cash Trust, Institutional Service
Shares, ................................. 1,805,000
=========
Total Investments -
(cost $70,726,717)........... 100.5% 70,726,717
Other Assets and
Liabilities - Net .......... ( 0.5) (334,865)
===== ==========
Net Assets .................. 100.0% $70,391,852
===== ===========
</TABLE>
24
<PAGE>
EVERGREEN
Pennsylvania Municipal Money Market Fund
Schedule of Investments (continued)
January 31, 1998
Summary of Abbreviations:
ACES Adjustable Convertible Extendable Security
AMBAC American Municipal Bond Assurance Corp.
ARB Adjustable Rate Bond
FGIC Financial Guaranty Insurance Co.
FSA Financial Security Assurance Inc.
GO General Obligation
IDA Industrial Development Authority
IDR Industrial Development Revenue
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corp.
PCRB Pollution Control Revenue Bond
RB Revenue Bond
SLMA Student Loan Marketing Association
SPA Securities Purchase Agreement
TECP Tax Exempt Commercial Paper
TRANS Tax Revenue Anticipation Note
VRDN Variable Rate Demand Note
(a) Securities that may be sold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
Adjustable Rate Bonds are putable back to the issuer or other parties not
affiliated with the issuer at par on the interest reset dates. Interest rates
are determined and set by the issuer quarterly, semi-annually or annually
depending upon the terms of the security. Interest rates and reset dates
presented for these securities are those in effect at January 31, 1998.
Variable Rate Demand Notes are payable on demand on no more than seven calendar
days notice given by the Fund to the issuer or other parties not affiliated
with the issuer. Interest rates are determined and reset by the issuer daily,
weekly, or monthly depending upon the terms of the security. Interest rates
presented for these securities are those in effect at January 31, 1998.
Certain obligations held in the portfolio have credit enhancements or liquidity
features that may, under certain circumstances, provide for repayment of
principal and interest on the obligation upon demand date, interest rate reset
date or final maturity. These enhancements include: letters of credit;
liquidity guarantees; standby bond purchase agreements; tender option purchase
agreements, and third party insurance (i.e. AMBAC, FGIC and MBIA). Adjustable
rate bonds and variable rate demand notes held in the portfolio may be
considered derivative securities within the standards imposed by the Securities
and Exchange Commission under Rule 2a-7 which were designed to minimize both
credit and market risk.
See Combined Notes to Financial Statements.
25
<PAGE>
EVERGREEN
Treasury Money Market Fund
Schedule of Investments
January 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
U.S. TREASURY NOTES - 18.7%
$ 75,000,000 6.13%, 3/31/98 .................... $ 75,038,664
50,000,000 5.88%, 4/30/98 .................... 49,998,036
135,000,000 6.25%, 6/30/98 .................... 135,270,757
110,000,000 4.75%-6.13%, 8/31/98 .............. 109,806,406
50,000,000 6.00%, 9/30/98 .................... 50,074,830
50,000,000 5.88%, 10/31/98 ................... 50,057,804
125,000,000 5.13%-5.75%, 12/31/98 ............. 124,615,304
--------------
Total U.S. Treasury Notes
(cost $594,861,801) ............... 594,861,801
--------------
REPURCHASE AGREEMENTS* - 81.0%
140,000,000 Aubrey G. Lanston & Co., Inc.,
5.58%, dated 1/26/98,
due 2/2/98 (1) .................... 140,000,000
140,000,000 Barclays Bank, PLC,
5.57%, dated 1/26/98,
due 2/2/98 (2) .................... 140,000,000
140,000,000 Credit Suisse First Boston Corp.,
5.58%, dated 1/26/98,
due 2/2/98 (3) .................... 140,000,000
140,000,000 Dean Witter Reynolds, Inc.,
5.58%, dated 1/26/98,
due 2/2/98 (4) .................... 140,000,000
140,000,000 Deutsche Bank GC,
5.58%, dated 1/26/98,
due 2/2/98 (5) .................... 140,000,000
140,000,000 Donaldson, Lufkin & Jenrette
Securities Corp.,
5.58%, dated 1/30/98,
due 2/2/98 (6) .................... 140,000,000
284,000,000 Dresdner Bank AG,
5.57%, dated 1/26/98,
due 2/2/98 (7) .................... 284,000,000
140,000,000 Goldman Sachs & Co.,
5.59%, dated 1/30/98,
due 2/2/98 (8) .................... 140,000,000
140,000,000 HSBC Securities, Inc.,
5.57%, dated 1/26/98,
due 2/2/98 (9) .................... 140,000,000
200,000,000 Lehman Brothers, Inc.,
5.55%, dated 1/30/98,
due 2/2/98 (10) ................... 200,000,000
140,000,000 Merrill Lynch, Pierce, Fenner & Smith
Inc.,
5.57%, dated 1/30/98,
due 2/2/98 (11) ................... 140,000,000
140,000,000 Morgan Guaranty Trust Co. of New
York,
5.58%, dated 1/30/98,
due 2/2/98 (12) ................... 140,000,000
50,000,000 NationsBank, Charlotte, NC,
5.57%, dated 1/30/98,
due 2/2/98 (13) ................... 50,000,000
210,000,000 Smith Barney Shearson, Inc.,
5.62%, dated 1/26/98,
due 2/2/98 (14) ................... 210,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
REPURCHASE AGREEMENTS* - continued
$140,000,000 State Street Bank & Trust Co.,
5.55%, dated 1/30/98,
due 2/2/98 (15) ................... $ 140,000,000
300,000,000 Union Bank of Switzerland, Inc.,
5.60%, dated 1/30/98,
due 2/2/98 (16) ................... 300,000,000
--------------
Total Repurchase Agreements
(cost $2,584,000,000) ............. 2,584,000,000
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C> <C>
MUTUAL FUND SHARES - 0.4% (cost $11,474,630)
11,474,630 Fidelity Institutional Cash Portfolio
Treasury Class 1 .................... 11,474,630
----------
Total Investments
(cost $3,190,336,431) ..... 100.1% 3,190,336,431
Other Assets and
Liabilities - Net ......... ( 0.1) (2,431,819)
----- -------------
Net Assets ................ 100.0% $3,187,904,612
===== ==============
</TABLE>
* Collateralized by:
(1) $139,434,000 U.S. Treasury Notes, 4.75% to 9.125%, 1/31/98 to 8/15/07;
value including accrued interest - $142,803,371.
(2) $141,326,000 U.S. Treasury Notes, 4.75% to 8.25%, 7/15/98 to 10/31/98;
value including accrued interest - $142,800,165.
(3) $129,001,000 U.S. Treasury Notes, 5.875% to 7.875%, 8/15/98 to 2/15/05;
value including accrued interest - $144,153,108.
(4) $365,407,924 U.S. Treasury STRIPS, 2/15/98 to 2/15/27; value including
accrued interest - $139,762,761 and $4,591,935 GNMA 5.50% to 10.50%,
10/15/08 to 8/20/27; value including accrued interest - $3,059,913.
(5) $137,256,000 U.S. Treasury Notes, 5.75% to 6.75%, 8/15/03 to 4/30/00;
value including accrued interest - $142,800,880.
(6) $343,786,000 U.S. Treasury STRIPS, 8/15/06 to 2/15/25; value including
accrued interest - $116,390,621, $1,297,000 U.S. Treasury Notes, 7.50%,
10/31/99; value including accrued interest - $1,366,529 and $17,989,000
U.S. Treasury Bonds, 8.75% to 11.625%, 11/15/02 to 5/15/20; value
including accrued interest - $25,043,768.
(7) $279,905,000 U.S. Treasury Notes, 5.875% to 9.25%, 6/30/98 to 6/30/01;
value including accrued interest - $289,689,017.
(8) $141,466,000 U.S. Treasury Notes, 5.625%, 12/31/99; value including
accrued interest - $142,800,251.
(9) $93,838,000 U.S. Treasury STRIPS, 8/15/20; value including accrued
interest - $24,481,396, $45,259,000 U.S. Treasury Notes, 5.875%, 8/31/99;
value including accrued interest - $46,686,195 and $43,870,000 U.S.
Treasury Bonds, 11.25%, 2/15/15; value including accrued interest -
$71,636,145.
(10) $54,455,000 U.S. Treasury STRIPS, 2/15/19; value including accrued
interest - $15,567,051, $94,057,000 U.S. Treasury Notes, 5.75% to 8.125%,
2/15/98 to 10/31/02; value including accrued interest - $97,347,262 and
$76,205,000 U.S. Treasury Bonds, 7.50%, 11/15/16; value including accrued
interest - $91,002,933.
(11) $109,464,000 U.S. Treasury Bonds, 6.75% to 8.875, 8/15/17 to 8/15/26;
value including accrued interest - $142,803,816.
(12) $81,813,000 U.S. Treasury Notes, 6.00% to 7.00%, 5/31/98 to 4/15/99; value
including accrued interest - $83,902,731 and $50,465,000 U.S. Treasury
Bonds, 7.25%, 5/15/16; value including accrued interest - $58,897,499.
(13) $50,000,000 U.S. Treasury Notes, 6.00%, 7/31/02; value including accrued
interest - $50,008,333.
(14) $296,893,734 GNMA, 6.00% to 8.00%, 3/15/21 to 10/15/27; value including
accrued interest - $214,200,000.
(15) $140,000,000 U.S. Treasury Notes, 8.00%, 8/15/99; value including accrued
interest - $142,803,000.
(16) $289,018,000 U.S. Treasury Notes, 5.875% to 11.75%, 9/30/98 to
11/15/14; value including accrued interest - $305,602,603 and $800,000
U.S. Treasury STRIPS, 11/15/14; value including accrued interest -
$402,128.
Summary of Abbreviations:
GNMA Government National Mortgage Association
STRIPS Separately Traded Registered Interest and Principal Securities
See Combined Notes to Financial Statements.
26
<PAGE>
EVERGREEN
Money Market Funds
Statements of Assets and Liabilities
January 31, 1998
<TABLE>
<CAPTION>
Money Municipal Pennsylvania Treasury
Market Money Market Municipal Money Money Market
Fund Fund Market Fund Fund
----------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Assets
Investments in securities ........................ $3,505,538,821 $1,052,542,763 $70,726,717 $ 606,336,431
Investments in repurchase agreements ............. 49,533,111 0 0 2,584,000,000
- --------------------------------------------------- -------------- -------------- ----------- ---------------
Investments at amortized cost .................... 3,555,071,932 1,052,542,763 70,726,717 3,190,336,431
Cash ............................................. 218,864 26,908 322 0
Interest receivable .............................. 25,275,269 7,528,223 461,510 9,536,819
Receivable for Fund shares sold .................. 11,136,303 360,029 60,481 1,221,909
Prepaid expenses and other assets ................ 312,320 69,413 3,228 75,779
- --------------------------------------------------- -------------- -------------- ----------- ---------------
Total assets ................................... 3,592,014,688 1,060,527,336 71,252,258 3,201,170,938
- --------------------------------------------------- -------------- -------------- ----------- ---------------
Liabilities
Payable for investments purchased ................ 25,011,917 0 703,547 0
Dividends payable ................................ 11,163,085 1,605,677 103,883 11,178,934
Payable for Fund shares redeemed ................. 6,585,791 378,666 0 93,326
Due to related parties ........................... 1,393,618 434,662 21,939 1,012,012
Distribution fee payable ......................... 728,510 170,846 3,244 654,507
Accrued Trustees' fees and expenses .............. 73,933 28,242 6,529 144,202
Accrued expenses and other liabilities ........... 376,273 97,549 21,264 183,345
- --------------------------------------------------- -------------- -------------- ----------- ---------------
Total liabilities ....................... ...... 45,333,127 2,715,642 860,406 13,266,326
- -------------------------------------------- ------ -------------- -------------- ----------- ---------------
Net assets ........................................ $3,546,681,561 $1,057,811,694 $70,391,852 $ 3,187,904,612
=================================================== ============== ============== =========== ===============
Net assets represented by
Paid-in capital .................................. $3,547,313,193 $1,058,039,832 $70,402,069 $ 3,187,814,260
Undistributed net investment income .............. 0 0 0 90,352
Accumulated net realized loss on investments ..... (631,632) (228,138) (10,217) 0
- --------------------------------------------------- -------------- -------------- ----------- ---------------
Total net assets ............................... $3,546,681,561 $1,057,811,694 $70,391,852 $ 3,187,904,612
=================================================== ============== ============== =========== ===============
Net assets consist of
Class A .......................................... $2,909,593,323 $ 671,754,330 $37,115,762 $ 2,616,379,921
Class B .......................................... 25,052,592 - - -
Class C .......................................... 2,028,845 - - -
Class Y .......................................... 610,006,801 386,057,364 33,276,090 571,524,691
- --------------------------------------------------- -------------- -------------- ----------- ---------------
$3,546,681,561 $1,057,811,694 $70,391,852 $ 3,187,904,612
============== ============== =========== ===============
Shares outstanding
Class A .......................................... 2,909,730,900 671,853,620 37,117,441 2,616,319,634
Class B .......................................... 25,055,619 - - -
Class C .......................................... 2,030,152 - - -
Class Y .......................................... 610,567,332 386,147,346 33,284,628 571,511,177
- --------------------------------------------------- -------------- -------------- ----------- ---------------
Net asset value per share
Class A .......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================== ============== ============== =========== ===============
Class B .......................................... $ 1.00 - - -
=================================================== ============== ============== =========== ===============
Class C .......................................... $ 1.00 - - -
=================================================== ============== ============== =========== ===============
Class Y .......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================== ============== ============== =========== ===============
</TABLE>
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
Money Market Funds
Statements of Operations
Five Months Ended January 31, 1998*
<TABLE>
<CAPTION>
Money Municipal Pennsylvania Treasury
Market Money Market Municipal Money Money Market
Fund Fund Market Fund Fund
-------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Investment income
Interest ................................................ $85,035,929 $17,538,976 $1,048,168 $71,376,919
- ---------------------------------------------------------- ----------- ----------- ---------- -----------
Expenses
Management fee .......................................... 6,801,389 2,155,943 111,425 4,446,822
Distribution Plan expenses .............................. 3,698,197 833,863 43,990 3,142,342
Transfer agent fees ..................................... 757,593 114,240 3,014 84,142
Custodian fees .......................................... 404,042 128,364 7,143 298,551
Professional fees ....................................... 96,614 38,961 19,265 71,467
Trustees' fees and expenses ............................. 55,526 10,559 1,844 26,064
Administrative services fees ............................ 0 0 9,122 426,817
Other ................................................... 553,636 75,618 8,132 84,095
Fee waivers ............................................. 0 0 (46,689) 0
- ---------------------------------------------------------- ----------- ----------- ---------- -----------
Total expenses ......................................... 12,366,997 3,357,548 157,246 8,580,300
Less: Indirectly paid expenses .......................... (30,215) (13,791) (786) (26,682)
- ---------------------------------------------------------- ----------- ----------- ---------- -----------
Net expenses ........................................... 12,336,782 3,343,757 156,460 8,553,618
- ---------------------------------------------------------- ----------- ----------- ---------- -----------
Net investment income .................................... 72,699,147 14,195,219 891,708 62,823,301
Net realized gain on investments ......................... 5,356 32,649 0 40,712
- ---------------------------------------------------------- ----------- ----------- ---------- -----------
Net increase in net assets resulting from operations ..... $72,704,503 $14,227,868 $ 891,708 $62,864,013
========================================================== =========== =========== ========== ===========
</TABLE>
* The Funds changed their fiscal year end from August 31 to January 31 during
the period.
Year Ended August 31, 1997
<TABLE>
<CAPTION>
Money Municipal Pennsylvania Treasury
Market Money Market Municipal Money Money Market
Fund Fund Market Fund Fund
--------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Investment income
Interest ................................................ $159,154,235 $45,162,514 $2,481,018 $168,500,697
- ---------------------------------------------------------- ------------ ----------- ---------- ------------
Expenses
Management fee .......................................... 13,092,396 5,695,367 275,516 10,831,288
Distribution Plan expenses .............................. 6,359,402 1,988,796 90,259 7,263,329
Transfer agent fees ..................................... 923,159 213,468 20,100 184,287
Custodian fees .......................................... 545,241 266,070 39,336 580,475
Administrative services fees ............................ 0 0 27,793 1,241,466
Professional fees ....................................... 32,998 37,267 15,890 28,199
Trustees' fees and expenses ............................. 53,364 25,813 5,512 65,862
Other ................................................... 595,807 123,733 24,404 203,935
Fee waivers and/or expense reimbursements ............... (1,482,584) (183,559) (123,088) (132,244)
- ---------------------------------------------------------- ------------ ----------- ---------- ------------
Total expenses ......................................... 20,119,783 8,166,955 375,722 20,266,597
Less: Indirectly paid expenses .......................... (21,867) (27,673) (88) (9,969)
- ---------------------------------------------------------- ------------ ----------- ---------- ------------
Net expenses ........................................... 20,097,916 8,139,282 375,634 20,256,628
- ---------------------------------------------------------- ------------ ----------- ---------- ------------
Net investment income .................................... 139,056,319 37,023,232 2,105,384 148,244,069
Net realized loss on investments ......................... (85,308) (2,907) 0 0
- ---------------------------------------------------------- ------------ ----------- ---------- ------------
Net increase in net assets resulting from operations ..... $138,971,011 $37,020,325 $2,105,384 $148,244,069
========================================================== ============ =========== ========== ============
</TABLE>
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
Money Market Funds
Statements of Changes in Net Assets
Five Months Ended January 31, 1998*
<TABLE>
<CAPTION>
Money
Market
Fund
-------------------
<S> <C>
Operations
Net investment income ...................................... $ 72,699,147
Net realized gain on investments ........................... 5,356
- ------------------------------------------------------------- -----------------
Net increase in net assets resulting from operations ...... 72,704,503
- ------------------------------------------------------------- -----------------
Distributions to shareholders from
Net investment income
Class A ................................................... (58,870,079)
Class B ................................................... (373,680)
Class C ................................................... (63,444)
Class K ................................................... (3,988)
Class Y ................................................... (13,387,956)
- ------------------------------------------------------------- -----------------
Total distributions to shareholders ...................... (72,699,147)
- ------------------------------------------------------------- -----------------
Capital share transactions
Proceeds from shares sold .................................. 3,567,022,048
Proceeds from reinvestment of distributions ................ 17,805,187
Payment for shares redeemed ................................ (3,503,474,896)
- ------------------------------------------------------------- -----------------
Net increase in net assets resulting from capital share
transactions ............................................. 81,352,339
- ------------------------------------------------------------- -----------------
Total increase in net assets ............................. 81,357,695
Net assets
Beginning of period ........................................ 3,465,323,866
- ------------------------------------------------------------- -----------------
End of period .............................................. $ 3,546,681,561
============================================================= =================
Undistributed net investment income ......................... $ 0
============================================================= =================
<CAPTION>
Municipal Pennsylvania Treasury
Money Market Municipal Money Money Market
Fund Market Fund Fund
------------------ ----------------- -------------------
<S> <C> <C> <C>
Operations
Net investment income ...................................... $ 14,195,219 $ 891,708 $ 62,823,301
Net realized gain on investments ........................... 32,649 0 40,712
- -------------------------------------------------------------- -------------- -------------- -----------------
Net increase in net assets resulting from operations ...... 14,227,868 891,708 62,864,013
- -------------------------------------------------------------- -------------- -------------- -----------------
Distributions to shareholders from
Net investment income
Class A ................................................... (8,830,796) (461,218) (51,249,555)
Class B ................................................... 0 0 0
Class C ................................................... 0 0 0
Class K ................................................... 0 0 0
Class Y ................................................... (5,364,423) (430,490) (11,573,746)
- -------------------------------------------------------------- -------------- -------------- -----------------
Total distributions to shareholders ...................... (14,195,219) (891,708) (62,823,301)
- -------------------------------------------------------------- -------------- -------------- -----------------
Capital share transactions
Proceeds from shares sold .................................. 934,299,761 72,891,344 2,512,165,806
Proceeds from reinvestment of distributions ................ 5,303,116 353,402 7,304,038
Payment for shares redeemed ................................ (926,250,046) (70,557,276) (2,363,286,357)
- -------------------------------------------------------------- -------------- -------------- -----------------
Net increase in net assets resulting from capital share
transactions ............................................. 13,352,831 2,687,470 156,183,487
- -------------------------------------------------------------- -------------- -------------- -----------------
Total increase in net assets ............................. 13,385,480 2,687,470 156,224,199
Net assets
Beginning of period ........................................ 1,044,426,214 67,704,382 3,031,680,413
- -------------------------------------------------------------- -------------- -------------- -----------------
End of period .............................................. $1,057,811,694 $ 70,391,852 $ 3,187,904,612
============================================================== ============== ============== =================
Undistributed net investment income ......................... $ 0 $ 0 $ 90,352
============================================================== ============== ============== =================
</TABLE>
* The Funds changed their fiscal year end from August 31 to January 31 during
the period.
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Money Market Funds
Statements of Changes in Net Assets
Prior Fiscal Periods
<TABLE>
<CAPTION>
Money Market Fund
---------------------------------------
Year Ended August 31,
1997 1996
------------------- -------------------
<S> <C> <C>
Operations
Net investment income ...................................... $ 139,056,319 $ 85,949,891
Net realized gain (loss) on investments .................... (85,308) (26,141)
- ------------------------------------------------------------- ----------------- -----------------
Net increase in net assets resulting from operations ..... 138,971,011 85,923,750
- ------------------------------------------------------ ------ ----------------- -----------------
Distributions to shareholders from
Net investment income
Class A ................................................... (101,255,910) (63,327,347)
Class B ................................................... (509,494) (382,116)
Class C ................................................... (17,908) 0
Class K ................................................... (2,220) 0
Class Y ................................................... (37,268,232) (22,240,428)
- ------------------------------------------------------------- ----------------- -----------------
Total distributions to shareholders ...................... (139,053,764) (85,949,891)
- ------------------------------------------------------------- ----------------- -----------------
Capital share transactions
Proceeds from shares sold .................................. 8,940,579,510 6,275,701,649
Proceeds from shares issued from acquisition of:
Keystone Liquid Trust ..................................... 163,579,564 0
FFB Cash Management Fund .................................. 0 592,358,361
FFB Lexicon Cash Management Fund .......................... 0 95,834,929
FFB Tax-Free Money Market Fund ............................ 0 0
Proceeds from reinvestment of distributions ................ 38,314,180 28,242,023
Payment for shares redeemed ................................ (8,113,736,002) (5,531,191,681)
- ------------------------------------------------------------- ----------------- -----------------
Net increase (decrease) in net assets resulting from
capital share transactions ............................... 1,028,737,252 1,460,945,281
- ------------------------------------------------------------- ----------------- -----------------
Total increase (decrease) in net assets .................. 1,028,654,499 1,460,919,140
Net assets
Beginning of period ........................................ 2,436,669,367 975,750,227
- ------------------------------------------------------------- ----------------- -----------------
End of period .............................................. $ 3,465,323,866 $ 2,436,669,367
============================================================= ================= =================
Undistributed net investment income ......................... $ 2,555 $ 0
============================================================= ================= =================
<CAPTION>
Municipal Money Market Fund
---------------------------------------
Year Ended August 31,
1997 1996
------------------- -------------------
<S> <C> <C>
Operations
Net investment income ...................................... $ 37,023,232 $ 36,638,019
Net realized gain (loss) on investments .................... (2,907) (6,227)
- -------------------------------------------------------------- ----------------- -----------------
Net increase in net assets resulting from operations ..... 37,020,325 36,631,792
- ------------------------------------------------------ ------- ----------------- -----------------
Distributions to shareholders from
Net investment income
Class A ................................................... (20,900,359) (19,837,670)
Class B ................................................... 0 0
Class C ................................................... 0 0
Class K ................................................... 0 0
Class Y ................................................... (16,122,873) (16,800,349)
- -------------------------------------------------------------- ----------------- -----------------
Total distributions to shareholders ...................... (37,023,232) (36,638,019)
- -------------------------------------------------------------- ----------------- -----------------
Capital share transactions
Proceeds from shares sold .................................. 2,604,375,798 2,572,408,736
Proceeds from shares issued from acquisition of:
Keystone Liquid Trust ..................................... 0 0
FFB Cash Management Fund .................................. 0 0
FFB Lexicon Cash Management Fund .......................... 0 0
FFB Tax-Free Money Market Fund ............................ 0 103,129,021
Proceeds from reinvestment of distributions ................ 14,787,888 16,202,992
Payment for shares redeemed ................................ (2,852,083,788) (2,390,799,129)
- -------------------------------------------------------------- ----------------- -----------------
Net increase (decrease) in net assets resulting from
capital share transactions ............................... (232,920,102) 300,941,620
- -------------------------------------------------------------- ----------------- -----------------
Total increase (decrease) in net assets .................. (232,923,009) 300,935,393
Net assets
Beginning of period ........................................ 1,277,349,223 976,413,830
- -------------------------------------------------------------- ----------------- -----------------
End of period .............................................. $ 1,044,426,214 $ 1,277,349,223
============================================================== ================= =================
Undistributed net investment income ......................... $ 0 $ 0
============================================================== ================= =================
</TABLE>
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
Money Market Funds
Statements of Changes in Net Assets (continued)
Prior Fiscal Periods
<TABLE>
<CAPTION>
Pennsylvania Municipal Money Market Fund
-----------------------------------------------------------
Year Ended Six Months Ended Year Ended
August 31, 1997 August 31, 1996 (a) February 29, 1996
----------------- --------------------- -------------------
<S> <C> <C> <C>
Operations
Net investment income ............... $ 2,105,384 $ 1,091,227 $ 2,665,986
Net realized gain (loss) on
investments ........................ 0 (378) (189)
- -------------------------------------- --------------- -------------- ---------------
Net increase in net assets
resulting from operations ......... 2,105,384 1,090,849 2,665,797
- -------------------------------------- --------------- -------------- ---------------
Distributions to shareholders from
Net investment income
Class A ............................ (905,311) (242,309) (9,466)
Class Y ............................ (1,203,873) (848,918) (2,656,520)
- -------------------------------------- --------------- -------------- ---------------
Total distributions to
shareholders ..................... (2,109,184) (1,091,227) (2,665,986)
- -------------------------------------- --------------- -------------- ---------------
Capital share transactions
Proceeds from shares sold ........... 127,715,297 61,460,030 179,632,522
Proceeds from shares issued from
acquisition of:
FFB U.S. Treasury Fund ............. 0 0 0
FFB U.S. Government Fund ........... 0 0 0
FFB 100% U.S. Treasury Fund ........ 0 0 0
Proceeds from reinvestment of
distributions ...................... 1,021,288 621,908 1,766,790
Payment for shares redeemed ......... (131,543,821) (79,296,671) (137,207,686)
- -------------------------------------- --------------- -------------- ---------------
Net increase (decrease) in net
assets resulting from capital
share transactions ................ (2,807,236) (17,214,733) 44,191,626
- -------------------------------------- --------------- -------------- ---------------
Total increase (decrease) in
net assets ....................... (2,811,036) (17,215,111) 44,191,437
Net assets
Beginning of period ................. 70,515,418 87,730,529 43,539,092
- -------------------------------------- --------------- -------------- ---------------
End of period ....................... $ 67,704,382 $ 70,515,418 $ 87,730,529
====================================== =============== ============== ===============
Undistributed net investment
income .............................. $ 0 $ 3,800 $ 3,800
====================================== =============== ============== ===============
<CAPTION>
Treasury Money Market Fund
---------------------------------------
Year Ended August 31,
1997 1996
------------------- -------------------
<S> <C> <C>
Operations
Net investment income ............... $ 148,244,069 $ 121,967,383
Net realized gain (loss) on
investments ........................ 0 161,674
- --------------------------------------- ----------------- -----------------
Net increase in net assets
resulting from operations ......... 148,244,069 122,129,057
- --------------------------------------- ----------------- -----------------
Distributions to shareholders from
Net investment income
Class A ............................ (114,457,775) (101,441,299)
Class Y ............................ (33,786,294) (20,526,084)
- --------------------------------------- ----------------- -----------------
Total distributions to
shareholders ..................... (148,244,069) (121,967,383)
- --------------------------------------- ----------------- -----------------
Capital share transactions
Proceeds from shares sold ........... 6,954,597,959 6,442,829,718
Proceeds from shares issued from
acquisition of:
FFB U.S. Treasury Fund ............. 0 1,070,672,333
FFB U.S. Government Fund ........... 0 327,532,054
FFB 100% U.S. Treasury Fund ........ 0 28,227,573
Proceeds from reinvestment of
distributions ...................... 19,627,202 17,972,077
Payment for shares redeemed ......... (7,310,208,436) (5,974,992,600)
- --------------------------------------- ----------------- -----------------
Net increase (decrease) in net
assets resulting from capital
share transactions ................ (335,983,275) 1,912,241,155
- --------------------------------------- ----------------- -----------------
Total increase (decrease) in
net assets ....................... (335,983,275) 1,912,402,829
Net assets
Beginning of period ................. 3,367,663,688 1,455,260,859
- --------------------------------------- ----------------- -----------------
End of period ....................... $ 3,031,680,413 $ 3,367,663,688
======================================= ================= =================
Undistributed net investment
income .............................. $ 49,640 $ 0
======================================= ================= =================
</TABLE>
(a) The Fund changed its fiscal year end from February 29 to August 31.
See Combined Notes to Financial Statements.
31
<PAGE>
Combined Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The Evergreen Money Market Funds (the "Funds") consist of the Evergreen Money
Market Fund ("Money Market Fund"), Evergreen Municipal Money Market Fund
("Municipal Money Market Fund") (formerly, Evergreen Tax Exempt Money Market
Fund), Evergreen Pennsylvania Municipal Money Market Fund ("Pennsylvania
Municipal Money Market Fund") (formerly, Evergreen Pennsylvania Tax-Free Money
Market Fund) and Evergreen Treasury Money Market Fund ("Treasury Money Market
Fund"), known collectively as the "Funds". Each Fund is a series of Evergreen
Money Market Trust (the "Trust"), a Delaware business trust organized on
September 17, 1997 as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). Each Fund is a
diversified series of the Trust.
Each Fund offers Class A and Class Y shares. In addition, the Money Market Fund
offers Class B and Class C shares. Class A shares are sold at net asset value
without a front-end sales charge, but pay distribution fees. Class B and Class
C shares pay a higher ongoing distribution fee than Class A. Class B shares are
sold subject to a contingent deferred sales charge that is payable upon
redemption and decreases depending on how long the shares have been held. Class
B shares will automatically convert to Class A shares after seven years. Class
C shares are sold subject to a contingent deferred sales charge payable on
shares redeemed within one year after the month of purchase. Class K shares
were available for exchange by shareholders of any Keystone Classic Fund. The
contingent deferred sales charge applicable to shares of the Keystone Classic
Fund exchanged for Class K shares had carried over to the Class K shares
received in the exchange. On January 16, 1998, Class K shares were converted to
Class B shares of the Money Market Fund. Class Y shares are not subject to any
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
A. Valuation of Securities
Portfolio securities are valued at amortized cost which approximates market
value. The amortized cost method involves valuing a security at cost on the
date of purchase and thereafter assuming a straight-line amortization of any
discount or premium.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the market value of the
securities pledged falls below the carrying value of the repurchase agreement,
including accrued interest. Each Fund will only enter into repurchase
agreements with banks and other financial institutions which are deemed by the
investment adviser to be creditworthy pursuant to guidelines established by the
Board of Trustees.
C. Securities Lending
In order to generate income and to offset expenses, the Funds may lend
portfolio securities to brokers, dealers and other financial organizations.
Each Fund's investment adviser will monitor the creditworthiness of such
borrowers. Loans of securities may not exceed 30% of a Fund's total assets and
will be collateralized by cash, letters of credit or United States Government
securities that are maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities, including accrued
interest. While such securities are on loan, the borrower will pay a Fund any
income accruing thereon, and a Fund may invest the collateral in portfolio
securities, thereby increasing its return. A Fund will have the right to call
any such loan and obtain the securities loaned at any time on five days'
notice. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A
Fund may pay reasonable fees in connection with such loans.
D. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums.
E. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute
32
<PAGE>
Combined Notes to Financial Statements (continued)
all of their net investment company taxable income, net tax-exempt income and
net capital gains, if any, to their shareholders. The Funds also intend to
avoid any excise tax liability by making the required distributions under the
Code. Accordingly, no provision for federal taxes is required. To the extent
that realized capital gains can be offset by capital loss carryforwards, it is
each Fund's policy not to distribute such gains.
F. Distributions
Distributions from net investment income for each Fund are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. To the extent these differences are permanent
in nature, such amounts are reclassified within the components of net assets.
G. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the
relative net assets of each class. Currently, class specific expenses are
limited to expenses incurred under the Distribution Plans for each class.
2. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of $0.001 par value shares of beneficial
interest authorized. The shares are divided into classes which are designated
Class A and Class Y shares. In addition, the Money Market Fund offers Class B
and Class C shares. Prior to January 16, 1998 the Money Market Fund also
offered Class K shares. Transactions in shares of beneficial interest (valued
at $1.00 per share) of the Funds were as follows:
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Ended August 31,
Five Months
Ended
January 31, 1998 1997 1996
------------------ ------------------- -------------------
<S> <C> <C> <C>
Class A
Shares sold ........................................ 2,143,096,717 4,913,816,942 3,360,065,151
Shares issued in acquisition of:
FFB Cash Management Fund .......................... 0 0 592,362,245
Keystone Liquid Trust ............................. 0 151,861,145 0
Shares issued in reinvestment of distributions ..... 11,138,399 19,783,898 13,630,468
Shares redeemed .................................... (2,047,246,823) (4,037,993,646) (2,895,924,591)
- ---------------------------------------------------- ---------------- ----------------- -----------------
Net increase ....................................... 106,988,293 1,047,468,339 1,070,133,273
- ---------------------------------------------------- ---------------- ----------------- -----------------
Class B
Shares sold ........................................ 33,697,484 22,383,686 13,107,126
Shares issued in:
Acquisition of Keystone Liquid Trust .............. 0 7,303,582 0
Conversion of Class K shares to Class B ........... 74,271 0 0
Shares issued in reinvestment of distributions ..... 314,550 442,030 307,330
Shares redeemed .................................... (31,906,139) (17,471,935) (11,123,113)
- ---------------------------------------------------- ---------------- ----------------- -----------------
Net increase ....................................... 2,180,166 12,657,363 2,291,343
==================================================== ================ ================= =================
</TABLE>
33
<PAGE>
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
MONEY MARKET FUND - continued
<TABLE>
<CAPTION>
August 1, 1997
Five Months (Commencement of
Ended Class Operations) to
January 31, 1998 August 31, 1997
------------------ ---------------------
<S> <C> <C>
Class C
Shares sold ............................................... 5,355,264 1,309,779
Shares issued in acquisition of Keystone Liquid Trust ..... 0 4,493,120
Shares issued in reinvestment of distributions ............ 51,687 16,706
Shares redeemed ........................................... (8,464,881) (731,523)
- ----------------------------------------------------------- -------------- ---------------
Net increase (decrease) ................................... (3,057,930) 5,088,082
- ----------------------------------------------------------- -------------- ---------------
Class K
Shares sold ............................................... 1,258,327 156,690
Shares issued in reinvestment of distributions ............ 1,841 208
Shares converted to Class B shares ........................ (74,271) 0
Shares redeemed ........................................... (1,291,309) (51,486)
- ----------------------------------------------------------- -------------- ---------------
Net increase (decrease) ................................... (105,412) 105,412
=========================================================== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31,
Five Months
Ended
January 31, 1998 1997 1996
------------------ ------------------- -------------------
<S> <C> <C> <C>
Class Y
Shares sold ........................................ 1,383,614,256 4,002,912,413 2,902,529,372
Shares issued in acquisition of
FFB Lexicon Cash Management Fund .................. 0 0 95,834,876
Shares issued in reinvestment of distributions ..... 6,298,710 18,071,338 14,304,225
Shares redeemed .................................... (1,414,565,744) (4,057,487,412) (2,624,143,977)
- ---------------------------------------------------- ---------------- ----------------- -----------------
Net increase (decrease) ............................ (24,652,778) (36,503,661) 388,524,496
==================================================== ================ ================= =================
</TABLE>
- --------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Ended August 31,
Five Months
Ended
January 31, 1998 1997 1996
------------------ ------------------- -------------------
<S> <C> <C> <C>
Class A
Shares sold ...................................... 481,665,658 1,491,746,339 1,329,098,871
Shares issued in acquisition of
FFB Tax-Free Money Market Fund .................. 0 0 103,102,728
Shares issued in reinvestment of distributions ... 1,156,331 3,081,550 3,435,421
Shares redeemed .................................. (477,834,788) (1,488,596,189) (1,330,067,450)
- -------------------------------------------------- --------------- ----------------- -----------------
Net increase ..................................... 4,987,201 6,231,700 105,569,570
- -------------------------------------------------- --------------- ----------------- -----------------
Class Y
Shares sold ...................................... 452,634,103 1,112,629,458 1,243,309,865
Shares issued in reinvestment of distributions ... 4,146,785 11,706,339 12,767,571
Shares redeemed .................................. (448,415,258) (1,363,487,668) (1,060,731,679)
- -------------------------------------------------- --------------- ----------------- -----------------
Net increase (decrease) .......................... 8,365,630 (239,151,871) 195,345,757
================================================== =============== ================= =================
</TABLE>
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
August 22, 1995
Five Months Six Months (Commencement of
Ended Year Ended Ended Class operations) to
January 31, 1998 August 31, 1997 August 31, 1996 February 29, 1996
------------------ ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Class A
Shares sold ................................... 53,496,270 84,061,251 40,205,338 4,636,845
Shares issued in reinvestment of distributions 60,103 196,984 35,417 3,934
Shares redeemed ............................... (52,168,806) (70,724,545) (22,377,383) (307,967)
- ----------------------------------------------- --------------- -------------- -------------- ---------------
Net increase .................................. 1,387,567 13,533,690 17,863,372 4,332,812
=============================================== =============== ============== ============== ===============
</TABLE>
34
<PAGE>
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL MONEY MARKET FUND - continued
<TABLE>
<CAPTION>
Five Months Six Months
Ended Year Ended Ended Year Ended
January 31, 1998 August 31, 1997 August 31, 1996 February 29, 1996
------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Class Y
Shares sold ................................... 19,395,074 43,654,046 21,254,692 174,995,677
Shares issued in reinvestment of distributions 293,299 824,304 586,491 1,762,856
Shares redeemed ............................... (18,388,470) (60,819,276) (56,919,288) (136,899,719)
- ----------------------------------------------- --------------- -------------- -------------- ---------------
Net increase (decrease) ....................... 1,299,903 (16,340,926) (35,078,105) 39,858,814
=============================================== =============== ============== ============== ===============
</TABLE>
- --------------------------------------------------------------------------------
TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Ended August 31,
Five Months
Ended
January 31, 1998 1997 1996
------------------ ------------------- -------------------
<S> <C> <C> <C>
Class A
Shares sold ................................... 1,939,261,773 4,767,671,119 4,828,856,886
Shares issued in acquisition of:
FFB U.S. Treasury Fund ....................... 0 0 1,070,688,429
FFB U.S. Government Fund ..................... 0 0 327,554,031
FFB 100% U.S. Treasury Fund .................. 0 0 28,227,628
Shares issued in reinvestment of distributions 5,981,255 16,715,941 16,836,594
Shares redeemed ............................... (1,813,656,225) (4,907,328,690) (4,842,442,130)
- ----------------------------------------------- ---------------- ----------------- -----------------
Net increase (decrease) ....................... 131,586,803 (122,941,630) 1,429,721,438
- ----------------------------------------------- ---------------- ----------------- -----------------
Class Y
Shares sold ................................... 572,904,033 2,186,926,840 1,613,972,832
Shares issued in reinvestment of distributions 1,322,783 2,911,261 1,135,483
Shares redeemed ............................... (549,630,132) (2,402,879,746) (1,132,550,470)
- ----------------------------------------------- ---------------- ----------------- -----------------
Net increase (decrease) ....................... 24,596,684 (213,041,645) 482,557,845
=============================================== ================ ================= =================
</TABLE>
3. SECURITIES TRANSACTIONS
The Treasury Money Market Fund loaned securities during the five months ended
January 31, 1998 to certain brokers who paid the Fund a negotiated lenders'
fee. These fees are included in interest income. The Fund received cash as
collateral against the loaned securities in an amount at least equal to 100% of
the market value of the loaned securities at the inception of each loan. The
Fund monitors the adequacy of the collateral daily and will require the broker
to provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. At January 31, 1998,
the Fund had no securities on loan. During the five months ended January 31,
1998, the Fund earned $70,686 in income from securities lending transactions.
On January 31, 1998, the cost of investments for federal income tax purposes of
each Fund was the same as for financial reporting purposes.
As of January 31, 1998, the Money Market Fund, Municipal Money Market Fund and
the Pennsylvania Municipal Money Market Fund had capital loss carryovers for
federal income tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
------------------------------------------------------------------
2001 2002 2003 2004 2005 2006
----------- --------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund ......................... - - $517,000 - $33,000 $82,000
Municipal Money Market Fund ............... $147,000 - 16,000 $65,000 - -
Pennsylvania Municipal Money Market Fund .. - $4,000 6,000 - - -
</TABLE>
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI") (formerly, Evergreen Keystone Distributor,
Inc.), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS"), serves as
the principal underwriter to the Funds. The Funds have adopted Distribution
Plans (the "Plans") for their Class A Shares, Class B Shares, Class C Shares
and Class K Shares pursuant to Rule 12b-1 under the 1940 Act. The Plans permit
each Fund to reimburse its principal underwriter for costs related to selling
shares of the Fund and for various other services. These costs, which
35
<PAGE>
Combined Notes to Financial Statements (continued)
consist primarily of commissions and services fees to broker-dealers who sell
shares of the Fund, are paid by shareholders through expenses called
"Distribution Plan expenses". Distribution Plan expenses are calculated daily
and paid monthly.
Under the terms of the Plans, the Funds may incur distribution-related and
shareholder servicing expenses which may not exceed an annual rate of 0.75% for
Class A Shares of the Money Market Fund and Municipal Money Market Fund and
0.35% for Class A Shares of the Pennsylvania Municipal Money Market and
Treasury Money Market Funds. The payments for Class A Shares for each Fund are
voluntarily limited to 0.30% of average daily net assets.
The Money Market Fund may incur distribution-related and shareholder servicing
expenses which may not exceed an annual fee of 1.00% of average daily net
assets for its Class B and Class C shares and up to 0.30% of its average daily
net assets of its Class K shares.
EDI has entered into a Shareholder Services Agreement with First Union
Brokerage Services ("FUBS"), an affiliate of First Union, whereby EDI will
compensate FUBS for certain services provided to shareholders and/or
maintenance of shareholder accounts relating to Money Market Fund's Class B
shares. EDI paid $11,046 to FUBS during the five months ended January 31, 1998
under the shareholder services agreement.
During the five months ended January 31, 1998, amounts paid to EDI pursuant to
each Fund's Class A, Class B, Class C and Class K Distribution Plans were as
follows:
<TABLE>
<CAPTION>
Amount paid Amount waived
------------------------------------------- --------------
Class A Class B Class C Class K Class A
------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Money Market Fund ....................... $3,594,206 $88,649 $15,098 $244 -
Municipal Money Market Fund ............. 833,863 - - - -
Pennsylvania Municipal Money Market Fund 43,990 - - - $29,326
Treasury Money Market Fund .............. 3,142,342 - - - -
</TABLE>
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class.
5. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned subsidiary
of First Union, is the investment adviser for the Money Market Fund and the
Municipal Money Market Fund. In return for providing investment management and
administrative services to the Funds, the Funds pay Evergreen Asset a
management fee that is calculated daily and paid monthly. The management fee is
computed by applying percentage rates, starting at 0.50% and declining to 0.45%
per annum as net assets increase, to the average daily net asset value of each
Fund.
The Capital Management Group ("CMG") of First Union National Bank of North
Carolina ("FUNB"), a subsidiary of First Union, serves as the investment
adviser to the Pennsylvania Municipal Money Market Fund and the Treasury Money
Market Fund. In return for providing investment management and administrative
services to the Funds, the Funds pay CMG a management fee that is calculated
daily and paid monthly. For the Pennsylvania Municipal Money Market Fund, the
management fee is calculated by applying percentage rates, starting at 0.40%
and declining to 0.28% per annum as net assets increase, to the average daily
net asset value of the Pennsylvania Municipal Money Market Fund. CMG is
entitled to an annual fee of 0.35% of the average daily net asset value of the
Treasury Money Market Fund.
During the five months ended January 31, 1998, the Pennsylvania Municipal Money
Market Fund voluntarily waived management fees of $17,363. The investment
adviser can modify or discontinue these voluntary waivers and reimbursements at
any time.
Lieber & Company, an affiliate of First Union, is the investment sub-adviser to
the Money Market and Municipal Money Market Funds. Lieber & Company is
reimbursed by Evergreen Asset, at no additional expense to the Money Market and
Municipal Money Market Funds, for its cost of providing sub-investment advisory
services.
Evergreen Investment Services, Inc. ("EIS") (formerly, Evergreen Keystone
Investment Services, Inc.), a subsidiary of First Union, serves as the
administrator for each Fund.
36
<PAGE>
Combined Notes to Financial Statements (continued)
The administrator and sub-administrator for the Pennsylvania Municipal Money
Market and Treasury Money Market Funds are entitled to an annual fee based on
the average daily net assets of the funds administered by EIS for which First
Union or its investment advisory subsidiaries are also the investment advisers.
The administration fee is calculated by applying percentage rates, which start
at 0.05% and decline to 0.01% per annum as net assets increase, to the average
daily net asset value of the Pennsylvania Municipal Money Market and Treasury
Money Market Funds. The sub-administration fee is calculated by applying
percentage rates, which start at 0.01% and decline to .004% as net assets
increase, to the average daily net asset value of the Pennsylvania Municipal
Money Market and Treasury Money Market Funds.
For the Money Market and Municipal Money Market Funds the administration and
sub-administration fees are paid by Evergreen Asset and are not fund expenses.
During the five months ended January 31, 1998, the Pennsylvania Municipal Money
Market and Treasury Money Market Funds paid or accrued $7,495 and $341,830,
respectively, to EIS for certain administrative services.
Evergreen Service Company ("ESC") (formerly, Evergreen Keystone Service
Company), a wholly-owned subsidiary of FUNB, serves as transfer and dividend
disbursing agent for the Funds. For certain accounts of the Money Market and
the Treaury Money Market Funds, First Union has been sub-contracted to maintain
shareholder sub-account records, take fund purchase and redemption orders and
answer inquiries. For each account of the Funds, First Union earned a fee which
aggregated as follows for the five months ended January 31, 1998:
<TABLE>
<S> <C>
Money Market Fund .................. $17,672
Treasury Money Market Fund ......... 45,198
</TABLE>
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds. As sub-administrator, BISYS provides the officers of the Funds.
6. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
7. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Funds may defer any or all compensation related
to performance of duties as a Trustee. Each Trustee's deferred balances are
allocated to deferral accounts which are included in the accrued expenses for
each Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly
installments for up to ten years at their election, not earlier than either the
year in which the Trustee ceases to be a member of the Board of Trustees or
January 1, 2000.
8. ACQUISITION INFORMATION
Effective August 1, 1997, the Money Market Fund acquired substantially all the
assets and assumed the liabilities of Keystone Liquid Trust in exchange for
Class A, Class B and Class C Shares of the Money Market Fund. The acquisition
was accomplished by a tax-free exchange of the respective shares of the Money
Market Fund for the net assets of the Keystone Liquid Trust. The net assets
acquired, valued at $1 per share, amounted to $163,579,564. The aggregate net
assets of the Money Market Fund immediately after the acquisition was
$ 3,202,817,920.
37
<PAGE>
Combined Notes to Financial Statements (continued)
Effective January 1, 1996, First Union merged with First Fidelity
Bancorporation. Effective on the close of business January 19, 1996, the Funds
noted below acquired substantially all of the net assets of the following
management investment companies, previously advised by a subsidiary of First
Fidelity Bancorporation, through non-taxable exchanges. The net assets
acquired, valued at $1 per share, and class of shares exchanged are as follows:
<TABLE>
<CAPTION>
Class of
Acquired Acquiring Shares
Fund Fund Exchanged Net Assets
- -------------------------------------------- ------------------- ----------- ----------------
<S> <C> <C> <C>
FFB Cash Management Fund ............. Money Market Fund Class A $ 592,358,361
FFB Lexicon Cash Management Fund ..... Money Market Fund Class Y 95,834,929
Municipal Money
FFB Tax-Free Money Market Fund ....... Market Fund Class A 103,129,021
Treasury Money
FFB U.S. Treasury Fund ............... Market Fund Class A 1,070,672,333
Treasury Money
FFB U.S. Government Fund ............. Market Fund Class A 327,532,054
Treasury Money
FFB 100% U.S. Treasury Fund .......... Market Fund Class A 28,227,573
</TABLE>
The aggregate net assets of the Money Market, Municipal Money Market and
Treasury Money Market Funds immediately after the acquisitions were
$1,865,328,722, $1,141,961,188 and $3,053,739,559, respectively.
9. FINANCING AGREEMENT
On October 31, 1996, a financing agreement among certain of the Evergreen
Funds, State Street Bank & Trust ("State Street") and a group of Banks
(collectively, the "Banks") became effective. Under this agreement, the Banks
provided an unsecured credit facility in the aggregate amount of $225 million
($112.5 million committed and $112.5 million uncommitted) allocated evenly
among the Banks. Borrowings under this facility bore interest at 0.75% per
annum above the Federal Funds rate. A commitment fee of 0.10% per annum was
incurred on the unused portion of the committed facility, which was allocated
to all participating funds. State Street served as agent for the Banks, and as
agent was entitled to a fee of $15,000 which was allocated to all of the
participating Funds. This agreement was terminated on October 31, 1997.
On October 31, 1997, a temporary financing agreement between the participating
Funds and First Union became effective. Under this agreement, First Union
provided a fully committed unsecured credit facility in the aggregate amount of
$300 million. Borrowings under this facility bore interest at 1.00% per annum
above the Federal Funds rate. State Street served as administrative agent under
this agreement, but received no compensation for its services. This agreement
was terminated on December 22, 1997.
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street and a group of banks (the "Banks") became effective. Under this
agreement, the Banks provide an unsecured credit facility in the aggregate
amount of $400 million ($275 million committed and $125 million uncommitted).
The credit facility is allocated, under the terms of the financing agreement,
among the Banks. The credit facility is to be accessed by the Funds for
temporary or emergency purposes only and is subject to each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be
incurred on the unused portion of the committed facility, which will be
allocated to all Funds. For its assistance in arranging this financing
agreement, the Capital Market Group of First Union was paid a one time
arrangement fee of $27,500. State Street serves as administrative agent for the
Banks, and as administrative agent is entitled to a fee of $20,000 per annum
which is allocated to all of the Funds.
During the five months ended January 31, 1998, the Municipal Money Market Fund
had borrowings outstanding for 5 days under these agreements and incurred
$11,667 in interest charges related to these borrowings. The average amount of
debt outstanding aggregated $14,000,000 at a weighted average interest rate of
6.00%. The maximum amount outstanding under the agreement was $14,002,333
(including accrued interest). On January 31, 1998, the Funds had no borrowings
under the agreement.
38
<PAGE>
Combined Notes to Financial Statements (continued)
10. CONCENTRATION OF CREDIT RISK
The Pennsylvania Municipal Money Market Fund invests a substantial portion of
its assets in issuers located in a single state, therefore, it may be more
affected by economic and political developments in that state or region than
would be a comparable general tax-exempt money market fund.
11. SUBSEQUENT EVENTS
Effective March 2, 1998, the Money Market Fund acquired substantially all the
assets and assumed the liabilities of Virtus Money Market Fund in exchange for
Class A and Class Y shares of the Money Market Fund. The acquisition was
accomplished by a tax-free exchange of the respective shares of the Money
Market Fund for the net assets of Virtus Money Market Fund. The net assets
acquired, valued at $1 per share, amounted to $227,443,405. The aggregate net
assets of the Money Market Fund immediately after the acquisition was
$3,972,178,894.
Effective March 2, 1998, the Municipal Money Market Fund acquired substantially
all the assets and assumed the liabilities of Virtus Tax Free Money Market Fund
in exchange for Class Y shares of the Municipal Money Market Fund. The
acquisition was accomplished by a tax-free exchange of the respective shares of
the Municipal Money Market Fund for the net assets of Virtus Tax Free Money
Market Fund. The net assets acquired, valued at $1 per share, amounted to
$51,784,668. The aggregate net assets of the Municipal Money Market Fund
immediately after the acquisition was $1,236,483,220.
Effective March 2, 1998, the Treasury Money Market Fund acquired substantially
all the assets and assumed the liabilities of Virtus Treasury Money Market Fund
in exchange for Class A and Class Y shares of the Treasury Money Market Fund.
The acquisition was accomplished by a tax-free exchange of the respective
shares of the Treasury Money Market Fund for the net assets of Virtus Treasury
Money Market Fund. The net assets acquired, valued at $1 per share, amounted to
$243,731,970. The aggregate net assets of the Treasury Money Market Fund
immediately after the acquisition was $3,473,282,398.
39
<PAGE>
Report of Independent Accountants
To the Trustees and Shareholders of
Evergreen Money Market Fund
Evergreen Municipal Money Market Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Evergreen Money
Market Fund and Evergreen Municipal Money Market Fund (formerly, Evergreen Tax
Exempt Money Market Fund) (the "Funds"), two of the funds of Evergreen Money
Market Trust, at January 31, 1998, the results of each of their operations for
the period then ended and for the year ended August 31, 1997, the changes in
each of their net assets for the five months ended January 31, 1998 and for
each of the two years in the period ended August 31, 1997, and the financial
highlights for each of the periods indicated in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at January 31, 1998 by
correspondence with the custodian and the application of alternative auditing
procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
March 13, 1998
40
<PAGE>
Independent Auditors' Report
The Trustees and Shareholders
Evergreen Money Market Trust
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of the Evergreen Money Market Funds
listed below as of January 31, 1998 and the related statements of operations,
statements of changes in net assets, and financial highlights for each of the
years or periods listed below:
Evergreen Pennsylvania Municipal Money Market Fund (formerly Evergreen
Pennsylvania Tax-Free Money Market Fund) (one of the portfolios
constituting Evergreen Money Market Trust) - statements of operations for
the five months ended January 31, 1998 and for the year ended August 31,
1997, statements of changes in nets assets for the five months ended
January 31, 1998, the year ended August 31, 1997, the six months ended
August 31, 1996 and the year ended February 29, 1996 and financial
highlights for the periods presented on page 11.
Evergreen Treasury Money Market Fund (one of the portfolios constituting
Evergreen Money Market Trust) - statements of operations for the five
months ended January 31, 1998 and for the year ended August 31, 1997,
statements of changes in net assets for the five months ended January 31,
1998 and for each of the years in the two-year period ended August 31,
1997, and the financial highlights for the periods presented on page 12.
These financial statements and financial highlights are the responsibility of
the Funds' 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 our 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 and financial highlights. Our procedures included confirmation of
securities owned as of January 31, 1998 by correspondence with the custodian
and 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
Evergreen Pennsylvania Municipal Money Market Fund and Evergreen Treasury Money
Market Fund as of January 31, 1998, the results of their operations, the
changes in their net assets and financial highlights for each of the years or
periods specified in the first paragraph above in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 2, 1998
41
<PAGE>
ADDITIONAL INFORMATION (Unaudited)
On December 15, 1997, a special meeting of shareholders for each of the Funds
was held to consider a number of proposals. On October 16, 1997, the record
date for the meeting, the Funds had the following shares outstanding and number
of shares represented at the meeting:
<TABLE>
<CAPTION>
Money Municipal
Market Money
Fund Market Fund
--------------- -----------------
<S> <C> <C>
Record Date Shares Outstanding ....................................... 665,368,074 1,050,705,165
Shares represented at meeting ........................................ 488,884,359 579,552,500
Percentage of record date shares represented at meeting .............. 73.48% 55.16%
The votes recorded at the meeting, by proposal, were as follows:
Proposal 1 - The proposed reorganization of each Fund as
a series of the Evergreen Money Market Trust, a
Delaware business trust:
Shares voted "For" ............................................. 437,248,834 503,077,636
Shares voted "Against" ......................................... 8,870,976 46,094,331
Shares voted "Abstain" ......................................... 42,765,549 30,380,533
Proposal 2 - Reclassification as non-fundamental of the
investment objective of those Funds whose investment
objective is currently classified as fundamental:
Shares voted "For" ............................................. 424,291,905 527,521,756
Shares voted "Against" ......................................... 23,470,191 23,391,548
Shares voted "Abstain" ......................................... 41,122,263 28,639,196
Proposal 3 - Changes to fundamental investment
restrictions:
Proposal to amend the fundamental restriction concerning
diversification of investments
Shares voted "For" ............................................. 430,292,983 508,978,082
Shares voted "Against" ......................................... 16,325,096 38,700,635
Shares voted "Abstain" ......................................... 42,266,280 31,873,783
Proposal to amend the fundamental restriction concerning
concentration of a Fund's assets in a particular industry:
Shares voted "For" ............................................. 430,228,747 510,380,526
Shares voted "Against" ......................................... 16,335,117 37,298,191
Shares voted "Abstain" ......................................... 42,320,495 31,873,783
Proposal to amend the fundamental restriction concerning the
issuance of senior securities:
Shares voted "For" ............................................. 430,116,992 510,503,604
Shares voted "Against" ......................................... 16,451,969 37,175,113
Shares voted "Abstain" ......................................... 42,315,398 31,873,783
Proposal to amend the fundamental restriction concerning
borrowing:
Shares voted "For" ............................................. 430,218,362 510,036,379
Shares voted "Against" ......................................... 16,350,599 37,642,338
Shares voted "Abstain" ......................................... 42,315,398 31,873,783
Proposal to amend the fundamental restriction concerning
underwriting:
Shares voted "For" ............................................. 430,188,158 510,615,086
Shares voted "Against" ......................................... 16,380,803 37,063,631
Shares voted "Abstain" ......................................... 42,315,398 31,873,783
Proposal to amend the fundamental restriction concerning
investments in Real Estate:
Shares voted "For" ............................................. 430,215,635 510,344,860
Shares voted "Against" ......................................... 16,353,327 37,333,857
Shares voted "Abstain" ......................................... 42,315,397 31,873,783
<CAPTION>
Pennsylvania Treasury
Money Money
Market Market
Fund Fund
------------------ -----------------
<S> <C> <C>
Record Date Shares Outstanding ....................................... 64,701,257,910 2,463,577,719
Shares represented at meeting ........................................ 45,310,144 1,429,067,131
Percentage of record date shares represented at meeting .............. 70.03% 58.01%
The votes recorded at the meeting, by proposal, were as follows:
Proposal 1 - The proposed reorganization of each Fund as
a series of the Evergreen Money Market Trust, a
Delaware business trust:
Shares voted "For" ............................................. 44,081,273 1,315,195,172
Shares voted "Against" ......................................... 507,602 14,760,448
Shares voted "Abstain" ......................................... 721,269 99,111,511
Proposal 2 - Reclassification as non-fundamental of the
investment objective of those Funds whose investment
objective is currently classified as fundamental:
Shares voted "For" ............................................. 44,187,509 1,298,572,711
Shares voted "Against" ......................................... 399,429 30,742,118
Shares voted "Abstain" ......................................... 723,206 99,752,302
Proposal 3 - Changes to fundamental investment
restrictions:
Proposal to amend the fundamental restriction concerning
diversification of investments
Shares voted "For" ............................................. 43,970,019 1,300,398,112
Shares voted "Against" ......................................... 618,856 27,635,300
Shares voted "Abstain" ......................................... 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
concentration of a Fund's assets in a particular industry:
Shares voted "For" ............................................. 43,970,019 1,300,398,112
Shares voted "Against" ......................................... 618,856 27,635,300
Shares voted "Abstain" ......................................... 721,269 101,033,719
Proposal to amend the fundamental restriction concerning the
issuance of senior securities:
Shares voted "For" ............................................. 43,970,019 1,300,398,112
Shares voted "Against" ......................................... 618,856 27,635,300
Shares voted "Abstain" ......................................... 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
borrowing:
Shares voted "For" ............................................. 43,970,019 1,300,398,112
Shares voted "Against" ......................................... 618,856 27,635,300
Shares voted "Abstain" ......................................... 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
underwriting:
Shares voted "For" ............................................. 43,970,019 1,300,398,112
Shares voted "Against" ......................................... 618,856 27,635,300
Shares voted "Abstain" ......................................... 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
investments in Real Estate:
Shares voted "For" ............................................. 43,970,019 1,300,398,112
Shares voted "Against" ......................................... 618,856 27,635,300
Shares voted "Abstain" ......................................... 721,269 101,033,719
</TABLE>
42
<PAGE>
ADDITIONAL INFORMATION (Unaudited) (continued)
<TABLE>
<CAPTION>
Pennsylvania Treasury
Money Municipal Money Money
Market Money Market Market
Fund Market Fund Fund Fund
------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Proposal to amend the fundamental restriction concerning
commodities:
Shares voted "For" ............................................ 430,006,628 508,414,064 43,970,019 1,300,398,112
Shares voted "Against" ........................................ 16,562,334 39,264,654 618,856 27,635,300
Shares voted "Abstain" ........................................ 42,315,397 31,873,782 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
lending:
Shares voted "For" ............................................ 430,035,104 510,319,808 43,970,019 1,300,398,112
Shares voted "Against" ........................................ 16,533,857 37,358,909 618,856 27,635,300
Shares voted "Abstain" ........................................ 42,315,398 31,873,783 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
investment in federally tax exempt securities:
Shares voted "For" ............................................ N/A 508,812,608 43,970,019 N/A
Shares voted "Against" ........................................ N/A 38,866,109 618,856 N/A
Shares voted "Abstain" ........................................ N/A 31,873,783 721,269 N/A
Proposal to amend the fundamental restriction concerning
unseasoned issuers:
Shares voted "For" ............................................ 430,085,012 503,271,988 N/A N/A
Shares voted "Against" ........................................ 16,491,910 44,410,534 N/A N/A
Shares voted "Abstain" ........................................ 42,307,437 31,869,978 N/A N/A
Proposal to amend the fundamental restriction concerning
purchases on margin:
Shares voted "For" ............................................ 430,049,725 504,229,826 43,970,019 N/A
Shares voted "Against" ........................................ 16,527,197 43,574,545 618,856 N/A
Shares voted "Abstain" ........................................ 42,307,437 31,748,129 721,269 N/A
To amend the fundamental restriction concerning control or
management:
Shares voted "For" ............................................ N/A 503,278,652 43,970,019 1,301,401,860
Shares voted "Against" ........................................ N/A 44,403,870 618,856 26,631,552
Shares voted "Abstain" ........................................ N/A 31,869,978 721,269 101,033,719
Proposal to amend the fundamental restriction concerning
short sales:
Shares voted "For" ............................................ 430,109,364 503,283,412 N/A 1,303,100,728
Shares voted "Against" ........................................ 16,467,557 44,399,110 N/A 24,932,684
Shares voted "Abstain" ........................................ 42,307,438 31,869,978 N/A 101,033,719
Proposal to amend the fundamental restriction concerning
purchases on margin:
Shares voted "For" ............................................ 430,156,384 N/A N/A N/A
Shares voted "Against" ........................................ 16,420,537 N/A N/A N/A
Shares voted "Abstain" ........................................ 42,307,438 N/A N/A N/A
Proposal to amend the fundamental restriction concerning
Officers and Directors' ownership of shares:
Shares voted "For" ............................................ 430,453,574 507,385,479 N/A 1,301,401,860
Shares voted "Against" ........................................ 16,454,101 40,418,893 N/A 26,631,552
Shares voted "Abstain" ........................................ 41,976,684 31,748,128 N/A 101,033,719
Proposal to amend the fundamental restriction concerning Oil,
Gas or other mineral exploration program:
Shares voted "For" ............................................ 430,468,733 504,199,839 43,970,019 N/A
Shares voted "Against" ........................................ 16,420,537 43,604,533 618,856 N/A
Shares voted "Abstain" ........................................ 41,995,089 31,748,128 721,269 N/A
Proposal to amend the fundamental restriction concerning
options:
Shares voted "For" ............................................ 430,404,993 504,199,839 N/A N/A
Shares voted "Against" ........................................ 16,425,577 43,604,533 N/A N/A
Shares voted "Abstain" ........................................ 42,053,789 31,748,128 N/A N/A
</TABLE>
43
<PAGE>
ADDITIONAL INFORMATION (Unaudited) (continued)
<TABLE>
<CAPTION>
Pennsylvania Treasury
Money Municipal Money Money
Market Money Market Market
Fund Market Fund Fund Fund
------------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
Proposal to amend the fundamental restriction concerning
warrants:
Shares voted "For" ....................................... N/A 504,217,213 N/A N/A
Shares voted "Against" ................................... N/A 43,587,159 N/A N/A
Shares voted "Abstain" ................................... N/A 31,748,128 N/A N/A
Proposal to amend the fundamental restriction concerning
investment in State Tax Exempt Securities:
Shares voted "For" ....................................... N/A N/A 43,970,019 N/A
Shares voted "Against" ................................... N/A N/A 618,856 N/A
Shares voted "Abstain" ................................... N/A N/A 721,269 N/A
Proposal to amend the fundamental restriction concerning
investment in Municipal Securities:
Shares voted "For" ....................................... N/A 504,217,213 43,970,019 N/A
Shares voted "Against" ................................... N/A 43,559,021 618,856 N/A
Shares voted "Abstain" ................................... N/A 31,776,266 721,269 N/A
Proposal to amend the fundamental restriction concerning
investment in Money Market securities:
Shares voted "For" ....................................... 430,414,206 N/A N/A N/A
Shares voted "Against" ................................... 16,456,782 N/A N/A N/A
Shares voted "Abstain" ................................... 42,013,371 N/A N/A N/A
Proposal to amend the fundamental restriction concerning
illiquid securities:
Shares voted "For" ....................................... N/A 504,199,839 N/A N/A
Shares voted "Against" ................................... N/A 43,604,533 N/A N/A
Shares voted "Abstain" ................................... N/A 31,748,128 N/A N/A
Proposal 4 - Changes to investment objective:
Shares voted "For" ....................................... N/A 501,142,661 43,763,630 N/A
Shares voted "Against" ................................... N/A 51,517,220 825,245 N/A
Shares voted "Abstain" ................................... N/A 26,892,619 721,269 N/A
</TABLE>
FEDERAL INCOME TAX STATUS OF DIVIDENDS (Unaudited)
100% of the dividends distributed by the Municipal Money Market Fund and the
Pennsylvania Municipal Money Market Fund for
the five months ended January 31, 1998 are exempt from federal income tax,
other than alternative minimum tax.
<PAGE>
[SQUARE BULLET]
COREFUND[REGISTERED MARK]
FAMILY OF MUTUAL FUNDS
- -------------------------
1997
ANNUAL REPORT
TO OUR
SHAREHOLDERS
YEAR ENDING JUNE 30, 1997
COREFUNDS...INVESTING OUR EXPERIENCE IN YOUR FUTURE.
<PAGE>
COREFUND
PORTFOLIOS
BY
ASSET
CLASS
[SQUARE BULLET] COREFUND
FUND TRADING SYMBOL
(A/C SHARES) (Y SHARES)
EQUITY FUNDS
<PAGE>
[SQUARE BULLET] Equity Index -- VEIFX
[SQUARE BULLET] Core Equity CVERX CVEAX
[SQUARE BULLET] Growth Equity CRQAX CRGEX
[SQUARE BULLET] Special Equity CSPAX CSEQX
[SQUARE BULLET] International Growth CROAX CFIGX
BALANCED FUNDS
[SQUARE BULLET] Balanced COBAX CBAAX
FIXED INCOME FUNDS
[SQUARE BULLET] Short Term Income -- COSTX
[SQUARE BULLET] Short-Intermediate Bond CSIAX CFBDX
[SQUARE BULLET] Government Income CRIAX CRYIX
[SQUARE BULLET] Bond CBOAX CONIX
[SQUARE BULLET] Global Bond CRGAX CGBIX
TAX-EXEMPT INCOME FUNDS
[SQUARE BULLET] Intermediate Municipal Bond CRMAX CRMYX
[SQUARE BULLET] Pennsylvania Municipal Bond CPAAX CPAYX
[SQUARE BULLET] New Jersey Municipal Bond CNJAX CNJYX
MONEY MARKET FUNDS
[SQUARE BULLET] Treasury Reserve CTRXX CRTXX
[SQUARE BULLET] Cash Reserve -- CRCXX
[SQUARE BULLET] Tax-Free Reserve CXCXX CRXXX
TABLE OF CONTENTS
INVESTING FOR THE LONG TERM
INSIDE COVER
MESSAGE TO OUR SHAREHOLDERS
1
HOW TO USE YOUR
ANNUAL REPORT
2
GLOSSARY OF TERMS
4
CHOOSING THE RIGHT FUNDS
6
FUND DESCRIPTIONS
8
<PAGE>
INVESTMENT ADVISERS' REVIEW
12
MANAGERS' DISCUSSIONS OF
FUND PERFORMANCE
16
REPORT OF INDEPENDENT AUDITORS
44
FINANCIAL STATEMENTS
45
SHAREHOLDER SERVICES
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) OR REFER TO YOUR FUND PROSPECTUS.
LIFT THIS FLAP AND
LEARN HOW LONG-TERM INVESTING CAN
HELP YOU REACH
YOUR GOALS.
[GRAPHIC OF POINTER]
<PAGE>
INVESTING FOR THE
LONG TERM
A LITTLE BIT TODAY
CAN TAKE YOU
A LONG WAY.
[GRAPHIC OF POINTER]
Throughout this report, we talk about investing for the long term --
setting financial goals, choosing your funds, and then staying with your plan
over a period of years. Why is this important? Because long-term investing can
truly help you reach your financial goals.
Whether you're investing for your retirement, a child's education, a
<PAGE>
vacation home, or some other goal, the key is to start early. This way, you can
actually reduce the total amount you will need to save. That's because your
money will work for you as it compounds over the years. The more time you have,
the more you will benefit from compounding.
In addition, when you stay with your plan over time, you can minimize
the impact of short-term fluctuations in the market. Historically, the longer an
investment is held, the less it is affected by market ups and downs.
Finally, by investing the same amount each month, you can reduce the
average cost you pay per share. Your money will buy more shares when the price
is low and fewer shares when the price is high. This is a proven technique for
not over paying for your investment.
STOCKS HAVE OUTPERFORMED OVER THE LONG TERM.
HISTORICALLY, STOCKS HAVE EXPERIENCED GREATER SHORT-TERM
VOLATILITY, BUT OVER
THE LONGER TERM, THEY HAVE OUTPERFORMED BONDS AND OTHER
FIXED-INCOME
INVESTMENTS.
TIME CAN SMOOTH THE BUMPS ALONG THE WAY. THE LONGER YOU HOLD YOUR
INVESTMENT, THE LESS IT WILL BE IMPACTED BY SHORT-TERM MARKET FLUCTUATIONS. THIS
CHART ILLUSTRATES THE MAXIMUM AND MINIMUM RETURNS FOR DIFFERENT INVESTMENT
PERIODS. AN INVESTOR WITH A LONGER TIME HORIZON CAN AFFORD TO ASSUME GREATER
RISK IN EXCHANGE FOR POTENTIALLY GREATER LONG-TERM REWARDS.
REGULAR INVESTING IS A SIMPLE STRATEGY THAT WORKS OVER TIME. THIS
HYPOTHETICAL EXAMPLE ASSUMES MONTHLY INVESTMENTS OF $100, $300, AND $500,
RESPECTIVELY, GROWING AT A COMPOUNDED ANNUAL RATE OF RETURN OF 8%.
<PAGE>
[LINE GRAPH DEPICTING GROWTH OF $10,000 SINCE 1973]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON LONG TERM GOV'T BOND INDEX, IBBOTSON 30
DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND DOES
NOT REPRESENT THE PERFORMANCE OF A PARTICULAR COREFUND. PAST PERFORMANCE IS NOT
<PAGE>
INDICATIVE OF FUTURE RESULTS.
[BAR GRAPH DEPICTING REDUCTION OF RISK OVER TIME]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON INTERMEDIATE GOV'T BOND INDEX, IBBOTSON
30 DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT THE PERFORMANCE OF A PARTICULAR COREFUND. PAST PERFORMANCE IS
NOT INDICATIVE OF FUTURE RESULTS.
[CHART DEPICTING REGULAR INVESTING CAN HELP YOU REACH YOUR GOALS]
SOURCE: SEI RESEARCH . THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT THE PERFORMANCE OF A PARTICULAR COREFUND.
<PAGE>
MESSAGE
TO OUR
SHAREHOLDERS
JUNE 30, 1997
[SQUARE BULLET] COREFUND
During the past year, CoreFund shareholders were rewarded with overall
strong performance as a healthy economy supported the funds' strategies. Despite
some early 1997 stock market volatility, we currently have the best of all
possible worlds in terms of market climate. Good economic growth, low inflation,
relatively low interest rates, and encouraging corporate earnings make
conditions ideal for continued market strength.
INVESTING FOR THE LONG TERM Fair weather or stormy, smart investors keep their
heads and resist the temptation to follow the latest hot stock or trendy mutual
fund. Studies have shown that jumping in and out of the market in reaction to
headlines simply doesn't pay off. If you stick with your investment plan, you
won't miss out on upward cycles. Sure, there will be some downward cycles. But
if you follow a consistent investment strategy, you are more likely to reap
market rewards over time.
[PHOTO OF EMIL J. MIKITY]
LEARNING ABOUT YOUR INVESTMENTS The best way to remain confident in your
investment plan is to learn as much as you can. To help make fund information
<PAGE>
easier to read and understand, CoreFunds has created a "plain English"
prospectus. This prospectus explains mutual fund concepts and terms, putting
detailed fund- specific information at your fingertips.
Other good sources for fund information are the mutual fund ratings
services. CoreFunds is proud to have recently received 1-year ratings of A or
higher by Lipper for most of its equity funds and 5-Star Morningstar ratings for
the CoreFund Equity Index Fund.
LOOKING INTO THE NEXT CENTURY With the year 2000 approaching, the CoreFund
Family of Mutual Funds is well positioned to meet your present and future
investment needs. We have a full range of fund alternatives with well-defined
goals and investment strategies. And, we've assembled an exceptional portfolio
management team. As we work to grow our fund assets, we remain committed to
customer service excellence and the enhancement of investor education programs
that will help you meet your financial goals for the long term.
/S/ SIGNATURE
EMIL J. MIKITY
CHAIRMAN
1
<PAGE>
HOW TO USE YOUR
ANNUAL
REPORT
[GRAPHIC OF POINTER]
COREFUND SHARES ARE
CURRENTLY AVAILABLE IN
THREE DIFFERENT CLASSES:
CLASS Y SHARES
ARE FOR INSTITUTIONAL INVESTORS.
CLASS A SHARES
ARE FOR INDIVIDUALS INVESTING IN EQUITY AND FIXED INCOME FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
CLASS C SHARES
ARE FOR INDIVIDUALS INVESTING
IN MONEY MARKET FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
THE COREFUND 1997 ANNUAL REPORT In the pages that follow, you will read about
your specific funds, the economic trends of the past year, and the outlook going
forward. But the most significant message of this 1997 Annual Report has nothing
to do with market conditions or forecasts. Instead, we want to stress the
importance of staying with your sound, long-term investment plan through all
economic cycles.
WHAT YOU NEED TO KNOW
[SQUARE BULLET]
On the inside front cover, we discuss the reasons why investing over a
period of many years can help you reduce the amount of money you will need to
reach your goal, and how long-term investing can limit the impact of short-term
market fluctuations on your investment. Don't underestimate the importance of
starting your investment program early and saving on a regular basis. Take a few
minutes and read this section. It may help you learn about new ways to reach
your financial goals.
Also in this Annual Report, you will find the CoreStates Investment
Advisers' Review which provides insights into current economic conditions and a
global investment outlook. You will find a Manager's Discussion of Fund
Performance for each fund in the CoreFund Family of Funds. Each manager's
commentary presents a snapshot of fund performance for the 12-month period
ending June 30, 1997. The managers offer you insights into the investment
strategies they are employing and examine the current climate of specific
markets, as well as the market forces that are expected to prevail during the
first half of 1997.
2
<PAGE>
[SQUARE BULLET] COREFUND
QUICK FUND FACTS
Accompanying each commentary are boxes highlighting important fund
information:
[SQUARE BULLET] When a fund was opened [SQUARE BULLET] Portfolio size [SQUARE
BULLET] Number of shares outstanding
[SQUARE BULLET] Average weighted maturity of a fund's fixed income holdings
(where applicable)
[SQUARE BULLET] Seven-day effective yield (where applicable)
PORTFOLIO COMPOSITION
For funds with equity holdings, the individual reports include listings
of the top five holdings and the percentage of the total fund invested in these
holdings.
For funds with only fixed income or money market holdings, the reports
include pie charts that show how these holdings are divided according to quality
ratings or maturity.
PERFORMANCE DATA EQUITY AND FIXED INCOME FUNDS
The performance box shows the average annual total returns from
inception, for both the institutional Class Y shares and retail Class A shares,
with and without the sales charge. Also, a line graph shows the change in value
of a hypothetical $10,000 investment over the lifetime of each fund. Performance
of both Y and A classes of each Fund is compared with a commonly used industry
index to show how the Fund's performance stacks up against the index.
For the CoreFund Class A (individual) shares, the performance
information has been adjusted to reflect the 12b-1 fee associated with these
shares. The Class A data has also been divided to show performance with and
without the assessment of a sales charge, also known as the load.
PERFORMANCE DATA MONEY MARKET FUNDS
The performance boxes show the six-month cumulative total return, 7-day
and 30-day yields for both classes Y and C as compared to the industry benchmark
that the fund manager uses to measure performance.
UNDERSTANDING FUND PERFORMANCE
[SQUARE BULLET]
As you review the information in these fund reports, please remember that past
performance of the portfolios does not predict future results. Also, investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
[GRAPHIC OF POINTER]
3
<PAGE>
GLOSSARY
OF TERMS
[GRAPHIC OF POINTER]
Various terms used in the fund reports are defined as follows:
CLASS Y/CLASS A&C CoreFund shares are currently offered in these classes. Class
Y shares are for institutional investors. Class A&C shares are for individuals,
and include added features such as shareholder servicing and automatic
investment plans, as well as some additional fees. Class C shares also offer
checkwriting privileges.
DISTRIBUTIONS are the payments of income and capital gains to shareholders of a
mutual fund. For tax purposes, capital gains distributions are calculated
separately from interest income or dividends.
DIVERSIFICATION is the spreading of investment risk by putting assets in a
wide-ranging portfolio of securities, such as a mutual fund.
DOLLAR-COST AVERAGING is an installment-purchase technique that involves
investing a fixed amount of money in mutual fund shares at regular intervals
rather than all at once. The objective is to buy fewer shares when prices are
high and more shares when prices are low.
EXPENSE RATIO is the amount, expressed as a percentage of average assets, that
shareholders paid in the past year for mutual fund operating expenses and
management fees.
FACE VALUE is the amount the bondholder receives when the bonds are redeemed at
maturity. Interest payments are based on the face value (also called "par
value").
HEDGE is a defensive investment strategy, often involving the buying or selling
of options, to offset possible losses and thereby to reduce risk.
INDEX is a statistical composite of selected stocks or bonds that is used to
measure price fluctuations in these markets. For example, Standard & Poor's 500
Composite Index (S&P 500) is a popular measure of the stock market's performance
based on prices of 500 common stocks listed on the New York and American stock
exchanges or traded over the counter.
4
<PAGE>
[SQUARE BULLET] COREFUND
LOAD refers to sales charges that may be associated with a particular fund.
Where loads are shown, both sales charges (incurred when purchasing shares) and
12b-1 fees have been included. The 12b-1 fee, named after the Securities and
Exchange Commission rule that permits it, is sometimes assessed to recover costs
incurred through advertising, commission payments to brokers, or other expenses
associated with marketing and distributing a fund.
MATURITY refers to the period over which a bond or other fixed income security
must be held to earn the full yield offered by the issuer of the security.
Average weighted maturity describes the average period of maturity in a
portfolio that contains fixed income securities of varying maturities.
NET ASSET VALUE (NAV) reflects the market value of one share of the fund on the
date listed. This figure is determined by taking the fund's total assets --
securities, cash, and any accrued earnings -- and then deducting liabilities and
dividing by the number of shares outstanding.
Money market funds seek to maintain a stable NAV of $1.00, although there
is no guarantee they will always do so. There are three money market portfolios
in the CoreFund Family of Mutual Funds: Cash Reserve, Treasury Reserve, and
Tax-Free Reserve.
TOTAL RETURN shows how the value of an investment has changed from the
beginning to the end of a period, assuming that dividends and capital gains have
been reinvested. In the performance tables for equity and fixed income funds,
total return is shown on an "annualized" basis -- it assumes performance at a
constant rate for each year. In the performance boxes for money market funds,
the six-month total return is shown on a "cumulative" basis -- i.e., the total
return for the period from January 1, 1997 to June 30, 1997.
VOLATILITY is a description of how much the price of securities, such as mutual
funds, moves up or down within a given period.
YIELD refers to the rate of return for an investment portfolio, expressed as a
percentage. Yield for mutual funds is established by a formula set by the
Securities and Exchange Commission. A fund's yield will fluctuate and reflect
the portfolio's net earning power after fund expenses have been paid.
DEFINING THE TERMS
[SQUARE BULLET]
5
<PAGE>
CHOOSING
THE
RIGHT FUNDS
[GRAPHIC OF POINTER]
The CoreFund Family offers a diverse range of high-quality mutual fund
investment options designed to help you reach your financial goals.
These include: the capital appreciation potential of equity and
balanced funds, the income potential of fixed-income funds, the tax advantages
of municipal bond funds, the stability of money market funds, and the expanded
reach and potential of international funds. By allowing free exchange among all
funds, CoreFund makes it easy for you to adapt your individual investment
program to your changing needs.
THE RIGHT CHOICES FOR A WELL-ROUNDED INVESTMENT PLAN.
Each investor has a unique notion of what the "right" mix of risk and
reward should be. You may, for example, be an investor who seeks to maintain the
highest possible degree of stability in your portfolio, and therefore favor
money market securities. Or, you may be at the opposite end of the spectrum --
someone who is willing to accept and tolerate higher degrees of risk in exchange
for the potential of higher returns offered by stocks. Because higher returns
generally mean greater price fluctuations, investment decisions will always
revolve around this tradeoff.
FINDING THE RIGHT MIX OF RISK AND REWARD.
To help you align your portfolio's particular blend of stability and
return with your investment preferences, CoreFunds offers a broad array of
investment options.
DIVERSIFICATION
IS A WAY TO
MODERATE
YOUR RISK.
As illustrated at right, these funds fall into distinct categories that match
up with the various stages of the risk/return spectrum. By taking these factors
into consideration, you can fashion a well-rounded, diversified portfolio that
will help you achieve your individual investment goals while maintaining a
comfortable level of risk. In this way, CoreFunds' expertise and experience can
best be used to shape your investment future.
6
<PAGE>
[SQUARE BULLET] COREFUND
<TABLE>
MUTUAL FUND CATEGORIES
LOWER HIGHER
RISK RISK
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH [SQUARE BULLET] INTERNATIONAL GROWTH
INTERNATIONAL STOCK FUNDS
OFFER POTENTIALLY HIGHER
RETURNS, BUT CARRY SPECIAL
RISKS. THESE RISKS ARE
OUTLINED IN YOUR PROSPECTUS.
GROWTH [SQUARE BULLET] SPECIAL EQUITY
[SQUARE BULLET] GROWTH EQUITY
STOCK AND BALANCED FUNDS [SQUARE BULLET] CORE EQUITY
PURSUE LONG-TERM GROWTH. [SQUARE BULLET] EQUITY INDEX
THEY OFFER THE GREATEST GROWTH [SQUARE BULLET] BALANCED
POTENTIAL, BUT FLUCTUATE MORE
IN PRICE.
INTERNATIONAL INCOME [SQUARE BULLET] GLOBAL BOND
GLOBAL BOND FUNDS SEEK GROWTH AND INCOME
OFFERING POTENTIALLY HIGHER RETURNS THAN
DOMESTIC BONDS, BUT WITH LESS STABILITY OF
PRINCIPAL.
INCOME [SQUARE BULLET] BOND
[SQUARE BULLET] GOVERNMENT INCOME
INTERMEDIATE- AND LONG-TERM TAXABLE BOND [SQUARE BULLET] SHORT-INTERMEDIATE BOND
FUNDS SEEK A MODERATE-TO-HIGH LEVEL OF [SQUARE BULLET] SHORT TERM INCOME
INCOME AND PRESERVATION OF CAPITAL.
TAX-FREE INCOME [SQUARE BULLET] INTERMEDIATE MUNICIPAL BOND
[SQUARE BULLET] PENNSYLVANIA MUNICIPAL BOND
THESE FUNDS SEEK TO PROVIDE INCOME THAT [SQUARE BULLET] NEW JERSEY MUNICIPAL BOND
IS GENERALLY EXEMPT FROM INCOME TAX,
WHILE PRESERVING CAPITAL.
STABILITY [SQUARE BULLET] TREASURY RESERVE
[SQUARE BULLET] CASH RESERVE
MONEY MARKET FUNDS SEEK GREATER SAFETY [SQUARE BULLET] TAX-FREE RESERVE
AND STABILITY OF PRINCIPAL WHILE
PROVIDING INCOME.
LOWER HIGHER
RETURN RETURN
RISK/RETURN SPECTRUM
</TABLE>
7
<PAGE>
FUND
DESCRIPTIONS
JUNE 30, 1997
[SQUARE BULLET] EQUITY (STOCK) FUNDS
INVEST PRIMARILY IN SECURITIES SUCH AS COMMON STOCKS. THESE FUNDS SEEK MAXIMUM
LONG-TERM GAINS THROUGH CAPITAL APPRECIATION.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] EQUITY Seeks to achieve price and yield ...results substantially in line with the performance
INDEX FUND performance similar to the S&P 500 of the stock market as a whole.
Composite Index.
[SQUARE BULLET] CORE EQUITY Seeks growth of capital by investing ...growth of capital and is willing to take higher
FUND primarily in a diversified portfolio risk for potentially higher returns.
of common stocks.
[SQUARE BULLET] GROWTH Seeks growth of capital and an ...capital appreciation and is willing to take higher
EQUITY FUND increasing flow of dividends from risk for potentially higher returns.
a diversified portfolio of common
stocks.
[SQUARE BULLET] SPECIAL Seeks capital growth by investing ...growth of capital and is willing to take higher risk
EQUITY FUND principally in a diversified and experience greater volatility for potentially higher
portfolio of common stocks. returns.
[SQUARE BULLET] INTERNATIONAL Seeks long-term growth of capital
...growth of capital and is willing to assume the GROWTH FUND by
investing in a portfolio of additional risks inherent in foreign
investing in
common stocks diversified by country exchange for potentially higher returns.
and industry.
</TABLE>
8
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
[SQUARE BULLET] BALANCED FUND
INVESTING IN BOTH COMMON STOCKS AND FIXED INCOME. THIS FUND SEEKS TO PROVIDE
TOTAL RETURN WHILE PRESERVING CAPITAL.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] BALANCED FUND Seeks to provide total return while ...participation in a diversified portfolio program
preserving capital. that is continuously and professionally managed and is
willing to take higher risk for potentially higher returns.
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS
INVEST PRIMARILY IN INTEREST-PAYING SECURITIES ISSUED BY THE U.S. GOVERNMENT AND
ITS AGENCIES AS WELL AS CORPORATE BONDS AND COMMERCIAL PAPER. THESE FUNDS SEEK
TO PROVIDE A REGULAR STREAM OF CURRENT INCOME.
[SQUARE BULLET] SHORT TERM Seeks consistent current income ...higher
yield than can be expected from either cash INCOME FUND and
relative stability of principal by management funds or other
short-term investments,
investing primarily in a diversified but with less volatility than most longer-term bond funds.
portfolio of investment-grade debt
securities with remaining maturities
of three years or less.
[SQUARE BULLET] SHORT- Seeks consistent current income by ...higher yield than can be expected from other
INTERMEDIATE investing principally in a short-term investments but without the wide swings
BOND FUND diversified portfolio of debt normally attributable to long-term bond funds.
securities with an average weighted
maturity of two to five years.
</TABLE>
9
<PAGE>
FUND
DESCRIPTIONS
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] GOVERNMENT Seeks to provide current income while
...investment performance and can tolerate the risk INCOME FUND
preserving principal value and from an actively managed
portfolio of taxable fixed-income
maintaining liquidity. securities without credit risk.
[SQUARE BULLET] BOND FUND Seeks to maximize long-term total ...investment performance and can tolerate the associated
return by investing principally in a risk from an actively managed portfolio of taxable fixed
diversified portfolio of debt income securities.
securities.
[SQUARE BULLET] GLOBAL Seeks to provide capital appreciation ...capital
appreciation and current income over the BOND FUND and current
income through investment long term, and is willing to assume
the additional
in fixed income securities of the risks of foreign investing for potentially higher returns,
United States and foreign issuers. and seeks benefits of international diversification.
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS
INVEST IN GENERAL OBLIGATION BONDS, REVENUE BONDS, AND MUNICIPAL NOTES, ALL OF
WHICH FINANCE PUBLIC WORKS AND SERVICES. THESE FUNDS SEEK TO PROVIDE INCOME THAT
IS GENERALLY EXEMPT FROM FEDERAL INCOME TAX AND IN SOME CASES FROM STATE AND
LOCAL TAXES.
[SQUARE BULLET] INTERMEDIATE Seeks a high level of income exempt ...a
conservative investment and seeks after-tax MUNICIPAL from
federal income tax consistent yields while protecting principal.
BOND FUND with the preservation of capital.
[SQUARE BULLET] PENNSYLVANIA Seeks a high level of current income, ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from PA state enhanced investment performance of an actively managed
and local personal income tax. portfolio of tax-free securities.
</TABLE>
10
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] NEW JERSEY Seeks a high level of current income ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from New Jersey enhanced investment performance of an actively managed
state and local personal income tax. portfolio of tax-free securities.
[SQUARE BULLET] MONEY MARKET FUNDS
INVEST PRIMARILY IN QUALITY SHORT-TERM SECURITIES OF THE U.S. GOVERNMENT AND ITS
AGENCIES, COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT, AND REPURCHASE AGREEMENTS.
THESE FUNDS SEEK TO MAINTAIN A CONSTANT SHARE PRICE OF $1.00 WITH INCOME VARYING
ACCORDING TO MARKET CONDITIONS AND INTEREST RATES. HOWEVER, MONEY MARKET FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO
ASSURANCE THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00.
[SQUARE BULLET] TREASURY Seeks current income with liquidity ...liquidity of assets, current income, and
RESERVE and stability of principal, with stability of principal.
investments exclusively in U.S.
Treasury obligations.
[SQUARE BULLET] CASH RESERVE Seeks current income with liquidity ...liquidity of assets, current income, and
and stability of principal. stability of principal.
[SQUARE BULLET] TAX-FREE Seeks current income that is exempt ...current income exempt from federal income taxes,
RESERVE from regular income tax with stability of principal, and liquidity of assets.
liquidity and stability of principal.
</TABLE>
11
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
JUNE 30, 1997
ABOUT CORESTATES
INVESTMENT ADVISERS
(CSIA)
[SQUARE BULLET] INVESTMENT MANAGERS FOR THE
COREFUND FAMILY OF MUTUAL
FUNDS.
[SQUARE BULLET] MANAGING MORE THAN $17.6
BILLION IN ASSETS, INCLUDING NEARLY
$4 BILLION IN COREFUNDS.
[SQUARE BULLET] AN AFFILIATE OF CORESTATES
FINANCIAL CORP, ONE OF THE
NATION'S LARGEST AND MOST
RESPECTED BANKING INSTITUTIONS.
[SQUARE BULLET] DEDICATED TO PROVIDING ITS
INVESTORS WITH PROFESSIONAL
INVESTMENT MANAGEMENT.
[SQUARE BULLET] SERVING THE NEEDS OF INSTITUTIONS,
CORPORATIONS, MUNICIPALITIES, AND
INDIVIDUAL INVESTORS.
[SQUARE BULLET] SUPPORTING YOU WITH INVESTMENT
EXPERTISE FOR THE LONG TERM.
COREFUND INVESTMENT REVIEW
We are pleased to report another solid year of investment returns for
the CoreFund Family of Mutual Funds. Taking advantage of a strong U.S. economy
and generally favorable conditions throughout the world, the Fund managers
produced overall positive returns for equity, fixed income, and money market
fund shareholders for the fiscal year ending June 30, 1997.
In the first quarter, real Gross Domestic Product (GDP) grew at an
annual rate of 5.9%, reducing unemployment and raising personal incomes and
corporate profits. Despite market forecasts and Federal Reserve expectations,
inflation remained low. This combination of strong economic growth and low
inflation remains the basis for continued strength in U.S. stock prices.
While long term interest rates rose modestly in the last six months,
they have remained fairly steady in recent quarters. This pattern has provided
investors with adequate, though hardly spectacular returns. After a slight
(.25%) increase in the closely watched Federal funds rate engineered by the
Federal Reserve in March, short-interest rates have been steady. No additional
Federal Reserve actions are expected for some time.
International markets have generally followed the bullish tone set in the
U.S., with equity prices higher in most markets. Interest rates in international
markets were relatively stable, but the stronger U.S. dollar hurt returns for
dollar-based investors.
[BAR GRAPH DEPICTING CAPITAL MARKET RETURNS]
CAPITAL MARKET RETURNS
(% OF TOTAL RETURN)
FULL YEAR (6/96-6/97) FIRST SIX MONTHS `97
DJIA 38.61 20.12
S&P 500 34.68 20.60
SBBI 8.15 3.06
JPMGB 9.28 4.02
EAFE 12.85 11.21
DJIA = DOW JONES INDUSTRIAL AVERAGE
S&P 500 = STANDARD & POOR'S COMPOSITE INDEX
SBBI = SALOMON BROTHERS BROAD BOND INDEX
JPMGB = JP MORGAN GLOBAL BOND INDEX, US$ HEDGED
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
12
<PAGE>
[SQUARE BULLET] COREFUND
EQUITY REVIEW
For the first six months of the calendar year 1997 (the last six months of
the Funds' fiscal year), the U.S. stock market continued to build on one of the
greatest bull markets in history. The large capitalization S&P 500 Index (S&P)
produced a return of 20.6%, after an 11.7% return in the prior six months. For
the full fiscal year ended June 30, 1997, the S&P showed a total return of
34.7%.
Although larger stocks, represented by the S&P, significantly
outperformed the broader market, mid-cap and small cap stocks reported more
modest returns. The Russell 3000 Equal Weighted Index, which includes mid-cap
and small cap stocks, produced returns of 11.2% and 17.0% over the six and
twelve month periods, respectively.
U.S. stock prices continue to benefit from low inflation, stable
interest rates, and strong profit growth. As long as these positive factors
continue, the market should prove resistant to any sustained selling pressure,
as was shown following the market's weakness in March and early April.
[PHOTO OF MARK E. STALNECKER, CHAIRMAN CSIA]
[LINE GRAPH DEPICTING CHANGES IN THE YIELD CURVE]
BOND AND MONEY MARKET REVIEW
After falling slightly in the first six months of the Funds' fiscal year,
long-term Treasury rates rose modestly in the first half of 1997. The increase
in the target Federal funds rate from 5.25% to 5.5% in March was a response by
Federal Reserve policy makers to the strong economic growth experienced in the
first quarter of 1997 and fears of accelerating inflation.
(CONTINUED)
13
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
(CONCLUDED)
JUNE 30, 1997
However, subsequent slowing in growth and subdued inflation reassured investors,
and long-term rates fell from their early 1997 levels to end June only slightly
higher than they had been at the end of 1996.
For the Funds' full year, longer-term rates declined. The total return
for fixed income assets, as measured by the Salomon Brothers Broad Bond Index,
was 8.1%. Returns for the Index for the last half of the Funds' fiscal year were
3.1%. With the positive current inflation trends, interest rates should remain
relatively stable, and some further decline in long-term rates is possible.
[BAR GRAPH DEPICTING STOCKS -- INTERNATIONAL VS. DOMESTIC]
STOCKS -- INTERNATIONAL VS. DOMESTIC
(% OF TOTAL RETURN AS OF 6/30/97)
S&P 500 EAFE
1 YR. 34.68 12.85
2 YR. 30.26 13.06
3 YR. 28.83 9.13
4 YR. 21.34 11.05
5 YR. 19.75 12.83
S&P 500 = STANDARD & POOR'S 500 COMPOSITE INDEX
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
INTERNATIONAL REVIEW
International markets continue to underperform the United States. For the
Funds' full fiscal year ended June 30, 1997, international equity returns
(measured in U.S. dollars) on the Morgan Stanley EAFE Index were 12.9%. Most of
this return (11.2%) was generated in the last six months, following weaker
returns in 1996.
Foreign markets were generally strong in local currency terms and the
Japanese market, while weak over the full year, began to show signs of strength
late in the period amid uncertainties regarding European common currency
developments. However, strength in the dollar certainly had a negative impact on
equity returns for dollar-based investors.
OVERALL MARKET OUTLOOK
Consistent strong economic fundamentals are cause for optimism about
the overall investment outlook, although with stock prices at current
valuations, the market is vulnerable to negative surprises. The surprise could
be higher inflation or possibly lower growth, led by earnings disappointments.
But even with this note of caution, longer-term demographic trends and worldwide
economic competition continue to provide an excellent backdrop for investors.
14
<PAGE>
[SQUARE BULLET] CORE FUND
[GRAPHIC OF POINTER]
As we have always recommended, the best course of action is to stay
with your long-term investment plan. Although future returns may not match the
returns seen in the past decade, this approach should reward investors with
solid long-term real returns that approximate historical averages.
Thank you for investing in the CoreFund Family of Mutual Funds. As
always, we are committed to providing you with strong returns as we work to help
you meet your investment objective.
/S/ SIGNATURE
MARK E. STALNECKER
CHAIRMAN, CSIA
15
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
JUNE 30, 1997
COREFUND EQUITY MANAGERS
LARY AASHEIM
EQUITY INDEX
STEPHEN DALTON
GROWTH EQUITY AND BALANCED
(MANAGERS NOT SHOWN)
JOSEPH STOCKE
CORE EQUITY & SPECIAL EQUITY
MICHAEL GIBSON
MARTIN CURRIE, INC.
AND
BEVERLY HENDRY
ABERDEEN MANAGERS
INTERNATIONAL GROWTH
[PHOTO OF LARY AASHEIM AND STEPHEN DALTON]
16
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] EQUITY INDEX FUND
[GRAPHIC OF POINTER]
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 34.44% after expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Composite Index (S&P
500), returned 34.68% for the same period.
[SQUARE BULLET] Assets in the Fund grew 47.9% from $166.3 million to
$245.9 million during the year.
COMMENTARY
The CoreFund Equity Index Fund is a good alternative for investors who want to
invest in stocks, but don't want the risks associated with a specific equity
management style. The Fund strives to be a pure mirror of the S&P 500 Index.
Working toward this goal, we invest in approximately 430 of the stocks included
in the Index.
The factors that influence the Fund's ability to track index
performance are cash management and transaction cost management. We tightly
manage the Fund's cash portion to greatly increase its ability to track the
index.
We take advantage of opportunities to keep transaction costs as low as
possible at all times because they can have a negative impact on performance.
Over the past year, we have improved the Fund's ability to track the index, and
produce positive returns for investors. As an index fund, the Fund is not
managed in terms of market conditions. However, our outlook for the coming
months is for a stable, low interest rate environment and reasonable economic
growth. These conditions should prove to be healthy for the S&P 500 Index and
therefore encouraging for the Fund's performance. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
----------------------------------------
1 YEAR 5 YEAR 10 YEAR
----------------------------------------
CLASS A SYNTHETIC YIELDS
CLASS Y 34.44% 18.90% 13.43%
CLASS A W/O LOAD 34.37% 18.89% 13.42%
CLASS A W/LOAD 26.97% 17.55% 12.79%
----------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,00 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2/28/95 6/85 6/86 6/87 6/88 6/89
EQUITY INDEX CLASS Y 10,000 10,867 14,507 17,828 16,248 19,238
EQUITY INDEX CLASS A 9,450 10,270 13,709 16,847 15,354 18,180
(SYNTHETIC)
S&P 500 COMPOSITE INDEX 10,000 10,742 14,590 18,262 16,996 20,481
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
EQUITY INDEX CLASS Y 21,906 23,498 26,450 29,727 29,891 37,199 46,755 62,858
EQUITY INDEX CLASS A 20,701 22,206 24,995 28,092 28,247 35,153 44,184 59,369
(SYNTHETIC)
S&P 500 COMPOSITE INDEX 23,852 25,610 29,052 33,005 33,461 42,171 53,127 71,551
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED BEGINNING OCTOBER
9, 1996. THE PERFORMANCE SHOWN FOR EQUITY INDEX PORTFOLIO CLASS A SHARES
(SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF INSTITUTIONAL
CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF 5.50% FOR THE
CLASS A SHARES. CLASS Y SHARES OF THE EQUITY INDEX PORTFOLIO COMMENCED
OPERATIONS ON FEBRUARY 14, 1985, AS A PREDECESSOR FUND WHICH WAS ACQUIRED JUNE
1, 1991, BY COREFUNDS, INC.
</FN>
</TABLE>
EQUITY INDEX FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 14, 1985
PORTFOLIO SIZE:
$245.9 MILLION
SHARES OUTSTANDING:
6,576,837 (Y&A COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
GENERAL ELECTRIC
3.2%
COCA-COLA
2.6%
MICROSOFT
2.3%
EXXON
2.3%
MERCK & COMPANY
1.9%
17
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
CORE EQUITY FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$531.1 MILLION
SHARES OUTSTANDING:
25,155,234 (Y&A COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
WORLDCOM
4.5%
AIRTOUCH COMMUNICATIONS
4.4%
LILLY ELI & COMPANY
3.3%
GENERAL ELECTRIC
2.9%
IBM
2.7%
[SQUARE BULLET] CORE EQUITY FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 33.10% after expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Index, returned 34.68%
for the same period.
[SQUARE BULLET] Assets in the Fund grew 24.7% from $426.0 million to
$531.1 million during the year.
COMMENTARY
Throughout the year, the CoreFund Core Equity Fund produced positive results for
shareholders while slightly underperforming its benchmark. With interest rates
and inflation rates stable, the Fund benefited from overall strong performance
in the technology sector. Although technology experienced a correction in
December of 1996, the Fund gained in this area for the year due to superior
stock selection and the sector's overperformance during the second quarter of
1997.
We continued our overweighting in IBM. Microsoft and Intel were also
strong contributors. And, we benefited from our holdings in Lucent, a company
spun off from AT&T that supplies equipment to telecommunications companies.
Healthcare stocks also contributed to the Fund's performance, as we
benefited from our holdings in Lilly Eli. In contrast, although underweighted in
this area, the Fund was hurt by poor performance in the utilities sector.
AVERAGE ANNUAL TOTAL RETURN1
------------------------------------------------
1 YEAR 5 YEAR INCEPTION
------------------------------------------------
CLASS Y (SYNTHETIC) 33.10% 18.74% 18.03%
CLASS A W/O LOAD 32.74% 18.64% 17.96%
CLASS A W/LOAD 25.41% 17.31% 17.06%
------------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,00 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/90 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
CORE EQUITY CLASS Y 10,000 10,964 11,978 14,285 16,109 16,352 19,814 25,338 33,725
(SYNTHETIC)
CORE EQUITY CLASS A 9,450 10,361 11,319 13,499 15,223 15,453 18,710 23,908 31,735
S&P 500 COMPOSITE INDEX 10,000 10,910 11,714 13,288 15,097 15,305 19,289 24,300 32,727
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS Y SHARES WERE OFFERED
BEGINNING FEBRUARY 21, 1995. THE PERFORMANCE SHOWN FOR CORE EQUITY PORTFOLIO
CLASS Y SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF
INDIVIDUAL CLASS A SHARES, WITHOUT THE MAXIMUM SALES CHARGE OF 5.50% FOR THE
CLASS A SHARES. CLASS A SHARES OF THE CORE EQUITY PORTFOLIO COMMENCED
OPERATIONS ON FEBRUARY 28, 1990.
</FN>
</TABLE>
During the year, we saw positive performance in our consumer cyclical stock
holdings, especially from General Nutrition, although the sector as a whole
underper-
18
<PAGE>
[SQUARE BULLET] CORE FUND
formed. Also, the impact of a strong U.S. dollar on multi-national companies
made us cautious about certain drug and auto companies.
[GRAPHIC OF POINTER]
Looking ahead, we expect the stock market to continue to be strong.
Demographics are working in favor of the market as are low inflation, declining
interest rates, a budget agreement which includes tax cuts, strong mutual fund
cash flows, and robust corporate profits. We will continue our strategy of
creating a diversified portfolio of large and mid-capitalization companies with
strong fundamentals.
[SQUARE BULLET]
[SQUARE BULLET] GROWTH EQUITY FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 21.67% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lipper Growth Fund Index, returned
25.57% for the same period. The S&P 500 Index returned 34.68%
for the twelve months.
[SQUARE BULLET] Assets in the Fund grew 23.7% from $123.2 million to
$152.4 million during the year.
COMMENTARY
The CoreFund Growth Equity Fund, while slightly underperforming its benchmark,
produced positive returns for investors. It was a mixed year of performance in
its sector of the stock market. After turning in strong performance from June
30, 1996 through November of 1996, the Fund ran into difficulty toward the end
of the first half of its fiscal year. Overweighted in technology stocks, it was
impacted by a correction in the technology sector in December of 1996. The first
quarter of 1997 was also volatile, as the market reacted to the first increase
in the Federal Funds rate in two years.
GROWTH EQUITY FUND
------------------
QUICK FUND FACTS
------------------
INCEPTION DATE:
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$152.4 MILLION
SHARES OUTSTANDING:
9,878,488 (Y&A COMBINED)
TOP FIVE HOLDINGS
------------------
(% OF FUND INVESTMENTS)
ORACLE
2.6%
INTEL
2.5%
HOME DEPOT
2.5%
DAYTON HUDSON
2.5%
HALLIBURTON
2.4%
19
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] GROWTH EQUITY (CONTINUED)
[GRAPHIC OF POINTER]
However, we maintained our position and the situation reversed. The
Fund benefited from its positioning in the second quarter of 1997 and
performance has been dynamic. The same overweighting in technology stocks that
hurt the Fund earlier is now responsible for its recent outperformance.
In addition to technology stocks, including such companies as Oracle,
Cisco Systems, Microsoft, Intel, and Motorola, the Fund is well-diversified into
other growth stock sectors. These sectors include healthcare, retail, consumer,
and financial stocks. We remain committed to our strategy of investing in high
quality, large-to-medium capitalization stocks of well-managed growth companies.
Looking ahead, the outlook for the stock market remains very positive.
Therefore, we're maintaining a fully invested position. We expect to see modest
economic growth, almost non-existent inflation, and no need for the Federal
Reserve to raise interest rates. We're also seeing some very strong corporate
profits reports. In short, the current outlook for equities appears to be very
encouraging.
[SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------
1 YEAR 5 YEAR INCEPTION CLASS Y 21.67% 15.86% 11.90% CLASS A
W/O LOAD 21.29% 15.62% 11.69% CLASS A W/ LOAD 14.65% 14.32% 10.53%
-----------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
<TABLE>
2/28/92 6/92 6/93 6/94 6/95 6/96 6/97
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH EQUITY CLASS Y 10,000 8,795 10,093 9,285 11,487 15,090 18,359
GROWTH EQUITY CLASS A
(SYNTHETIC) 9,450 8,311 9,538 8,763 10,817 14,170 17,187
S&P 500 COMPOSITE INDEX 10,000 9,992 11,352 11,508 14,504 18,272 24,608
LIPPER GROWTH FUNDS INDEX 10,000 9,494 11,067 11,254 13,857 16,718 20,993
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING JANUARY 4, 1993. THE PERFORMANCE SHOWN FOR GROWTH EQUITY PORTFOLIO
CLASS A SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF
INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF
5.50% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE GROWTH EQUITY PORTFOLIO
COMMENCED OPERATIONS ON FEBRUARY 3, 1992.
</FN>
</TABLE>
20
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] SPECIAL EQUITY FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 17.94% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Russell 3000 Equal Weighted Index,
returned 17.03% for the same period.
[SQUARE BULLET] Assets in the Fund grew 14.7% from $64.8 million to
$74.3 million during the year.
COMMENTARY
During the last year, CoreFund Special Equity Fund produced positive results for
shareholders while slightly outperforming its benchmark. The approach of this
Fund is very issue-specific, relying on company fundamentals. We work to choose
the very best stocks for the Fund, without concern for sector diversification.
[GRAPHIC OF POINTER]
With interest rates and inflation rates stable, the Fund benefited from
overall strong performance in the technology sector. Although technology
experienced a correction in December of 1996, the Fund gained in this area for
the year due to superior stock selection and the sector's overperformance during
the second quarter of 1997.
We continued our overweighting in IBM. Microsoft and Intel were also
strong contributors. Another stock that has performed well for the Fund is
Teradyne, a supplier of test equipment for the electronics industry. And, we
benefited from our holdings in Lucent, a company spun off from AT&T that
supplies equipment to telecommunications companies.
Healthcare stocks also contributed to the Fund's performance. The Fund
benefited from holdings in Guilford
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y (SYNTHETIC) 17.94% 25.29% 17.31%
CLASS A W/O LOAD 17.73% 25.16% 17.20%
CLASS A W/LOAD 11.25% 22.83% 15.22%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
3/31/94 6/94 6/95 6/96 6/97
SPECIAL EQUITY CLASS Y
(SYNTHETIC) 10,000 9,279 11,363 15,477 18,253
SPECIAL EQUITY CLASS A 9,450 8,769 10,735 14,605 17,194
FRANK RUSSELL 3000 INDEX
(EQUALLY WEIGHTED) 10,000 9,645 11,773 14,711 17,216
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INSTITUTIONAL CLASS Y SHARES WERE OFFERED
BEGINNING FEBRUARY 21, 1995. THE PERFORMANCE SHOWN FOR SPECIAL EQUITY
PORTFOLIO CLASS Y SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE
PERFORMANCE OF INDIVIDUAL CLASS A SHARES, WITHOUT THE MAXIMUM SALES CHARGE OF
5.50% FOR THE CLASS A SHARES. CLASS A SHARES OF THE SPECIAL EQUITY PORTFOLIO
COMMENCED OPERATIONS ON MARCH 15, 1994.
SPECIAL EQUITY FUND
-------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MARCH 15, 1994
PORTFOLIO SIZE:
$74.3 MILLION
SHARES OUTSTANDING:
6,594,766 (Y&A COMBINED)
TOP FIVE HOLDINGS
-------------------
(% OF FUND INVESTMENTS)
KUHLMAN
2.2%
SCIOS NOVA
1.9%
VDI MEDIA
1.8%
EVEREST REINSURANCE HOLDINGS
1.7%
INTEL
1.7%
21
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] SPECIAL EQUITY (CONTINUED)
Pharmaceuticals, a biotechnology company focusing on new ways of delivering
cancer drugs directly into tumors.
During the year, we saw positive performance in our consumer cyclical stock
holdings, especially from General Nutrition, although the sector as a whole
underperformed. Also, the impact of a strong U.S. dollar on multi-national
companies made us cautious about certain drug and auto companies.
Looking ahead, we expect the stock market to continue to be strong.
Demographics are working in favor of the market as are low inflation, declining
interest rates, a budget agreement which includes tax cuts, strong mutual fund
cash flows, and robust corporate profits. [SQUARE BULLET]
[SQUARE BULLET] INTERNATIONAL GROWTH FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 15.43% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Morgan Stanley Capital International
EAFE Index, returned 12.85% for the same period.
[SQUARE BULLET] Assets in the Fund grew 17.1% from $141.4 million to $165.6
million during the year.
[GRAPHIC OF POINTER]
COMMENTARY
The CoreFund International Growth Fund outperformed its benchmark and provided
healthy returns for investors. The Fund is co-managed by Martin Currie, Inc.
(80% of Fund Assets) and Aberdeen Managers (20% of Fund Assets), providing the
portfolio with an added level of diversification. Both managers do extensive
research on individual companies throughout the world. By visiting over 2,000
companies a year from their international offices, they learn about each
company's facilities, products, balance sheets, and management within the
context of its local market and economy. A combination of micro and macro
economic factors are considered when making buy and sell decisions for the Fund.
22
<PAGE>
[SQUARE BULLET] COREFUND
INTERNATIONAL MARKET OVERVIEW
The UK market benefited from a stronger currency as the economy began
experiencing an earlier recovery than the rest of Europe. Financial stocks
dominated returns. However, there is concern about the continued strength of the
sterling in the coming months and its impact on forecasts.
The European markets made good progress throughout the period, although
recovery is far behind North America. In spite of uncertainty over the European
Monetary Union, the improved outlook for corporate profits pushed share prices
up. Although this market is benefiting from corporate restructuring and an
emphasis on shareholder value, for U.S. dollar-based investors, returns weren't
as good as they were in local currency terms.
The Japanese market suffered during the first six months of this period,
but began to show signs of improvement at the beginning of 1997. Gains, however,
have been aided greatly by the yen strengthening significantly on the back of
possible interest rate rises. Companies which have already restructured and are
competitive globally, such as in electronics, have performed well with increases
in earnings.
Among the Asia Pacific Region markets, Hong Kong remained the best of the
major markets. Despite Hong Kong's hand over to China, there were many
opportunities for strong returns. In contrast, Thailand, Malaysia, Korea, and
Singapore were consistently disappointing throughout the year.
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 5 YEAR INCEPTION
CLASS Y 15.43% 11.87% 9.57%
CLASS A W/O LOAD 15.09% 11.67% 9.44%
CLASS A W/LOAD 8.78% 10.42% 8.60%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/90 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
INTERNATIONAL EQUITY
CLASS Y 10,000 10,985 10,688 11,210 12,562 14,611 14,581 17,018 19,644
INTERNATIONAL EQUITY
CLASS A (SYNTHETIC) 9,450 10,381 10,100 10,594 11,907 13,824 13,758 16,034 18,453
MORGAN STANLEY MSCI EAFE
INDEX 10,000 9,814 8,682 8,626 10,375 12,138 12,341 13,980 15,776
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING JANUARY 4, 1993. THE PERFORMANCE SHOWN FOR INTERNATIONAL GROWTH
PORTFOLIO CLASS A SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE
PERFORMANCE OF INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM
SALES CHARGE OF 5.50% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE
INTERNATIONAL GROWTH PORTFOLIO COMMENCED OPERATIONS ON FEBRUARY 12, 1990.
</FN>
</TABLE>
INTERNATIONAL GROWTH FUND
-------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 12, 1990
PORTFOLIO SIZE:
$165.6 MILLION
SHARES OUTSTANDING:
11,250,338 (Y&A COMBINED)
TOP FIVE HOLDINGS
-------------------
(% OF FUND INVESTMENTS)
NOVARTIS
2.2%
MANNESMANN
1.6%
ROCHE HOLDINGS
1.6%
ROHM LTD
1.6%
ING GROUP
1.5%
23
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] INT'L GROWTH FUND (CONTINUED)
Latin American markets, in particular Argentina and Brazil, were up
nicely after the first six months of the period. Mexico also gained during the
second half of 1996, but the gain was canceled out by the renewed weakness of
the peso. In the second half of the period, strong rallies in the utility
sectors of Brazil made it the strongest market in its region. Argentine and
Mexican markets were also encouraged by stronger than expected economic growth.
MARTIN CURRIE, INC.
(80% OF FUND ASSETS )
Our investment approach is to invest in growth, but at the right price. During
the year, the largest sector of our asset allocation model has been Europe,
where we've invested more than half of all assets.
Latin America, including Brazil and Mexico, proved to be the best
performing sector for the period producing returns of about 45%. We've seen a
lot of privatization in these countries, particularly in utilities, from which
the Fund has benefited. After a dramatic Latin American recovery, however, we
have taken profits ahead of elections in Mexico and Brazil. We also have a very
small, but strong performing, portion in cash in the Middle East.
Going forward, we are confident of continued favorable conditions in
Hong Kong in spite of its hand over to China. We will continue to underweight or
avoid the markets of Thailand, Korea, and Malaysia due to weak conditions.
Although Japan had a difficult first half of the period, it has been
recovering nicely over the last six months. We've invested in a very focused
group of world class consumer electronics companies in Japan such as Sony,
Hitachi, and Canon, giving us the ability to produce high returns atypical of
the Japanese market as a whole. We will continue to maximize opportunities in
this market.
ABERDEEN MANAGERS
(20% OF FUND ASSETS)
Throughout the year, we remained underweighted in Japan, which benefited the
portfolio due to that country's weak performance during the early part of the
period. We have recently seen volatility in the world markets, and we expect
this trend to increase. We also expect to see volatility in the currency
24
<PAGE>
[SQUARE BULLET] COREFUND
markets as Europe moves toward one currency. We're closely watching Hong Kong
since its hand over to China, looking for opportunities. The Far East should
begin to outperform as conditions there are excellent for growth. Looking ahead,
although the international markets have generally underperformed the U.S. over
the last few years, we believe the cycle is now beginning to turn around.
[SQUARE BULLET]
[SQUARE BULLET] BALANCED FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 16.44% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmarks, the S&P 500 Index returned 34.68% and
the Lehman Brothers Intermediate Government/Corporate Bond Index
returned 7.23% for the same period, respectively.
[SQUARE BULLET] Assets in the Fund grew 11.5% from $105.7 million to
$117.8 million during the year.
COMMENTARY
The CoreFund Balanced Fund produced positive returns for investors for the one
year period ending June 30, 1997. Throughout the year, the Fund had mixed
performance as it shifted its equity sector weightings to a more advantageous
position.
[GRAPHIC OF POINTER]
On the equity side, we began the period by decreasing the Fund's
exposure to financial stocks while increasing its energy holdings. This hurt
performance as a post election rally in the market produced high returns in the
financial sector. Also, volatility in the Fund's technology and communica-
BALANCED FUND
-------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
JANUARY 4, 1993
PORTFOLIO SIZE:
$117.8 MILLION
SHARES OUTSTANDING:
8,717,507 (Y&A COMBINED)
TOP FIVE EQUITY HOLDINGS
-------------------------
(% OF FUND INVESTMENTS)
WARNER LAMBERT
1.3%
HEALTH MANAGEMENT ASSOCIATES
1.3%
PEOPLESOFT
1.2%
ORACLE
1.2%
DAYTON HUDSON
1.2%
25
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] BALANCED FUND (CONTINUED)
tions services holdings had a negative impact late in 1996.
The situation reversed during the first quarter 1997 correction, when the
overweighted technology sector generated superior returns relative to the
market. We then increased the Fund's holdings in the financial sector toward a
market weighting and decreased energy holdings. These trends continued through
the second quarter of 1997. In addition, holdings in the capital goods and
healthcare sectors continued to post strong returns, while large capitalization,
predictable growth stocks resumed market leadership.
On the fixed income side of the portfolio, we shortened duration during
periods of price strength from 10 years to about 51/2 years, bringing it closer
to the index. We also worked to add income during periods of price weakness.
Looking ahead, the Fund is now in a strong position both on the equity
side and the fixed income side in light of current market conditions. We do not
foresee economic conditions changing in the next six months, although we
continue to look for signs to the contrary. We continue to favor stocks of
companies which are generating accelerating earnings momentum and positive
earnings surprises, as well as improved earnings prospects. In contrast, we
intend to avoid new purchases of bonds, as we anticipate stable to gently
falling interest rates through the calendar year end. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 16.44% 17.01% 12.01%
CLASS A W/O LOAD 16.15% 16.70% 11.56%
CLASS A W/LOAD 9.79% 14.51% 10.10%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
1/31/93 6/93 6/94 6/95 6/96 6/97
BALANCED CLASS Y 10,000 10,478 10,309 11,980 14,185 16,517
BALANCED CLASS A
(SYNTHETIC) 9,450 9,899 9,715 11,254 13,294 15,441
S&P 500 COMPOSITE
INDEX 10,000 10,399 10,543 13,287 16,739 22,544
LEHMAN INTERMEDIATE
GOVERNMENT-CORPORATE
INDEX 10,000 10,419 10,392 11,468 12,042 12,912
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING MARCH 16, 1993. THE PERFORMANCE SHOWN FOR BALANCED PORTFOLIO CLASS A
SHARES (SYNTHETIC) PERIOD TO THAT DATE IS BASED ON THE PERFORMANCE OF
INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF
5.50% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE BALANCED PORTFOLIO
COMMENCED OPERATIONS ON JANUARY 4, 1993.
26
<PAGE>
[SQUARE BULLET] COREFUND
COREFUND FIXED INCOME MANAGERS
(LEFT TO RIGHT)
JOSEPH BAXTER
INTERMEDIATE, PA & NJ MUNI BONDS
DAN TAYLOR
SHORT-INTERMEDIATE BOND
BRIAN SNYDER
MUNICIPAL BOND SPECIALIST
JOHN ACKLER
SHORT TERM INCOME
WILLIAM LAWRENCE
GOVERNMENT INCOME & BOND
(MANAGER NOT SHOWN)
GEORGE MCNEILL
GLOBAL BOND
[PHOTO OF JOSEPH BAXTER, DAN TAYLOR, BRIAN SNYDER,
JOHN ACKLER, WILLIAM LAWRENCE]
27
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
SHORT TERM INCOME FUND
-----------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 15, 1995
PORTFOLIO SIZE:
$37.5 MILLION
SHARES OUTSTANDING:
3,762,789 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
1.0 YEARS
QUALITY DIVERSIFICATION
[PIE CHART]
AAA 55%
AA 4%
A 19%
BBB 10%
OTHER 12%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.82% net of fees for the year ending
June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-year Treasury
Bill Index, had a gross return of 6.18% for the same period.
[SQUARE BULLET] Assets in the Fund grew 24.6% from $30.1 million to
$37.5 million during the year.
COMMENTARY
Despite slightly underperforming its benchmark, the CoreFund Short Term Income
Fund provided money market investors with positive returns for the year. During
the period, the average weighted maturity of the Fund was about one year, toward
the shorter end of its range of three years or less.
During the first six months of the period, the Federal funds rate remained
unchanged. However, the market experienced some short-term interest rate
volatility as concerns about inflation fueled fears that the Federal Reserve
would raise interest rates. By September, evidence of a softer economy quieted
these fears and rates dropped significantly.
The first quarter of 1997 again found short-term income securities trading
on expectations of an upward interest rate move. In March, the interest rate was
increased followed by the influx of enormous tax receipts in April and May. With
the treasury flush with cash, action was taken to reduce the auction sizes of
several Treasury issuances reducing supply for the remainder of the period.
Throughout this cycle, a laddered maturity approach was maintained,
exposing the portfolio all along the yield curve. This
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR INCEPTION
CLASS Y 5.82% 5.42%
CLASS A W/O LOAD 5.59% 5.07%
CLASS A W/LOAD 2.19% 3.43%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
5/31/95 6/95 6/96 6/97
SHORT-TERM INCOME
FUND CLASS Y 10,000 10,046 10,534 11,147
SHORT-TERM INCOME
FUND CLASS A 9,450 9,718 10,160 10,728
MERRILL LYNCH 1-YEAR
TREASURY BILL INDEX 10,000 10,057 10,615 11,271
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES WERE OFFERED BEGINNING MAY
15, 1995 AND CLASS A SHARES WERE OFFERED BEGINNING MAY 17, 1995. THE MAXIMUM
SALES CHARGE ON CLASS A SHARES IS 3.25%.
28
<PAGE>
[SQUARE BULLET] COREFUND
strategy helps to neutralize interest rate risk and is a great way to achieve
better yields due to representation at the higher end of the yield curve.
In addition, our floater and asset-backed positions were increased
slightly as a hedge against higher interest rates. This technique produces a
more constant yield.
Looking ahead, we intend to keep a disciplined laddered approach to Fund
management. We will continue to work to neutralize interest rate risk and
duration rate risk as we concentrate on yield. We believe that it will take a
while for technical factors, such as treasury supply, to change. In terms of the
economy, although we think there still may be another interest rate hike
somewhere on the horizon, the economic data is simply too good for the market to
change much in the near future. [SQUARE BULLET]
[SQUARE BULLET] SHORT-INTERMEDIATE BOND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.90% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-5 year Treasury
Index, returned 6.70% for the same period.
[SQUARE BULLET] Assets in the Fund grew 1.8% from $162.9 million to $165.9
million during the year.
COMMENTARY
The CoreFund Short-Intermediate Bond Fund provided investors with positive
returns for the year while slightly outperforming its benchmark. The Fund
benefited from overweighted positions in asset-backed securities and Yankee
securities. Underweighting in corporate bonds, treasuries, and a slight
underweighting in mortgages has been the Fund's position throughout the period.
We work to add value through security selection and sector allocation, striving
to invest in the right sectors, as well as the right securities and companies.
Overall, the bond market was surprisingly stable over the past twelve
months. The Federal Reserve Board raised interest
SHORT-INTERMEDIATE BOND FUND
----------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$165.9 MILLION
SHARES OUTSTANDING:
16,882,464 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
4.4 YEARS
QUALITY DIVERSIFICATION
[PIE CHART]
AAA 71%
AA 2%
A 10%
BBB 8%
BB 3%
NOT RATED 2%
OTHER 4%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
29
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] SHORT-INTERMEDIATE (CONTINUED)
rates once during the period, but there was a modest rally across the yield
curve. Volatility was very low in the marketplace.
In terms of the economy, although we think there still may be another
interest rate hike somewhere on the horizon, the economic data is simply too
good for the market to change much in the near future.
In this environment, the Fund will work to add value by continuing to
emphasize its yield advantage with corporate, mortgage-backed, and asset-backed
securities. And we continue to see potential in asset-backed securities and
Yankee securities. Although duration has been somewhat longer than the Fund's
21/2 year target, we anticipate scaling back duration to be neutral with our
benchmarks as we move forward. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 5 YEAR INCEPTION
CLASS Y 6.90% 5.51% 5.56%
CLASS A W/O LOAD 6.64% 5.26% 5.34%
CLASS A W/LOAD 3.15% 4.56% 4.69%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT [DOLLARS IN THOUSANDS]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
2/29/92 6/92 6/93 6/94 6/95 6/96 6/97
SHORT-INTERMEDIATE
BOND CLASS Y 10,000 10,249 11,059 11,025 11,931 12,533 13,398
SHORT-INTERMEDIATE
BOND CLASS A
(SYNTHETIC) 9,675 9,916 10,700 10,641 11,487 12,037 12,836
MERRILL 1-5 YEAR SHORT-
INTERMEDIATE TREASURY
INDEX 10,000 10,324 11,189 11,265 12,248 12,883 13,747
MERILL 1-3 YEAR SHORT-
TERM TREASURY INDEX 10,000 10,284 10,961 11,138 11,999 12,651 13,483
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING JANUARY 4, 1993. THE PERFORMANCE SHOWN FOR SHORT-INTERMEDIATE BOND
PORTFOLIO CLASS A SHARES (SYNTHETIC) PRIOR TO THAT DATE IS BASED ON THE
PERFORMANCE OF INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM
SALES CHARGE OF 3.25% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE
SHORT-INTERMEDIATE BOND PORTFOLIO COMMENCED OPERATIONS ON FEBRUARY 3, 1992. WE
HAVE CHANGED THE BENCHMARK FOR THIS FUND BECAUSE WE FEEL THE MERRILL LYNCH 1-5
YR. TREASURY INDEX MORE ACCURATELY REPRESENTS THE HOLDINGS OF THIS FUND.
</FN>
</TABLE>
30
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] GOVERNMENT INCOME FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 8.15% after expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Salomon Brothers Broad
Investment Grade Bond Index, also returned 8.15% for the same
period.
[SQUARE BULLET] Assets in the Fund grew 36.2% from $15.2 million to
$20.7 million during the year.
[GRAPHIC OF POINTER]
COMMENTARY
The CoreFund Government Income Fund produced positive results for its
shareholders while matching its benchmark. The Fund's performance was helped
significantly by an overweighting in mortgage-backed securities. Representing
about 75% of the Fund's assets, mortgage-backed securities were a strong
performing sector of the market. The balance of the Fund was in U.S. Treasury
securities.
Throughout the period, the Fund's duration management has been minimal.
The Fund's average duration is typically 43/4 years. We went a little bit longer
in the second half of 1996 which modestly helped Fund performance. During the
first quarter of 1997, we shortened duration slightly, which helped performance
during that period but took away from performance during the following quarter.
The Fund emphasizes high income as a source of return for its investors,
and it takes on no credit risks.
Overall, the bond market was surprisingly stable over the past twelve
months. The Federal Reserve Board raised interest rates once during the period,
but there was a modest rally across the yield curve. Volatility was very low in
the marketplace.
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 8.15% 7.47% 5.66%
CLASS A W/O LOAD 7.88% 7.25% 5.21%
CLASS A W/LOAD 4.41% 6.07% 4.37%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
4/30/93 6/93 6/94 6/95 6/96 6/97
GOVERNMENT INCOME CLASS Y 10,000 10,235 10,098 11,134 11,589 12,534
GOVERNMENT INCOME CLASS A
(SYNTHETIC) 9,675 9,890 9,735 10,730 11,131 12,008
SOLOMON BROAD INVESTMENT-
GRADE BOND INDEX 10,000 10,196 10,076 11,340 11,905 12,875
LEHMAN BROTHERS AGGREGATE
BOND INDEX 10,000 10,194 10,061 11,324 11,892 12,862
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS A SHARES WERE OFFERED
BEGINNING MAY 3, 1993. THE PERFORMANCE SHOWN FOR GOVERNMENT INCOME PORTFOLIO
CLASS A SHARES (SYNTHETIC) PRIOR TO THAT DATE IS BASED ON THE PERFORMANCE OF
INSTITUTIONAL CLASS Y SHARES, ADJUSTED TO REFLECT THE MAXIMUM SALES CHARGE OF
3.25% FOR THE CLASS A SHARES. CLASS Y SHARES OF THE GOVERNMENT INCOME
PORTFOLIO COMMENCED OPERATIONS ON APRIL 1, 1993.
GOVERNMENT INCOME FUND
----------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
APRIL 1, 1993
PORTFOLIO SIZE:
$20.7 MILLION
SHARES OUTSTANDING:
2,118,140 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
8.8 YEARS
MATURITY DIVERSIFICATION
[PIE CHART]
UNDER 1 YEAR 2%
1-5 YEARS 22%
6-10 YEARS 66%
OVER 20 YEARS 10%
MATURITY IN YEARS --% OF FUND INVESTMENTS
31
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] GOV'T INCOME (CONTINUED)
Looking ahead, we've shortened duration a bit due to prepayment fears in
the mortgage sector sparked by the second quarter rally. Overall, we plan to
stay duration neutral to the market with an emphasis on yield. We plan to
continue our emphasis on the mortgage sector, but we look to purchase mortgages
with less prepayment exposure to avoid prepayment risk.
We expect the economy to continue with low inflation and good growth
throughout the third quarter of 1997, within the context of a tight labor
market. However, if there is any rebound in retail spending, we believe there
may be another rise in interest rates in the future and the yield curve will
probably flatten. Volatility should remain generally low; therefore, we will
maintain a neutral duration strategy with an emphasis on yield. [SQUARE BULLET]
[SQUARE BULLET] BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 7.43% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Aggregate Bond Index returned
8.16% for the same period.
[SQUARE BULLET] Assets in the Fund declined 8.0% from $199.9 million to
$184.0 million during the year.
COMMENTARY
During the last year, the CoreFund Bond Fund produced positive returns for
investors while slightly underperforming its benchmark. Early in the period, we
had an underweighting in mortgage-backed securities which helped the Fund's
performance as the market rallied. We then added more mortgages, but were still
underweighted when mortgages began to outperform the market in early 1997, which
hurt the Fund's performance.
[GRAPHIC OF POINTER]
An 8% to 10% overweighting in asset-backed securities helped
significantly throughout the Fund's fiscal year. We also had an overall neutral
weighting in the corporate bond sector with an overweight in the Yankee sector.
And, we were overweighted in
32
<PAGE>
[SQUARE BULLET] COREFUND
brokerage firm securities where we benefited from recent consolidations in that
industry.
The Fund performed well during the second half of 1996 with a duration
neutral to the index. During the first half of 1997, we extended duration by
about 3 months in the first quarter. This hurt our performance because when the
market rallied in the second quarter, we were very early on duration. Right now,
we are duration neutral.
Overall, the bond market was surprisingly stable over the past twelve
months. The Federal Reserve Board raised interest rates once during the period,
but there was a modest rally across the yield curve. Volatility was very low in
the marketplace. Lesser-rated corporate bonds were the top performers. Mortgages
performed well in the first half of 1997 after slight underperformance in the
second half of 1996. Asset-backed securities also performed well for the period.
We expect the economy to continue with low inflation and good growth
throughout the third quarter of 1997, within the context of a tight labor
market. However, if there is any rebound in retail spending, we believe there
may be another rise in interest rates in the future and then the yield curve
would probably flatten. However, volatility should remain generally low, and
therefore we will maintain a neutral duration strategy with an emphasis on
yield.
We will continue to overweight the asset-backed securities and the Yankee
sectors. These are the two areas where we are seeing the most innovation from
issuers and, therefore, the most opportunities. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 5 YEAR INCEPTION
CLASS Y 7.43% 6.03% 7.73%
CLASS A W/O LOAD 7.15% 5.91% 7.65%
CLASS A W/LOAD 2.03% 4.88% 6.94%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/90 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97
BOND CLASS Y
(SYNTHETIC) 10,000 10,266 11,279 12,883 14,254 13,946 15,403 16,078 17,272
BOND CLASS A 9,525 9,778 10,743 12,271 13,577 13,283 14,674 15,262 16,354
LEHMAN BROTHERS
AGGREGATE BOND
INDEX 10,000 10,373 11,482 13,095 14,639 14,447 16,261 17,076 18,470
<FN>
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. INSTITUTIONAL CLASS Y SHARES WERE OFFERED
BEGINNING FEBRUARY 21, 1995. THE PERFORMANCE SHOWN FOR BOND PORTFOLIO CLASS Y
SHARES (SYNTHETIC) PRIOR TO THAT DATE IS BASED ON THE PERFORMANCE OF
INDIVIDUAL CLASS A SHARES, WITHOUT THE MAXIMUM SALES CHARGE OF 4.75% FOR THE
CLASS A SHARES. CLASS A SHARES OF THE BOND PORTFOLIO COMMENCED OPERATIONS ON
FEBRUARY 28, 1990.
</FN>
</TABLE>
BOND FUND
---------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$184.0 MILLION
SHARES OUTSTANDING:
17,959,624 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
11.0 YEARS
QUALITY DIVERSIFICATION
AAA 77%
AA 1%
A 7%
BBB 10%
NOT RATED 3%
OTHER 2%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
33
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
GLOBAL BOND FUND
----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
FEBRUARY 15, 1993
PORTFOLIO SIZE:
$34.8 MILLION
SHARES OUTSTANDING:
3,646,453 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
8.7 YEARS
QUALITY DIVERSIFICATION
AAA 68%
AA 25%
A 6%
NOT RATED 1%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] GLOBAL BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.18% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the J.P. Morgan Global Bond Index,
returned 4.48% for the same period.
[SQUARE BULLET] Assets in the Fund grew 4.8% from $33.2 million to $34.8
million during the year.
COMMENTARY
[GRAPHIC OF POINTER]
During the past year, the Global Bond Fund outperformed its benchmark, reporting
positive performance for shareholders. For the year ending in June 1997, bond
markets globally have done quite well. We have an environment where restrained
growth is appearing around the world with seemingly no inflationary
consequences. The bond markets have responded well to this structural change in
the world. However, because of the strength of the dollar, the performance has
not reflected this as well as we would like.
During the first six months of the Fund's fiscal year, investors were
uncertain about the strength of the U.S. economy. This is important because the
performance of U.S. Treasuries has been setting the tone for other world bond
markets.
Also during this period, we saw volatility in parts of Europe in light
of uncertainty about the European Monetary Union (EMU). In response to continued
uneasiness about the EMU, all of the Fund's European
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 6.18% 7.99% 3.92%
CLASS A W/O LOAD 5.92% 7.74% 3.65%
CLASS A W/LOAD 0.92% 6.01% 2.23%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
12/31/93 6/94 6/95 6/96 6/97
GLOBAL BOND CLASS Y 10,000 9,045 9,923 10,729 11,392
GLOBAL BOND CLASS A 9,525 8,595 9,418 10,147 10,748
J.P. MORGAN GLOBAL
BOND INDEX 10,000 9,964 11,704 11,942 12,477
J.. MORGAN GLOBAL
BOND INDEX, HEDGED 10,000 9,489 10,537 11,498 12,565
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING FEBRUARY 15, 1993. THE MAXIMUM SALES CHARGE ON CLASS A
SHARES IS 4.75%.
holdings are now hedged back to the dollar. We believe that European currency
will continue to be weak in the coming months.
The first half of 1997 brought the March interest rate increase in the U.S.
We
34
<PAGE>
[SQUARE BULLET] COREFUND
also saw strong employment numbers and rising average earnings implying the
danger of further interest rate moves for the U.S. and the UK. In Europe, slow
growth and the constraints of the EMU set the stage for higher interest rates.
And, in Japan, while export growth was strengthening, domestic growth was
inhibited.
We see the next six months as a dangerous period for global bonds because
any kick in inflation, no matter how small, may take the market by surprise, and
the risk is that yields will go back up. We expect to see virtually all bond
markets with higher yields over the next six months, and therefore, we are
continuing to keep a short maturity profile. [SQUARE BULLET]
[SQUARE BULLET] INTERMEDIATE MUNI BOND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.62% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers 7-Year Municipal Bond
Index, returned 7.05% for the same period.
[GRAPHIC OF POINTER]
[SQUARE BULLET] Assets in the Fund grew 42.9% from $1.4 million to $2.0
million during the year.
COMMENTARY
During the year, the CoreFund Intermediate Municipal Bond Fund provided
investors with positive returns, even though it underperformed its benchmark.
The municipal bond market experienced slow economic growth during the first
quarter of 1997. After a Federal Funds rate hike of .25% and tax exempt yields
rose 25 to 30 basis points, the municipal market rallied along with the Treasury
market in the second quarter. Yields fell 40 basis points across the municipal
curve.
In April, higher yields, the stock market sell-off, and a slowing economy
drew investors into the muni marketplace. Demand soon outstripped bond supply.
Also, April tax payments increased municipal cash,
INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 3, 1993
PORTFOLIO SIZE:
$2.0 MILLION
SHARES OUTSTANDING:
194,239 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
7.1 YEARS
QUALITY DIVERSIFICATION
AAA 68%
AA 22%
A 3%
NOT RATED 4%
OTHER 3%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
35
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] INTERMEDIATE MUNI (CONTINUED)
decreasing the need for new issues. As a result, a strong technical rally pushed
yields down. Yields rose slightly in June as supply began to increase, creating
a small window of opportunity for investors.
We believe that interest rates will remain unchanged for at least the
near future. We will remain focused on investing in tax-exempt municipal bonds
maintaining an average weighted maturity of three to ten years. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 5.62% 5.31% 4.07%
CLASS A W/O LOAD 5.36% 5.09% 3.81%
CLASS A W/LOAD 1.97% 3.95% 2.98%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
5/31/93 6/93 6/94 6/95 6/96 6/97
INTERMEDIATE TERM MUNI
CLASS Y 10,000 10,124 10,097 10,660 11,165 11,793
INTERMEDIATE TERM MUNI
CLASS A (SYNTHETIC) 9,675 9,782 9,732 10,259 10,719 11,293
LEHMAN 7-YEAR MUNICIPAL
BOND INDEX 10,000 10,183 10,311 11,163 11,781 12,612
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING MAY 3, 1993. THE MAXIMUM SALES CHARGE ON CLASS A SHARES IS
3.25%.
[SQUARE BULLET] PA MUNICIPAL BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 7.92% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers Pennsylvania Bond
Index, returned 8.07% for the same period.
[SQUARE BULLET] Assets in the Fund grew 23.2% from $9.9 million to $12.2
million during the year.
COMMENTARY
The CoreFund Pennsylvania Municipal Bond Fund almost equaled its benchmark
performance for the year, providing investors with positive tax-free returns.
The Fund benefited from an increase in AA rated bonds which added yield with
minimal additional risk exposure. Also, by increasing the Fund's average
maturity to the upper end of its 9-11 year range, we've enhanced returns.
After outperforming their treasury counterparts during the second half
of 1996, the municipal bond market experienced slow economic growth during the
first quarter of 1997. After a Federal Funds rate hike of .25% and tax exempt
yields rising 25
36
<PAGE>
[SQUARE BULLET] COREFUND
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 7.92% 7.14% 6.90%
CLASS A W/O LOAD 7.65% 6.88% 6.64%
CLASS A W/LOAD 2.54% 5.15% 4.98%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
5/31/94 6/94 6/95 6/96 6/97
PENNSYLVANIA MUNI BOND
CLASS Y 10,000 9,913 10,656 11,298 12,193
PENNSYLVANIA MUNI BOND
CLASS A 9,525 9,429 10,112 10,695 11,513
LEHMAN BROTHERS MUTUAL
FUND PA INDEX 10,000 9,946 10,828 11,505 12,433
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING MAY 16, 1994. THE MAXIMUM SALES CHARGE ON CLASS A SHARES
IS 4.75%.
to 30 basis points, the municipal market rallied along with the Treasury market
in the second quarter. Yields fell 40 basis points across the municipal curve.
In April, higher yields, the stock market sell-off, and a slowing
economy drew investors into the muni marketplace. Demand soon outstripped bond
supply. Also, April tax payments increased municipal cash decreasing the need
for new issues. As a result, a strong technical rally pushed yields down. Yields
rose slightly in June as supply began to increase, creating a small window of
opportunity for investors. Looking ahead, we believe that interest rates will
remain unchanged for at least the near future. [SQUARE BULLET]
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 16, 1994
PORTFOLIO SIZE:
$12.2 MILLION
SHARES OUTSTANDING:
1,162,752 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.7 YEARS
QUALITY DIVERSIFICATION
AAA 65%
AA 19%
A 6%
OTHER 10%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
37
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
NEW JERSEY MUNICIPAL BOND FUND
------------------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
MAY 16, 1994
PORTFOLIO SIZE:
$1.9 MILLION
SHARES OUTSTANDING:
184,608 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
9.9 YEARS
QUALITY DIVERSIFICATION
AAA 37%
AA 27%
NOT RATED 31%
OTHER 5%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] NJ MUNICIPAL BOND FUND
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.70% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers New Jersey Bond Index,
returned 7.88% for the same period.
[SQUARE BULLET] Assets in the Fund grew 18.8% from $1.6 to $1.9 million
during the year.
COMMENTARY
The CoreFund NJ Municipal Bond Fund provided investors with positive tax-free
returns for the year despite underperforming its benchmark. The Fund benefited
from an extension of its average maturity which enhanced returns.
After outperforming their treasury counterparts during the second half of
1996, the municipal bond market experienced slow economic growth during the
first quarter of 1997. After a Federal Funds rate hike of .25% and tax exempt
yields rising 25 to 30 basis points, the municipal market rallied along with the
Treasury market in the second quarter. Yields fell 40 basis points across the
municipal curve.
In April, higher yields, the stock market sell-off, and a slowing economy
drew investors into the muni market place. Demand soon outstripped bond supply.
Also, April tax payments increased municipal cash, decreasing the need for new
issues. As a result, a strong technical rally pushed yields down. Yields rose
slightly in June as supply began to increase, creating a small window of
opportunity for investors. Looking ahead, we believe that interest rates will
remain unchanged for at least the near future. [SQUARE BULLET]
AVERAGE ANNUAL TOTAL RETURN1
-----------------------------------------------
1 YEAR 3 YEAR INCEPTION
CLASS Y 6.70% 6.41% 6.15%
CLASS A W/O LOAD 6.44% 6.07% 5.85%
CLASS A W/LOAD 1.40% 4.35% 4.21%
-----------------------------------------------
[LINE GRAPH DEPICTING COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT (DOLLARS IN THOUSANDS)
5/31/94 6/94 6/95 6/96 6/97
NEW JERSEY MUNI BOND
CLASS Y 10,000 9,930 10,650 11,212 11,963
NEW JERSEY MUNI BOND
CLASS A 9,525 9,466 10,113 10,612 11,295
LEHMAN BROTHERS MUTUAL
FUND NEW JERSEY INDEX 10,000 9,939 10,783 11,443 12,344
1 FOR THE PERIOD ENDED JUNE 30, 1997. PAST PERFORMANCE OF THE PORTFOLIO IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. CLASS Y SHARES AND CLASS A SHARES WERE
OFFERED BEGINNING MAY 16, 1994. THE MAXIMUM SALES CHARGE ON CLASS A SHARES
IS 4.75%.
38
<PAGE>
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET MANAGERS
(LEFT TO RIGHT)
JOHN ACKLER
CASH RESERVE
FOLU ABIONA
TAX-FREE RESERVE
RONALD BRASTEN
TREASURY RESERVE
[PHOTO OF JOHN ACKLER, FOLU ABIONA, RONALD BRASTEN]
39
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
TREASURY RESERVE
-----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
NOVEMBER 21, 1988
PORTFOLIO SIZE:
$847.5 MILLION
AVERAGE WEIGHTED MATURITY:
55 DAYS
SEVEN DAY YIELD:
5.01% (CLASS Y)
4.76% (CLASS C)
QUALITY DIVERSIFICATION
AAA 36%
NOT RATED 2%
OTHER 62%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] TREASURY RESERVE
ANNUAL RESULTS
[GRAPHIC POINTER]
[SQUARE BULLET] This Fund returned 4.97% net of expenses for the year
ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC/Donoghue Treasury & REPO
Index, returned 4.78% for the same period. The IBC/Donoghue 100%
Treasury Fund Index returned 4.72%, net of expenses, for the
year.
[SQUARE BULLET] Assets in the Fund declined 7.1% from $911.9 million to
$847.5 million during the year.
COMMENTARY
The average weighted maturity of the CoreFund Treasury Reserve decreased from 58
to 55 days during the year. The Fund slightly outperformed its benchmark for the
year. The drop in Fund assets was primarily due to investors moving money out of
money market funds and into longer-term coupon securities.
During the first six months of the period, the Federal Funds rate
remained unchanged. However, the market experienced some short-term interest
rate volatility as concerns about inflation fueled fears that the Federal
Reserve would raise interest rates. By September, evidence of a softer economy
quieted these fears and rates dropped significantly.
The first quarter of 1997 again found money market securities trading
on expectations of an upward interest rate move. In March, there was an interest
rate increase followed by the influx of enormous tax receipts in April and May.
With the Treasury flush with cash, the supply of Treasury bills was reduced for
the remainder of the period.
As the market began to anticipate the interest rate increase, we began
lowering the Fund's average maturity to take advantage of market opportunities.
The Fund's primary consideration is yield, so we look for value as we invest.
Throughout this cycle, a laddered maturity approach was maintained, exposing the
portfolio all along the yield curve. This strategy helps to neutralize interest
rate risk and is a great way to achieve better yields due to representation at
the higher end of the yield curve.
Over the last few months, we've seen expensive Treasury bills and an
inverted yield curve in which overnight yields are higher than longer
maturities. To take advantage of
40
<PAGE>
[SQUARE BULLET] COREFUND
this scenario, we've increased our position in overnight repurchase agreements.
This position also helps us to maintain complete liquidity.
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)(COMPOUNDED)
- ------------------------------------------
CLASS Y 2.45% 5.01% 4.98%
CLASS C 2.32% 4.76% 4.73%
IBC DONOGHUE 2.36% 4.83% 4.81%
TREASURY &
REPO INDEX
- ------------------------------------------
Looking forward, we continue to anticipate another interest rate
increase. However the timing of the move is unclear. Economic growth remains
slow and inflation benign, but the economy is expected to rebound in the third
or fourth quarters.
The Treasury bill remains very rich. Decreased supply and other technical
factors have caused the 3-month sector to trade well below the Federal Funds
target. For this reason, the investment in other Treasury sectors, including
overnight repurchase agreements, will continue to increase until the Treasury
bill market cheapens up. [SQUARE BULLET]
[SQUARE BULLET] CASH RESERVE
ANNUAL RESULTS
[GRAPHIC OF POINTER]
[SQUARE BULLET] This Fund returned 5.09% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC/Donoghue All-Taxable Money Fund
Average, returned 4.97% for the same period.
[SQUARE BULLET] Assets in the Fund grew 12.8% from $809.9 million to $913.9
million during the year.
COMMENTARY
Outperforming its benchmark, the Cash Reserve provided money market investors
with positive returns for the year. During the period, the average weighted
maturity of the Fund was increased to over 70 days.
During the first six months of the period, the Federal Funds rate
remained unchanged. However, the market experienced some short-term interest
rate volatility as concerns about inflation fueled fears that the Federal
Reserve would raise interest rates. By September, evidence of a softer economy
quieted these fears and rates dropped significantly.
CASH RESERVE
-----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE
AUGUST 16, 1985
PORTFOLIO SIZE:
$913.9 MILLION
AVERAGE WEIGHTED MATURITY:
73 DAYS
SEVEN DAY YIELD:
5.20% (CLASS Y)
4.96% (CLASS C)
QUALITY DIVERSIFICATION
AAA 2%
AA 9%
A 4%
NOT RATED 6%
OTHER 79%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
41
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
JUNE 30, 1997
[SQUARE BULLET] CASH RESERVE (CONTINUED)
The first quarter of 1997 again found money market securities trading
on expectations of an upward interest rate move. In March, there was an interest
rate increase followed by the influx of enormous tax receipts in April and May.
With the Treasury flush with cash, the supply of Treasury bills was reduced for
the remainder of the period.
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)(COMPOUNDED)
- ------------------------------------------
CLASS Y 2.53% 5.20% 5.12%
CLASS C 2.40% 4.96% 4.88%
IBC DONOGHUE 2.46% 5.04% 5.02%
ALL-TAXABLE
MONEY MARKET
- ------------------------------------------
Throughout this cycle, a laddered maturity approach was maintained
exposing the portfolio all along the yield curve. This strategy helps to
neutralize interest rate risk and is a great way to achieve better yields due to
representation at the higher end of the yield curve.
In addition, we swapped some of the Fund's fixed-rate debt into
floating rate debt as a hedge against higher interest rates. This technique
produces a more constant yield.
Looking ahead, we intend to keep a disciplined laddered approach to
Fund management. We will continue to work to neutralize interest rate risk and
duration rate risk as we concentrate on yield. We believe that it will take a
while for technical factors, such as Treasury bill supply, to change. In terms
of the economy, although we think there still may be another interest rate hike
somewhere on the horizon, the economic data is simply too good for the market to
change much in the near future. [SQUARE BULLET]
42
<PAGE>
[SQUARE BULLET] COREFUND
[SQUARE BULLET] TAX-FREE RESERVE
ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 3.08% for the year ending June 30, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC/Donoghue Tax-Free Average,
returned 3.03% for the same period.
[SQUARE BULLET] Assets in the Fund grew 14.8% from $107.0 million to
$122.8 million during the year.
COMMENTARY
The average weighed maturity of the Tax-Free Reserve was 51 days during the
year. And, the Fund's one year effective yield was 3.08%, as the Fund
outperformed its benchmark.
During the first six months of this period we experienced normal
patterns in the tax-free money market securities market. The market is driven by
seasonality in terms of the amount of cash in the market. Typically during
January, June, and July, yields fall due to an abundance of cash in the market.
However, in January of 1997, a new pattern emerged as a strong decline in
pre-refinanced bonds took cash out of the market. As a result, supply was
adequate and yields were fabulous.
Throughout the first half of 1997, conditions have remained positive for
the Fund. In June, the tax-exempt rate was equal to the taxable rate. We're
seeing changes to
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)(COMPOUNDED)
- ------------------------------------------
CLASS Y 1.53% 3.61% 3.35%
CLASS C 1.40% 3.36% 3.10%
IBC DONOGHUE 1.52% 3.45% 3.28%
TAX-FREE
AVERAGE
- ------------------------------------------
the fundamentals of the market that are resulting in higher yields. And, the
trend should continue. It appears that supply should remain strong and, with
more availability comes higher yields.
Our strategy will remain steady as we keep the average maturity of the Fund
between 50 and 60 days. We will extend out on the yield curve when we see an
issue of high value. We will also continue to utilize commercial paper and
smaller note deals as appropriate. Our challenge will be to research and
identify new cash flow patterns and take advantage of them in the coming months.
[SQUARE BULLET]
TAX-FREE RESERVE
-----------------
QUICK FUND FACTS
-------------------
INCEPTION DATE:
APRIL 16, 1991
PORTFOLIO SIZE:
$122.8 MILLION
AVERAGE WEIGHTED MATURITY:
51 DAYS
SEVEN DAY YIELD:
3.61% (CLASS Y)
3.36% (CLASS C)
QUALITY DIVERSIFICATION
AAA 9%
AA 8%
A 22%
NOT RATED 17%
OTHER 44%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
43
<PAGE>
REPORT
OF
INDEPENDENT
AUDITORS
[SQUARE BULLET] COREFUND
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statements of net assets of the Equity Index
Fund, Core Equity Fund, Growth Equity Fund, Special Equity Fund, International
Growth Fund, Balanced Fund, 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, Treasury Reserve, Cash Reserve, and Tax-Free Reserve of CoreFunds, Inc.
(the "Fund") as of June 30, 1997, and the related statements of operations for
the year then ended, and the statements of changes in net assets for the periods
presented herein. We have also audited the financial highlights for each of the
periods presented herein for the Equity Index Fund, Growth Equity Fund,
International Growth Fund, Balanced Fund, Short-Intermediate Bond Fund,
Government Income Fund, Global Bond Fund, Intermediate Municipal Bond Fund,
Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond Fund, Treasury
Reserve, Cash Reserve, and Tax-Free Reserve, and for the periods ended June 30,
1996 and June 30, 1997 presented herein for the Core Equity Fund, Special Equity
Fund, Short Term Income Fund, and Bond Fund. 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. The financial highlights for the
periods ended October 31, 1990 through October 31, 1995 for the Core Equity
Fund, Special Equity Fund, Short Term Income Fund, and Bond Fund were audited by
other auditors whose report dated December 8, 1995 expressed an unqualified
opinion on those statements and financial highlights.
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, 1997 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 1997 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Equity Index Fund, Core Equity Fund, Growth Equity Fund, Special
Equity Fund, International Growth Fund, Balanced Fund, 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, Treasury Reserve, Cash Reserve, and Tax-Free Reserve
at June 30, 1997 and the results of their operations for the year then ended,
and the changes in their net assets for the periods presented herein and for the
Equity Index Fund, Growth Equity Fund, International Growth Fund, Balanced Fund,
Short-Intermediate Bond Fund, Government Income Fund, Global Bond Fund,
Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey
Municipal Bond Fund, Treasury Reserve, Cash Reserve, and Tax-Free Reserve, the
financial highlights for each of the periods presented herein, and for the Core
Equity Fund, Special Equity Fund, Short Term Income Fund, and Bond Fund, the
financial highlights for the periods ended June 30, 1996 and June 30, 1997
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997
/S/ SIGNATURE
ERNST & YOUNG LLP
44
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND EQUITY FUNDS
EQUITY INDEX FUND
[PIE CHART]
MISCELLANEOUS 8%
UTILITIES 8%
TRANSPORTATION 1%
RETAIL 5%
METALS & MINING 1%
FINANCE 16%
CHEMICALS & DRUGS 15%
CONSUMER PRODUCTS 11%
DURABLE GOODS 28%
ENERGY 7%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 99.6%
AEROSPACE & DEFENSE -- 0.5%
Lockheed Martin 6,800 $ 704
Raytheon 8,900 454
TRW 3,000 170
----------
1,328
----------
AGRICULTURE -- 0.1%
Pioneer Hi-Bred International 3,000 240
----------
AIR TRANSPORTATION -- 0.4%
AMR* 2,800 259
Delta Air Lines 2,500 205
Federal Express* 4,000 231
US Air Group* 7,800 273
----------
968
----------
AIRCRAFT -- 1.9%
Allied Signal 9,100 764
Boeing 24,810 1,316
McDonnell Douglas 8,200 562
Northrop Grumman 1,700 149
Parker Hannifin 2,850 173
Rockwell International 8,763 517
Textron 8,000 531
United Technologies 8,600 714
----------
4,726
----------
APPAREL/TEXTILES -- 0.3%
Liz Claiborne 5,000 233
Nike, Class B 8,800 514
Russell 3,100 92
----------
839
----------
APPLIANCES -- 0.1%
Allegheny Teledyne 8,300 224
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
AUTOMOTIVE -- 1.8%
Chrysler 26,200 $ 860
Echlin 8,300 299
Ford Motor 43,400 1,638
General Motors 27,600 1,537
Paccar 3,000 139
----------
4,473
----------
BANKS -- 8.0%
Banc One 18,444 893
Bank of New York 13,000 566
BankAmerica 25,600 1,653
BankBoston 4,500 324
Bankers Trust New York 3,800 331
Barnett Banks of Florida 6,800 357
Chase Manhattan 15,766 1,530
Citicorp 16,800 2,025
Comerica 3,700 252
Fifth Third Bancorp 3,000 246
First Bank System 3,800 324
First Chicago 12,701 768
First Union 10,530 974
Fleet Financial Group 9,801 620
Golden West Financial 3,300 231
Great Western Financial 3,000 161
H.F. Ahmanson 2,400 103
J.P. Morgan 8,300 866
Keycorp 7,800 436
MBNA 11,925 437
Mellon Bank 11,400 514
National City 6,800 357
NationsBank 27,000 1,742
Norwest 15,300 861
PNC Bank 13,900 579
Providian Financial* 2,300 74
Suntrust Banks 8,400 463
U.S. Bancorp 4,300 276
UST 13,600 377
Wachovia 7,100 414
Wells Fargo 3,433 925
----------
19,679
----------
BEAUTY PRODUCTS -- 2.0%
Avon Products 3,200 226
Colgate Palmolive 10,492 685
Ecolab 3,300 158
International Flavors &
Fragrances 2,500 126
Procter & Gamble 25,400 3,588
----------
4,783
----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 0.6%
Comcast, Class A 14,200 304
Interpublic Group 2,200 135
Tele-Communications, Class A* 18,900 281
US West Media Group* 21,800 441
Viacom, Class B* 10,526 316
----------
1,477
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
EQUITY INDEX FUND (CONTINUED)
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.3%
Centex 2,400 $ 98
Fluor 1,900 105
Foster Wheeler 3,300 134
Halliburton 4,600 365
McDermott International 3,400 99
----------
801
----------
BUILDING MATERIALS -- 0.1%
Owens Corning 2,800 121
----------
CHEMICALS -- 2.7%
Air Products & Chemical 3,100 252
B.F. Goodrich 4,200 182
Dow Chemical 8,150 710
E.I. DuPont de Nemours 40,000 2,515
Eastman Chemical 5,700 362
FMC* 3,400 270
Great Lakes Chemical 300 16
Hercules 2,700 129
Monsanto 19,500 840
Morton International 10,300 311
Nalco Chemical 5,700 220
Praxair 3,500 196
Sigma Aldrich 10,600 372
Union Carbide 3,400 160
W.R. Grace & Company 3,100 171
----------
6,706
----------
COMMUNICATIONS EQUIPMENT -- 2.5%
Cabletron Systems* 5,800 164
Cisco Systems* 24,600 1,651
Lucent Technologies 23,300 1,679
Motorola 20,600 1,566
Northern Telecom 8,300 755
Tellabs* 6,200 346
----------
6,161
----------
COMPUTERS, SOFTWARE, & SERVICES -- 8.0%
3COM* 12,000 540
Autodesk 6,300 241
Automatic Data Processing 9,400 442
Ceridian* 3,400 144
Compaq Computer* 9,700 963
Computer Associates
International 12,050 671
Computer Sciences* 1,900 137
CUC International* 13,350 345
Dell Computer* 6,200 728
Digital Equipment* 3,900 138
EMC* 7,100 277
Equifax 6,000 223
First Data 15,400 677
Harris Computer Systems 1,600 134
Hewlett Packard 35,300 1,977
International Business Machines 37,800 3,409
Microsoft* 44,300 5,598
Novell* 29,300 203
Oracle Systems* 24,575 1,238
Parametric Technology* 5,000 213
Pitney Bowes 5,000 356
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Seagate Technology* 7,200 $ 253
Shared Medical Systems 2,400 130
Silicon Graphics* 4,600 69
Sun Microsystems* 11,200 417
Tandy 2,000 112
----------
19,635
----------
CONTAINERS & PACKAGING -- 0.1%
Bemis 3,500 152
Crown Cork & Seal 3,700 198
----------
350
----------
DRUGS -- 8.3%
Abbott Labs 28,000 1,869
Allergan 4,300 137
American Home Products 22,800 1,744
Amgen* 9,600 558
Baxter International 7,800 408
Bristol-Myers Squibb 37,040 3,000
Eli Lilly 19,900 2,175
Merck 44,400 4,595
Pfizer 24,100 2,880
Pharmacia & Upjohn 16,255 565
Schering Plough 27,200 1,302
Warner Lambert 9,400 1,168
----------
20,401
----------
ELECTRICAL EQUIPMENT -- 3.7%
Emerson Electric 14,600 804
General Electric 120,900 7,904
Westinghouse Electric 21,500 497
----------
9,205
----------
ELECTRICAL SERVICES -- 2.1%
American Electric Power 5,300 223
Baltimore Gas & Electric 4,700 125
Carolina Power & Light 3,600 129
Central & South West 5,400 115
Cinergy 4,600 160
Consolidated Edison of New York 5,300 156
Dominion Resources of Virginia 5,500 201
DTE Energy 4,200 116
Duke Power 12,984 622
Edison International 13,400 333
Entergy 5,200 142
FPL Group 6,100 281
GPU 4,200 151
Niagara Mohawk Power* 26,200 224
Northern States Power 3,700 191
Pacificorp 6,400 141
PECO Energy 16,000 336
PG&E 11,500 279
PP&L Resources 5,500 110
Public Service Enterprise Group 5,500 138
Southern 20,100 440
Texas Utilities 7,300 251
Unicom 4,800 107
Union Electric Power 4,300 162
----------
5,133
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
ENTERTAINMENT -- 0.9%
King World Productions* 6,600 $ 231
Walt Disney 24,926 2,000
----------
2,231
----------
ENVIRONMENTAL SERVICES -- 0.4%
Browning Ferris Industries 5,900 196
Laidlaw Incorporated, Class B 14,000 193
Waste Management 15,200 488
----------
877
----------
FINANCIAL SERVICES -- 3.3%
Allstate 15,700 1,146
American Express 16,600 1,237
Beneficial 2,400 171
Charles Schwab 6,400 260
Countrywide Credit Industries 6,000 187
FHLMC 30,200 1,038
FNMA 38,800 1,693
Green Tree Financial 5,900 210
Household International 4,100 482
Merrill Lynch 11,200 668
Morgan Stanley, Dean Witter,
Discover 19,330 832
Salomon 2,500 139
----------
8,063
----------
FOOD, BEVERAGE & TOBACCO -- 8.6%
Anheuser Busch 16,400 688
Archer Daniels Midland 16,455 387
Brown Forman, Class B 2,700 132
Campbell Soup 16,200 810
Coca Cola 91,600 6,389
ConAgra 7,300 468
Coors, Adolph, Class B 5,600 149
CPC International 5,400 499
Fortune Brands 700 26
General Mills 5,900 384
H.J. Heinz 16,650 768
Hershey Foods 4,000 221
Kellogg 7,600 651
Pepsico 56,800 2,134
Philip Morris 89,400 3,967
Quaker Oats 5,800 260
Ralston-Purina Group 3,900 321
Sara Lee 16,900 703
Seagram 12,300 495
Unilever 5,900 1,263
Whitman 5,100 129
Wrigley, William Jr. 4,000 268
----------
21,112
----------
GAS/NATURAL GAS -- 1.0%
Coastal 2,500 133
Columbia Gas Systems 3,500 228
Consolidated Natural Gas 6,600 355
Enron 7,300 298
Nicor 3,700 133
Noram Energy 17,800 271
Oneok 5,900 190
Pacific Enterprises 3,800 128
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Peoples Energy 4,100 $ 154
Sonat 6,800 349
Williams 3,750 164
----------
2,403
----------
GLASS PRODUCTS -- 0.3%
Corning 7,300 406
PPG Industries 7,300 424
----------
830
----------
HOTELS & LODGING -- 0.4%
HFS* 4,100 238
Hilton Hotels 8,500 226
ITT Corporation* 3,600 220
Marriott International 2,900 178
----------
862
----------
HOUSEHOLD FURNITURE & FIXTURES-- 0.4%
Armstrong World Industries 1,600 117
Masco 3,500 146
Newell 3,600 143
Sherwin Williams 4,600 142
Snap-On Tools 4,050 159
Stanley Works 3,600 144
----------
851
----------
HOUSEHOLD PRODUCTS -- 1.1%
Clorox 2,900 383
Gillette 20,500 1,942
National Service Industries 3,000 146
Whirlpool 5,700 311
----------
2,782
----------
INSURANCE -- 4.2%
Aetna 5,308 543
American General 9,716 464
American International Group 17,000 2,539
AON 5,250 272
Chubb 6,600 441
Cigna 2,900 515
Conseco 5,600 207
General Re 2,400 437
Hartford Financial
Services Group 3,100 257
Lincoln National 2,100 135
Loews 3,400 340
Marsh and McLennan 7,400 528
MBIA 1,900 214
MGIC Investment 5,000 240
Safeco 2,800 131
St. Paul 2,827 216
Torchmark 5,400 385
Transamerica 1,600 150
Travelers 21,866 1,379
United Healthcare 5,100 265
Unum 6,000 252
USF&G 13,500 324
----------
10,234
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
EQUITY INDEX FUND (CONTINUED)
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
LUMBER & WOOD PRODUCTS -- 0.1%
Georgia Pacific 2,700 $ 231
Potlatch 2,100 95
----------
326
----------
MACHINERY -- 1.7%
Baker Hughes 1,000 39
Black & Decker 3,500 130
Briggs & Stratton 3,800 190
Brunswick 9,500 297
Case 3,000 207
Caterpillar 6,900 741
Crane 4,650 194
Deere 7,800 428
Dover 2,800 172
Eaton 2,700 236
General Instrument* 5,800 145
Illinois Tool Works 8,200 410
Ingersoll Rand 2,400 148
Tenneco 5,000 226
Timken 5,000 178
Tyco International 5,300 369
----------
4,110
----------
MEASURING DEVICES -- 0.5%
Honeywell 4,400 334
Johnson Controls 3,000 123
Millipore 3,400 150
Perkin Elmer 2,000 159
Tektronix 3,500 210
Thermo Electron* 5,100 173
----------
1,149
----------
MEDICAL PRODUCTS & SERVICES-- 3.0%
Becton Dickinson 4,600 233
Beverly Enterprises* 19,600 319
Biomet* 7,400 138
Boston Scientific* 5,800 356
Cardinal Health 4,000 229
Columbia/HCA Healthcare 22,850 898
Guidant 3,000 255
Healthsouth* 11,000 274
Humana* 10,800 250
Johnson & Johnson 48,000 3,090
Manor Care 3,900 127
Medtronic 8,000 648
Tenet Healthcare* 12,900 381
U.S. Surgical 6,000 224
----------
7,422
----------
METALS & MINING -- 0.9%
Alcan Aluminum 7,700 267
Aluminum Company of America 5,200 392
Asarco 3,300 101
Cyprus AMAX Minerals 7,400 181
Freeport-McMoran Copper
and Gold, Class B 6,000 187
Inco 7,600 228
Newmont Mining 10,770 420
Phelps Dodge 1,600 136
Reynolds Metals 3,500 249
----------
2,161
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
MISCELLANEOUS CHEMICAL PRODUCTS-- 0.1%
Raychem 1,900 $ 141
----------
MISCELLANEOUS CONSUMER SERVICES-- 0.2%
Gallaher Group PLC* 7,600 140
H & R Block 7,000 226
Service International 5,800 191
----------
557
----------
MISCELLANEOUS MANUFACTURING-- 0.3%
Hasbro 3,600 102
ITT Industries* 10,500 270
Mattel 8,250 279
----------
651
----------
PAPER & PAPER PRODUCTS -- 1.9%
Avery Dennison 4,600 185
Champion International 2,200 122
International Paper 12,035 584
James River 3,200 118
Kimberly Clark 23,704 1,179
Minnesota Mining &
Manufacturing 14,600 1,489
Stone Container 3,800 54
Temple Inland 2,400 130
Union Camp 4,750 238
Westvaco 3,150 99
Weyerhaeuser 6,006 312
Willamette Industries 1,900 133
----------
4,643
----------
PETROLEUM REFINING -- 8.6%
Amerada Hess 2,100 117
Amoco 17,500 1,521
Ashland 4,300 199
Atlantic Richfield 12,000 846
Burlington Resources 2,900 128
Chevron 23,300 1,723
Enserch 6,600 147
Exxon 90,900 5,590
Helmerich and Payne 6,600 380
Mobil 28,800 2,012
Occidental Petroleum 9,900 248
Oryx Energy* 8,400 177
Phillips Petroleum 7,200 315
Rowan Companies* 10,000 282
Royal Dutch Petroleum ADR 76,800 4,176
Santa Fe Energy Resources* 7,300 107
Schlumberger 8,900 1,113
Sun 8,200 254
Texaco 7,800 848
Union Pacific Resources Group 8,629 215
Unocal 8,900 345
USX Marathon Group 9,500 274
Western Atlas* 3,000 220
----------
21,237
----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES-- 0.8%
Eastman Kodak 11,300 867
Polaroid 6,100 339
Xerox 10,800 852
----------
2,058
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
PRECIOUS METALS -- 0.2%
Barrick Gold 12,000 $ 264
Echo Bay Mines 9,100 51
Placer Dome Group 5,400 88
----------
403
----------
PRINTING & PUBLISHING -- 1.2%
Deluxe 2,500 85
Donnelly R.R. & Sons 9,200 337
Dow Jones 5,600 225
Gannett 4,800 474
Knight-Ridder 3,000 147
McGraw-Hill 2,200 129
Meredith 6,000 174
New York Times, Class A 3,200 162
Time Warner, Class A 19,800 955
Times Mirror, Class A 3,900 222
Tribune 3,000 144
----------
3,054
----------
PROFESSIONAL SERVICES -- 0.2%
Cognizant 11,000 446
Dun & Bradstreet 4,700 123
----------
569
----------
RAILROADS -- 0.8%
Burlington Northern Santa Fe 5,464 491
CSX 8,200 455
Norfolk Southern 4,600 463
Union Pacific 8,300 585
----------
1,994
----------
RETAIL -- 5.1%
Albertson's 8,400 307
American Stores 3,200 158
Autozone* 10,000 236
Charming Shoppes* 35,000 183
Circuit City Stores 3,000 107
Costco Companies* 10,900 358
CVS 6,400 328
Darden Restaurants 11,800 107
Dayton-Hudson 7,800 415
Dillards, Class A 9,700 336
Federated Department Stores* 5,700 198
Gap 9,600 373
Giant Food, Class A 3,900 126
Harcourt General 2,300 110
Home Depot 17,066 1,177
J.C. Penney 8,600 449
K Mart* 10,000 123
Kroger* 6,200 180
Limited 9,500 192
Lowes 5,500 204
May Department Stores 6,900 326
McDonald's 24,900 1,203
Mercantile Stores 2,500 157
Rite Aid 3,700 185
Sears Roebuck 13,500 726
TJX Companies 13,400 353
Toys R Us* 9,800 343
Wal Mart Stores 82,600 2,793
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Walgreen 7,600 $ 408
Wendy's International 5,900 153
Winn Dixie Stores 3,400 127
Woolworth* 7,500 180
----------
12,621
----------
RUBBER & PLASTIC -- 0.5%
Goodyear Tire & Rubber 5,380 341
Reebok International 7,300 341
Rubbermaid 8,500 253
Tupperware 5,700 208
----------
1,143
----------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.7%
Advanced Micro Devices* 7,500 270
AMP 6,200 259
Applied Materials* 6,600 467
Intel 30,100 4,269
LSI Logic* 4,000 128
Micron Technology 5,900 236
National Semiconductor* 5,600 172
Texas Instruments 6,600 555
Thomas & Betts 5,000 263
----------
6,619
----------
SPECIALTY MACHINERY -- 0.1%
Cooper Industries 2,600 129
----------
STEEL & STEEL WORKS -- 0.1%
Bethlehem Steel* 5,900 62
Nucor 2,000 115
USX U.S. Steel Group 1,900 67
Worthington Industries 4,600 84
----------
328
----------
TELEPHONES & TELECOMMUNICATION-- 6.1%
AT&T 58,736 2,059
Airtouch Communications* 19,100 523
Alltel 5,500 184
Ameritech 21,800 1,481
Bell Atlantic 17,400 1,320
Bellsouth 36,100 1,674
GTE 33,600 1,474
MCI Communications 26,658 1,021
NYNEX 14,600 841
SBC Telecommunications 33,586 2,078
Sprint 14,000 737
US West 17,600 663
Worldcom* 33,500 1,072
----------
15,127
----------
TRUCKING -- 0.1%
Ryder System 5,000 165
----------
WHOLESALE -- 0.3%
Genuine Parts 4,200 142
Ikon Office Solutions 11,600 289
Sysco 4,100 150
W.W. Grainger 2,000 156
----------
737
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
EQUITY INDEX FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $146,336) $244,839
----------
REPURCHASE AGREEMENTS -- 0.1%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price
$183,030 (collateralized by U.S. Treasury Note, par value $145,000, 11.875%,
11/15/03; market
value $188,152) $183 183
Swiss Bank
5.875%, dated 06/30/97, matures 07/01/97, repurchase price $183,030
(collateralized by U.S. Treasury Note, par value $190,000, 5.625%, 11/30/00;
market value
$187,397) 183 183
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $366) 366
----------
TOTAL INVESTMENTS -- 99.7%
(Cost $146,702) 245,205
----------
OTHER ASSETS AND LIABILITIES,
NET -- 0.3% 715
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 500 million authorized shares)
based on 6,456,231 outstanding shares of beneficial interest 139,806
Portfolio Shares -- Class A ($0.001 par value -- 500 million authorized shares)
based on 120,606 outstanding shares of beneficial interest 4,032
Accumulated Net Realized Gain
on Investments 3,579
Net Unrealized Appreciation
on Investments 98,503
----------
TOTAL NET ASSETS -- 100.0% $245,920
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $37.39
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $37.37
==========
* NON INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
PLC -- PUBLIC LIMITED COMPANY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CORE EQUITY FUND
MISCELLANEOUS 7%
UTILITIES 12%
TRANSPORTATION 2%
RETAIL 5%
HEALTHCARE SERVICES 2%
FINANCE 13%
CHEMICALS & DRUGS 7%
CONSUMER PRODUCTS 10%
DURABLE GOODS 37%
ENERGY 5%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 100.1%
AIRCRAFT -- 2.4%
Boeing 120,000 $ 6,367
McDonnell Douglas 35,000 2,397
Textron 60,000 3,982
----------
12,746
----------
APPAREL/TEXTILES -- 0.1%
Burlington Industries* 49,771 597
----------
AUTOMOTIVE -- 1.6%
Allied Signal 60,000 5,040
Ford Motor 91,900 3,469
----------
8,509
----------
BEAUTY PRODUCTS -- 0.1%
USA Detergents* 56,500 579
----------
BROADCASTING, NEWSPAPERS
& ADVERTISING -- 0.6%
Emmis Broadcasting* 77,500 3,381
----------
BUILDING & CONSTRUCTION -- 1.2%
Clayton Homes 250,000 3,563
Foster Wheeler 62,500 2,531
----------
6,094
----------
CHEMICALS -- 4.4%
Hercules 20,000 958
IMC Global 120,000 4,200
Monsanto 99,000 4,263
Praxair 128,000 7,168
3COM* 147,500 6,638
----------
23,227
----------
50
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.2%
Cabletron Systems* 86,000 $ 2,435
ITT Industries 47,500 1,223
Lucent Technologies 51,853 3,737
Motorola 53,700 4,081
----------
11,476
----------
COMPUTERS & SERVICES -- 6.9%
America Online* 35,000 1,947
Computer Associates
International 125,000 6,961
International Business
Machines 160,000 14,430
Microsoft* 70,000 8,846
Storage Technology* 100,000 4,450
----------
36,634
----------
CONTAINERS & PACKAGING -- 0.4%
Ball 67,500 2,029
----------
DRUGS -- 8.6%
Biogen* 210,000 7,114
Eli Lilly & Co. 160,900 17,588
General Electric 235,000 15,363
Ivax 126,900 1,428
Mylan Laboratories 275,200 4,059
----------
45,552
----------
ELECTRICAL SERVICES -- 2.0%
FPL Group 55,000 2,533
Pinnacle West Capital 125,000 3,758
Unicom 196,500 4,372
----------
10,663
----------
ENVIRONMENTAL SERVICES -- 1.5%
Browning Ferris Industries 240,000 7,980
----------
FINANCIAL SERVICES -- 1.1%
Equity Residential
Properties Trust 108,000 5,130
Mercury Finance 330,000 804
----------
5,934
----------
FOOD, BEVERAGE & TOBACCO -- 8.0%
Canandaigua Wine, Class A* 195,005 6,630
Chiquita Brands International 460,000 6,325
Nabisco Holdings, Class A 330,000 13,159
Philip Morris 150,500 6,678
RJR Nabisco Holdings 288,200 9,511
----------
42,303
----------
HEALTHCARE SERVICES -- 2.1%
Medpartners* 525,572 11,365
----------
HOTELS & LODGING -- 3.5%
Felcor Suite Hotels 110,000 4,098
HFS* 180,000 10,440
Hilton Hotels 150,000 3,984
----------
18,522
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
INSURANCE -- 12.2%
Conseco 200,000 $ 7,400
Equitable 225,800 7,508
Everest Reinsurance Holdings 287,000 11,372
General Re 67,500 12,285
Hartford Financial
Services Group 96,900 8,018
Sunamerica 75,000 3,656
Travelers 166,000 10,468
Travelers Property Casualty 100,000 3,988
----------
64,695
----------
MACHINERY -- 1.6%
Case 45,000 3,099
Cummins Engine 75,000 5,292
----------
8,391
----------
MEASURING DEVICES -- 1.0%
Thermo Electron* 150,000 5,100
----------
MEDICAL PRODUCTS & SERVICES-- 2.7%
Alza* 189,300 5,478
Human Genome Sciences* 24,700 821
United States Surgical 220,000 8,195
----------
14,494
----------
METALS & MINING -- 1.2%
Freeport-McMoran Copper
and Gold, Class B 75,000 2,334
Potash of Saskatchewan 54,000 4,053
----------
6,387
----------
PETROLEUM & FUEL PRODUCTS -- 3.5%
Louisiana Land & Exploration 23,000 1,314
Reading & Bates* 105,000 2,809
Repsol ADR 85,000 3,607
Tidewater 114,300 5,029
Triton Energy, Class A* 70,000 3,207
USX Marathon Group 95,000 2,743
----------
18,709
----------
PETROLEUM REFINING -- 5.0%
British Petroleum ADR 136,218 10,199
Mobil 195,000 13,626
Texaco 27,500 2,991
----------
26,816
----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.7%
Xerox 50,000 3,944
----------
PRINTING & PUBLISHING -- 0.3%
News ADR 110,000 1,719
----------
RAILROADS -- 0.8%
CSX 45,000 2,498
Union Pacific 25,000 1,763
----------
4,261
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
CORE EQUITY FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
REAL ESTATE -- 0.2%
Kimco Realty 37,500 $ 1,191
----------
RESTAURANTS -- 0.9%
Darden Restaurants 410,000 3,716
Lone Star Steakhouse & Saloon* 45,000 1,170
----------
4,886
----------
RETAIL -- 5.3%
Albertson's 75,000 2,738
CML Group 275,000 498
Corporate Express* 185,000 2,671
General Nutrition* 322,750 9,037
Lowes 58,400 2,168
Pep Boys - Manny,
Moe & Jack 185,000 6,302
Saks Holdings* 60,000 1,500
Staples* 137,600 3,199
----------
28,113
----------
RUBBER & PLASTIC -- 1.4%
Goodyear Tire & Rubber 120,000 7,598
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 2.7%
Intel 77,500 10,990
VLSI Technology* 135,000 3,189
----------
14,179
----------
STEEL & STEEL WORKS -- 0.3%
USX U.S. Steel Group 45,000 1,578
----------
TELEPHONES &
TELECOMMUNICATION -- 12.8%
Airtouch Communications* 860,000 23,543
Bellsouth 76,000 3,525
Mcleod, Class A* 185,000 6,244
Qualcomm* 170,000 8,649
Qwest Communications Int'l* 70,700 1,927
Worldcom* 754,600 24,147
----------
68,035
----------
WATER TREATMENT -- 0.8%
U.S. Filter* 150,000 4,088
----------
TOTAL COMMON STOCKS
(Cost $420,376) 531,775
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.1%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price $66,011
(collateralized by U.S. Treasury Note, par value $50,000, 11.875%,
11/15/03; market value $67,320) $66 $ 66
Sanwa Bank
5.85%, dated 06/30/97, matures
07/01/97, repurchase price $66,011
(collateralized by U.S. Treasury Note,
par value $65,000, 6.625%, 06/30/01;
market value $67,320) 66 66
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $132) 132
----------
TOTAL INVESTMENTS -- 100.2%
(Cost $420,508) 531,907
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.2%) (849)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 50 million authorized) based on
24,395,839 outstanding shares 363,289
Portfolio Shares -- Class A ($0.001 par value -- 50 million authorized) based on
759,395 outstanding shares 10,067
Accumulated Net Realized Gain
on Investments 46,302
Net Unrealized Appreciation
on Investments 111,399
Undistributed Net Investment Income 1
----------
TOTAL NET ASSETS -- 100.0% $531,058
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $21.11
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $21.13
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
GROWTH EQUITY FUND
MISCELLANEOUS 3%
UTILITIES 1%
RETAIL 11%
FINANCE 14%
ENERGY 5%
CASH EQUIVALENTS 5%
CHEMICAL & DRUGS 15%
CONSUMER PRODUCTS 8%
DURABLE GOODS 39%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMON STOCKS -- 98.4%
AIRCRAFT -- 2.0%
Allied Signal 20,000 $ 1,680
Boeing 26,000 1,380
----------
3,060
----------
BANKS -- 6.9%
Barnett Banks of Florida 50,000 2,625
Citicorp 24,643 2,971
J.P. Morgan 28,000 2,922
Norwest 35,000 1,969
----------
10,487
----------
BEAUTY PRODUCTS -- 2.4%
Colgate Palmolive 56,000 3,654
----------
CHEMICALS -- 1.9%
Monsanto 66,600 2,868
----------
COMMUNICATIONS EQUIPMENT -- 4.0%
Cisco Systems* 43,900 2,947
Motorola 41,600 3,162
----------
6,109
----------
COMPUTERS, SOFTWARE & SERVICES-- 13.6%
Compaq Computer* 32,000 3,176
Computer Associates
International 53,926 3,003
Microsoft* 25,032 3,163
Oracle Systems* 81,124 4,087
Parametric Technology* 56,200 2,392
Paychex 36,787 1,398
Peoplesoft* 66,000 3,481
----------
20,700
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
DRUGS -- 9.0%
Johnson & Johnson 49,000 $ 3,154
Merck 15,900 1,646
Schering Plough 40,000 1,915
SmithKline Beecham ADR 38,550 3,532
Warner Lambert 28,000 3,479
----------
13,726
----------
ELECTRICAL EQUIPMENT -- 5.4%
General Electric 47,178 3,084
Illinois Tool Works 70,000 3,496
Westinghouse Electric 70,400 1,628
----------
8,208
----------
ENTERTAINMENT -- 1.8%
Walt Disney 34,300 2,753
----------
FINANCIAL SERVICES -- 4.0%
FHLMC 85,000 2,922
FNMA 74,656 3,257
----------
6,179
----------
FOOD, BEVERAGE & TOBACCO -- 4.3%
Coca Cola 25,600 1,786
ConAgra 25,000 1,603
Hershey Foods 30,000 1,659
Sara Lee 38,500 1,603
----------
6,651
----------
HEALTHCARE SERVICES -- 2.3%
Health Management Associates* 124,025 3,535
----------
HOUSEHOLD PRODUCTS -- 3.7%
Gillette 34,800 3,297
Sunbeam Oster 62,100 2,344
----------
5,641
----------
INSURANCE -- 2.9%
American International Group 18,400 2,748
Oxford Health Plan* 22,300 1,600
----------
4,348
----------
MEASURING DEVICES -- 1.0%
Honeywell 21,000 1,593
----------
MEDICAL INFORMATION SYSTEMS -- 2.2%
HBO 48,000 3,306
----------
MEDICAL PRODUCTS & SERVICES-- 3.6%
Acuson* 112,000 2,576
Cardinal Health 51,600 2,954
----------
5,530
----------
PETROLEUM REFINING -- 4.7%
Baker Hughes 38,000 1,470
Halliburton 48,000 3,804
Schlumberger 15,100 1,887
----------
7,161
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
GROWTH EQUITY FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -------------------------------------------------------
RETAIL -- 10.8%
Costco* 45,000 $ 1,479
Dayton-Hudson 72,000 3,829
Gap 90,000 3,499
Home Depot 56,000 3,861
Walgreen 70,000 3,754
----------
16,422
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 3.6%
Intel 27,400 3,886
Linear Technology 30,000 1,553
----------
5,439
----------
TELEPHONES & TELECOMMUNICATION -- 8.3%
Brooks Fiber Properties* 97,400 3,287
LCI International* 126,834 2,774
McLeod, Class A* 82,000 2,768
Qualcomm* 49,900 2,539
Worldcom* 38,137 1,220
----------
12,588
----------
TOTAL COMMON STOCKS
(Cost $104,982) 149,958
----------
REPURCHASE AGREEMENTS -- 4.0%
Aubrey Lanston
5.90%, dated 06/30/97, matures
07/01/97, repurchase price
$2,048,336 (collateralized by U.S.
Treasury Note, par value $1,610,000,
11.875%, 11/15/03;
market value $2,089,136) $2,048 2,048
Hong Kong Shanghai Bank 5.80%, dated 06/30/97, matures 07/01/97, repurchase
price $2,048,330 (collateralized by U.S. Treasury Note, par value $1,990,000,
7.25%, 05/15/04;
market value $2,100,843) 2,048 2,048
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $2,048,333
(collateralized by U.S. Treasury Note, par value $2,070,000, 6.625%,
06/30/01;
market value $2,094,840) 2,048 2,048
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,144) 6,144
----------
TOTAL INVESTMENTS -- 102.4%
(Cost $111,126) 156,102
----------
OTHER ASSETS AND LIABILITIES,
NET -- (2.4%) (3,709)
----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 100 million authorized) based
on 9,573,636 outstanding shares $ 97,352
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 304,852 outstanding shares 3,280
Accumulated Net Realized Gain
on Investments 6,786
Net Unrealized Appreciation
on Investments 44,976
Distributions in Excess of Net
Investment Income (1)
----------
TOTAL NET ASSETS -- 100.0% $152,393
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $15.43
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $15.39
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
SPECIAL EQUITY FUND
MISCELLANEOUS 13%
UTILITIES 3%
REAL ESTATE 3%
FINANCE 9%
ENERGY 2%
BUILDING & CONSTRUCTION 3%
CASH EQUIVALENTS 1%
CHEMICAL & DRUGS 13%
CONSUMER PRODUCTS 9%
DURABLE GOODS 44%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMON STOCKS -- 99.3%
AIRCRAFT -- 0.7%
McDonnell Douglas 7,500 $ 514
----------
APPAREL/TEXTILES -- 2.1%
Burlington Industries* 5,117 61
Fieldcrest Cannon* 17,400 331
Haggar 20,000 255
Mothers Work* 17,500 127
Oneita Industries* 55,000 22
Oxford Industries 20,000 567
Quaker Fabric* 11,900 196
----------
1,559
----------
AUTOMOTIVE -- 0.4%
Earl Scheib* 4,900 30
Ford Motor 5,000 189
Walbro 3,000 61
----------
280
----------
BUILDING & CONSTRUCTION -- 1.3%
Cavalier Homes 20,483 205
Jacobs Engineering Group* 29,500 793
----------
998
----------
CHEMICALS -- 2.2%
Kinark* 57,500 194
Royal Group Technologies Ltd* 27,500 729
----------
1,733
----------
COMMUNICATIONS EQUIPMENT -- 3.6%
Ciena* 10,700 504
ITT Industries 5,000 129
Scientific-Atlanta 31,000 678
VDI Media* 120,000 1,350
----------
2,661
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMPUTERS & SERVICES -- 4.9%
America Online* 8,000 $ 445
Apex PC Solutions Inc* 36,000 711
Computer Associates
International 7,000 390
Gametek* 10,000 11
International Business
Machines 11,000 992
Mizar* 18,200 66
Mylex* 75,000 712
Pace Health
Management Systems* 43,500 98
Video Lotteries Technologies* 34,200 205
----------
3,630
----------
CONTAINERS & PACKAGING -- 1.2%
Ball 20,000 601
Cronos Group* 31,400 216
Silgan Holdings* 1,000 39
----------
856
----------
DRUGS -- 11.3%
Anesta* 45,200 859
Aphton* 52,500 774
Biogen* 6,500 220
ChiRex* 62,000 736
Collagenex Pharmaceuticals* 46,300 556
Flamel Technologies ADR* 97,700 446
Guilford Pharmaceuticals* 40,500 982
Hybridon* 22,500 112
Ilex Oncology* 31,500 500
Isis Pharmaceutical* 27,300 398
Medpartners* 45,000 973
Pharmaceutical Resources* 105,000 289
Roberts Pharmaceuticals* 12,500 140
Scios Nova* 218,200 1,391
----------
8,376
----------
ELECTRICAL EQUIPMENT -- 1.2%
Magnetek* 54,000 898
----------
ELECTRONICS -- 4.0%
Kuhlman 50,000 1,612
Lam Research* 12,700 471
Smartflex Systems* 2,300 22
Teradyne* 23,000 903
----------
3,008
----------
ENERGY & POWER -- 0.3%
Comfort Systems USA Inc* 14,500 227
----------
ENTERTAINMENT -- 1.0%
Boomtown* 5,700 51
Cinergi Pictures Entertainment* 14,300 18
Meridian Sports* 17,300 22
Mikohn Gaming* 110,000 481
Sports Club* 38,000 204
----------
776
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
SPECIAL EQUITY FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.5%
Harding Lawson
Associates Group* 40,300 $ 281
Philip Services* 52,500 833
----------
1,114
----------
FINANCIAL SERVICES -- 3.6%
Aames Financial 46,500 860
Arm Financial Group* 4,500 90
Delta Financial* 34,700 664
Mercury Finance 75,000 183
Prentiss Properties Trust 34,000 871
----------
2,668
----------
FOOD, BEVERAGE & TOBACCO -- 2.9%
General Nutrition* 36,700 1,028
Philip Morris 10,300 457
RJR Nabisco Holdings 20,200 667
Rymer Foods* 60,100 3
----------
2,155
----------
HOTELS & LODGING -- 3.3%
HFS* 18,500 1,073
John Q. Hammons Hotels* 9,600 89
Prime Hospitality* 64,500 1,274
U.S. Franchise Systems, Class A* 4,500 44
----------
2,480
----------
HOUSEHOLD FURNISHINGS -- 0.6%
Winsloew Furniture* 44,180 483
----------
INSURANCE -- 5.7%
Conseco 18,000 666
Everest Reinsurance Holdings 32,300 1,280
Gryphon Holdings* 36,700 560
Sunamerica 7,500 366
Travelers 9,501 599
Travelers Property Casualty 18,100 722
----------
4,193
----------
MACHINERY -- 3.4%
Case 12,500 861
Cummins Engine 17,000 1,200
First Aviation* 45,000 439
----------
2,500
----------
MEASURING DEVICES -- 0.9%
Rofin-Sinar Technologies* 36,000 688
----------
MEDICAL PRODUCTS & SERVICES-- 5.7%
Acme United* 129,200 791
American Retirement* 23,000 408
Coast Dental Services* 4,500 69
Emeritus* 27,000 398
Harborside Healthcare* 18,000 256
Innovasive Devices* 9,000 106
Metra Biosystems* 6,800 33
Molecular Dynamics* 1,400 20
Possis Medical* 22,600 381
Quest Medical* 9,000 82
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Resound* 47,400 $ 267
Spectranetics* 27,000 86
United States Surgical 22,500 838
Urologix* 26,500 450
Value Health* 5,400 109
----------
4,294
----------
METALS & MINING -- 1.6%
Potash of Saskatchewan 4,300 323
UCAR International* 18,500 846
----------
1,169
----------
MISCELLANEOUS BUSINESS SERVICES-- 0.5%
Mecon* 62,000 194
RMH Teleservices* 27,500 206
----------
400
----------
MISCELLANEOUS MANUFACTURING-- 1.4%
Foster Wheeler 20,000 810
RMI Titanium* 35,000 954
----------
1,764
----------
PETROLEUM & FUEL PRODUCTS -- 3.3%
Cairn Energy USA* 63,200 829
Callon Petroleum* 9,000 144
Shaw Group* 35,000 569
Tidewater 20,000 880
----------
2,422
----------
PETROLEUM REFINING -- 0.7%
USX-U.S. Steel Group 14,000 491
----------
RAILROADS -- 0.7%
Union Pacific 7,000 493
----------
REAL ESTATE -- 2.1%
Agree Realty 9,400 193
Liberty Property Trust 25,800 642
Pacific Gulf Properties 31,400 691
----------
1,526
----------
RESTAURANTS/FOOD SERVICES -- 1.5%
Darden Restaurants 50,000 453
Uno Restaurant* 90,000 636
Vie de France* 21,000 28
----------
1,117
----------
RETAIL -- 4.4%
Bon-Ton Stores* 46,300 370
Chicos* 4,500 24
Corporate Express* 42,500 614
CML Group 92,200 167
Cross-Continent Auto Retailers* 65,000 687
Drug Emporium* 92,100 472
Hot Topic* 4,400 99
Microage* 40,000 735
Sportmart* 14,400 54
Sportmart, Class A* 14,400 40
Strouds* 19,000 33
----------
3,295
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
RUBBER & PLASTIC -- 0.8%
Goodyear Tire & Rubber 4,000 $ 253
O'Sullivan 45,000 377
----------
630
----------
SEMI-CONDUCTORS/INSTRUMENTS-- 3.2%
Ess Technology* 4,600 62
Intel 9,000 1,276
VLSI Technology* 45,000 1,063
----------
2,401
----------
SPECIALTY CONSTRUCTION -- 1.0%
Oakwood Homes 30,000 720
----------
STEEL & STEEL WORKS -- 1.1%
Texas Industries 32,000 850
----------
TECHNOLOGY, SERVICES -- 0.8%
Cabletron Systems* 20,000 566
----------
TELEPHONES & TELECOMMUNICATION -- 13.0%
Aerial Communications* 92,000 782
Airtouch Communications* 41,500 1,136
Amnex* 171,500 418
Clearnet, Class A* 40,000 485
Intermedia Communications
of Florida* 25,000 809
Lucent Technologies 16,500 1,189
Mcleod, Class A* 25,000 844
Metrocall* 25,000 112
Qualcomm* 15,500 789
Qwest Communications Int'l* 19,100 520
Rural Cellular* 92,000 949
Smartalk Teleservices* 65,000 1,008
Viatel* 90,000 608
----------
9,649
----------
TESTING LABORATORIES -- 0.5%
Genome Therapeutics* 45,000 388
----------
WATER TREATMENT -- 0.9%
U.S. Filter* 25,000 681
----------
TOTAL COMMON STOCKS
(Cost $67,323) 73,843
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
REPURCHASE AGREEMENT -- 1.2%
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $870,141
(collateralized by U.S. Treasury Note, par value $880,000, 6.625%, 06/30/01;
market value $890,560) $870 $ 870
----------
TOTAL REPURCHASE AGREEMENT
(Cost $870) 870
----------
TOTAL INVESTMENTS -- 100.5%
(Cost $68,193) 74,713
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.5%) (386)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 1 billion authorized)
based on 6,386,101 outstanding shares 62,238
Portfolio Shares -- Class A ($0.001
par value -- 1 billion authorized)
based on 208,665 outstanding shares 2,199
Accumulated Net Realized Gain
on Investments 3,428
Net Unrealized Appreciation
on Investments 6,520
Distributions in Excess of Net
Investment Income (58)
----------
TOTAL NET ASSETS -- 100.0% $74,327
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $11.27
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $11.25
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
INTERNATIONAL GROWTH FUND
UNITED KINGDOM 18%
SMALLER MARKETS 9%
OTHER PACIFIC RIM 16%
CASH EQUIVALENTS 4%
EUROPE 35%
JAPAN 18%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
FOREIGN STOCKS -- 94.5%
ARGENTINA -- 0.9%
Banco Frances ADR 4,025 $ 131
Irsa GDR 1,440 63
Perez Companc 83,643 668
Telefonica Argentina ADR 18,500 641
----------
1,503
----------
AUSTRALIA -- 1.5%
AGl 80,000 471
Lend Lease 25,000 528
National Australia Bank 44,500 637
QBE Insurance 150,000 906
----------
2,542
----------
AUSTRIA -- 0.9%
VA Technologie 7,800 1,428
----------
BELGIUM -- 0.8%
Generale Banque 3,500 1,347
----------
BRAZIL -- 1.9%
Centrais Electricas GDR* 750 105
Companhia Brasileira de
Distribuicao Grupo de
Acucar ADR 4,400 100
Electrobras ADR 38,500 1,076
Telebras ADR 11,970 1,816
----------
3,097
----------
CHILE -- 0.7%
Compania de Telecom de
Chile ADR 32,000 1,056
Santa Isabel ADR 2,100 68
----------
1,124
----------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
DENMARK -- 1.7%
Coloplast, Series B 3,100 $ 207
Danske Traelast 2,430 222
Novo-Nordisk, Class B 20,000 2,180
Sydbank 4,824 220
----------
2,829
----------
FINLAND -- 0.4%
Amer Group 20,000 360
Nokia AB, Series A 3,080 230
----------
590
----------
FRANCE -- 7.8%
Air Liquide 11,450 1,816
Alcatel Alsthom 2,500 313
AXA 28,595 1,777
Cie Financiere de Paribas,
Class A 3,865 267
Cie Generale des Eaux 9,248 1,184
Cie Generale des Eaux Warrants 2,000 1
Hermes International 540 50
Michelin `B' 27,900 1,674
Penauille Polyservices 1,000 226
Rhone Poulenc 44,000 1,796
Schneider 32,900 1,750
SGS-Thomson Microelectronics* 2,265 179
Societe Nationale Elf Aquitaine 15,166 1,635
Valeo 3,000 186
----------
12,854
----------
GERMANY -- 9.0%
Bayer 2,500 96
BMW 1,950 1,607
Deutsche Bank AG 34,100 2,002
Eurobike 7,000 197
Fried Krupp 665 131
Hoechst 47,402 2,008
Leica Camera 5,525 136
Mannesmann 5,700 2,545
Puma 5,500 169
SGL Carbon 10,100 1,379
Veba 40,749 2,301
Volkswagen 2,800 2,122
Wella 450 304
----------
14,997
----------
HONG KONG -- 6.7%
Amoy Properties 635,000 701
Cheung Kong Holdings 159,000 1,570
China Light & Power 140,000 793
China Overseas Land &
Investment 950,000 766
Citic Pacific 100,000 625
First Pacific 502,000 642
Giordano 650,000 445
HSBC Holdings 50,481 1,518
Hutchison Whampoa 161,000 1,392
New World Development 182,000 1,085
Swire Pacific, Series A 79,500 716
Swire Pacific, Series B 550,000 834
----------
11,087
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
HUNGARY -- 0.1%
Pannoplast RT 3,200 $ 161
----------
INDIA -- 1.9%
Himilayan Fund* 75,918 1,146
Icici GDR* 60,000 840
Indian Opportunities Fund* 41,981 410
Videsh Sanchar Nigam GDR* 35,000 726
----------
3,122
----------
INDONESIA -- 2.4%
Bank Bali "F" 300,000 802
Bank International
Indonesia "F" 1,100,000 950
Indosat "F" 275,000 823
Telekomunikasi "F" 850,000 1,390
----------
3,965
----------
ISRAEL -- 0.6%
Near East Opportunity Fund* 59,000 878
Tadarin Limited* 4,032 113
----------
991
----------
ITALY -- 1.8%
Banca Popolare
Commercio e Industria 19,650 237
Bulgari 46,000 262
ENI SPA 255,967 1,447
Fila ADR 3,500 117
Finanziaria Autogrill* 188,250 315
Gucci Group ADR 2,400 155
Industrie Natuzzi Spa ADR 17,500 448
----------
2,981
----------
JAPAN -- 17.3%
77th Bank 33,000 320
Canon 79,000 2,152
DDI 145 1,071
Eiden Sakakiya 30,000 251
Hitachi 115,000 1,285
Honda Motor 25,000 753
Hoya 8,000 356
Ito Yokado 24,000 1,393
Kamigumi 95,000 535
Kao 21,000 291
Kyocera 13,000 1,033
Mabuchi Motor 8,000 464
Marui Company 39,000 725
Mitsubishi Heavy Industries 171,000 1,312
Mitsui Fudosan 66,000 910
Nippon Express 80,000 639
Nitto Denko 32,000 623
Nomura Securities 56,000 772
Riso Kagaku Corporation 5,100 419
Rohm Company 24,000 2,472
Secom 16,000 1,175
Shimachu 17,000 511
Shin-Etsu Chemical 56,000 1,486
Sony Corporation 24,000 2,093
Sumitomo Electric 75,000 1,257
Suzuki Motor 24,000 304
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Taisho Pharmaceutical 25,000 $ 674
Tokio Marine & Fire Insurance 63,000 825
Toyota Motor 51,000 1,505
Yamanouchi Pharmaceutical 38,000 1,022
----------
28,628
----------
MALAYSIA -- 1.1%
AMMB Holdings 117,000 728
AMMB Holdings Rights* 100,000 36
AMMB Holdings Warrants* 10,000 13
Edaran Otomobil 63,000 537
Malaysian Oxygen 100,000 507
----------
1,821
----------
MEXICO -- 1.9%
Cifra SA, Series B 550,000 1,011
Corporacion Industrial Alfa 61,945 423
Empresas ICA Sociedad 18,300 294
Grupo Corvi UBL* 120,000 70
Grupo Financiero Banamex 355,000 930
Grupo Modelo, Series C 9,000 62
Grupo Radio Centro ADR 3,300 39
Grupo Televisa GDR 4,000 122
Industrias CH, Series B* 30,000 123
----------
3,074
----------
NETHERLANDS -- 3.0%
Gucci Group NV 1,400 90
ING Groep 51,305 2,364
Phillips Electronics NV 30,000 2,148
Vendex International 4,000 219
Wolters Kluwer 800 97
----------
4,918
----------
NORWAY -- 0.2%
Tomra Systems 13,500 276
----------
PERU -- 0.0%
Credicorp 4,230 93
----------
PHILIPPINES -- 1.5%
Ayala Land, Series B 800,000 736
Belle* 4,000,000 1,169
Philippine Long Distance
Telephone ADR 10,000 643
----------
2,548
----------
SINGAPORE -- 0.5%
Development Bank of Singapore 74,000 932
----------
SOUTH KOREA -- 0.4%
Korea Electric Power ADR 35,000 654
Samsung Electronics 2,463 67
----------
721
----------
SPAIN -- 2.5%
Banco de Santander 71,400 2,200
Corp Financiera Reunida 75,000 316
Telefonica de Espana 55,000 1,590
----------
4,106
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
INTERNATIONAL GROWTH FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
SWEDEN -- 1.6%
ABB AB, Class A 134,200 $ 1,882
Ericsson Telephone ADR 8,360 329
SSAB A 20,000 408
----------
2,619
----------
SWITZERLAND -- 5.3%
Ciba Speciality Chemicals* 557 51
Credit Suisse Group 18,000 2,311
Disetronic 130 263
Novartis AG 2,217 3,542
Oerlikon-Buehrle 790 92
Roche 276 2,495
----------
8,754
----------
TAIWAN -- 0.3%
Standard Foods Taiwan GDR* 50,000 479
----------
THAILAND -- 0.6%
Ruam Pattan Fund II 1,281,000 386
Siam Cement "F" 16,000 277
Siam Commercial Bank 100,000 410
----------
1,073
----------
UNITED KINGDOM -- 18.3%
3i Group 35,130 292
Barclays Bank 14,425 286
Brit-Borneo Petroleum
Syndicate 14,250 336
British Aerospace 14,475 322
British Petroleum 24,320 302
British Sky Broadcasting 30,420 223
British Telecommunications 157,000 1,166
Cable & Wireless 85,000 782
General Electric 158,000 944
GKN 74,500 1,283
Glaxo Wellcome 67,000 1,383
Granada Group 74,750 983
JJB Sports 34,200 280
Ladbroke 374,430 1,465
Lasmo 240,318 1,038
Logica 21,300 246
Manchester United 28,850 292
Marks & Spencer 164,000 1,360
McKechnie 76,500 538
National Power 33,420 290
National Westminster Bank 60,000 807
Next 24,500 277
NFC 333,000 723
Norwich Union PLC 27,200 145
Prudential 28,100 272
Railtrack Group 28,090 292
Reckitt & Coleman 102,500 1,528
Rentokil Group 79,000 276
Royal Bank of Scotland 149,000 1,388
Safeway 158,144 915
Scottish Power 187,000 1,217
Shell Transportation
& Trading 235,500 1,605
SmithKline Beecham Units 15,100 278
SmithKline Beecham, Series A 2,190 40
- -------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -------------------------------------------------------
Smiths Industries 86,782 $ 1,112
Standard Chartered Bank 17,840 272
Tesco 47,900 295
TSB Lloyds Group 170,500 1,748
Unilever 57,200 1,639
Wassall 119,625 615
Wolseley 98,000 764
Zeneca Group 9,600 317
----------
30,336
----------
VENEZUELA -- 0.9%
Cia Anonima Telecom ADR* 33,000 1,423
----------
TOTAL FOREIGN STOCKS
(Cost $128,125) 156,419
----------
FOREIGN PREFERRED STOCKS -- 1.2%
AUSTRALIA -- 0.5%
Newscorp 220 867
----------
BRAZIL -- 0.6%
Petroleo Brasileira ADR 35,000 1,015
----------
GERMANY -- 0.1%
Fresnius 888 202
----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $1,908) 2,084
----------
CONVERTIBLE BONDS -- 0.9%
JAPAN -- 0.9%
Mitsubishi Bank
3.000%, 11/30/02 $ 900 984
Namco
4.700%, 09/30/98 35,000 434
----------
1,418
----------
MALAYSIA -- 0.0%
AMMB
5.000%, 05/13/02 100 34
----------
TOTAL CONVERTIBLE BONDS
(Cost $1,406) 1,452
----------
DEMAND DEPOSIT -- 3.9%
Morgan Stanley
4.350%, 07/01/97 6,500 6,500
----------
TOTAL DEMAND DEPOSIT
(Cost $6,500) 6,500
----------
TOTAL INVESTMENTS -- 100.5%
(Cost $137,939) 166,455
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.5%) (907)
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION VALUE (000)
- -------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($.001 par
value -- 25 million authorized)
based on 11,084,932 outstanding shares $130,725
Portfolio Shares -- Class A ($.001 par
value -- 25 million authorized) based
on 165,406 outstanding shares 2,133
Accumulated net realized gain
on investments 3,773
Net unrealized depreciation on
forward foreign currency contracts,
foreign currency and translation of
other assets and liabilities in
foreign currency (3)
Net unrealized appreciation
on investments 28,516
Accumulated net investment income 404
----------
TOTAL NET ASSETS -- 100.0% $165,548
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $14.72
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $14.70
==========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPTS
"F" -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPTS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
BALANCED FUND
U.S. TREASURY OBLIGATIONS 18%
U.S. GOVERNMENT BACKED BONDS 5%
U.S. AGENCY BACKED BONDS 5%
CORPORATE BONDS 7%
CASH EQUIVALENTS 6%
COMMON STOCK 59%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 59.2%
AIRCRAFT -- 0.8%
Boeing 18,400 $ 976
----------
BANKS -- 1.9%
Citicorp 10,000 1,206
J.P. Morgan 10,000 1,044
----------
2,250
----------
BEAUTY PRODUCTS -- 1.8%
Colgate Palmolive 21,800 1,422
Procter & Gamble 5,000 706
----------
2,128
----------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 1.0%
Comcast, Class A 50,000 1,069
TCI Satellite Entertainment* 4,300 34
----------
1,103
----------
CHEMICALS -- 0.8%
Monsanto 21,750 937
----------
COMMUNICATIONS EQUIPMENT -- 3.2%
Cisco Systems* 19,600 1,316
Motorola 17,000 1,292
Qualcomm* 23,500 1,196
----------
3,804
----------
COMPUTERS, SOFTWARE & SERVICES-- 5.9%
Compaq Computer* 13,000 1,290
Computer Associates
International 24,000 1,337
Microsoft* 11,000 1,390
Oracle Systems* 29,000 1,461
Peoplesoft* 28,000 1,477
----------
6,955
----------
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPTS
"F" -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPTS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
BALANCED FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
DRUGS -- 7.2%
Amgen* 20,000 $ 1,162
Bristol-Myers Squibb 12,000 972
Genzyme* 30,000 833
Glaxo ADR 29,400 1,229
Merck 7,000 725
Schering Plough 20,000 958
SmithKline Beecham ADR 11,800 1,081
Warner Lambert 12,000 1,491
----------
8,451
----------
ELECTRICAL EQUIPMENT -- 2.9%
Emerson Electric 17,300 953
General Electric 20,200 1,321
Westinghouse Electric 47,000 1,087
----------
3,361
----------
ENTERTAINMENT -- 0.6%
Walt Disney 8,500 682
----------
FINANCIAL SERVICES -- 2.2%
FHLMC 41,000 1,409
FNMA 28,000 1,222
----------
2,631
----------
FOOD, BEVERAGE & TOBACCO -- 1.8%
Coca Cola 13,400 935
Philip Morris 13,500 599
Sara Lee 15,000 624
----------
2,158
----------
HEALTHCARE SERVICES -- 3.3%
HBO 19,500 1,343
Health Management Associates* 52,299 1,491
Oxford Health Plan* 15,000 1,076
----------
3,910
----------
HOUSEHOLD PRODUCTS -- 1.7%
Gillette 13,800 1,308
Sunbeam Oster 19,000 717
----------
2,025
----------
INSURANCE -- 1.8%
American International Group 8,000 1,195
General Re 5,000 910
----------
2,105
----------
MACHINERY -- 1.7%
Caterpillar 9,500 1,020
Deere 17,500 960
----------
1,980
----------
MEASURING DEVICES -- 1.1%
Honeywell 17,000 1,290
----------
MEDICAL PRODUCTS & SERVICES-- 3.3%
Acuson* 35,000 805
Boston Scientific* 15,000 922
Cardinal Health 22,850 1,308
Johnson & Johnson 13,200 850
----------
3,885
----------
- -------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- -------------------------------------------------------
METALS & MINING -- 0.8%
Aluminum Company of America 12,700 $ 957
----------
PETROLEUM REFINING -- 6.4%
Amoco 12,400 1,078
Atlantic Richfield 12,000 846
Chevron 17,100 1,264
Exxon 19,500 1,199
Mobil 16,200 1,132
Schlumberger 7,700 963
Texaco 10,000 1,088
----------
7,570
----------
RETAIL -- 3.9%
Costco* 30,000 986
Dayton-Hudson 27,000 1,436
Gap 30,000 1,166
Home Depot 15,000 1,034
----------
4,622
----------
SEMI-CONDUCTORS/INSTRUMENTS -- 0.9%
Intel 7,500 1,064
----------
TECHNOLOGY, SERVICES -- 0.7%
Paychex 21,000 798
----------
TELEPHONES & TELECOMMUNICATION-- 3.5%
Alltel 30,000 1,003
LCI International* 48,000 1,050
McLeod, Class A* 24,000 810
Worldcom* 39,900 1,277
----------
4,140
----------
TOTAL COMMON STOCKS
(Cost $50,338) 69,782
----------
U.S. TREASURY OBLIGATIONS -- 18.2%
U.S. Treasury Bonds
6.000%, 08/15/99 $1,500 1,496
7.250%, 05/15/16 500 521
8.750%, 05/15/17 665 800
U.S. Treasury Notes
8.500%, 07/15/97 1,215 1,216
8.125%, 02/15/98 1,670 1,694
6.125%, 05/15/98 1,000 1,003
9.250%, 08/15/98 1,620 1,677
8.875%, 11/15/98 1,105 1,146
8.875%, 02/15/99 110 115
6.000%, 06/30/99 2,000 1,999
6.000%, 10/15/99 500 499
5.875%, 11/15/99 2,000 1,987
7.750%, 11/30/99 700 724
6.375%, 01/15/00 500 502
7.500%, 11/15/01 3,235 3,370
6.625%, 03/31/02 1,000 1,008
7.500%, 02/15/05 600 634
6.500%, 08/15/05 500 498
6.875%, 05/15/06 500 510
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $21,553) 21,399
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.6%
FHLB
8.120%, 09/26/06 $1,800 $ 1,801
8.000%, 10/17/11 1,250 1,260
FHLMC
6.440%, 01/28/00 500 501
8.150%, 09/12/06 500 500
8.025%, 09/15/06 1,000 1,025
8.055%, 09/30/11 1,000 1,015
FNMA
5.940%, 12/12/05 500 474
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $6,548) 6,576
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 5.3%
FHLMC
6.000%, 05/01/08 670 646
5.500%, 11/01/08 569 536
FNMA
6.500%, 08/01/10 236 231
6.500%, 09/01/10 307 301
6.500%, 11/01/24 467 447
GNMA
7.500%, 10/15/11 2,365 2,407
9.000%, 10/15/19 161 170
7.500%, 03/15/26 1,479 1,483
----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $6,245) 6,221
----------
CORPORATE OBLIGATIONS -- 6.8%
BANKING -- 1.5%
First Bank System
6.875%, 09/15/07 500 489
MBNA
7.250%, 09/15/02 185 186
Midland Bank
6.950%, 03/15/11 200 193
Nationsbank
6.500%, 03/15/06 200 192
Provident Bank
6.125%, 12/15/00 25 25
Royal Bank of Scotland
6.375%, 02/01/11 205 188
Santander
7.250%, 11/01/15 100 96
U.S. Bancorp
6.750%, 10/15/05 500 488
----------
1,857
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
FINANCIAL SERVICES -- 2.7%
Chrysler Financial
6.950%, 03/25/02 $ 500 $ 501
CSR Finance
7.700%, 07/21/25 200 202
Donaldson Lufkin & Jenrette
6.875%, 11/01/05 185 180
Ford Motor Credit
6.375%, 04/15/00 500 498
6.250%, 11/08/00 500 494
7.500%, 01/15/03 1,000 1,028
Merrill Lynch
7.000%, 04/27/08 250 248
----------
3,151
----------
INDUSTRIAL -- 2.6%
Arco Chemical
10.250%, 11/01/10 210 266
Bellsouth
7.000%, 02/01/05 500 504
Coca Cola
6.000%, 07/15/03 1,000 960
Dayton Hudson
8.500%, 12/01/22 500 510
ITT
7.375%, 11/15/15 360 335
Laidlaw
8.750%, 04/15/25 75 83
MacMillan Bloedel
7.700%, 02/15/26 215 202
Noranda
8.125%, 06/15/04 195 205
----------
3,065
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $8,166) 8,073
----------
REPURCHASE AGREEMENTS -- 5.9%
Aubrey Lanston
5.90%, dated 06/30/97, matures
07/01/97, repurchase price
$1,728,283 (collateralized by U.S.
Treasury Note, par value $1,360,000,
11.875%, 11/15/03;
market value $1,764,736) 1,728 1,728
Hong Kong Shanghai Bank
5.80%, dated 06/30/97, matures
07/01/97, repurchase price $1,728,278
(collateralized by U.S. Treasury Note,
par value $1,680,000,
7.25%, 05/15/04;
market value $1,773,576) 1,728 1,728
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
BALANCED FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Sanwa Bank
5.85%, dated 06/30/97, matures
07/01/97, repurchase price
$1,728,281 (collateralized by U.S.
Treasury Note, par value $1,745,000,
6.625%, 06/30/01;
market value $1,765,940) $1,728 $ 1,728
Swiss Bank
5.875%, dated 06/30/97, matures 07/01/97, repurchase price $1,728,282
(collateralized by U.S. Treasury Note, par value $1,795,000, 5.625%,
11/30/00;
market value $1,770,409) 1,728 1,728
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,912) 6,912
----------
TOTAL INVESTMENTS -- 101.0%
(Cost $99,764) 118,963
----------
OTHER ASSETS AND LIABILITIES,
NET -- (1.0%) (1,123)
----------
- -------------------------------------------------------
DESCRIPTION VALUE (000)
- -------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 100 million authorized)
based on 8,407,085 outstanding shares $ 90,012
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 310,422 outstanding shares 3,413
Accumulated Net Realized Gain
on Investments 5,216
Net Unrealized Appreciation
on Investments 19,199
----------
TOTAL NET ASSETS -- 100.0% $117,840
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $13.52
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $13.52
==========
*NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
SHORT TERM INCOME FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 42%
CASH EQUIVALENTS 10%
CORPORATE BONDS 48%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 39.6%
U.S. Treasury Notes
5.750%, 10/31/97 $ 500 $ 500
7.375%, 11/15/97 1,000 1,006
6.000%, 12/31/97 575 576
5.625%, 01/31/98 750 750
6.125%, 03/31/98 500 502
5.875%, 04/30/98 2,000 2,002
6.125%, 05/15/98 1,000 1,003
6.000%, 05/31/98 1,000 1,002
6.125%, 08/31/98 1,000 1,003
6.000%, 09/30/98 2,500 2,503
5.875%, 10/31/98 1,000 999
5.750%, 12/31/98 1,000 997
6.375%, 01/15/99 1,000 1,006
5.875%, 01/31/99 1,000 998
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $14,842) 14,847
----------
CORPORATE BONDS -- 35.7%
BANKING -- 4.0%
American Express Centurion Bank
5.738%, 08/21/98 1,000 1,001
Citicorp
6.013%, 11/23/99 500 502
----------
1,503
----------
FINANCIAL SERVICES -- 21.2%
American General Finance
7.000%, 10/01/97 985 988
Associates of North America
6.250%, 03/15/99 525 524
Chrysler Financial
6.375%, 01/28/00 510 507
Credit Suisse
5.628%, 03/13/98 1,000 1,000
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Fleet Mortgage Group
6.500%, 09/15/99 $ 500 $ 501
Lehman Brothers Holdings
6.375%, 06/01/98 500 501
Mellon Financial
7.625%, 11/15/99 255 263
Morgan Stanley Group
5.853%, 02/26/99 1,250 1,250
5.625%, 03/01/99 1,000 991
Salomon
6.500%, 03/01/00 750 745
Sears Roebuck Acceptance
6.380%, 02/16/99 650 652
----------
7,922
----------
INDUSTRIAL -- 10.5%
AT&T Capital
5.970%, 02/27/98 1,000 1,000
Shell Oil
6.950%, 12/15/98 1,000 1,010
Time Warner
7.450%, 02/01/98 735 740
USX
6.650%, 10/09/97 1,200 1,202
----------
3,952
----------
TOTAL CORPORATE BONDS
(Cost $13,375) 13,377
----------
COMMERCIAL PAPER -- 1.3% BANKING -- 1.3% Abn Amro North American Finance
5.392%, 07/28/97 500 498
----------
TOTAL COMMERCIAL PAPER
(Cost $498) 498
----------
TIME DEPOSITS -- 10.0%
BANKING -- 4.7%
First Union Bank
6.000%, 07/01/97 1,752 1,752
----------
FINANCIAL SERVICES -- 5.3%
Allstate
5.745%, 07/01/97 2,000 2,000
----------
TOTAL TIME DEPOSITS
(Cost $3,752) 3,752
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
SHORT TERM INCOME FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 12.4%
Cit Rv Owner Trust,
Series 1995-B, Class A
6.500%, 04/15/11 $258 $ 260
Eqcc Home Equity Loan Trust,
Series 1996-2, Class A2
6.700%, 09/15/08 250 251
Eqcc Home Equity Loan Trust,
Series 1997-1, Class A3
6.840%, 09/15/11 750 753
Independent National Mortgage,
Series 96-A, Class A1
6.710%, 09/25/26 638 642
Money Store Home Equity Loan
Trust, Series 93-B
5.400%, 08/15/05 333 329
Navistar Financial Owner Trust,
Series 1997-A, Class A2
6.350%, 01/15/00 500 502
Student Loan Marketing Association,
Series 1997-1, Class A1 (A)
5.530%, 10/25/05 750 749
Union Acceptance,
Series 1997-A, Class A
6.130%, 07/10/01 404 405
Union Acceptance, Series 96-A
5.400%, 04/07/03 572 567
WFS Financial Owner Trust,
Series 1996-B, Class A2 CMO
6.200%, 05/20/99 203 203
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,655) 4,661
----------
TOTAL INVESTMENTS -- 99.0%
(Cost $37,122) 37,135
----------
OTHER ASSETS AND LIABILITIES,
NET -- 1.0% 369
----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 1 billion authorized)
based on 3,713,316 outstanding shares $37,088
Portfolio Shares -- Class A ($0.001
par value -- 1 billion authorized)
based on 49,473 outstanding shares 492
Accumulated Net Realized Loss
on Investments (89)
Net Unrealized Appreciation
on Investments 13
----------
TOTAL NET ASSETS -- 100.0% $37,504
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $9.97
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $9.96
==========
CMO -- COLLATERALIZED MORTGAGE OBLIGATIONS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
SHORT-INTERMEDIATE BOND FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 52%
CASH EQUIVALENTS 4%
CORPORATE BONDS 42%
U.S. AGENCY BACKED BONDS 2%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 52.7%
U.S. Treasury Notes
6.000%, 08/31/97 $ 1,500 $ 1,501
7.375%, 11/15/97 4,000 4,025
5.125%, 02/28/98 1,500 1,494
6.000%, 05/31/98 12,145 12,169
7.125%, 10/15/98 4,105 4,165
5.625%, 11/30/98 1,630 1,623
8.875%, 02/15/99 1,755 1,830
6.500%, 04/30/99 9,035 9,100
6.000%, 10/15/99 2,200 2,196
7.750%, 12/31/99 2,500 2,588
7.750%, 01/31/00 8 8
7.125%, 02/29/00 6,735 6,880
8.000%, 05/15/01 6,635 7,004
6.625%, 07/31/01 17,355 17,512
6.500%, 08/31/01 3,850 3,867
6.625%, 04/30/02 5,775 5,826
6.250%, 02/15/07 1,675 1,638
6.625%, 05/15/07 4,000 4,030
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $87,474) 87,456
----------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 2.6%
FHLMC
6.750%, 03/15/07 1,755 1,760
FNMA
6.500%, 08/01/10 1,482 1,453
6.500%, 10/01/10 1,120 1,098
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $4,322) 4,311
----------
CORPORATE OBLIGATIONS -- 23.2%
BANKING -- 4.5%
Bank One
7.600%, 05/01/07 1,815 1,865
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
BCH Cayman Islands Limited
7.700%, 07/15/06 $1,630 $ 1,671
Security Pacific
11.500%, 11/15/00 1,955 2,234
Societe Generale
7.400%, 06/01/06 1,755 1,768
----------
7,538
----------
FINANCIAL SERVICES -- 6.7%
Associates Corporation of
North America
6.375%, 08/15/98 1,500 1,504
Dean Witter Discover
6.300%, 01/15/06 1,540 1,463
Ford Motor Credit
6.800%, 08/15/97 1,000 1,002
Lehman Brothers
7.250%, 04/15/03 2,630 2,640
Paine Webber Group
6.500%, 11/01/05 1,745 1,653
Salomon
7.200%, 02/01/04 2,810 2,810
----------
11,072
----------
INDUSTRIALS -- 9.2%
Barrick Gold
7.500%, 05/01/07 1,780 1,816
CSR America
6.875%, 07/21/05 1,670 1,645
Loews
6.750%, 12/15/06 1,705 1,652
Nabisco
6.850%, 06/15/05 1,425 1,388
Noranda
8.125%, 06/15/04 1,770 1,858
Tele-Communications
8.650%, 09/15/04 985 1,027
Time Warner
7.750%, 06/15/05 1,770 1,805
United Air Lines
6.750%, 12/01/97 2,435 2,443
USX
9.625%, 08/15/03 1,490 1,672
----------
15,306
----------
UTILITIES -- 2.8%
Coastal
8.125%, 09/15/02 1,370 1,437
Tosco
7.625%, 05/15/06 1,790 1,832
Penn Power and Light
7.750%, 05/01/02 1,280 1,328
----------
4,597
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $38,388) 38,513
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
SHORT-INTERMEDIATE BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 19.6%
Aames Mortgage Trust,
Series 96-B, Class A1B
7.275%, 05/15/20 $2,100 $ 2,123
Banc One Auto Guarantor Trust,
Series 1997-A, Class A
6.270%, 11/20/03 1,867 1,867
Citicorp Mortgage Securities,
Series 97-1, Class A2
7.250%, 02/25/27 1,775 1,772
Countrywide Mortgage Broker
Services, Series 97-A1, Class A1
7.000%, 03/25/27 1,869 1,866
Eqcc, Series 1996-4, Class A5
6.710%, 07/15/11 1,875 1,868
Equivantage Home Loan Trust,
Series 96-1, Class A1
6.550%, 10/25/25 830 818
General Electric Capital Mortgage
Services, Series 97-3, Class A4
7.500%, 04/25/27 1,800 1,815
Independent National Mortgage,
Series 96-A, Class A1
6.710%, 09/25/26 2,700 2,714
Metlife Captial Equipment Loan
Trust, Series 97-A, Class A
6.850%, 05/20/08 1,600 1,606
Money Store Home Equity Trust,
Series 96-B, Class A7
7.550%, 06/15/20 3,000 3,065
Residential Asset Securization Trust,
Series 97-A3, Class A10
7.250%, 05/25/27 1,770 1,768
Saxon Asset Securities Trust,
Series 96-2, Class A2
6.475%, 11/25/20 1,993 1,979
Sears Credit Account Master Trust,
Series 95-3, Class A
7.000%, 10/15/04 3,000 3,045
Standard Credit Card Master Trust,
Series 95-6, Class A
6.750%, 06/07/00 2,000 2,016
Union Acceptance,
Series 96-A, Class A
5.400%, 04/07/03 1,544 1,531
WFS Financial Owner Trust,
Series 1996-D, Class A3
6.050%, 07/20/01 2,650 2,636
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $32,288) 32,489
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 4.3%
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $7,121,157
(collateralized by U.S. Treasury Note, par value $7,200,000, 6.625%,
06/30/01;
market value $7,286,400) $7,120 $ 7,120
----------
TOTAL REPURCHASE AGREEMENT
(Cost $7,120) 7,120
----------
TOTAL INVESTMENTS -- 102.4%
(Cost $169,592) 169,889
----------
OTHER ASSETS AND LIABILITIES,
NET -- (2.4%) (3,984)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 100 million authorized)
based on 16,602,388 outstanding shares 165,179
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 280,076 outstanding shares 3,380
Accumulated Net Realized Loss
on Investments (2,951)
Net Unrealized Appreciation
on Investments 297
----------
TOTAL NET ASSETS -- 100.0% $165,905
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.83
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $9.83
==========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
[PIE CHART]
GOVERNMENT INCOME FUND
U.S. TREASURY OBLIGATIONS 23%
CASH EQUIVALENTS 2%
U.S. AGENCY BACKED BONDS 12%
U.S. GOVERNMENT BACKED BONDS 63%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.1%
U.S. Treasury Bond
6.625%, 02/15/27 $1,250 $ 1,223
U.S. Treasury Notes
6.375%, 05/15/99 970 975
8.000%, 05/15/01 1,200 1,267
6.500%, 08/31/01 1,000 1,004
6.625%, 04/30/02 300 303
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,760) 4,772
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 62.9%
GNMA
8.000%, 09/15/09 668 690
8.000%, 02/15/22 336 344
8.000%, 09/15/22 59 60
8.000%, 10/15/22 257 262
8.000%, 11/15/22 468 479
7.000%, 04/15/23 348 341
7.500%, 08/15/23 1,109 1,112
6.500%, 11/15/23 442 423
7.000%, 01/15/24 805 791
8.000%, 05/15/25 839 858
6.500%, 12/15/25 992 949
7.500%, 02/15/26 469 471
6.500%, 04/15/26 487 465
8.000%, 05/15/26 961 983
8.000%, 06/15/26 694 709
8.000%, 08/15/26 1,987 2,032
8.000%, 09/15/26 1,992 2,038
----------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $12,946) 13,007
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 11.6%
FHLMC
6.000%, 05/01/08 $330 $ 318
FNMA
7.000%, 10/01/22 696 682
7.000%, 11/01/26 401 393
7.500%, 05/01/27 996 999
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $2,415) 2,392
----------
REPURCHASE AGREEMENT -- 1.8%
Sanwa Bank
5.85% dated 06/30/97, matures 07/01/97, repurchase price $375,061
(collateralized by U.S. Treasury Note, par value $380,000, 6.625%, 06/30/01;
market value $384,560) 375 375
----------
TOTAL REPURCHASE AGREEMENT
(Cost $375) 375
----------
TOTAL INVESTMENTS -- 99.4%
(Cost $20,496) 20,546
----------
OTHER ASSETS AND LIABILITIES,
NET -- 0.6% 121
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 100 million authorized)
based on 1,948,080 outstanding shares 19,281
Portfolio Shares -- Class A ($0.001
par value -- 100 million authorized)
based on 170,059 outstanding shares 1,722
Accumulated Net Realized Loss
on Investments (385)
Net Unrealized Appreciation
on Investments 50
Distribution in Excess of Net
Investment Income (1)
----------
TOTAL NET ASSETS -- 100.0% $20,667
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.76
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $9.76
==========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE CORPORATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE CORPORATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
BOND FUND
[PIE CHART]
U.S. TREASURY OBLIGATIONS 35%
U.S. GOVERNMENT BACKED BONDS 8%
CASH EQUIVALENTS 2%
CORPORATE BONDS 33%
U.S. AGENCY BACKED BONDS 22%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 34.5%
U.S. Treasury Bonds
6.500%, 11/15/26 $2,160 $ 2,069
6.625%, 02/15/27 4,890 4,784
U.S. Treasury Notes
5.625%, 11/30/98 4,075 4,056
8.875%, 02/15/99 12,755 13,302
6.500%, 04/30/99 6,610 6,658
7.750%, 01/31/00 503 521
6.750%, 04/30/00 4,305 4,359
8.000%, 05/15/01 2,795 2,951
6.625%, 07/31/01 4,740 4,783
7.500%, 11/15/01 6,590 6,865
6.250%, 02/28/02 1,335 1,327
7.250%, 05/15/04 3,735 3,894
6.250%, 02/15/07 1,888 1,847
6.625%, 05/15/07 6,025 6,070
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $63,250) 63,486
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 30.0%
FHLMC
6.750%, 03/15/07 2,355 2,361
7.500%, 10/01/10 2,600 2,640
8.000%, 07/01/25 3,413 3,493
FNMA
6.500%, 08/01/10 3,096 3,035
6.500%, 09/01/10 3,489 3,421
7.500%, 06/01/11 2,493 2,529
6.500%, 03/25/19 1,690 1,656
8.500%, 02/01/25 3,439 3,568
7.500%, 08/01/25 3,006 3,012
8.500%, 08/01/26 3,470 3,600
7.000%, 11/01/26 4,012 3,931
8.000%, 12/15/26 1,953 1,997
7.500%, 05/01/27 4,514 4,524
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
GNMA
7.500%, 12/15/25 $5,391 $ 5,408
6.500%, 04/15/26 5,932 5,674
7.000%, 06/15/26 1,885 1,858
7.500%, 06/15/27 2,485 2,493
----------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $54,950) 55,200
----------
ASSET-BACKED SECURITIES -- 9.8%
Aames Mortgage Trust,
Series 96-B, Class A1B
7.275%, 05/15/20 2,489 2,517
EQCC, Series 96-4, Class A5
6.710%, 07/15/11 2,000 1,992
Equivantage Home Equity Loan
Trust, Series 96-1, Class A1
6.550%, 10/25/25 1,473 1,451
First Plus Home Loan Trust,
Series 1997-2, Class A5
6.820%, 04/10/23 2,200 2,201
Independent National Mortgage,
Series 96-A, Class A1
6.710%, 09/25/26 96 96
Metlife Captial Equipment Loan
Trust, Series 97-A, Class A
6.850%, 05/20/08 1,800 1,806
Money Store Home Equity Trust,
Series 96-B, Class A7
7.550%, 06/15/20 3,145 3,213
Saxon Asset Securities Trust,
Series 96-2, Class A2
6.475%, 11/25/20 1,950 1,936
UCFC, Series 96-D, Class A2
6.381%, 07/15/10 1,480 1,476
Vanderbilt Mortgage Finance,
Series 1997-B, Class 1A4
7.190%, 02/07/14 1,404 1,418
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $18,045) 18,106
----------
NON-AGENCY MORTGAGE-BACKED BONDS -- 4.5%
Citicorp Mortgage Securities,
Series 97-1, Class A2 CMO
7.250%, 02/25/27 2,060 2,057
Countrywide Mortgage Broker
Services, Series 97-A1,
Class A1 CMO
7.000%, 03/25/27 2,075 2,071
General Electric Capital Mortgage
Services, Series 97-3,
Class A4 CMO
7.500%, 04/25/27 2,300 2,320
Residential Asset Securization Trust,
Series 97-A3, Class A10 CMO
7.250%, 05/25/27 1,835 1,833
----------
TOTAL NON-AGENCY MORTGAGE-BACKED BONDS
(Cost $8,205) 8,281
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CORPORATE BONDS -- 18.1%
BANKING -- 6.5%
Bank One
8.000%, 04/29/27 $1,980 $ 2,039
First Union Capital I
7.935%, 01/15/27 1,820 1,790
Provident Bank
7.125%, 03/15/03 1,955 1,953
Santander Finance
6.375%, 02/15/11 1,955 1,784
Societe Generale
7.400%, 06/01/06 2,115 2,131
Wells Fargo Capital I
7.960%, 12/15/26 2,210 2,191
----------
11,888
----------
FINANCIAL SERVICES -- 1.9%
CNA Financial
7.250%, 11/15/23 725 681
Fairfax Financial Holdings LP
8.300%, 04/15/26 1,515 1,572
Lehman Brothers Holdings
7.375%, 05/15/04 1,320 1,333
----------
3,586
----------
INDUSTRIAL -- 9.7%
American Stores
8.000%, 06/01/26 2,110 2,128
Barrick Gold
7.500%, 05/01/07 1,855 1,892
Legrand S.A.
8.500%, 02/15/25 2,590 2,862
Loews
6.750%, 12/15/06 1,880 1,821
Nabisco
7.550%, 06/15/15 1,845 1,806
Noranda
8.125%, 06/15/04 1,940 2,037
Tele-Communications
8.650%, 09/15/04 1,000 1,043
Time Warner
7.750%, 06/15/05 1,985 2,025
Tosco
7.625%, 05/15/06 2,185 2,237
----------
17,851
----------
TOTAL CORPORATE BONDS
(Cost $33,313) 33,325
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 2.3%
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $4,194,682
(collateralized by U.S. Note, par value $4,240,000, 6.625%, 06/30/01; market
value $4,290,880) $4,194 $ 4,194
----------
TOTAL REPURCHASE AGREEMENT
(Cost $4,194) 4,194
----------
TOTAL INVESTMENTS -- 99.2%
(Cost $181,957) 182,592
----------
OTHER ASSETS AND LIABILITIES,
NET -- 0.8% 1,394
----------
NET ASSETS:
Portfolio Shares -- Class Y ($.001
par value -- 1 billion authorized)
based on 17,801,308 outstanding shares 183,444
Portfolio Shares -- Class A ($.001
par value -- 1 billion authorized)
based on 158,316 outstanding shares 1,664
Accumulated Net Realized Loss
on Investments (1,757)
Net Unrealized Appreciation
on Investments 635
----------
TOTAL NET ASSETS -- 100.0% $183,986
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.24
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.24
==========
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
LP -- LIMITED PARTNERSHIP
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
GLOBAL BOND FUND
[PIE CHART]
UNITED STATES 28%
UNITED KINGDOM 20%
SWEDEN 5%
AUSTRALIA 6%
CASH EQUIVALENTS 7%
DENMARK 7%
FRANCE 3%
GERMANY 16%
NEW ZEALAND 5%
SPAIN 3%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000)(1) VALUE (000)
- -------------------------------------------------------
FOREIGN BONDS -- 52.3%
AUSTRALIA -- 6.2%
Australian Government
10.000%, 10/15/02 $ 800 $ 697
New South Wales Treasury
12.000%, 12/01/01 1,600 1,466
----------
2,163
----------
DENMARK -- 7.2%
Kingdom of Denmark
7.000%, 11/10/24 16,850 2,509
----------
GERMANY -- 15.4%
Bundesrepublic
6.250%, 01/04/24 9,590 5,348
----------
NEW ZEALAND -- 4.8%
Government of New Zealand
8.000%, 11/15/06 2,320 1,687
----------
SWEDEN -- 4.7%
Government of Sweden
8.000%, 08/15/07 11,500 1,634
----------
UNITED KINGDOM -- 14.0%
Chubu Electric Power
6.750%, 08/10/99 950 1,565
Halifax Building
8.375%, 12/15/99 950 1,616
United Kingdom Treasury
10.500%, 05/19/99 950 1,674
----------
4,855
----------
TOTAL FOREIGN BONDS
(Cost $18,084) 18,196
----------
- -------------------------------------------------------
DESCRIPTION PAR (000)(1) VALUE (000)
- -------------------------------------------------------
COMMERCIAL PAPER -- 18.7%
Banque International Luxembourg
5.58%, 07/21/97 $ 1,000 $ 997
Cargill Financial
5.81%, 07/10/97 1,000 998
Commerical Union
5.58%, 07/10/97 1,000 999
Credit Local
5.56%, 07/07/97 1,000 999
McDonald's
5.61%, 07/07/97 500 499
National Rural Utilities
5.65%, 07/21/97 1,000 997
Santander International
5.67%, 07/28/97 1,000 996
----------
TOTAL COMMERCIAL PAPER
(Cost $6,486) 6,485
----------
DEBT OPTIONS -- 0.6%
FRANCE -- 0.1%
Government of France OAT 7.5%
Put, strike @ 114.68* 23,000,000 52
----------
GERMANY -- 0.4%
Bundesrepublic 7.375% Put,
strike @ 112.45* 7,300,000 40
Bundesrepublic 6.25% Put,
strike @ 96.32* 6,000,000 89
----------
129
----------
SWEDEN -- 0.1%
Government of Sweden 8.00%
Put, strike @ 6.71* 11,500,000 36
----------
TOTAL DEBT OPTIONS
(Cost $382) 217
----------
CURRENCY OPTIONS -- 0.1%
Deutsche Mark Call,
strike 1.7025* 7,000,000 28
----------
TOTAL CURRENCY OPTIONS
(Cost $139) 28
----------
U.S. TREASURY OBLIGATIONS-- 19.3%
U.S. Treasury Notes
4.75%, 09/30/98 6,800 6,705
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,777) 6,705
----------
DEMAND DEPOSIT -- 6.7%
Morgan Stanley
4.35%, 07/01/97 2,347 2,347
----------
TOTAL DEMAND DEPOSIT
(Cost $2,347) 2,347
----------
TOTAL INVESTMENTS -- 97.7%
(Cost $34,215) 33,978
----------
OTHER ASSETS AND LIABILITIES,
NET -- 2.3% 794
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($.001
par value -- 25 million authorized)
based on 3,627,358 outstanding shares $36,004
Portfolio Shares -- Class A ($.001
par value --25 million authorized)
based on 19,095 outstanding shares 189
Accumulated net realized loss
on investments (1,573)
Net unrealized appreciation on forward
foreign currency contracts, foreign
currency and translation of other assets
and liabilities in foreign currency 211
Net unrealized depreciation
on investments (237)
Accumulated net investment income 178
----------
TOTAL NET ASSETS -- 100.0% $34,772
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.54
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $9.52
==========
* NON-INCOME PRODUCING SECURITY
(1) IN LOCAL CURRENCY UNLESS OTHERWISE INDICATED
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INTERMEDIATE MUNICIPAL BOND FUND
[PIE CHART]
REVENUE BONDS 50%
CASH EQUIVALENTS 3%
GENERAL OBLIGATIONS 37%
PRE-REFUNDED SECURITIES 10%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 94.6% COLORADO -- 1.1% El Paso County, Colorado GO
5.200%, 12/01/02 $ 20 $ 21
----------
FLORIDA -- 2.7%
Jacksonville, Florida Electric
Authority Revenue Bond,
Series 3-A
5.200%, 10/01/02 50 52
----------
GEORGIA -- 2.7%
De Kalb County, Georgia Health
Facilities GO
5.300%, 01/01/03 50 52
----------
HAWAII -- 2.6%
Hawaii State GO
5.200%, 06/01/04 50 51
----------
ILLINOIS -- 7.5%
Bloomingdale, Illinois GO
5.450%, 01/01/09 85 87
Illinois State Sales Tax
Revenue Bond, Series S
4.900%, 06/15/07 60 59
----------
146
----------
MARYLAND -- 2.6%
Maryland State Health & Higher
Education Facilities Authority
Revenue Bond for Johns
Hopkins Project
5.125%, 07/01/03 50 51
----------
MASSACHUSETTS -- 2.7%
Massachusetts Bay Transportation
Authority Revenue Bond, Series A
5.300%, 03/01/05 50 52
----------
MICHIGAN -- 5.2%
Grand Haven, Michigan Electric
Revenue Bond MBIA
5.000%, 07/01/04 100 102
----------
73
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
INTERMEDIATE MUNICIPAL BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
NEW JERSEY -- 6.1%
Burlington County, New Jersey
Community Bridge Systems
Revenue Bond, Callable
10/01/03 at 101 CG
5.050%, 10/01/04 $ 50 $ 51
Medford Township, New Jersey
Board of Education FGIC
5.950%, 02/01/03 65 69
----------
120
----------
PENNSYLVANIA -- 61.4%
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Presbyterian
University Hospital, Series B2 (A)
4.200%, 03/01/18 80 80
Allegheny County, Pennsylvania,
Series C-33, GO
7.450%, 02/15/98 50 51
Governor Mifflin, Pennsylvania
School District GO AMBAC
4.850%, 11/15/01 50 51
Lehigh County, Pennsylvania
GO FGIC
5.125%, 11/15/08 110 111
Luzerne County, Pennsylvania,
Series A, GO, Pre-Refunded
09/15/00 at 100 FGIC
5.850%, 09/15/02 50 52
Pennsylvania State Higher Education
Facilities Authority Hospital
Revenue Bond for Thomas
Jefferson University Project,
Pre-Refunded 01/01/98 at 102
8.000%, 01/01/18 85 88
Pennsylvania State Industrial
Development Authority Revenue
Bond AMBAC
5.000%, 07/01/04 100 101
Pennsylvania State Infrastructure
Authority Revenue Bond for
Pennvest Loan Pool Project MBIA
6.000%, 09/01/03 65 70
Pennsylvania State Turnpike
Commission Revenue Bond,
Series 1, Pre-Refunded 12/01/01
at 102 FGIC
7.150%, 12/01/11 50 56
Pennsylvania State Turnpike
Commission Revenue Bond,
Series F, Pre-Refunded 12/01/99
at 102 AMBAC
7.250%, 12/01/17 50 54
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Philadelphia, Pennsylvania Airport
Parking Authority Revenue
Bond AMBAC
5.500%, 09/01/05 $ 80 $ 83
Pittsburgh, Pennsylvania School
District, Series A, GO FGIC
4.850%, 09/01/03 100 101
Reading, Pennsylvania Parking
Authority Revenue Bond MBIA
4.950%, 11/15/02 50 51
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond for Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 50 50
University of Pittsburgh, Pennsylvania
Revenue Bond for University
Capital Projects FGIC
5.050%, 06/01/10 90 89
Wallenpaupack, Pennsylvania Area
School District, Series C, GO,
Callable 09/01/00 at 100 FGIC
6.000%, 09/01/03 50 52
West View, Pennsylvania Municipal
Water Authority Revenue
Bond FGIC
4.800%, 11/15/06 60 59
----------
1,199
----------
TOTAL MUNICIPAL BONDS
(Cost $1,825) 1,846
----------
CASH EQUIVALENT -- 3.4%
SEI Institutional Tax
Free Portfolio
67 67
----------
TOTAL CASH EQUIVALENT
(Cost $67) 67
----------
TOTAL INVESTMENTS -- 98.0%
(Cost $1,892) 1,913
----------
OTHER ASSETS AND LIABILITIES,
NET -- 2.0% 39
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 100 million authorized) based
on 98,840 outstanding shares 1,025
Portfolio Shares -- Class A ($0.001 par value -- 100 million authorized) based
on 95,399 outstanding shares 989
Accumulated Net Realized Loss
on Investments (83)
Net Unrealized Appreciation
on Investments 21
----------
TOTAL NET ASSETS -- 100.0% $1,952
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.05
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.05
==========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
PENNSYLVANIA MUNICIPAL BOND FUND
[PIE CHART]
REVENUE BONDS 72%
GENERAL OBLIGATIONS 27%
PRE-REFUNDED SECURITIES 1%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 98.5%
PENNSYLVANIA -- 96.1%
Allegheny County, Pennsylvania
GO, Series C-43, Callable
09/15/04 at 100 MBIA
5.875%, 09/15/10 $ 60 $ 62
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Mercy Hospital
of Pittsburgh AMBAC
6.450%, 04/01/01 200 213
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Montefiore
Hospital Association
5.800%, 10/01/03 125 129
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Presbyterian
Health Center, Series B, Callable
11/01/02 at 102 MBIA
6.000%, 11/01/12 25 26
Allegheny County, Pennsylvania
Redevelopment Authority
Revenue Bond for Home
Improvement Loan Project,
Series A, Callable 02/01/04
at 102 FHA
5.700%, 02/01/07 10 10
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Series B,
Pre-Refunded 06/01/99
at 100 FGIC
7.450%, 06/01/99 130 138
Allegheny County, Pennsylvania
GO, Series C-43, Callable
09/15/04 at 100 MBIA
5.875%, 09/15/13 100 103
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Berks County, Pennsylvania
Revenue Bond for Reading
Hospital & Medical Center,
Series B, Callable 10/01/04
at 102 MBIA
5.600%, 10/01/06 $ 65 $ 68
Bucks County, Pennsylvania Bucks
County Community College
5.500%, 06/15/14 300 301
Center City District, Pennsylvania
Business Improvement
Assessment Bond, Callable
12/01/07 at 100 AMBAC
5.600%, 12/01/08 60 63
Central Bucks, Pennsylvania
School District GO, Callable
02/01/01 at 100
6.600%, 02/01/03 175 187
Crawford, Pennsylvania Central
School District GO FGIC
7.000%, 02/15/05 100 114
Delaware County, Pennsylvania
Revenue Bond for Villanova
University AMBAC
5.400%, 08/01/08 200 206
Delaware County, Pennsylvania GO
7.100%, 12/01/98 170 172
5.500%, 10/01/15 75 75
Dover Township, Pennsylvania
Sewer Authority Revenue Bond
6.250%, 05/01/12 20 22
Hampden Township, Pennsylvania
Sewer Authority Special
Obligation Bond, Callable
10/01/96 at 100
5.350%, 04/01/03 110 112
Lower Burrell, Pennsylvania City
Municipal Sewer Authority
Revenue Bond AMBAC
5.125%, 02/01/16 250 238
Lower Merion Township,
Pennsylvania GO, Callable
08/01/02 at 100
5.625%, 08/01/05 100 104
Manheim, Pennsylvania Central
School District GO, Callable
05/15/04 at 100 FGIC
6.100%, 05/15/14 100 104
Millcreek Township, Pennsylvania
Sewer Authority Revenue Bond,
Callable 11/01/99 at 100 MBIA
6.000%, 11/01/06 150 156
Montgomery County, Pennsylvania
Higher Education and Health
Authority Revenue Bond for
Abington Memorial Hospital,
Series A AMBAC
5.125%, 06/01/14 250 237
Montgomery County, Pennsylvania
GO, Callable 10/15/03 at 100
5.750%, 10/15/11 175 181
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
75
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
PENNSYLVANIA MUNICIPAL BOND FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
North Wales, Pennsylvania Water
Authority Revenue Bond
Pre-Refunded 11/01/04 at 100
6.750%, 11/01/04 $ 100 $ 112
Northampton County, Pennsylvania
Higher Education Authority
Revenue Bond for Lehigh
University, Series A MBIA
5.750%, 11/15/18 150 152
Pennsylvania Housing Finance
Agency Single Family
Mortgage- 55 Revenue Bond
4.700%, 10/01/01 100 100
Pennsylvania State Convention
Center Authority Revenue Bond,
Series A FGIC
6.700%, 09/01/16 75 87
Pennsylvania State General
Obligation Bond
5.125%, 09/15/04 450 460
5.000%, 11/15/12 500 487
Pennsylvania State GO, Series 2
6.000%, 07/01/05 25 27
6.250%, 07/01/11 60 66
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for University of
Pennsylvania, Series B
5.700%, 01/01/11 150 154
Pennsylvania State Higher
Education Facilities Authority
Health Services Revenue Bond
for Allegheny/Delaware Valley,
Series A MBIA
5.500%, 11/15/08 400 413
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for Allegheny General Hospital,
Series A
6.300%, 09/01/97 200 201
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for Health Services, Series A,
Callable 01/01/04 at 102
6.000%, 01/01/10 100 106
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for Thomas Jefferson University,
Series A, Callable 07/01/99 at 102
6.000%, 07/01/19 150 152
Pennsylvania State Higher Education
Facilities Authority Revenue Bond
for University of Pennsylvania,
Series B
5.850%, 09/01/13 100 102
Pennsylvania State Higher
Educational Facilities
Authority, University of
Pennsylvania Project, Series B, RB
5.250%, 01/01/07 500 508
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State Housing
Finance Agency Revenue
Bond, Series C
6.400%, 07/01/12 $ 300 $ 310
Pennsylvania State Industrial
Development Authority
Revenue Bond, State
Infrastructure Investment
Authority Revenue Bond for
Pennvest Loan Pool MBIA
6.000%, 09/01/04 400 431
Pennsylvania State Industrial
Development Authority
Revenue Bond AMBAC
5.800%, 07/01/09 250 266
6.000%, 07/01/09 305 329
6.000%, 01/01/12 100 105
Pennsylvania State Industrial
Development Authority Revenue
Bond Economic Development
AMBAC
6.000%, 07/01/08 600 649
Pennsylvania State Turnpike
Commission Revenue Bond,
Series O, Callable 12/01/02
at 102 FGIC
5.900%, 12/01/08 125 132
Pennsylvania State Turnpike
Commission Revenue Bond,
Series P
5.100%, 12/01/99 150 153
5.800%, 12/01/06 75 79
Pennsylvania State University
Revenue Bond
5.200%, 03/01/98 250 252
Pennsylvania State University
Revenue Bond, Callable
03/01/04 at 100
6.150%, 03/01/05 185 198
Pennsylvania State, Third Series,
Callable 09/01/03 at 101 GO
5.000%, 09/01/12 350 337
Philadelphia Pennsylvania Parking
Authority Revenue Bond
5.750%, 09/01/07 400 426
Philadelphia Pennsylvania, Industrial
Authority, Revenue Bond
5.250%, 11/15/09 500 502
Philadelphia, Pennsylvania Hospitals
and Higher Education Facilities
Authority Revenue Bond for
Pennsylvania Hospital,
Series A FGIC
5.250%, 02/15/14 100 96
Pittsburg Pennsylvania General
Obligation Bond Callable
09/01/05 at 100, FGIC
4.900%, 03/01/07 350 350
Pittsburgh, Pennsylvania GO,
Series D, Callable 09/01/02
at 102 AMBAC
6.125%, 09/01/17 25 26
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Pittsburgh, Pennsylvania Higher
Education Authority Revenue
Bond for University Capital
Project, Series A, Callable
06/01/02 at 102 MBIA
6.125%, 06/01/21 $115 $ 119
Radnor Township, Pennsylvania
GO, Callable 05/01/06 at 100
5.250%, 11/01/16 200 196
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 250 251
Scranton-Lackawanna, Pennsylvania
Health and Welfare Authority
Revenue Bond for University of
Scranton, Series A
6.150%, 03/01/03 150 159
Seneca Valley, Pennsylvania GO
5.850%, 02/15/15 105 107
York, Pennsylvania City School
District GO, Callable 03/01/03
at 100 FGIC
5.600%, 03/01/07 75 77
----------
11,698
----------
PUERTO RICO -- 2.4%
University of Puerto Rico, Series M,
Revenue Bond, MBIA
5.250%, 06/01/25 300 291
----------
TOTAL MUNICIPAL BONDS
(Cost $11,731) 11,989
----------
TOTAL INVESTMENTS -- 98.5%
(Cost $11,731) 11,989
----------
OTHER ASSETS AND LIABILITIES,
NET -- 1.5% 186
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 100 million authorized shares)
based on 971,402 outstanding shares 10,037
Portfolio Shares -- Class A ($0.001 par value -- 100 million authorized shares)
based on 191,350 outstanding shares 1,977
Accumulated Net Realized Loss
on Investments (97)
Net Unrealized Appreciation
on Investments 258
----------
TOTAL NET ASSETS -- 100.0% $12,175
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $10.47
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS A $10.47
==========
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FHA -- FEDERAL HOUSING AGENCY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
NEW JERSEY MUNICIPAL BOND FUND
[PIE CHART]
REVENUE BONDS 40%
CASH EQUIVALENTS 4%
GENERAL OBLIGATIONS 56%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 94.7% NEW JERSEY -- 91.0% Bayonne, New Jersey GO FGIC
5.900%, 05/01/08 $ 150 $ 158
Burlington County, New Jersey GO
5.200%, 10/01/05 80 82
Cherry Hill Township, New Jersey GO
5.900%, 06/01/05 50 53
Evesham Township, New Jersey Board
of Education GO FSA
4.900%, 09/01/02 75 76
Flemington-Raritan, New Jersey
Regional School District GO
5.700%, 05/01/06 50 52
Manalapan Township, New Jersey
Fire District Number 1
5.300%, 12/15/99 80 82
Marlboro Township, New Jersey
Board of Education GO FGIC
5.500%, 07/15/09 40 41
Monmouth County, New Jersey
Improvement Authority
Revenue Bond CG
6.625%, 12/01/05 40 43
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Bridgeton Hospital Association
Project, Series B
6.000%, 07/01/13 50 52
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Burlington County Memorial
Hospital Project
6.000%, 07/01/12 50 52
New Jersey State Economic
Development Authority Revenue
Bond for Peddie School
Project, Series A
5.400%, 02/01/06 50 52
77
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
NEW JERSEY MUNICIPAL BOND FUND (CONCLUDED)
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
New Jersey State Economic
Development Authority Revenue
Bond for Rutgers State
University-Civic Square AMBAC
6.125%, 07/01/24 $ 55 $ 57
New Jersey State Educational
Facilities Authority Revenue
Bond for University of Medicine
and Dentistry, Series B AMBAC
5.250%, 12/01/13 60 60
New Jersey State Educational
Facilities Authority Revenue
Bond for Princeton University
Project, Series A
5.500%, 07/01/04 100 106
New York & New Jersey States
Port Authority Revenue Bond,
Series 81
5.700%, 08/01/07 50 52
North Bergen Township,
New Jersey GO AMBAC
5.000%, 08/15/09 75 74
North Brunswick Township,
New Jersey GO
6.125%, 05/15/04 24 26
North Brunswick Township,
New Jersey Board of
Education GO
6.300%, 02/01/12 150 161
Ocean County, New Jersey GO
5.650%, 07/01/03 75 79
Ocean County, New Jersey
Utilities Authority Wastewater
Revenue Bond
5.125%, 01/01/11 75 74
Secaucus, New Jersey Utilities
Authority Sewer
Revenue Bond, Series A
6.100%, 12/01/10 60 65
South Brunswick Township,
New Jersey GO
5.950%, 08/01/14 100 104
South Monmouth, New Jersey
Regional Sewer Authority
Revenue Bond MBIA
5.550%, 01/15/06 50 52
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
West Windsor Township,
New Jersey Parking Authority
Revenue Bond
6.100%, 12/01/12 $ 50 $ 53
----------
1,706
----------
PENNSYLVANIA -- 3.7%
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project,
Series B2 (A) (B) (C)
4.200%, 03/01/18 70 70
----------
TOTAL MUNICIPAL BONDS
(Cost $1,729) 1,776
----------
CASH EQUIVALENT -- 4.2%
SEI Institutional Tax
Free Portfolio 79 79
----------
TOTAL CASH EQUIVALENT
(Cost $79) 79
----------
TOTAL INVESTMENTS -- 98.9%
(Cost $1,808) 1,855
----------
OTHER ASSETS AND LIABILITIES,
NET -- 1.1% 20
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value --100 million authorized)
based on 145,400 outstanding shares 1,429
Portfolio Shares -- Class A ($0.001
par value --100 million authorized)
based on 39,208 outstanding shares 402
Accumulated Net Realized Loss
on Investments (3)
Net Unrealized Appreciation
on Investments 47
----------
TOTAL NET ASSETS -- 100.0% $1,875
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.16
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.15
==========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSOR OF THE
PUT DEMAND DATE OR MATURITY DATE.
(C) SECURITY IS HELD IN CONNECTION WITH A LETTER OF CREDIT OR STANDBY BOND
PURCHASE AGREEMENT ISSUED BY A MAJOR COMMERCIAL BANK OR OTHER INSTITUTION.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FSA -- FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
TREASURY RESERVE
[PIE CHART]
U.S. TREASURY SECURITIES 38%
CASH EQUIVALENTS 62%
% OF TOTAL PORTFOLIOS INVESTMENTS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 38.3%
U.S. Treasury Bills+
5.356%, 08/14/97 $15,000 $ 14,905
5.662%, 08/21/97 10,000 9,924
5.901%, 08/21/97 10,000 9,921
5.328%, 08/28/97 9,000 8,926
5.404%, 09/04/97 15,000 14,859
5.581%, 09/11/97 15,000 14,839
5.539%, 09/18/97 10,000 9,883
5.643%, 10/02/97 10,000 9,860
5.597%, 10/09/97 15,000 14,776
5.589%, 10/16/97 15,000 14,760
5.508%, 11/13/97 10,000 9,804
5.564%, 11/13/97 10,000 9,800
5.361%, 12/11/97 10,000 9,768
5.624%, 01/08/98 8,500 8,260
5.592%, 02/05/98 7,000 6,774
5.648%, 03/05/98 10,000 9,630
5.806%, 04/02/98 10,000 9,579
5.796%, 04/30/98 10,000 9,538
5.587%, 05/28/98 10,000 9,512
U.S. Treasury Notes
5.550%, 07/31/97 8,500 8,499
5.750%, 10/31/97 12,000 12,000
5.375%, 11/30/97 13,000 12,993
5.250%, 12/31/97 12,000 11,985
5.625%, 01/31/98 15,000 15,001
U.S. Treasury STRIPS+
5.400%, 08/15/97 20,000 19,871
5.684%, 11/15/97 15,300 14,985
5.710%, 02/15/98 10,000 9,658
5.725%, 05/15/98 14,600 13,899
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $324,209) 324,209
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS -- 62.1%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price
$198,032,450 (collateralized by various U.S. Treasury Notes, ranging in par
value $25,089,000- $49,877,000, 5.125%-8.25%, 04/30/98-06/30/02; total
market value $202,064,598) $198,000 $198,000
First National Bank of Chicago 5.95%, dated 06/30/97, matures 07/01/97,
repurchase price $38,350,337 (collateralized by various U.S. Treasury Notes,
ranging in par value $4,438,000- $26,115,000, 5.75%-8.00%, 10/31/00-05/15/01;
total market
value $39,237,251) 38,344 38,344
Goldman Sachs
5.80%, dated 06/30/97, matures
07/01/97, repurchase price $23,003,706
(collateralized by various U.S. Treasury
Notes, ranging in par value
$2,393,000- $20,607,000, 9.125%,
05/15/99; total market value
$23,548,457) 23,000 23,000
Hong Kong Shanghai Bank 5.80%, 06/30/97, matures 07/01/97, repurchase price
$20,003,222 (collateralized by various U.S. Treasury Notes, ranging in par
value $8,035,000-$11,965,000, 5.75%-7.25%, 08/15/03-05/15/04; total market
value
$20,540,214) 20,000 20,000
Merrill Lynch 5.60%, dated 06/30/97, matures 07/01/97, repurchase price
$30,004,667 (collateralized by U.S. Treasury Note, par value $30,260,000,
6.125%, 05/15/98;
market value $30,580,756) 30,000 30,000
Sanwa Bank
5.85%, dated 06/30/97, matures 07/01/97, repurchase price $197,032,013
(collateralized by various U.S. Treasury Notes, ranging in par value
$19,628,000- $52,052,000, 6.00%-8.875%, 07/15/98-02/15/99; total market
value $200,973,619) 197,000 197,000
Swiss Bank
5.875%, dated 06/30/97, matures 07/01/97, repurchase price $20,003,264
(collateralized by U.S. Treasury Note, par value $20,765,000, 5.625%,
11/30/00;
market value $20,480,520) 20,000 20,000
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $526,344) 526,344
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
TREASURY RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
TOTAL INVESTMENTS -- 100.4%
(Cost $850,553) $850,553
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.4%) (3,023)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 1,250 million authorized) based
on 835,378,664 outstanding shares 835,379
Portfolio Shares -- Class C ($0.001 par value -- 1,250 million authorized) based
on 12,144,618 outstanding shares 12,145
Accumulated Net Realized Gain
on Investments 6
----------
TOTAL NET ASSETS -- 100.0% $847,530
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS C $1.00
==========
+ YIELD TO MATURITY
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CASH RESERVE
[PIE CHART]
U.S. GOVERNMENT SECURITIES 6%
CASH EQUIVALENTS 15%
CORPORATE SECURITIES 79%
% OF TOTAL INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
COMMERCIAL PAPER -- 48.8%
BANKING -- 9.7%
Abbey National Bank
5.725%, 08/11/97 $10,000 $ 9,936
Abn Amro North
American Finance
5.479%, 07/09/97 15,000 14,982
5.392%, 07/28/97 2,000 1,992
Banc One Funding
5.630%, 07/29/97 10,000 9,957
Banc One Guaranteed Funding
5.688%, 07/30/97 13,000 12,941
Bank of America
5.690%, 08/04/97 15,000 14,921
Deutsche Bank
5.680%, 07/07/97 15,000 14,986
Society Generale
5.900%, 06/16/98 9,000 8,991
----------
88,706
----------
FINANCIAL SERVICES -- 19.1%
Asset Securitization
5.713%, 07/15/97 15,000 14,967
5.722%, 07/21/97 10,000 9,969
5.689%, 08/11/97 7,500 7,452
5.680%, 09/03/97 6,050 5,990
Eureka Securitization
5.711%, 07/31/97 15,000 14,930
5.647%, 09/15/97 11,500 11,365
Goldman Sachs
5.576%, 07/02/97 3,000 3,000
5.533%, 07/22/97 5,000 4,984
5.676%, 08/20/97 10,000 9,922
Merrill Lynch
5.494%, 07/01/97 5,000 5,000
5.726%, 07/22/97 7,000 6,977
5.808%, 10/31/97 10,000 9,808
5.835%, 12/02/97 7,500 7,318
80
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
Morgan Stanley
5.518%, 07/15/97 $ 5,000 $ 4,990
5.689%, 07/16/97 10,000 9,977
5.650%, 09/16/97 10,000 9,881
New Center Asset Trust
5.464%, 07/28/97 3,000 2,988
5.707%, 11/25/97 10,000 9,773
Paccar Financial
5.566%, 07/02/97 20,000 19,997
5.563%, 09/23/97 5,000 4,937
----------
174,225
----------
INDUSTRIAL -- 19.2%
Cafco
5.591%, 07/15/97 12,800 12,772
Caisse de Depots En
Consignations
5.600%, 07/08/97 8,000 7,991
5.730%, 08/06/97 18,880 18,773
Campbell Soup
5.617%, 07/15/97 11,900 11,875
Ford Motor
5.689%, 08/05/97 10,000 9,946
Ford Motor Credit
5.560%, 07/08/97 7,000 6,992
5.693%, 07/21/97 17,000 16,947
General Electric Credit
5.707%, 08/12/97 10,000 9,934
General Electric Capital
5.546%, 08/26/97 10,000 9,917
5.665%, 10/21/97 10,000 9,827
Mitsubishi International
5.580%, 07/07/97 15,000 14,986
Mobil Australia
6.201%, 07/01/97 8,097 8,097
Norwest Financial
5.628%, 09/22/97 15,000 14,808
Pitney Bowes Credit
5.643%, 09/26/97 3,600 3,552
5.851%, 10/02/97 4,000 3,941
Southwestern Bell Capital
Communications
5.607%, 07/22/97 5,250 5,233
Swedish Export Credit
5.497%, 07/16/97 10,000 9,978
----------
175,569
----------
UTILITIES -- 0.8%
National Rural Utilities
5.614%, 09/19/97 7,200 7,111
----------
TOTAL COMMERCIAL PAPER
(Cost $445,611) 445,611
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.0%
FHLB
6.000%, 09/24/97 $ 6,500 $ 6,508
5.350%, 12/10/97 18,350 18,347
5.810%, 01/23/98 11,000 11,000
5.805%, 02/13/98 13,400 13,400
5.850%, 03/17/98 5,000 5,000
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $54,255) 54,255
----------
CORPORATE OBLIGATIONS -- 18.0%
BANKING -- 2.2%
Abbey National Bank (A)
5.575%, 02/25/98 20,000 19,983
----------
FINANCIAL SERVICES -- 9.1%
Abbey National Treasury
Services (A)
5.650%, 04/15/98 10,000 9,996
American Express (A)
5.658%, 09/11/97 10,000 10,000
Associates of North America (A)
5.570%, 03/02/98 15,000 14,993
Associates of North America
6.625%, 11/15/97 10,000 10,028
Credit Suisse (A)
5.628%, 03/13/98 10,000 10,000
Goldman Sachs
6.100%, 04/15/98 6,825 6,827
Morgan Stanley (A)
5.638%, 11/07/97 9,375 9,375
Paccar Financial (A)
5.568%, 06/18/98 12,000 11,993
----------
83,212
----------
INDUSTRIAL -- 6.7%
Amex Centurian (A)
5.658%, 09/12/97 6,000 6,000
E.I. DuPont de Nemours
5.590%, 10/08/97 5,000 5,000
8.650%, 12/01/97 5,000 5,061
Ford Motor Credit
8.000%, 12/01/97 3,460 3,486
6.350%, 02/12/98 1,800 1,806
Gannett
5.250%, 03/01/98 10,000 9,959
General Electric Capital
7.620%, 11/18/97 4,500 4,527
Province of Ontario
5.700%, 10/01/97 10,000 10,004
Rabobank Nederland
6.500%, 08/05/97 1,160 1,160
Toyota Motor Credit (A)
5.680%, 09/26/97 10,000 10,000
Wal-Mart Stores
5.500%, 03/01/98 4,000 3,997
----------
61,000
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $164,195) 164,195
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
81
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
CASH RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
TIME DEPOSITS -- 5.5%
First Union Bank
6.000%, 07/01/97 $10,000 10,000
Sumitomo Bank
6.125%, 07/01/97 40,000 40,000
----------
50,000
----------
TOTAL TIME DEPOSITS
(Cost $50,000) 50,000
----------
INSURANCE FUNDING AGREEMENTS -- 4.7%
Allstate (A)
5.745%, 07/01/97 18,000 18,000
Pacific Mutual Insurance (A)
5.721%, 07/01/97 25,000 25,000
----------
INSURANCE FUNDING AGREEMENTS
(Cost $43,000) 43,000
----------
MASTER NOTES -- 1.5%
Associates Corporation of
North America (A)
5.497%, 07/01/97 13,991 13,991
SLMA (A)
5.220%, 07/01/97 3 3
----------
13,994
----------
TOTAL MASTER NOTES
(Cost $13,994) 13,994
----------
CERTIFICATES OF DEPOSIT -- 10.0%
BANKING -- 8.9%
Barclays Bank PLC
5.910%, 03/09/98 14,750 14,747
5.940%, 06/19/98 5,000 4,997
Nat West Bank
5.860%, 03/10/98 10,000 9,995
National Westminster Bank PLC
5.940%, 06/26/98 15,000 14,992
Societe Generale
6.350%, 04/15/98 10,000 10,003
6.080%, 06/09/98 10,000 9,996
Swiss Bank
5.976%, 03/19/98 7,000 6,999
6.020%, 06/12/98 10,000 10,003
----------
81,732
----------
FINANCIAL SERVICES -- 1.1%
Credit Suisse
6.310%, 04/16/98 10,000 10,000
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $91,732) $ 91,732
----------
ASSET-BACKED SECURITIES -- 1.8%
Capita Equipment Receivables
Trust, Series 1996-1, Class A1
5.600%, 10/15/97 $ 2,077 $ 2,078
Goldman Sachs, Investment
Trust Series 1997-C, Class N (A)
5.688%, 02/17/10 15,000 15,000
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $17,078) 17,078
----------
REPURCHASE AGREEMENTS -- 3.8%
First National Bank of Chicago
5.95%, dated 06/30/97, matures 07/01/97,
repurchase price $1,549,256 (collateralized
by U.S. Treasury Note, par value
$1,555,000, 6.25%, 02/28/02; market value
$1,582,990) 1,549 1,549
Swiss Bank
5.95%, dated 06/30/97, matures 07/01/97, repurchase price $33,246,494
(collateralized by U.S. Treasury Note, par value $33,405,000, 6.50%,
04/30/99;
market value $34,039,695) 33,241 33,241
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $34,790) 34,790
----------
TOTAL INVESTMENTS -- 100.1%
(Cost $914,655) 914,655
----------
OTHER ASSETS AND LIABILITIES,
NET -- (0.1%) (711)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001
par value -- 1 billion authorized)
based on 886,387,843 outstanding shares 886,388
Portfolio Shares -- Class C ($0.001
par value -- 1 billion authorized)
based on 27,696,662 outstanding shares 27,697
Accumulated Net Realized Loss
on Investments (141)
----------
TOTAL NET ASSETS -- 100.0% $913,944
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS C $1.00
==========
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON JUNE 30, 1997.
FHLB -- FEDERAL HOME LOAN BANK
PLC -- PUBLIC LIMITED COMPANY
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
TAX-FREE RESERVE
[PIE CHART]
TAX-EXEMPT COMMERCIAL PAPER 38%
ANTICIPATION NOTES 8%
GENERAL OBLIGATIONS 2%
REVENUE BONDS 42%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 102.8%
ALASKA -- 1.6%
City of Valdez Alaska TECP
3.650%, 08/08/97 $1,500 $ 1,500
Valdez, Alaska Exxon Pipeline
Company Project (A) (B)
4.000%, 07/01/97 500 500
----------
2,000
----------
ARIZONA -- 0.6%
Flagstaff Arizona TECP
3.800%, 09/08/97 750 750
----------
CALIFORNIA -- 0.3%
Santa Clara, California Electric
Revenue Bond, Series A (A) (B)
4.000%, 07/01/97 340 340
----------
DELAWARE -- 1.8%
Delaware State Econ TECP
3.800%, 09/08/97 750 750
Wilmington, Delaware Franciscan
Health System (A) (B)
4.100%, 07/01/97 800 800
Wilmington, Delaware Hospital
Revenue Bond for Franciscan
Health Systems Project,
Series A (A) (B) (C)
4.100%, 07/01/97 700 700
----------
2,250
----------
FLORIDA -- 3.1%
Dade County, Florida Capital
Asset Series 1990 (A) (B) (C)
4.450%, 07/01/97 1,000 1,000
Sunshine State Florida TECP
3.600%, 08/14/97 2,800 2,800
----------
3,800
----------
- -------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- -------------------------------------------------------
ILLINOIS -- 8.6%
Chicago, Illinois Equipment Notes
3.600%, 12/04/97 $2,000 $ 2,000
Chicago, Illinois O'Hare
International Airport Revenue
Industrial Lien, Series C (A) (B)
4.100%, 07/01/97 1,500 1,500
Illinois Development Finance
Authority Revenue Bond
(A) (B) (C)
4.150%, 07/02/97 1,800 1,800
Illinois Development Finance
Authority Illinois Power
Company Project, Series B (A)
4.150%, 07/02/97 1,400 1,400
Illinois State Pollution Control
Authority Amoco Oil Company
Project (A) (B)
4.000%, 07/01/97 100 100
Illinois State Toll Highway
Authority, Series B
MBIA (A) (B)
4.150%, 07/01/97 2,400 2,400
St Charles, Illinois Revenue
Bond (A) (B) (C)
4.200%, 07/01/97 1,300 1,300
----------
10,500
----------
INDIANA -- 5.0%
City of Mount Vernon
Indiana TECP
3.750%, 08/13/97 2,000 2,000
Gary, Indiana Industrial
Environmental Improvement
Authority U.S. Steel
Corporation Project (A) (B)
4.100%, 07/15/97 1,600 1,600
Sullivan, Indiana TECP
3.650%, 08/12/97 2,535 2,535
----------
6,135
----------
IOWA -- 0.3%
Des Moines, Iowa Commercial
Development Revenue Bond
Capitol Center III Project (A) (B)
4.150%, 07/01/97 400 400
----------
KANSAS -- 4.6%
Burlington Kansas Power and
Light TECP
3.750%, 09/12/97 2,000 2,000
Burlington, Kansas TECP
3.900%, 09/05/97 1,500 1,500
3.750%, 09/08/97 600 600
3.750%, 09/10/97 1,450 1,450
Wichita, Kansas Revenue Bond
Wichita Health Systems Project,
Series XXV (A) (B)
4.350%, 07/02/97 100 100
----------
5,650
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
83
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
TAX-FREE RESERVE (CONTINUED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
KENTUCKY -- 1.6%
Mayfield, Kentucky Multi-City
Lease Revenue Bond Kentucky
League of Cities Funding
Project (A)
4.300%, 07/01/97 $2,000 $ 2,000
----------
LOUISIANA -- 5.9%
De Soto Parish, Louisiana Central
Louisiana Electric Company
Pollution Control Revenue
Bond (A) (B)
4.150%, 07/02/97 700 700
Jefferson Parish, Louisiana
Industrial Development Board
George J. Ackel, Sr.
Project (A) (B)
4.200%, 07/01/97 3,750 3,750
Saint Charles Parish, Louisiana
Pollution Control Shell Oil
Company Project,
Series B (A) (B)
4.000%, 07/01/97 750 750
South Louisiana Port Common
Marine Term Revenue Refunding-
Occidental Petroleum (A) (B) (C)
4.150%, 07/01/97 2,000 2,000
----------
7,200
----------
MASSACHUSETTS -- 1.6%
Massachusetts State GO,
Series B (A) (B)
4.000%, 12/01/97 2,000 2,000
----------
MICHIGAN -- 1.2%
Cornell Township, Michigan
Environment Improvement
Authority Escanaba Paper
Company Project (A) (B)
4.000%, 07/01/97 450 450
Delta County, Michigan
Environmental Improvement
Authority Mead Escambia
Paper, Series C (A) (B)
4.100%, 07/01/97 700 700
Michigan State Consumers
Power Project (A) (B)
4.050%, 07/01/97 300 300
----------
1,450
----------
MINNESOTA -- 1.2%
Rochester, Minnesota TECP
3.700%, 08/20/97 1,500 1,500
----------
MISSISSIPPI -- 1.4%
Clairborne County, Mississippi
TECP
3.700%, 07/25/97 1,000 1,000
Jackson County, Mississippi
Chevron USA Incorporated
Project (A) (B)
4.000%, 07/01/97 700 700
----------
1,700
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MISSOURI -- 1.8%
Missouri State Environmental
Improvement & Energy
Pollution Control Revenue
Bond (A) (B)
3.950%, 12/01/97 $1,800 $ 1,800
Missouri State Health and
Educational Facilities Authority
Washington University
Series A (A) (B) (C)
4.100%, 07/01/97 400 400
----------
2,200
----------
MONTANA -- 0.3%
Forsyth, Montana Pollution
Control Revenue Bond Portland
General Electric Project (A) (B)
4.150%, 07/01/97 200 200
Forsyth, Montana Pollution Control
Revenue Bond, Series B Portland
General Electric Project (A) (B)
4.150%, 07/01/97 100 100
----------
300
----------
NEVADA -- 2.1%
Clark County, Nevada Industrial
Development Revenue
Series C (A) (B)
4.200%, 07/01/97 1,000 1,000
Nevada State Housing Division
Multi Unit Park,
Series A (A) (B)
4.250%, 07/01/97 1,500 1,500
----------
2,500
----------
NEW MEXICO -- 0.8%
Albuquerque, New Mexico Gross
Receipts Revenue Bond
(A) (B) (C)
4.200%, 07/02/97 1,000 1,000
----------
NEW YORK -- 1.6%
New York City, New York Municipal
Water Finance Authority Municipal
Water and Sewer Systems,
Series C FGIC (A) (B)
4.150%, 07/15/97 2,000 2,000
----------
NORTH CAROLINA -- 5.4%
Lexington, North Carolina
Lexington Memorial Hospital
Project (A) (B)
4.200%, 07/01/97 4,500 4,500
North Carolina Eastern
Municipal Power (A) (B)
8.000%, 01/01/98 1,305 1,357
Wake County, North Carolina
Carolina Power & Light
Company (A) (B)
4.150%, 07/02/97 800 800
----------
6,657
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
OREGON -- 0.3%
Port of St. Helens Portland,
Oregon Pollution Control
Revenue Bond (A) (B)
4.050%, 07/01/97 $ 400 $ 400
----------
PENNSYLVANIA -- 14.7%
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project, Series B1
(A) (B) (C)
4.200%, 07/01/97 290 290
Allegheny County, Pennsylvania
Hospital Development Revenue
Bond for Presbyterian University
Hospital Project, Series B3 (A) (B)
4.200%, 07/01/97 1,005 1,005
Beaver County, Pennsylvania
Industrial Development
Authority Revenue Bond for
Duquesne Light Company
Project, Series B (A) (B) (C)
4.050%, 07/01/97 100 100
Lehigh County, Pennsylvania
Industrial Development
Authority Pollution
Control (A) (B)
3.800%, 07/01/97 200 200
Montgomery County,
Pennsylvania TECP
3.850%, 08/21/97 1,200 1,200
3.600%, 07/10/97 2,300 2,300
3.650%, 07/28/97 2,000 2,000
Pennsylvania State Higher
Education Authority Carnegie
Mellon University,
Series D (A) (B)
4.150%, 07/01/97 700 700
Pennsylvania State Higher
Educational Facilities Authority
Hospital Revenue Bond for
Thomas Jefferson University
Project Pre-Refunded
@ 102 (D)
8.000%, 01/01/98 1,910 1,988
Pittsburgh, Pennsylvania Water
and Sewer Authority Revenue
Bond Series A FGIC
3.750%, 09/01/97 1,500 1,499
Temple University Pennsylvania GO
4.750%, 05/18/98 1,000 1,007
Washington County, Pennsylvania
Lease Revenue Bond
(A) (B) (C)
4.200%, 07/01/97 2,440 2,440
West Whiteland Township,
Pennsylvania GO
3.400%, 12/01/97 245 245
Wissahickon, Pennsylvania
School District GO
4.500%, 11/15/97 1,125 1,128
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
York, Pennsylvania General
Authority Revenue Bond (A) (B)
4.150%, 07/01/97 $2,000 $ 2,000
----------
18,102
----------
PUERTO RICO -- 1.6%
Puerto Rico Commonwealth
TRAN Series A
4.000%, 07/30/97 2,000 2,001
----------
SOUTH CAROLINA -- 2.5%
Berkley County, South Carolina
Pollution Control Revenue
Bond for Amoco Chemical
Project (A) (B) (C)
4.000%, 07/01/97 200 200
Richland County, South Carolina
Hospital Facilities Revenue
Bond Sunhealth-Orangeburg
Project, Series C-2 (A) (B)
4.450%, 07/02/97 450 450
York County, South Carolina
Pollution Control Revenue Bond
Electric Project, Series
NRU-84N-2 (A) (B)
4.200%, 07/02/97 400 400
York County, South Carolina
Pollution Control Revenue
for Saluda River Project
National Rural
3.500%, 08/15/97 2,000 2,000
----------
3,050
----------
TEXAS -- 17.4%
Camp County, Texas Industrial
Development Corporation
Pollution Control Revenue
Bond Texas Oil and Gas
Project (A) (B)
4.300%, 07/02/97 500 500
Grapevine, Texas Industrial
Development Authority
Revenue Bond for American
Airlines Project, Series B3
(A) (B) (C)
4.100%, 07/01/97 500 500
Grapevine, Texas Industrial
Development Authority
Revenue Bond American
Airlines Project, Series A2 (A) (B)
4.100%, 07/01/97 700 700
Grapevine, Texas Industrial
Development Corporation
American Airlines,
Series A1 (A) (B)
4.100%, 07/01/97 200 200
Grapevine, Texas Industrial
Development Corporation
Revenue Bond American
Airlines Project,
Series B2 (A) (B)
4.100%, 07/01/97 200 200
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
85
<PAGE>
STATEMENT
OF
NET ASSETS
AS OF
JUNE 30, 1997
TAX-FREE RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Hunt County, Texas Industrial
Development Authority Trico
Industries Incorporated
Project (A) (B)
4.100%, 07/01/97 $1,600 $ 1,600
North Central Texas Health
Facilities Development Revenue
Bond Baylor Medical Center
Project, Series A, Pre-Refunded
@ 102 (D)
7.900%, 05/15/98 500 526
Nueces County, Texas Health
Facilities Authority Driscoll
Childrens Foundation (A) (B)
4.200%, 07/01/97 1,675 1,675
Port Corpus Christi Texas
Industrial Development
Corporation Refunding Revenue
Bonds Series A (A) (B)
4.200%, 07/01/97 2,000 2,000
Richardson Texas Independent
School District (A) (B)
3.620%, 09/04/97 3,000 3,000
San Antonio, Texas Electric and
Gas Revenue Bond
Pre-Refunded @ 102 (D)
7.800%, 02/01/98 3,900 4,071
Texas State Higher Education
Authority University and
College Improvement,
Series B FGIC (A) (B)
4.150%, 07/02/97 1,350 1,350
Texas State TAN
4.750%, 08/29/97 5,000 5,006
----------
21,328
----------
VERMONT -- 1.1%
Vermont State Student Loan
Assistance Corporation Student
Loan Revenue Bond (A) (B)
3.800%, 07/01/97 1,335 1,335
----------
VIRGINIA -- 7.5%
Chesapeake, Virginia TECP
3.700%, 07/24/97 1,000 1,000
Penn Ports Virginia TECP
3.800%, 08/07/97 1,500 1,500
Richmond, VA Housing Authority
Old Manchester Project
Series A (A) (B)
4.300%, 07/01/97 3,250 3,250
Virginia State Housing
Revenue Bonds
3.800%, 06/10/98 3,500 3,500
----------
9,250
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
WEST VIRGINIA -- 0.5%
Putnam County, West Virginiarity
Industrial Development Authority
FMC Corporation Project (A) (B)
3.800%, 07/01/97 $ 200 $ 200
West Virginia State Hospital
Finance Authority Revenue
Bond Saint Mary's Hospital
Project (A) (B)
4.200%, 07/01/97 400 400
----------
600
----------
ISCONSIN -- 0.5%
Lac Du Flambeau, Wisconsin Lake
Superior Chippewa Indians
Special Obligation Simpson
Electric Project (A) (B)
4.150%, 07/01/97 600 600
----------
WYOMING -- 5.9%
Converse, Wyoming TECP
3.650%, 07/07/97 2,600 2,600
Gillette County Wyoming TECP
3.800%, 09/10/97 1,400 1,400
Lincoln County, Wyoming
Resource Recovery Revenue
Bond for Exxon Project,
Series C (A) (B) (C)
4.100%, 07/01/97 1,000 1,000
Platte County, Wyoming Pollution
Control Revenue Bond,
Series A (A) (B) (C)
4.200%, 07/01/97 1,400 1,400
Platte County, Wyoming Pollution
Control (A) (B)
4.200%, 07/01/97 500 500
Sublette County, Wyoming Exxon
Project, Series 84 (A) (B)
4.000%, 07/01/97 300 300
----------
7,200
----------
TOTAL MUNICIPAL BONDS
(Cost $126,198) 126,198
----------
TOTAL INVESTMENTS -- 102.8%
(Cost $126,198) 126,198
----------
OTHER ASSETS AND LIABILITIES,
NET -- (2.8%) (3,417)
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par value -- 250 million authorized) based
on 119,607,821 outstanding shares $119,608
Portfolio Shares -- Class C ($0.001
par value -- 250 million authorized)
based on 3,203,258 outstanding shares 3,203
Accumulated Net Realized Loss
on Investments (54)
Undistributed Net Investment Income 24
----------
TOTAL NET ASSETS -- 100.0% $122,781
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE -- CLASS C $1.00
==========
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO --GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
TAN -- TAX ANTICIPATION NOTE
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTE
(A) VARIABLE RATE SECURITIES--THE RATE REFLECTED ON THE STATEMENT OF THE NET
ASSETS IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSOR OF THE
PUT DEMAND OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK OR FINANCIAL INSTITUTION.
(D) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
87
<PAGE>
STATEMENT
OF
OPERATIONS
(000)
FOR THE PERIOD
ENDED
JUNE 30, 1997
COREFUND EQUITY FUNDS [SQUARE BULLET] COREFUND
<TABLE>
<CAPTION>
---------- ----------- -----------
EQUITY CORE EQUITY GROWTH
INDEX FUND FUND(3) EQUITY FUND
---------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C>
Dividends $ 3,973 $ 6,777 $ 1,346
Interest 37 763 371
Less: Foreign taxes withheld -- -- --
------- --------- -------
Total investment income 4,010 7,540 1,717
------- --------- -------
EXPENSES:
Investment advisory fees 800 3,459 1,024
Less: waiver of investment advisory fees (516) -- (20)
Administrative fees 500 1,169 341
Less: waiver of administrative fees (167) (260) (116)
Transfer agent fees & expenses 44 80 30
Custodian fees -- -- --
Professional fees 14 38 10
Registration & filing fees 25 17 12
12b-1 fees-- individual shares -- 32 10
Taxes--other than income 10 -- 5
Printing fees 29 55 18
Organizational costs -- -- --
Miscellaneous 15 23 4
------- --------- -------
Total expenses 754 4,613 1,318
------- --------- -------
NET INVESTMENT INCOME 3,256 2,927 399
------- --------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 3,591 66,598 14,635
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- -- --
Net change in unrealized appreciation on investments 55,389 67,597 12,411
------- --------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $62,236 $137,122 $27,445
======= ========= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 37.39 $ 21.11 $15.43
======= ========= =======
CLASS A
1Net asset value, redemption price 37.37 21.13 15.39
Maximum sales charge of 5.50% 2.17 1.23 0.90
======= ========= =======
2Offering price $ 39.54 $ 22.36 $16.29
======= ========= =======
----------- ------------ --------
SPECIAL INTERNATIONAL BALANCED
EQUITY FUND GROWTH FUND FUND
----------- ------------ --------
INVESTMENT INCOME
<S> <C> <C> <C>
Dividends $ 527 $ 2,650 $ 1,027
Interest 161 225 3,006
Less: Foreign taxes withheld -- (196) --
-------- -------- -------
Total investment income 688 2,679 4,033
-------- -------- -------
EXPENSES:
Investment advisory fees 1,006 1,131 789
Less: waiver of investment advisory fees (609) -- (147)
Administrative fees 168 355 282
Less: waiver of administrative fees (49) (128) (97)
Transfer agent fees & expenses 12 28 19
Custodian fees 8 216 --
Professional fees 11 19 5
Registration & filing fees 7 13 5
12b-1 fees-- individual shares 4 5 9
Taxes--other than income 2 1 6
Printing fees 9 37 14
Organizational costs 2 -- 6
Miscellaneous (4) 33 3
-------- -------- -------
Total expenses 567 1,710 894
-------- -------- -------
NET INVESTMENT INCOME 121 969 3,139
-------- -------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 7,793 3,611 7,717
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- 1,679 --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- (892) --
Net change in unrealized appreciation on investments 3,603 16,581 6,601
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,517 $21,948 $17,457
======== ======== =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $11.27 $ 14.72 $ 13.52
======== ======== =======
CLASS A
1Net asset value, redemption price 11.25 14.70 13.52
Maximum sales charge of 5.50% 0.65 0.86 0.79
======== ======== =======
2Offering price $11.90 $ 15.56 $ 14.31
======== ======== =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0
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 5.50%.
3 THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88 & 89
<PAGE>
STATEMENT
OF
OPERATIONS
(000)
FOR THE PERIOD
ENDED
JUNE 30, 1997
COREFUND FIXED INCOME FUNDS [SQUARE BULLET] COREFUND
<TABLE>
<CAPTION>
---------- ------------ ------------ ------
SHORT TERM SHORT-
INCOME INTERMEDIATE GOVERNMENT BOND
FUND BOND FUND INCOME FUND FUND
---------- ------------ ------------ ------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest $ 1,911 $10,913 $1,438 $13,350
------- ------- ------ -------
Total Investment income 1,911 10,913 1,438 13,350
------- ------- ------ -------
EXPENSES
Investment advisory fees 242 843 101 1,441
Less: waiver of investment advisory fees (160) (379) (14) (759)
Administrative fees 82 421 51 487
Less:waiver of administrative fees (29) (138) (17) (175)
Transfer agent fees & expenses 6 29 5 46
Custodian fees (3) -- -- (35)
Professional fees 5 14 2 47
Registration & filing fees 3 12 (5) 18
12b-1 fees-- individual shares -- 7 4 4
Taxes--other than income -- 10 7 2
Printing fees 3 16 2 18
Organizational costs 2 -- 6 --
Miscellaneous 3 4 3 11
------- ------- ------ -------
Total expenses 154 839 145 1,105
------- ------- ------ -------
NET INVESTMENT INCOME 1,757 10,074 1,293 12,245
------- ------- ------ -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized (loss) gain from:
Security transactions (8) (26) (156) (735)
Option transactions -- -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- -- --
Net unrealized appreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- -- -- --
Net change in unrealized appreciation (depreciation)
on investments 91 993 434 2,749
------- ------- ------ -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,840 $11,041 $1,571 $14,259
======= ======= ====== =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.97 $ 9.83 $ 9.76 $10.24
======= ======= ====== =======
CLASS A
1Net asset value, redemption price 9.96 9.83 9.76 10.24
Maximum sales charge of 3.25% or 4.75% 0.33 0.33 0.33 0.51
------- ------- ------ -------
2Offering price $10.29 $ 10.16 $10.09 $10.75
======= ======= ====== =======
------ ------------ ------------ ----------
GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND BOND FUND BOND FUND
------ ------------ ------------ ----------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest $2,067 $ 83 $ 595 $ 85
------ ----- ------ ------
Total Investment income 2,067 83 595 85
------ ----- ------ ------
EXPENSES
Investment advisory fees 207 9 56 8
Less: waiver of investment advisory fees (32) (6) (56) (8)
Administrative fees 86 4 28 4
Less:waiver of administrative fees (31) (2) (28) (4)
Transfer agent fees & expenses 16 (1) 2 --
Custodian fees 8 -- -- --
Professional fees 4 -- 1 --
Registration & filing fees 4 (1) 2 --
12b-1 fees-- individual shares 1 2 3 1
Taxes--other than income -- -- 1 --
Printing fees 9 -- 1 --
Organizational costs 7 5 1 2
Miscellaneous 14 2 1 1
------ ----- ------ ------
Total expenses 293 12 12 4
------ ----- ------ ------
NET INVESTMENT INCOME 1,774 71 583 81
------ ----- ------ ------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized (loss) gain from:
Security transactions 659 (6) 20 (3)
Option transactions (1,242) -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions 1,006 -- -- --
Net unrealized appreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies 138 -- -- --
Net change in unrealized appreciation (depreciation)
on investments (287) 25 240 24
------ ----- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,048 $ 90 $ 843 $ 102
====== ===== ====== ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.54 $10.05 $10.47 $10.16
====== ===== ====== ======
CLASS A
1Net asset value, redemption price 9.52 10.05 10.47 10.15
Maximum sales charge of 3.25% or 4.75% 0.47 0.34 0.52 0.51
------ ----- ------ ------
2Offering price $ 9.99 $10.39 $10.99 $10.66
====== ===== ====== ======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
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 3.25% FOR THE SHORT TERM INCOME,
SHORT-INTERMEDIATE BOND, GOVERNMENT INCOME AND INTERMEDIATE MUNICIPAL BOND
FUNDS AND 4.75% FOR THE BOND, GLOBAL BOND, PENNSYLVANIA MUNICIPAL BOND AND NEW
JERSEY MUNICIPAL BOND FUNDS.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90 & 91
<PAGE>
STATEMENT
OF
OPERATIONS
(000)
FOR THE PERIOD
ENDED
JUNE 30, 1997
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET FUNDS
-------- ------- --------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------- ------- --------
INVESTMENT INCOME:
Interest $48,486 $48,651 $4,415
------- ------- ------
Total investment income 48,486 48,651 4,415
------- ------- ------
EXPENSES:
Investment advisory fees 3,607 3,542 494
Less: waiver of investment advisory fees (994) (972) (136)
Administrative fees 2,255 2,214 309
Less: waiver of administrative fees (783) (768) (107)
Transfer agent fees & expenses 169 143 20
Professional fees 68 55 4
Registration & filing fees 37 75 7
12b-1 fees 37 57 8
Taxes--other than income 48 49 4
Printing 92 93 12
Miscellaneous 90 36 13
------- ------- ------
Total expenses 4,626 4,524 628
------- ------- ------
NET INVESTMENT INCOME 43,860 44,127 3,787
------- ------- ------
NET REALIZED GAIN
ON INVESTMENTS:
Net realized gain (loss) from security
transactions 8 1 (1)
------- ------- ------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $43,868 $44,128 $3,786
======= ======= ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
92
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS
(000)
FOR THE PERIODS
ENDED
JUNE 30,
[SQUARE BULLET] COREFUND
COREFUND EQUITY FUNDS
<TABLE>
<CAPTION>
------------------ -------------------
EQUITY CORE EQUITY
INDEX FUND(3) FUND(4)
------------------ -------------------
1997 1996 1997 1996(1)
------ ------- ------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $3,256 $ 2,673 $ 2,927 $ 3,058
Net realized gain on investments, forward foreign currency contracts
and foreign currency 3,591 4,702 66,598 43,129
Net unrealized appreciation on investments, forward foreign currency
contracts and translation of assets and liabilites in foreign currencies 55,389 23,222 67,597 23,229
-------- -------- -------- --------
Net increase in net assets resulting from operations 62,236 30,597 137,122 69,416
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Retail Class (a) -- -- -- (35)
Institutional Class (a) -- -- -- (2,133)
Class Y (b) (3,225) (2,677) (2,858) (1,001)
Class A (b) (28) -- (49) (21)
Net realized gains:
Retail Class (a) -- -- -- (1,150)
Institutional Class (a) -- -- -- (57,348)
Class Y (b) (1,484) (3,835) (35,253) --
Class A (b) (6) -- (977) --
-------- -------- -------- --------
Total dividends distributed (4,743) (6,512) (39,137) (61,688)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- --
Proceeds from shares issued -- -- -- 1,033
Reinvestment of cash distributions -- -- -- 1,168
Cost of shares redeemed -- -- -- (674)
-------- -------- -------- --------
Increase (decrease) in net assets from Retail Class transactions -- -- -- 1,527
-------- -------- -------- --------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- --
Proceeds from shares issued -- -- -- 35,302
Reinvestment of cash distributions -- -- -- 58,151
Cost of shares redeemed -- -- -- (92,405)
-------- -------- -------- --------
Increase (decrease) in net assets from Institutional Class transactions -- -- -- 1,048
-------- -------- -------- --------
Class Y (b):
Proceeds from shares issued in merger (c) -- -- -- 34,310
Proceeds from shares issued 43,492 50,936 56,759 16,834
Reinvestment of cash distributions 4,960 6,064 38,110 --
Cost of shares redeemed (30,407) (27,288) (89,855) (23,221)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 18,045 29,712 5,014 27,923
-------- -------- -------- --------
Class A (b):
Proceeds from shares issued in merger (c) -- -- -- 2,807
Proceeds from shares issued 4,101 -- 3,395 575
Reinvestment of cash distributions 34 -- 1,038 --
Cost of shares redeemed (103) -- (2,376) (549)
-------- -------- -------- --------
Increase (decrease) in net assets from Class A transactions 4,032 -- 2,057 2,833
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 22,077 29,712 7,071 33,331
-------- -------- -------- --------
Net increase in net assets 79,570 53,797 105,056 41,059
-------- -------- -------- --------
NET ASSETS:
Beginning of period 166,350 112,553 426,002 384,943
-------- -------- -------- --------
End of period $245,920 $166,350 $531,058 $426,002
======== ======== ======== ========
----------------- ----------------
GROWTH SPECIAL
EQUITY FUND EQUITY FUND
----------------- ----------------
1997 1996 1997 1996(1)
------- ------ ------- ---------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 399 $ 695 $ 121 $ 378
Net realized gain on investments, forward foreign currency contracts
and foreign currency 14,635 10,837 7,793 9,147
Net unrealized appreciation (depreciation) on investments, forward foreign currency
contracts and translation of assets and liabilites in foreign currencies 12,411 17,962 3,603 2,372
-------- -------- ------- -------
Net increase in net assets resulting from operations 27,445 29,494 11,517 11,897
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (393) (691) (177) (388)
Class A (b) (3) (11) (2) (6)
Net realized gains:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (13,864) (2,808) (13,011) (8,564)
Class A (b) (404) (63) (307) (113)
-------- -------- ------- -------
Total dividends distributed (14,664) (3,573) (13,497) (9,071)
-------- -------- ------- -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- (984)
Proceeds from shares issued -- -- -- 166
Reinvestment of cash distributions -- -- -- 115
Cost of shares redeemed -- -- -- (29)
-------- -------- ------- -------
Increase (decrease) in net assets from Retail Class transactions -- -- -- (732)
-------- -------- ------- -------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- (58,929)
Proceeds from shares issued -- -- -- 6,660
Reinvestment of cash distributions -- -- -- 8,821
Cost of shares redeemed -- -- -- (12,704)
-------- -------- ------- -------
Increase (decrease) in net assets from Institutional Class transactions -- -- -- (56,152)
-------- -------- ------- -------
Class Y (b):
Proceeds from shares issued in merger (c) -- -- -- 58,929
Proceeds from shares issued 38,807 24,852 13,884 2,827
Reinvestment of cash distributions 12,752 3,081 13,074 --
Cost of shares redeemed (36,303) (24,528) (16,684) (2,083)
-------- -------- ------- -------
Increase in net assets from Class Y transactions 15,256 3,405 10,274 59,673
-------- -------- ------- -------
Class A (b):
Proceeds from shares issued in merger (c) -- -- -- 984
Proceeds from shares issued 1,712 980 1,020 98
Reinvestment of cash distributions 410 71 310 --
Cost of shares redeemed (1,001) (530) (121) (3)
-------- -------- ------- -------
Increase (decrease) in net assets from Class A transactions 1,121 521 1,209 1,079
-------- -------- ------- -------
Increase in net assets derived from capital share transactions 16,377 3,926 11,483 3,868
-------- -------- ------- -------
Net increase in net assets 29,158 29,847 9,503 6,694
-------- -------- ------- -------
NET ASSETS:
Beginning of period 123,235 93,388 64,824 58,130
-------- -------- ------- -------
End of period $152,393 $123,235 $74,327 $64,824
======== ======== ======= =======
----------------- -----------------
INTERNATIONAL BALANCED
GROWTH FUND FUND
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 969 $ 1,286 $ 3,139 $ 2,183
Net realized gain on investments, forward foreign currency contracts
and foreign currency 5,290 11,844 7,717 4,822
Net unrealized appreciation (depreciation) on investments, forward foreign currency
contracts and translation of assets and liabilites in foreign currencies 15,689 5,712 6,601 6,379
-------- -------- -------- --------
Net increase in net assets resulting from operations 21,948 18,842 17,457 13,384
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (3,802) (2,440) (3,056) (2,108)
Class A (b) (53) (38) (92) (69)
Net realized gains:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) (8,375) (548) (5,885) (840)
Class A (b) (130) (10) (184) (32)
-------- -------- -------- --------
Total dividends distributed (12,360) (3,036) (9,217) (3,049)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Retail Class transactions -- -- -- --
-------- -------- -------- --------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Institutional Class transactions -- -- -- --
-------- -------- -------- --------
Class Y (b):
Proceeds from shares issued in merger (c) -- 16,130 -- 38,306
Proceeds from shares issued 34,899 17,623 23,565 17,797
Reinvestment of cash distributions 11,015 2,732 8,737 2,494
Cost of shares redeemed (31,528) (23,593) (29,150) (27,174)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 14,386 12,892 3,152 31,423
-------- -------- -------- --------
Class A (b):
Proceeds from shares issued in merger (c) -- 59 -- 95
Proceeds from shares issued 489 421 1,285 678
Reinvestment of cash distributions 178 46 293 96
Cost of shares redeemed (506) (592) (833) (360)
-------- -------- -------- --------
Increase (decrease) in net assets from Class A transactions 161 (66) 745 509
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 14,547 12,826 3,897 31,932
-------- -------- -------- --------
Net increase in net assets 24,135 28,632 12,137 42,267
-------- -------- -------- --------
NET ASSETS:
Beginning of period 141,413 112,781 105,703 63,436
-------- -------- -------- --------
End of period $165,548 $141,413 $117,840 $105,703
======== ======== ======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(A) RETAIL AND INSTITUTIONAL CLASS AMOUNTS FOR THE YEAR ENDED JUNE 30, 1996
REPRESENT ACTIVITY OF THE ACQUIRED CONESTOGA FUND FROM NOVEMBER 1, 1995
THROUGH APRIL 14, 1996.
(B) ON APRIL 22, 1996 SERIES A SHARES WERE REDESIGNATED CLASS Y SHARES, AND
SERIES B SHARES WERE REDESIGNATED CLASS A SHARES.
(C) ON APRIL 15 & 22, 1996 THE CONESTOGA FUNDS WERE ACQUIRED BY COREFUNDS, INC.
(1) AMOUNTS REPRESENT CONESTOGA FUNDS ACTIVITY FROM NOVEMBER 1, 1995 THROUGH
APRIL 14, 1996 AND COREFUND ACTIVITY FROM APRIL 15, 1996 TO JUNE 30, 1996.
(2) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS. (3) ON OCTOBER 9, 1996, THE EQUITY INDEX FUND CLASS A
SHARES COMMENCED OPERATIONS.
(4) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
94 & 95
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS
(000)
FOR THE PERIODS
ENDED
JUNE 30,
[SQUARE BULLET] COREFUND
COREFUND FIXED INCOME FUNDS
<TABLE>
<CAPTION>
------------------- ----------------- -----------------
SHORT-
SHORT TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
------------------- ----------------- -----------------
1997 1996(1) 1997 1996 1997 1996
-------- -------- ------- ------- -------- ------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,757 $ 1,174 $10,074 $ 4,696 $ 1,293 $ 892
Net realized (loss) gain on investments, forward foreign
currency contracts and foreign currency (8) (81) (26) (987) (156) 31
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 91 (170) 993 156 434 (414)
------- ------- -------- -------- ------- -------
Net increase in net assets resulting from operations 1,840 923 11,041 3,865 1,571 509
------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (b) (1,748) (1,238) (9,902) (4,567) (1,204) (812)
Class A (b) (9) -- (172) (123) (90) (78)
Net realized gains:
Retail Class (a) -- -- -- -- -- --
Institutional Class (a) -- (32) -- -- -- --
Class Y (b) -- -- -- -- -- --
Class A (b) -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total dividends distributed (1,757) (1,270) (10,074) (4,690) (1,294) (890)
------- ------- -------- -------- ------- -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- (1) -- -- -- --
Proceeds from shares issued -- -- -- -- -- --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed -- (11) -- -- -- --
------- ------- -------- -------- ------- -------
Decrease in net assets from Retail Class transactions -- (12) -- -- -- --
------- ------- -------- -------- ------- -------
Institutional Class (a):
Exchanged for Class Y Shares -- (29,918) -- -- -- --
Proceeds from shares issued -- 5,788 -- -- -- --
Reinvestment of cash distributions -- 931 -- -- -- --
Cost of shares redeemed -- (12,577) -- -- -- --
------- ------- -------- -------- ------- -------
Decrease in net assets from Institutional
Class transactions -- (35,776) -- -- -- --
------- ------- -------- -------- ------- -------
Class Y (b):
Proceeds from shares issued in merger (c) -- 29,918 -- 113,422 -- --
Proceeds from shares issued 16,475 2,116 45,113 16,680 8,152 5,296
Reinvestment of cash distributions 1,808 203 9,516 3,735 612 412
Cost of shares redeemed (11,486) (2,040) (52,263) (28,327) (3,957) (2,718)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from
Class Y transactions 6,797 30,197 2,366 105,510 4,807 2,990
------- ------- -------- -------- ------- -------
Class A (b):
Proceeds from shares issued in merger (c) -- 1 -- 1,207 -- --
Proceeds from shares issued 483 -- 391 282 579 157
Reinvestment of cash distributions 9 -- 143 85 85 70
Cost of shares redeemed (1) -- (865) (445) (311) (285)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from
Class A transactions 491 1 (331) 1,129 353 (58)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 7,288 (5,590) 2,035 106,639 5,160 2,932
------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets 7,371 (5,937) 3,002 105,814 5,437 2,551
------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 30,133 36,070 162,903 57,089 15,230 12,679
------- ------- -------- -------- ------- -------
End of period $37,504 $30,133 $165,905 $162,903 $20,667 $15,230
======= ======= ======== ======== ======= =======
------------------ ----------------- ------------------
INTERMEDIATE
BOND GLOBAL MUNICIPAL
FUND BOND FUND BOND FUND
------------------ ----------------- ------------------
1997 1996(1) 1997 1996 1997 1996
-------- ------- -------- ------- -------- --------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 12,245 $ 8,196 $ 1,774 $ 1,851 $ 71 $ 46
Net realized (loss) gain on investments, forward foreign
currency contracts and foreign currency (735) (1,252) 423 1,197 (6) --
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 2,749 (4,687) (149) (638) 25 13
-------- -------- ------- ------- ------ -------
Net increase in net assets resulting from operations 14,259 2,257 2,048 2,410 90 59
-------- -------- ------- ------- ------ -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (b) (12,161) (8,523) (2,621) (2,254) (34) (10)
Class A (b) (84) (56) (13) (11) (37) (35)
Net realized gains:
Retail Class (a) -- (10) -- -- -- --
Institutional Class (a) -- (1,458) -- -- -- --
Class Y (b) -- -- -- -- -- --
Class A (b) -- -- -- -- -- --
-------- -------- ------- ------- ------ -------
Total dividends distributed (12,245) (10,047) (2,634) (2,265) (71) (45)
-------- -------- ------- ------- ------ -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- (1,294) -- -- -- --
Proceeds from shares issued -- 122 -- -- -- --
Reinvestment of cash distributions -- 44 -- -- -- --
Cost of shares redeemed -- (198) -- -- -- --
-------- -------- ------- ------- ------ -------
Decrease in net assets from Retail Class transactions -- (1,326) -- -- -- --
-------- -------- ------- ------- ------ -------
Institutional Class (a):
Exchanged for Class Y Shares -- (194,533) -- -- -- --
Proceeds from shares issued -- 28,200 -- -- -- --
Reinvestment of cash distributions -- 7,057 -- -- -- --
Cost of shares redeemed -- (28,354) -- -- -- --
-------- -------- ------- ------- ------ -------
Decrease in net assets from Institutional
Class transactions -- (187,630) -- -- -- --
-------- -------- ------- ------- ------ -------
Class Y (b):
Proceeds from shares issued in merger (c) -- 194,533 -- -- -- --
Proceeds from shares issued 18,942 13,215 107 5,150 841 193
Reinvestment of cash distributions 12,215 1,409 2,670 1,604 12 8
Cost of shares redeemed (49,397) (9,632) (602) (797) (269) (167)
-------- -------- ------- ------- ------ -------
Increase (decrease) in net assets from
Class Y transactions (18,240) 199,525 2,175 5,957 584 34
-------- -------- ------- ------- ------ -------
Class A (b):
Proceeds from shares issued in merger (c) -- 1,294 -- -- -- --
Proceeds from shares issued 579 65 31 2 80 126
Reinvestment of cash distributions 78 13 15 10 37 31
Cost of shares redeemed (323) (88) (13) (32) (186) (179)
-------- -------- ------- ------- ------ -------
Increase (decrease) in net assets from
Class A transactions 334 1,284 33 (20) (69) (22)
-------- -------- ------- ------- ------ -------
Increase (decrease) in net assets derived from capital
share transactions (17,906) 11,853 2,208 5,937 515 12
-------- -------- ------- ------- ------ -------
Net increase (decrease) in net assets (15,892) 4,063 1,622 6,082 534 26
-------- -------- ------- ------- ------ -------
NET ASSETS:
Beginning of period 199,878 195,815 33,150 27,068 1,418 1,392
-------- -------- ------- ------- ------ -------
End of period $183,986 $199,878 $34,772 $33,150 $1,952 $ 1,418
======== ======== ======= ======= ====== =======
------------------ -------------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------------ -------------------
1997 1996 1997 1996
-------- ------ --------- ------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 583 $ 234 $ 81 $ 77
Net realized (loss) gain on investments, forward foreign
currency contracts and foreign currency 20 (30) (3) 16
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 240 36 24 (8)
------- ------- ------ -------
Net increase in net assets resulting from operations 843 240 102 85
------- ------- ------ -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (b) (521) (212) (65) (72)
Class A (b) (62) (21) (16) (5)
Net realized gains:
Retail Class (a) -- -- -- --
Institutional Class (a) -- -- -- --
Class Y (b) -- -- (8) (9)
Class A (b) -- -- (2) (1)
------- ------- ------ -------
Total dividends distributed (583) (233) (91) (87)
------- ------- ------ -------
CAPITAL TRANSACTIONS (2):
Retail Class (a):
Exchanged for Class A Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
------- ------- ------ -------
Decrease in net assets from Retail Class transactions -- -- -- --
------- ------- ------ -------
Institutional Class (a):
Exchanged for Class Y Shares -- -- -- --
Proceeds from shares issued -- -- -- --
Reinvestment of cash distributions -- -- -- --
Cost of shares redeemed -- -- -- --
------- ------- ------ -------
Decrease in net assets from Institutional
Class transactions -- -- -- --
------- ------- ------ -------
Class Y (b):
Proceeds from shares issued in merger (c) -- 5,703 -- --
Proceeds from shares issued 3,530 1,175 525 438
Reinvestment of cash distributions 297 134 14 39
Cost of shares redeemed (2,772) (397) (388) (625)
------- ------- ------ -------
Increase (decrease) in net assets from
Class Y transactions 1,055 6,615 151 (148)
------- ------- ------ -------
Class A (b):
Proceeds from shares issued in merger (c) -- 684 -- --
Proceeds from shares issued 1,341 124 99 196
Reinvestment of cash distributions 56 17 15 4
Cost of shares redeemed (420) (153) (22) (3)
------- ------- ------ -------
Increase (decrease) in net assets from
Class A transactions 977 672 92 197
------- ------- ------ -------
Increase (decrease) in net assets derived from capital
share transactions 2,032 7,287 243 49
------- ------- ------ -------
Net increase (decrease) in net assets 2,292 7,294 254 47
------- ------- ------ -------
NET ASSETS:
Beginning of period 9,883 2,589 1,621 1,574
------- ------- ------ -------
End of period $12,175 $ 9,883 $1,875 $ 1,621
======= ======= ====== =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(A) RETAIL AND INSTITUTIONAL CLASS AMOUNTS REPRESENT ACTIVITY OF THE ACQUIRED
CONESTOGA FUND FROM NOVEMBER 1, 1995 THROUGH APRIL 21, 1996.
(B) ON APRIL 22, 1996 SERIES A SHARES WERE REDESIGNATED CLASS Y SHARES, AND
SERIES B SHARES WERE REDESIGNATED CLASS A SHARES.
(C) ON APRIL 15 & 22, 1996 THE CONESTOGA FUNDS WERE ACQUIRED BY COREFUNDS, INC.
(1) AMOUNTS REPRESENT CONESTOGA FUNDS ACTIVITY FROM NOVEMBER 1, 1995 THROUGH
APRIL 14, 1996 AND COREFUND ACTIVITY FROM APRIL 15, 1996 TO JUNE 30, 1996.
(2) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
96 & 97
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS
(000)
FOR THE PERIODS
ENDED
JUNE 30
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET FUNDS
<TABLE>
<CAPTION>
-------------------- ---------------------- -------------------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------------------- ---------------------- -------------------
1997 1996 1997 1996 1997 1996
-------- -------- ---------- -------- --------- --------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 43,860 $ 29,926 $ 44,127 $ 32,976 $ 3,787 $ 2,300
Net realized gain (loss) on securities
transactions 8 (4) 1 (2) (1) --
---------- ---------- ---------- ---------- -------- --------
Net increase in net assets resulting
from operations 43,868 29,922 44,128 32,974 3,786 2,300
---------- ---------- ---------- ---------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (a) (43,173) (28,940) (43,042) (32,056) (3,677) (2,245)
Class C (a) (687) (986) (1,085) (920) (86) (55)
---------- ---------- ---------- ---------- -------- --------
Total dividends distributed (43,860) (29,926) (44,127) (32,976) (3,763) (2,300)
---------- ---------- ---------- ---------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Class Y (a)
Proceeds from shares issued in merger (b) -- 397,193 -- 220,190 -- 51,375
Proceeds from shares issued 2,548,964 2,291,733 2,154,887 1,319,098 392,069 223,212
Reinvestment of cash distributions 4,246 5,323 3,136 3,471 229 216
Cost of shares redeemed (2,610,396) (2,280,888) (2,061,985) (1,262,885) (376,938) (233,363)
---------- ---------- ---------- ---------- -------- --------
(Decrease) increase in net assets
from Class Y (a) transactions (57,186) 413,361 96,038 279,874 15,360 41,440
---------- ---------- ---------- ---------- -------- --------
Class C (a)
Proceeds from shares issued in merger (b) -- 744 -- 2,038 -- 1,258
Proceeds from shares issued 12,429 32,271 44,890 34,793 3,779 2,753
Reinvestment of cash distributions 264 440 1,023 905 79 53
Cost of shares redeemed (19,933) (35,682) (37,956) (35,584) (3,506) (2,738)
---------- ---------- ---------- ---------- -------- --------
(Decrease) increase in net assets from
Class C transactions (7,240) (2,227) 7,957 2,152 352 1,326
---------- ---------- ---------- ---------- -------- --------
(Decrease) increase in net assets derived
from capital share transactions (64,426) 411,134 103,995 282,026 15,712 42,766
---------- ---------- ---------- ---------- -------- --------
Net (decrease) increase in net assets (64,418) 411,130 103,996 282,024 15,735 42,766
---------- ---------- ---------- ---------- -------- --------
NET ASSETS:
Beginning of period 911,948 500,818 809,948 527,924 107,046 64,280
---------- ---------- ---------- ---------- -------- --------
End of period $847,530 $ 911,948 $913,944 $ 809,948 $122,781 $107,046
========== ========== ========== ========== ======== ========
<FN>
(A) ON APRIL 22, 1996 SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B
SHARES WERE REDESIGNATED CLASS C.
(B) ON APRIL 15 & 22, THE CONESTOGA FUNDS WERE AQUIRED BY COREFUNDS INC. </FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
98
<PAGE>
[This page intentionally left blank.]
<PAGE>
FINANCIAL
HIGHLIGHTS
FOR THE PERIODS
ENDED
JUNE 30,
COREFUND EQUITY FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- ----------- ----------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $28.47 $0.51 $ 9.16 $(0.51) $(0.24) $37.39 34.44% $241,413 0.37% 1.63%
1996 23.79 0.51 5.47 (0.51) (0.79) 28.47 25.69 166,350 0.35 1.94
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,533 0.37 2.48
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552 0.35 2.63
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551 0.49 2.82
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166 0.57 2.66
19911 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117 0.97 1.79
CLASS A
199710 $29.62 $0.32 $ 8.05 $(0.38) $(0.24) $37.37 28.58%+ $4,507 0.37% 1.51%
- --------------------
CORE EQUITY FUND(9)
- --------------------
CLASS Y*
1997 $17.26 $0.12 $ 5.32 $(0.12) $(1.47) $21.11 33.10% $515,015 0.98% 0.63%
1996 17.07 0.14 1.49 (0.14) (1.30) 17.26 19.24 414,824 0.97 1.15
INSTITUTIONAL CLASS*
1995 15.00 0.19 2.87 (0.19) (0.80) 17.07 22.00 378,352 1.05 1.44
CLASS A*
1997 $17.28 $0.07 $ 5.32 $(0.07) $(1.47) $21.13 32.74% $16,043 1.23% 0.38%
1996 17.08 0.12 1.49 (0.11) (1.30) 17.28 19.11 11,178 1.22 0.89
RETAIL CLASS*
1995 15.00 0.18 2.87 (0.17) (0.80) 17.08 21.94 6,591 1.34 1.23
PRIOR CLASS
1994 $15.39 $0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $ 50,128 1.49% 0.75%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90 45,677 1.20 0.94
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27 28,103 0.92 1.47
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12,830 0.54 2.30
19902 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.65 2.29
- -------------------
GROWTH EQUITY FUND
- -------------------
CLASS Y**
1997 $14.19 $0.04 $ 2.81 $(0.04) $(1.57) $15.43 21.67% $147,700 0.96% 0.30%
1996 11.18 0.08 3.36 (0.08) (0.35) 14.19 31.36 120,073 0.89 0.64
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345 0.76 0.84
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877 0.69 0.48
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777 0.43 0.85
19923 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418 0.14 1.38
CLASS A**
1997 $14.17 $0.01 $ 2.79 $(0.01) $(1.57) $15.39 21.29% $4,693 1.21% 0.04%
1996 11.17 0.05 3.35 (0.05) (0.35) 14.17 31.00 3,162 1.14 0.40
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043 1.01 0.59
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,73 0.94 0.23
19934 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224 0.80 0.39
- -----------------------
SPECIAL EQUITY FUND(9)
- -----------------------
CLASS Y*
1997 $11.86 $0.02 $ 1.81 $(0.03) $(2.39) $11.27 17.94% $71,980 0.84% 0.19%
1996 11.42 0.07 2.13 (0.07) (1.69) 11.86 22.27 63,680 0.34 0.94
INSTITUTIONAL CLASS*
1995 9.37 0.12 2.12 (0.12) (0.07) 11.42 24.44 57,396 0.32 1.14
CLASS A*
1997 $11.85 $ -- $ 1.81 $(0.02) $(2.39) $11.25 17.73% $2,347 1.14% (0.12)%
1996 11.42 0.08 2.11 (0.07) (1.69) 11.85 22.14 1,144 0.37 0.91
RETAIL CLASS*
1995 9.37 0.12 2.12 (0.12) (0.07) 11.42 24.44 734 0.27 1.29
PRIOR CLASS
19945 $10.00 $0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $ 10,069 0.15% 1.06%
RATIO RATIO OF NET
OF EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO AVG.
(EXCLUDING (EXCLUDING TURNOVER COMM.
WAIVERS) WAIVERS) RATE*** RATE11
----------- ------------ --------- ------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C>
1997 0.71% 1.29% 11% $0.0545
1996 0.71 1.59 13 0.0641
1995 0.76 2.09 27 n/a
1994 0.75 2.23 13 n/a
1993 0.88 2.43 4 n/a
1992 1.06 2.17 27 n/a
19911 1.20 1.56 -- n/a
CLASS A
199710 0.69% 1.19% 11% $0.0545
- --------------------
CORE EQUITY FUND(9)
- --------------------
CLASS Y*
1997 1.03% 0.58% 79% $0.0512
1996 1.01 1.11 114 0.0636
INSTITUTIONAL CLASS*
1995 1.10 1.44 119 n/a
CLASS A*
1997 1.28% 0.33% 79% $0.0512
1996 1.26 0.85 114 0.0636
RETAIL CLASS*
1995 1.53 1.04 119 n/a
PRIOR CLASS
1994 1.51% 0.73% 35% n/a
1993 1.41 0.73 24 n/a
1992 1.23 1.17 39 n/a
1991 1.48 1.36 68 n/a
19902 1.59 1.35 43 n/a
- -------------------
GROWTH EQUITY FUND
- -------------------
CLASS Y**
1997 1.06% 0.20% 74% $0.0451
1996 1.05 0.48 81 0.0601
1995 1.10 0.50 113 n/a
1994 1.11 0.06 127 n/a
1993 1.11 0.17 103 n/a
19923 1.12 0.40 66 n/a
CLASS A**
1997 1.31% (0.06)% 74% $0.0451
1996 1.30 0.23 81 0.0601
1995 1.35 0.25 113 n/a
1994 1.36 (0.19) 127 n/a
19934 1.48 (0.29) 103 n/a
- -----------------------
SPECIAL EQUITY FUND(9)
- -----------------------
CLASS Y*
1997 1.82% (0.79)% 74% $0.0257
1996 1.79 (0.51) 72 0.0539
INSTITUTIONAL CLASS*
1995 1.97 (0.51) 129 n/a
CLASS A*
1997 2.07% (1.05)% 74% $0.0257
1996 1.82 (0.55) 72 0.0539
RETAIL CLASS*
1995 2.24 (0.68) 129 n/a
PRIOR CLASS
19945 2.10% (0.89)% 39% n/a
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
100
<PAGE>
[SQUARE BULLET] COREFUND
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- ----------- ----------
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $13.97 $0.14 $ 1.84 $(0.37) $(0.86) $14.72 15.43% $163,117 1.20% 0.82%
1996 12.29 0.16 1.86 (0.28) (0.06) 13.97 16.72 139,275 1.14 1.05
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838 1.05 0.98
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911 0.99 0.23
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655 0.99 1.22
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594 0.96 1.67
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582 0.99 1.80
19906 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513 1.22 2.57
CLASS A**
1997 $13.96 $0.09 $ 1.85 $(0.34) $(0.86) $14.70 15.09% $2,431 1.45% 0.57%
1996 12.27 0.11 1.89 (0.25) (0.06) 13.96 16.54 2,138 1.39 0.80
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943 1.30 0.73
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019 1.24 0.05
19934 10.07 0.05 1.59 -- -- 11.71 16.29+ 344 1.15 1.51
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997 $12.59 $0.36 $ 1.61 $(0.36) $(0.68) $13.52 16.44% $113,642 0.78% 2.79%
1996 11.06 0.33 1.68 (0.33) (0.15) 12.59 18.41 102,515 0.81 2.79
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21 61,092 0.73 3.51
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429 0.62 3.46
19934 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45 3.38
CLASS A**
1997 $12.59 $0.32 $ 1.61 $(0.32) $(0.68) $13.52 16.15% $4,198 1.03% 2.54%
1996 11.06 0.30 1.68 (0.30) (0.15) 12.59 18.13 3,188 1.06 2.53
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84 2,344 0.98% 3.27
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222 0.87 3.21
19937 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55 5.76
RATIO RATIO OF NET
OF EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO AVG.
(EXCLUDING (EXCLUDING TURNOVER COMM.
WAIVERS) WAIVERS) RATE*** RATE11
----------- ------------ --------- ------
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
<S> <C> <C> <C> <C>
1997 1.29% 0.73% 59% $0.0080
1996 1.25 0.94 41 0.0270
1995 1.19 0.84 59 n/a
1994 1.18 0.04 67 n/a
1993 1.28 0.93 59 n/a
1992 1.40 1.23 87 n/a
1991 1.56 1.23 49 n/a
19906 1.99 1.80 20 n/a
CLASS A**
1997 1.54% 0.48% 59% $0.0080
1996 1.50 0.69 41 0.0270
1995 1.44 0.59 59 n/a
1994 1.43 (0.14) 67 n/a
19934 1.44 1.22 59 n/a
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997 1.00% 2.57% 54% $0.0033
1996 1.03 2.57 74 0.0621
1995 1.07 3.17 46 n/a
1994 1.08 3.00 56 n/a
19934 1.39 2.45 21 n/a
CLASS A**
1997 1.25% 2.32% 54% $0.0033
1996 1.27 2.32 74 0.0621
1995 1.32 2.93 46 n/a
1994 1.33 2.75 56 n/a
19937 1.48 4.83 21 n/a
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED 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. ADDITIONALLY, ON APRIL 15 & 22, 1996 THE CONESTOGA EQUITY AND SPECIAL EQUITY
FUNDS WERE ACQUIRED BY COREFUNDS, INC.; AT WHICH TIME THE INSTITUTIONAL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED
FOR CLASS Y SHARES AND THE RETAIL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED FOR CLASS A SHARES.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SPECIAL
EQUITY FUND, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF EACH FUND
WERE REDESIGNATED CLASS A.
***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 JUNE 1, 1991. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS MARCH 15, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 12, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED. 7 COMMENCED OPERATIONS MARCH 16, 1993. UNLESS
OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED. 8 TOTAL RETURN
DOES NOT REFLECT APPLICABLE SALES LOAD. ADDITIONALLY TOTAL RETURN FOR CLASS Y &
CLASS A FOR THE CORE
EQUITY & SPECIAL EQUITY FUNDS FOR 1996 ARE FOR AN EIGHT MONTH PERIOD ENDED
JUNE 30, 1997.
9 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR 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.
10 COMMENCED OPERATIONS ON OCTOBER 9, 1996. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
11 AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER
SEPTEMBER 1, 1995.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
101
<PAGE>
FINANCIAL
HIGHLIGHTS
FOR THE PERIODS
ENDED
JUNE 30,
COREFUND FIXED INCOME FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- -------- --------- ----------- ----------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.94 $0.53 $ 0.03 $(0.53) $ -- $ 9.97 5.82% $ 37,011 0.47% 5.37%
1996 10.05 0.36 (0.08) (0.38) (0.01) 9.94 2.78 30,132 0.51 5.31
INSTITUTIONAL CLASS*
19951 10.00 0.25 0.03 (0.23) -- 10.05 2.57%+ 36,059 0.63 5.43
CLASS A*
1997 $ 9.93 $0.51 $ 0.03 $(0.51) $ -- $ 9.96 5.59%$ 493 0.73% 5.18%
1996 10.04 0.35 (0.10) (0.35) (0.01) 9.93 2.55 1 0.76 5.05
RETAIL CLASS*
19952 10.01 0.23 0.02 (0.22) -- 10.04 2.87%+ 11 0.88 5.05
- ------------------------------
SHORT-INTERMEDIATE BOND FUND
- ------------------------------
CLASS Y**
1997 $ 9.76 $0.59 $ 0.07 $(0.59) $ -- $ 9.83 6.90% $163,153 0.49% 5.98%
1996 9.84 0.57 (0.08) (0.57) -- 9.76 5.05 159,841 0.55 5.80
1995 9.63 0.53 0.21 (0.53) -- 9.84 8.22 55,128 0.60 5.76
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379 0.58 4.30
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692 0.42 4.62
19923 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11 5.73
CLASS A**
1997 $ 9.76 $0.56 $ 0.07 $(0.56) $ -- $ 9.83 6.64%$ 2,752 0.74% 5.73%
1996 9.84 0.54 (0.08) (0.54) -- 9.76 4.79 3,062 0.81 5.51
1995 9.63 0.54 0.20 (0.53) -- 9.84 7.95 1,961 0.85 5.27
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365 0.83 4.05
19934 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75 3.78
- ------------------------
GOVERNMENT INCOME FUND
- ------------------------
CLASS Y**
1997 $ 9.62 $0.62 $ 0.14 $(0.62) $ -- $ 9.76 8.15% $ 19,007 0.70% 6.40%
1996 9.83 0.61 (0.21) (0.61) -- 9.62 4.09 13,943 0.64 6.17
1995 9.52 0.62 0.31 (0.62) -- 9.83 10.26 11,305 0.59 6.53
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089 0.50 4.93
19935 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44 5.41
CLASS A**
1997 $ 9.62 $0.60 $ 0.14 $(0.60) $ -- $ 9.76 7.88% $ 1,660 0.95% 6.15%
1996 9.84 0.58 (0.22) (0.58) -- 9.62 3.73 1,287 0.88 5.93
1995 9.51 0.61 0.33 (0.61) -- 9.84 10.23 1,374 0.85 6.25
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536 0.75 4.68
19938 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63 5.35
- -------------
BOND FUND11
- -------------
CLASS Y*
1997 $10.15 $0.64 $ 0.09 $(0.64) $ -- $10.24 7.43% $182,364 0.56% 6.29%
1996 10.55 0.43 (0.30) (0.45) (0.08) 10.15 1.23 198,605 0.55 6.28
INSTITUTIONAL CLASS*
1995 9.81 0.61 0.71 (0.58) -- 10.55 13.87 194,442 0.71 6.09
CLASS A*
1997 $10.15 $0.62 $ 0.09 $(0.62) $ -- $10.24 7.15%$ 1,622 0.81% 6.05%
1996 10.56 0.44 (0.33) (0.44) (0.08) 10.15 0.98 1,273 0.80 6.02
RETAIL CLASS*
1995 9.81 0.60 0.72 (0.57) -- 10.56 13.83 1,373 0.97 6.02
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377 1.01% 5.07%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346 0.88 5.16
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180 0.46 6.78
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255 0.47 7.71
19906 10.00 0.50 (0.04) (0.50) -- 9.96 4.64+ 4,593 0.68 7.75
RATIO RATIO OF
OF EXPENSES NET INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
WAIVERS) WAIVERS) RATE***
----------- ------------ ---------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C>
1997 1.05% 4.79% 99%
1996 1.03 4.79 102
INSTITUTIONAL CLASS*
19951 1.08 4.98 40
CLASS A*
1997 1.32% 4.59% 99%
1996 1.25 4.56 102
RETAIL CLASS*
19952 1.33 4.60 40
- ------------------------------
SHORT-INTERMEDIATE BOND FUND
- ------------------------------
CLASS Y*
1997 0.80% 5.67% 158%
1996 0.81 5.54 257
1995 0.84 5.52 405
1994 0.86 4.02 299
1993 0.86 4.18 188
19923 0.84 5.00 51
CLASS A**
1997 1.05% 5.42% 158%
1996 1.06 5.27 257
1995 1.09 5.03 405
1994 1.11 3.77 299
19934 1.19 3.34 188
- ------------------------
GOVERNMENT INCOME FUND
- ------------------------
CLASS Y*
1997 0.85% 6.25% 120%
1996 0.89 5.92 131
1995 0.98 6.14 368
1994 1.00 4.43 157
19935 1.10 4.75 93
CLASS A**
1997 1.10% 6.00% 120%
1996 1.14 5.67 131
1995 1.24 5.86 368
1994 1.25 4.18 157
19938 1.29 4.69 93
- -------------
BOND FUND11
- -------------
CLASS Y*
1997 1.04% 5.81% 210%
1996 0.97 5.86 190
INSTITUTIONAL CLASS*
1995 1.12 5.68 352
CLASS A*
1997 1.29% 5.57% 210%
1996 1.22 5.61 190
RETAIL CLASS*
1995 1.44 5.55 352
PRIOR CLASS
1994 1.60% 4.48% 232%
1993 1.49 4.55 158
1992 1.24 6.01 99
1991 1.41 6.78 47
19906 1.62 6.81 23
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
102
<PAGE>
[SQUARE BULLET] COREFUND
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET RATIO
NET ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO OF NET
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- -------- --------- ----------- ----------
- -----------------
GLOBAL BOND FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 9.70 $0.49 $ 0.09 $(0.74) $ -- $ 9.54 6.18% $ 34,590 0.85% 5.14%
1996 9.62 0.47 0.30 (0.69) -- 9.70 8.00 32,998 0.71 5.81
1995 9.06 0.62 0.24 (0.30) -- 9.62 9.70 26,898 0.64 6.84
19947 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73 5.04
CLASS A**
1997 $ 9.68 $0.42 $ 0.14 $(0.72) $ -- $ 9.52 5.92% $ 182 1.10% 4.89%
1996 9.61 0.61 0.12 (0.66) -- 9.68 7.74 152 0.96 5.56
1995 9.04 0.61 0.24 (0.28) -- 9.61 9.57 170 0.89 6.59
19947 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98 4.79
- ----------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ----------------------------------
CLASS Y**
1997 $ 9.92 $0.42 $ 0.13 $(0.42) $ -- $10.05 5.62% $ 993 0.55% 4.20%
1996 9.83 0.37 0.09 (0.37) -- 9.92 4.74 403 0.81 3.73
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365 0.82 3.91
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088 0.63 3.91
19938 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58 2.74
CLASS A**
1997 $ 9.92 $0.39 $ 0.13 $(0.39) $ -- $10.05 5.36% $ 959 0.80% 3.92%
1996 9.83 0.35 0.09 (0.35) -- 9.92 4.48 1,015 1.08 3.47
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027 1.08 3.65
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311 0.88 3.66
19938 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81 2.51
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997 $10.22 $0.54 $ 0.25 $(0.54) $ -- $10.47 7.92% $ 10,171 0.08% 5.23%
1996 10.16 0.55 0.06 (0.55) -- 10.22 6.02 8,864 0.21 5.25
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39 5.26
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42 5.09
CLASS A**
1997 $10.22 $0.51 $ 0.25 $(0.51) $ -- $10.47 7.65% $ 2,004 0.33% 4.99%
1996 10.16 0.52 0.06 (0.52) -- 10.22 5.76 994 0.46 4.93
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64 4.95
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67 4.84
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997 $10.08 $0.51 $ 0.15 $(0.51) $(0.07) $10.16 6.70% $ 1,477 0.21% 5.02%
1996 10.12 0.51 0.02 (0.51) (0.06) 10.08 5.28 1,317 0.37 4.93
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42 5.21
19949 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432 0.43 5.07
CLASS A**
1997 $10.07 $0.48 $ 0.15 $(0.48) $(0.07) $10.15 6.44%$ 398 0.45% 4.81%
1996 10.12 0.48 0.01 (0.48) (0.06) 10.07 4.93 304 0.60 4.65
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68 4.97
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68 4.82
RATIO RATIO OF
OF EXPENSES NET INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
WAIVERS) WAIVERS) RATE***
----------- ------------ ---------
- -----------------
GLOBAL BOND FUND
- -----------------
CLASS Y**
<S> <C> <C> <C>
1997 1.03% 4.96% 90%
1996 0.95 5.57 67
1995 1.03 6.45 133
19947 1.12 4.65 161
CLASS A**
1997 1.28% 4.71% 90%
1996 1.20 5.32 67
1995 1.28 6.20 133
19947 1.37 4.40 161
- ----------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ----------------------------------
CLASS Y**
1997 1.02% 3.73% 22%
1996 1.31 3.23 10
1995 1.26 3.47 9
1994 1.17 3.37 43
19938 1.45 1.87 10
CLASS A**
1997 1.23% 3.49% 22%
1996 1.61 2.94 10
1995 1.52 3.21 9
1994 1.42 3.12 43
19938 1.68 1.64 10
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997 0.83% 4.48% 39%
1996 0.96 4.50 92
1995 1.14 4.51 18
19949 1.17 4.34 3
CLASS A**
1997 1.08% 4.24% 39%
1996 1.21 4.18 92
1995 1.39 4.20 18
19949 1.42 4.09 3
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997 0.96% 4.27% 19%
1996 1.12 4.18 21
1995 1.17 4.46 32
19949 1.35 4.15 13
CLASS A**
1997 1.20% 4.06% 19%
1996 1.35 3.90 21
1995 1.44 4.21 32
19949 1.60 3.90 13
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
*ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED 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.
ADDITIONALLY, ON APRIL 22, 1996 THE CONESTOGA SHORT-TERM INCOME AND BOND
FUNDS WERE ACQUIRED BY COREFUNDS, INC. AT WHICH TIME THE INSTITUTIONAL CLASS
OF SHARES OF THESE FUNDS WERE REDESIGNATED CLASS Y AND THE RETAIL CLASS OF
SHARES OF THESE FUNDS WERE REDESIGNATED CLASS A.
**ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SHORT TERM
INCOME AND BOND FUNDS, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF
EACH FUND, EXCLUDING THE SHORT TERM INCOME AND BOND FUNDS, WERE REDESIGNATED
CLASS A.
***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 ANNULAIZED.
1 COMMENCED OPERATIONS MAY 15, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS MAY 17, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS APRIL 1, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS DECEMBER 15, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 COMMENCED OPERATIONS MAY 3, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
9 COMMENCED OPERATIONS MAY 16, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE
PERIOD HAVE BEEN ANNUALIZED.
10 TOTAL RETURN DOES NOT REFLECT THE SALES LOAD CHARGED ON THE CLASS A SHARES.
ADDITIONALLY, TOTAL RETURN FOR CLASS Y & CLASS A FOR THE SHORT TERM INCOME
AND BOND FUNDS FOR 1996 ARE FOR THE EIGHT MONTH PERIOD ENDED DECEMBER 31,
1996.
11 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR 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.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
103
<PAGE>
FINANCIAL
HIGHLIGHTS
FOR THE PERIODS
ENDED
JUNE 30,
[SQUARE BULLET] COREFUND
COREFUND MONEY MARKET FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO RATIO OF
NET RATIO OF EXPENSES NET INCOME
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ------------- ----------- ------ --------- ----------- ---------- ----------- -----------
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $(0.05) $1.00 4.97% $835,384 0.51% 4.86% 0.71% 4.66%
1996 1.00 0.05 (0.05) 1.00 5.20 892,562 0.50 5.02 0.77 4.75
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91 0.85 4.54
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87 0.86 2.49
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89 0.85 2.50
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58 0.82 4.14
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80 0.82 6.35
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03 0.84 7.56
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
CLASS C*
1997 $1.00 $0.05 $(0.05) $1.00 4.71% $ 12,146 0.76% 4.61% 0.96% 4.41%
1996 1.00 0.05 (0.05) 1.00 4.94 19,386 0.75 4.81 1.03 4.53
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81 1.10 4.44
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62 1.11 2.24
19931 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- -------------
CASH RESERVE
- -------------
CLASS Y*
1997 $1.00 $0.05 $(0.05) $1.00 5.09% $886,251 0.50% 4.99% 0.70% 4.79%
1996 1.00 0.05 (0.05) 1.00 5.26 790,211 0.50 5.09 0.78 4.81
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04 0.85 4.67
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95 0.85 2.57
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97 0.85 2.58
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68 0.82 4.24
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94 0.82 6.49
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28 0.80 7.82
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62 0.90 8.05
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54 1.14 5.96
1987 1.00 0.06 (0.06) 1.00 5.85 35,054 0.54 5.60 1.01 5.13
CLASS C*
1997 $1.00 $0.05 $(0.05) $1.00 4.83% $ 27,693 0.75% 4.74% 0.95% 4.54%
1996 1.00 0.05 (0.05) 1.00 5.00 19,736 0.75 4.86 1.03 4.58
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86 1.10 4.49
1994 1.00 0.03 (0.03) 1.00 2.74 11,451 0.72 2.70 1.10 2.32
19931 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
- -----------------
TAX-FREE RESERVE
- -----------------
CLASS Y*
1997 $1.00 $0.03 $(0.03) $1.00 3.08% $119,579 0.50% 3.07% 0.70% 2.87%
1996 1.00 0.03 (0.03) 1.00 3.20 104,196 0.48 3.14 0.76 2.86
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09 0.85 2.72
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00 0.87 1.62
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20 0.89 1.82
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39 0.88 2.88
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
CLASS C*
1997 $1.00 $0.03 $(0.03) $1.00 2.83% $ 3,202 0.75% 2.82% 0.95% 2.62%
1996 1.00 0.03 (0.03) 1.00 2.95 2,850 0.73 2.94 1.02 2.65
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80 1.10 2.43
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75 1.12 1.37
19931 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
<FN>
* ON APRIL 22, 1996, SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B SHARES WERE REDESIGNATED CLASS C.
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JANUARY 4, 1993. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS NOVEMBER 21, 1988. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS APRIL 16, 1991. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
104
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND
1. ORGANIZATION
The CoreFund Equity Index Fund, Core Equity Fund, Growth Equity Fund,
Special Equity Fund, International Growth Fund, Balanced Fund (the Equity
Funds), 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 (the Fixed
Income Funds), Treasury Reserve, Cash Reserve, and Tax-Free Reserve (the Money
Market Funds) are portfolios offered by CoreFunds, Inc. (The Company), an
open-end investment company registered under the Investment Company Act of 1940,
as amended. The Company is presently authorized to offers 20 separate portfolios
(the Funds):
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
The financial statements of the Elite Cash Reserve, Elite Treasury Reserve
and Elite Tax-Free Reserve are not presented herein.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Funds' prospectus
provides a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities of the Equity and Fixed Income
Funds 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.
Investment securities of the Money Market Funds are stated at amortized
cost, which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
The books and records of the International Growth Fund and Global Bond Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following 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 International Growth Fund does not isolate the portion of gains or
losses on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Global Bond Fund 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.
105
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of unrealized and realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund and
Global Bond Fund enter into forward foreign currency contracts as hedges against
either specific transactions or portfolio positions. The aggregate principal
amounts of the contracts are not recorded the funds intend to settle the
contracts prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The funds realize gains or losses at the time forward
contracts are extinguished. Financial future contracts are valued at the
settlement price established each day by the board of trade on 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. Dividend income is recorded on ex-dividend
date.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Portfolio may be delayed or limited.
EXPENSES--Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Company are
pro-rated to the Funds on the basis of relative net assets.yClass 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 Equity Index Fund, Core Equity Fund,
Growth Equity Fund, Special Equity Fund, Balanced Fund and Global Bond Fund
declare and pay dividends on a quarterly basis. The International Growth Fund
declares and pays dividends periodically. Such dividends are reinvested in
additional shares unless otherwise requested. The Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve and Tax-Free Reserve distributions from net
investment income are declared on a daily basis and are payable on the first
business day of the following month. Any net realized capital gains on sales of
securities for a Fund 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 International Growth Fund, $413,000 was reclassified
from accumulated net realized gain on investments to accumulated net investment
income. In addition, the following permanent differences primarily attributable
to realized foreign exchange gains and losses, have been relassified from
accumulated net realized gain (loss) on foreign currency transactions to
accumulated net investment income:
(000)
-----
INTERNATIONAL GROWTH FUND $1,679
GLOBAL BOND FUND 1,006
FEDERAL INCOME TAXES--It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income tax is required.
OTHER--Organizational costs incurred with the start up of the Balanced
Fund, Government Income Fund, Short Term Income Fund, Intermediate Municipal
Bond Fund, Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund are being amortized on a straight line basis over a maximum
period of sixty months. If any or all of the shares representing initial capital
of each fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
106
<PAGE>
[SQUARE BULLET] COREFUND
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 each Fund. For its services CSIA receives a fee based on the annual
average daily net assets of each Fund as shown in the following table:
<TABLE>
<CAPTION>
ADVISER INVESTMENT ADVISORY ADVISER INVESTMENT ADVISORY
FUND FEE AGREEMENT DATE FUND FEE AGREEMENT DATE
- ----------------- ------ ------------------- --------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index 0.40% March 25, 1991 Short Term Income 0.74% April 12, 1996
Core Equity 0.74 April 12, 1996 Short-Intermediate Bond 0.50 March 25, 1991
Growth Equity 0.75 March 25, 1991 Government Income 0.50 March 25, 1991
Special Equity 1.50 April 12, 1996 Bond 0.74 April 12, 1996
International
Growth 0.80 December 5, 1989 Global Bond 0.60 March 25, 1991
Balanced 0.70 March 25, 1991 Intermediate Municipal
Bond 0.50 March 25, 1991
Treasury Reserve 0.40 April 12, 1996 Pennsylvania Municipal
Cash Reserve 0.40 April 12, 1996 Bond 0.50 May 15, 1994
Tax-Free Reserve 0.40 April 12, 1996 New Jersey Municipal
Bond 0.50 May 15, 1994
</TABLE>
Advisory fees are computed daily and paid monthly for all Funds.
Additionally, for the year ended June 30, 1997, CSIA has voluntarily waived a
portion of their fees in order to assist the Funds in maintaining competitive
expense ratios.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, in
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
Sub-Advisory services are provided to the CoreStates Advisers for the
International Growth Fund by Martin Currie, Inc. and Aberdeen Managers (The
"Sub-Advisers"). Sub-Advisory services are provided for the Global Bond Fund 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 Fund'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 Funds. SFR voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
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 Funds' Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the Funds.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Funds' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the Plan) for those Funds
offering Class A and C shares. The Plan provides for the payment by the Company
to the Distributor of up to 0.25% of the daily net assets of each Class A and C
Portfolio to which the Plan is applicable. The Distributor is authorized to use
this fee as compensation for its distribution-related services and as payment to
certain securities broker/dealers and financial institutions that enter into
shareholder servicing agreements or broker agreements with the Distributor. The
Funds paid approximately $2,071,000 to affiliated brokers for commissions earned
on the sales of the shares of the Funds.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Funds.
The Funds have paid legal fees in the amount of $187,000 to a law firm in
which the Secretary of the Company is a partner.
107
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
5. INVESTMENT TRANSACTIONS
During the year ended June 30, 1997, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term
securities, were as follows: <TABLE> <CAPTION>
- ---------------------------------------------------------------------------------------------------------------
--------------------------------- -------------------------------
PURCHASES SALES
--------------------------------- -------------------------------
U.S. U.S.
PORTFOLIO INVESTMENT TRANSACTIONS (000) GOVERNMENT OTHER TOTAL GOVERNMENT OTHER TOTAL
------------ --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Equity Index Fund $ -- $ 41,562 $ 41,562 $ -- $ 21,792 $ 21,792
Core Equity Fund -- 360,782 360,782 -- 377,058 377,058
Growth Equity Fund -- 99,072 99,072 -- 95,849 95,849
Special Equity Fund -- 47,567 47,567 -- 47,793 47,793
International Growth Fund -- 93,823 93,823 -- 80,367 80,367
Balanced Fund 17,498 37,932 55,430 6,264 51,482 57,746
Short Term Income Fund 18,275 11,227 29,502 18,994 7,177 26,171
Short-Intermediate Bond Fund 169,942 73,534 243,476 160,267 83,151 243,418
Government Income Fund 26,799 -- 26,799 23,101 -- 23,101
Bond Fund 289,125 99,353 388,478 286,710 112,502 399,212
Global Bond Fund -- 24,856 24,856 -- 30,685 30,685
Intermediate Municipal Fund -- 942 942 -- 365 365
Pennsylvania Municipal Bond Fund -- 6,182 6,182 -- 4,110 4,110
New Jersey Municipal Bond Fund -- 867 867 -- 287 287
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Certain net capital losses incurred subsequent to October 31, 1996 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1998. The Funds had capital loss carryforwards at June 30, 1997,
as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/97 2002 2003 2004 2005
------------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Short Term Income Fund $ 88,520 $ -- $ -- $ -- $ 88,520
Short-Intermediate Bond Fund 2,907,103 -- 1,483,436 217,497 1,206,170
Government Income Fund 319,174 -- 222,660 4,127 92,387
Bond Fund 1,702,115 -- -- -- 1,702,115
Global Bond Fund 1,573,551 -- 844,493 -- 729,058
Intermediate Term Municipal Bond Fund 79,158 -- 41,918 34,827 2,413
Pennsylvania Municipal Bond Fund 96,691 73,679 95 8,784 14,133
Treasury Reserve 9,082 -- -- -- 9,082
Cash Reserve 167,012 134,628 23,362 9,022 --
Tax-Free Reserve 54,381 5,273 44,981 4,127 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
At June 30, 1997 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, 1997 for each fund within the
CoreFunds is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
------------ ------------ --------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN (LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ --------
<S> <C> <C> <C>
Equity Index Fund $100,868 $(2,365) $98,503
Core Equity Fund 125,274 (13,875) 111,399
Growth Equity Fund 46,345 (1,369) 44,976
Special Equity Fund 16,602 (10,082) 6,520
International Growth Fund 32,813 (4,297) 28,516
Balanced Fund 20,203 (1,004) 19,199
Short Term Income Fund 40 (27) 13
Short-Intermediate Bond Fund 794 (497) 297
Government Income Fund 191 (141) 50
Bond Fund 1,253 (618) 635
Global Bond Fund 119 (356) (237)
Intermediate Municipal Fund 22 (1) 21
Pennsylvania Municipal Bond Fund 278 (20) 258
New Jersey Municipal Bond Fund 48 (1) 47
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
108
<PAGE>
[SQUARE BULLET] COREFUND
6. FORWARD FOREIGN CURRENCY CONTRACTS
The International Growth Fund and Global Bond Fund enter into forward foreign
currency contracts as hedges against portfolio positions. Such contracts, which
protect the value of a Fund's investment securities against a decline in the
value of currency, do not eliminate fluctuations in the underlying prices of the
securities. They simply establish an exchange rate at a future date. Also,
although such contracts tend to minimize the risk of loss due to a decline in
the value of a hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of such foreign currency
increase. The following forward foreign currency contracts were outstanding at
June 30, 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GLOBAL BOND FUND:
Foreign Currency Sales:
Unrealized
Contracts to In Exchange Appreciation/
Deliver/Receive For (Depreciation)
--------------- ----------- --------------
<S> <C> <C> <C>
7/23/97 DM 9,450,000 $5,471,917 $ 45,959
7/23-9/23/97 DK 17,000,000 2,640,875 75,155
9/12/97 GP 3,030,000 5,000,864 3,373
9/23/97 SK 13,376,000 1,742,347 7,518
----------
Net Unrealized Appreciation $ 132,005
==========
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
CURRENCY LEGEND
DM German Marks
DK Danish Kroner
GP British Pounds
SK Swedish Krona
At June 30, 1997, the CoreFund Global Bond Fund had unrealized gains on closed
but unsettled forward foreign currency contracts of $83,006 scheduled to settle
between July 23, 1997 and September 12, 1997.
109
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
7. CONCENTRATION OF CREDIT RISK
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in debt instruments of
municipal issuers. Although these Funds maintain a diversified portfolio, with
the exception of the Pennsylvania Municipal Bond Fund and the New Jersey
Municipal Bond Fund, the issuers ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities that
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At June 30, 1997, the percentage of
portfolio investments by each revenue source was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ ---------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL
BOND BOND BOND TAX-FREE
FUND FUND FUND RESERVE
------------ ------------ ---------- --------
REVENUE BONDS:
<S> <C> <C> <C> <C>
Education Bonds 10.9% 25.1% 21.1% 8.9%
Health Care Bonds 6.8 11.1 9.4 8.3
Transportation Bonds 11.2 6.6 2.8 4.4
Utility Bonds 14.8 10.1 10.3 6.6
Housing Bonds -- 3.5 -- 6.5
Pollution Control Bonds -- -- -- 10.4
Industrial Bonds 5.3 15.4 -- 7.8
Public Facility Bonds -- 1.3 2.9 1.6
Resource Recovery Bonds -- -- -- 0.8
Other 18.3 1.6 6.6 11.7
GENERAL OBLIGATIONS 32.7 25.3 46.9 3.5
TAX EXEMPT COMMERCIAL PAPER -- -- -- 23.9
TAX AND REVENUE ANTICIPATION NOTES -- -- -- 1.6
TAX ANTICIPATION NOTES -- -- -- 4.0
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The rating of long-term debt as a percentage of total value of investments
at June 30, 1997 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
SHORT- PENNSYLVANIA NEW JERSEY
SHORT TERM INTERMEDIATE GOVERNMENT GLOBAL INTERMEDIATE MUNICIPAL MUNICIPAL
INCOME BOND INCOME BOND BOND MUNICIPAL BOND BOND
FUND FUND FUND FUND FUND FUND FUND FUND
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
STANDARD & POORS RATINGS:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 56% 71% 98% 77% 84% 68% 65% 37%
AA+ -- -- -- -- 10 3 -- --
AA 3 -- -- -- 5 16 11 18
AA- 1 2 -- 1 -- 3 8 9
A+ 13 4 -- 3 -- 3 3 --
A 3 5 -- 3 -- -- 2 --
A- 3 2 -- 1 -- -- 1 --
BBB+ -- 1 -- 4 -- -- -- --
BBB 5 4 -- 2 -- -- -- --
BBB- 5 4 -- 4 -- -- -- --
BB+ -- 1 -- -- -- -- -- --
BB -- 1 -- -- -- -- -- --
NR 11 5 2 5 1 7 10 36
----- ----- ----- ----- ------ ------ ------ ------
100% 100% 100% 100% 100% 100% 100% 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
110
<PAGE>
[SQUARE BULLET] COREFUND
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount on an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by the issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At June 30, 1997, the percentage of securities with credit
enhancements are as follows:
- ----------------------------------------------------------------------------
------- ----------
LETTERS
OF BOND
CREDIT INSURANCE
------- ----------
Intermediate Municipal Bond Fund --% 66.3%
Pennsylvania Municipal Bond Fund -- 51.4
New Jersey Municipal Bond Fund 3.7 19.5
Tax-Free Reserve 54.2 37.8
- ----------------------------------------------------------------------------
8. SHARE TRANSACTIONS (000):
The following are the share transactions for the year ended June 30, 1997.
<TABLE>
<CAPTION>
------ ------- ------- ------- ------------- -------- -------- ------- --------
EQUITY CORE GROWTH SPECIAL INTERNATIONAL
INDEX EQUITY EQUITY EQUITY GROWTH BALANCED TREASURY CASH TAX-FREE
FUND FUND(1) FUND FUND FUND FUND RESERVE RESERVE RESERVE
------ ------- ------ ------- ------------- -------- -------- ------- --------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 1,368 3,083 2,709 1,267 2,555 1,854 2,548,964 2,154,887 392,069
Shares issued in lieu
of cash distributions 158 2,104 937 1,299 840 694 4,246 3,136 229
Shares redeemed (913) (4,824) (2,533) (1,549) (2,276) (2,286) (2,610,396) (2,061,985) (376,938)
----- ------ ------ ------ ------ ------ ---------- ---------- --------
Net increase (decrease) 613 363 1,113 1,017 1,119 262 (57,186) 96,038 15,360
===== ====== ====== ====== ====== ====== ========== ========== ========
CLASS A/C
Shares issued 123 181 120 92 35 100 12,429 44,890 3,779
Shares issued in lieu
of cash distributions 1 57 30 31 14 23 264 1,023 79
Shares redeemed (3) (126) (68) (11) (37) (66) (19,933) (37,956) (3,506)
----- ------ ------ ------ ------ ------ ---------- ---------- --------
Net increase (decrease) 121 112 82 112 12 57 (7,240) 7,957 352
===== ====== ====== ====== ====== ====== ========== ========== ========
TOTAL SHARE ACTIVITY
FOR PERIOD 734 475 1,195 1,129 1,131 319 (64,426) 103,995 15,712
===== ====== ====== ====== ====== ====== ========== ========== ========
<FN>
(1) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND. AMOUNTS DESIGNATED AS "--"
ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
111
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
8. SHARE TRANSACTIONS (000): -- CONTINUED
<TABLE>
<CAPTION>
---------- ------------ ---------- ----- ------- ------------ ------------ ----------
SHORT TERM SHORT- GOVERNMENT GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
INCOME INTERMEDIATE INCOME BOND BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND FUND FUND FUND BOND FUND BOND FUND BOND FUND
---------- ------------ ---------- ----- ------- ------------ ------------ ----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 1,654 4,595 844 1,850 11 84 340 52
Shares issued in lieu
of cash distributions 181 970 63 1,198 276 1 28 1
Shares repurchased (1,154) (5,334) (408) (4,823) (62) (27) (267) (39)
------ ------ ---- ------ --- ---- ---- ----
Net increase (decrease) 681 231 499 (1,775) 225 58 101 14
====== ====== ==== ====== === ==== ==== ====
CLASS A
Shares issued 48 40 59 57 3 8 129 10
Shares issued in lieu
of cash distributions 1 14 9 8 1 4 5 1
Shares repurchased -- (88) (32) (32) (1) (19) (40) (2)
------ ------ ---- ------ --- ---- ---- ----
Net increase (decrease) 49 (34) 36 33 3 (7) 94 9
====== ====== ==== ====== === ==== ==== ====
TOTAL SHARE ACTIVITY
FOR PERIOD 730 197 535 (1,742) 228 51 195 23
====== ====== ==== ====== === ==== ==== ====
</TABLE>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
112
<PAGE>
[SQUARE BULLET] COREFUND
(UNAUDITED)
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, each portfolio is designating
long-term capital gains, qualifying dividends and exempt income with regard to
distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX (F)
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST TAX CREDIT(2)
- --------- ------------- ------------- ------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index Fund 26% 74% 100% 100% 0% 0%
Core Equity Fund 35% 65% 100% 24% 0% 0%
Growth Equity Fund 91% 9% 100% 92% 0% 0%
Special Equity Fund 19% 81% 100% 4% 0% 0%
International Growth Fund 61% 39% 100% 0% 0% 9%(3)
Balanced Fund 44% 56% 100% 18% 0% 0%
Short Term Income Fund 0% 100% 100% 0% 0% 0%
Short-Intermediate Bond Fund 0% 100% 100% 0% 0% 0%
Government Income Fund 0% 100% 100% 0% 0% 0%
Bond Fund 0% 100% 100% 0% 0% 0%
Global Bond Fund 0% 100% 100% 0% 0% 0%
Intermediate Municipal Bond Fund 0% 100% 100% 0% 100% 0%
Pennsylvania Municipal Bond Fund 0% 100% 100% 0% 100% 0%
New Jersey Municipal Bond Fund 11% 89% 100% 0% 100% 0%
Treasury Reserve 0% 100% 100% 0% 0% 0%
Cash Reserve 0% 100% 100% 0% 0% 0%
Tax-Free Reserve 0% 100% 100% 0% 100% 0%
<FN>
Please consult your tax adviser for proper treatment of this information.
- ----------
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.
(2) SEE ATTACHED NOTICE WHICH DETAILS THE PER SHARE AMOUNT OF FOREIGN TAXES PAID
BY COUNTRY AND THE PER SHARE AMOUNT OF EACH DIVIDEND THAT REPRESENTS INCOME
DERIVED FROM SOURCES WITHIN EACH COUNTRY.
(3) THIS AMOUNT REPRESENTS THE FOREIGN TAX CREDIT FOR CLASS Y. THE FOREIGN TAX
CREDIT FOR CLASS A IS 10%.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE PORTFOLIO'S TOTAL
DISTRIBUTIONS.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME
DISTRIBUTIONS OF THE PORTFOLIO.
</FN>
</TABLE>
113
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
(CONTINUED)
AS OF
JUNE 30, 1997
[SQUARE BULLET] COREFUND
(UNAUDITED)
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
The CoreFund International Growth Fund has made an election under Section
853 of the Internal Revenue Code to provide a foreign tax deduction or credit to
its shareholders for the fiscal year ended June 30, 1997. The information
provided below is pertinent to taxpayers who meet the following two criteria: 1)
file a U.S. Federal Income Tax Return on the basis of the fiscal year ended June
30, 1997, and 2) held shares of the Fund on the dividend record date of December
30, 1996.
The amount per share of income and foreign taxes paid to each country is
listed in the following schedule:
<TABLE>
<CAPTION>
Class Y Class A
Gross Foreign Gross Foreign
Country Dividend Taxes Paid Dividend Taxes Paid
- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Argentina................................................... 0.0019 0.0000 0.0018 0.0000
Australia................................................... 0.0169 0.0005 0.0155 0.0005
Austria..................................................... 0.0012 0.0000 0.0011 0.0000
Belgium..................................................... 0.0035 0.0004 0.0032 0.0004
Denmark..................................................... 0.0002 0.0000 0.0002 0.0000
Finland..................................................... 0.0002 0.0000 0.0002 0.0000
France...................................................... 0.0163 0.0021 0.0150 0.0021
Germany..................................................... 0.0162 0.0014 0.0148 0.0014
Hong Kong................................................... 0.0355 0.0000 0.0323 0.0000
Indonesia................................................... 0.0015 0.0000 0.0014 0.0000
Italy....................................................... 0.0058 0.0004 0.0053 0.0004
Japan....................................................... 0.0368 0.0037 0.0338 0.0037
Malaysia.................................................... 0.0057 0.0013 0.0053 0.0013
Mexico...................................................... 0.0004 0.0000 0.0004 0.0000
Netherlands................................................. 0.0143 0.0019 0.0132 0.0019
New Zealand................................................. 0.0018 0.0002 0.0016 0.0002
Norway...................................................... 0.0003 0.0000 0.0003 0.0000
Philippines................................................. 0.0001 0.0000 0.0001 0.0000
Singapore................................................... 0.0043 0.0008 0.0040 0.0008
Spain....................................................... 0.0094 0.0006 0.0086 0.0006
South Africa................................................ 0.0022 0.0001 0.0020 0.0001
Sweden...................................................... 0.0078 0.0008 0.0072 0.0008
Switzerland................................................. 0.0116 0.0012 0.0106 0.0012
Thailand.................................................... 0.0115 0.0009 0.0106 0.0009
United Kingdom.............................................. 0.1512 0.0158 0.1391 0.0158
United States............................................... 0.0452 0.0001 0.0412 0.0001
------- ------- ------- -------
0.4017 0.0322 0.3687 0.0322
</TABLE>
114
<PAGE>
SHAREHOLDER
NOTES
[SQUARE BULLET] COREFUND
115
<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 FUNDS ARE NOT
DEPOSITS OR OBLIGATIONS 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. INVESTMENTS IN SHARES OF A MUTUAL FUND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. CORESTATES BANK, N.A.
SERVES AS CUSTODIAN FOR THE FUNDS. SEIFINANCIAL SERVICES COMPANY SERVES AS
DISTRIBUTOR AND IS NOT AFFILIATED WITH CORESTATES BANK, N.A.
<PAGE>
COREFUNDS,
INC.
[SQUARE BULLET]
DIRECTORS
EMIL J. MIKITY, CHAIRMAN
GEORGE H. STRONG
ERIN ANDERSON
THOMAS TAYLOR
CHERYL 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
SEIINVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
LEGAL COUNSEL
MORGAN, LEWIS &BOCKIUS
PHILADELPHIA, PA 19103
AUDITORS
ERNST & YOUNG LLP
PHILADELPHIA, PA 19103
INVESTMENT ADVISER
[COREFUND LOGO]
CORESTATES INVESTMENT ADVISERS FOR MORE INFORMATION, CALL COREFUND AT
1-800-355-CORE (2673).
COR-F-044-05
<PAGE>
CoreFunds,Inc.
-------------
ELITE CASH RESERVE
ANNUAL REPORT
June 30, 1997
<PAGE>
INVESTMENT ADVISER'S REPORT
COREFUND ELITE CASH RESERVE
JUNE 30, 1997
The CoreFund Elite Cash Reserve Fund (Class Y) returned 5.30% for the one-year
period ended June 30, 1997. The Fund significantly outperformed it's benchmark
index, The IBC/Donoghue All-Taxable Money Fund, which returned 4.87% for the
same period.
The Fund's assets decreased by 46.1% during the period from $384.4 million on
June 30, 1996 to $207 million on June 30, 1997.
The average weighted maturity was reduced during this first quarter of 1997 to
accommodate this move. The average weighted maturity changed from 45-55 to 55-65
days during the one-year period. The current maturity target for the CoreFund
Elite Cash Reserve is 65 to 70 days.
The portfolio structure continues to favor commercial paper as it offers the
best absolute value to the Fund. Other spread products, such as, floaters,
insurance funding agreements and corporate note also enhance the overall yield.
We continue to use a laddered approach and look for added value along the money
market yield curve.
<PAGE>
<PAGE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER - 57.4%
BANKING - 7.3%
Abbey National Bank (A)
5.770%, 07/01/97 ...................... $ 150 $ 148
Abm Amro North American Finance
5.479%, 07/09/97 ...................... 5,000 4,994
Cit Group Holdings
5.628%, 08/21/97 ...................... 5,000 4,961
Eureka Securitization
5.580%, 09/03/97 ...................... 5,000 4,950
---------
Total Banking 15,053
---------
FINANCIAL SERVICES - 23.8%
AI Credit
5.560%, 07/21/97 ...................... 5,000 4,985
Ameritech Capital Funding
5.799%, 12/08/97 ...................... 5,000 4,875
Asset Securitization Coop
5.715%, 07/10/97 ...................... 4,450 4,444
5.606%, 08/28/97 ...................... 5,000 4,955
Ciesco
5.679%, 08/12/97 ...................... 5,000 4,967
Merrill Lynch
5.494%, 07/01/97 ...................... 5,000 5,000
5.689%, 08/01/97 ...................... 5,000 4,976
Morgan Stanley
5.518%, 07/15/97 ...................... 5,000 4,989
5.610%, 09/12/97 ...................... 5,000 4,943
Pitney Bowes Credit
5.670%, 07/07/97 ...................... 5,000 4,995
---------
Total Financial Services 49,129
---------
INDUSTRIAL - 16.7%
Amoco
5.587%, 07/08/97 ...................... 5,000 4,995
5.500%, 08/13/97 ...................... 5,000 4,967
Ford Motor Credit
5.638%, 08/27/97 ...................... 5,000 4,956
5.640%, 12/03/97 ...................... 5,000 4,878
1
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
General Electric Capital
5.603%, 07/28/97 ...................... $5,000 $ 4,979
5.765%, 10/31/97 ...................... 5,000 4,905
Mobil Australia Finance
5.694%, 08/06/97 ...................... 5,000 4,972
--------
Total Industrial 34,652
--------
SOVEREIGNTIES - 9.6%
Province of British Columbia
5.655%, 07/16/97 ...................... 5,000 4,988
5.783%, 10/29/97 ...................... 5,000 4,906
Province of Quebec
5.667%, 07/03/97 ...................... 5,000 4,998
5.603%, 07/17/97 ...................... 5,000 4,988
--------
Total Sovereignties 19,880
--------
TOTAL COMMERCIAL PAPER
(Cost $118,714) ............................................ 118,714
- -----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.3%
FHLB
6.000%, 09/24/97 ...................... 5,000 5,006
5.260%, 12/10/97 (A) .................. 5,000 4,999
5.810%, 01/23/98 ...................... 5,000 5,000
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $15,005) ............................................. 15,005
- -----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 2.8%
Capita Equipment Receivables Trust, Series 1996-1, Class A1
5.600%, 10/15/97 ...................... 869 869
Goldman Sachs Asset Backed Securities Investment Trust,
Series 1997-C, Class N (A)
5.688%, 07/16/97 ...................... 5,000 5,000
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $5,869) .............................................. 5,869
- -----------------------------------------------------------------------------
2
<PAGE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 10.8%
FINANCIAL SERVICES - 3.5%
Abbey National Treasury Services (A)
5.650%, 04/15/98 ...................... $5,000 $ 4,998
Associates Corporation of North America
7.750%, 11/01/97 ...................... 2,200 2,215
--------
Total Financial Services 7,213
--------
INDUSTRIAL - 7.3%
E.I. duPont de Nemours
5.590%, 10/08/97 ...................... 5,000 5,000
8.650%, 12/01/97 ...................... 5,000 5,061
Toyota Motor Credit (A)
5.680%, 07/01/97 ...................... 5,000 5,000
--------
Total Industrial 15,061
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $22,274) ............................................. 22,274
- -----------------------------------------------------------------------------
MASTER NOTES - 1.8%
FINANCIAL SERVICES - 1.8%
Associates Corporation of North America (A)
5.497%, 07/01/97 ...................... 3,647 3,647
SLMA (A)
5.220%, 07/01/97 ...................... 14 14
--------
Total Financial Services 3,661
--------
TOTAL MASTER NOTES
(Cost $3,661) .............................................. 3,661
- -----------------------------------------------------------------------------
TIME DEPOSITS - 8.2%
BANKING - 8.2%
Bank of Montreal
6.000%, 07/01/97 ...................... 5,000 5,000
First Union Bank
6.000%, 07/01/97 ...................... 2,000 2,000
Republic New York
6.000%, 07/01/97 ...................... 5,000 5,000
Sumitomo Bank
6.125%, 07/01/97 ...................... 5,000 5,000
--------
Total Banking 17,000
--------
3
<PAGE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE CASH RESERVE (000) (000)
- --------------------------------------------------------------------------------
TOTAL TIME DEPOSITS
(Cost $17,000) .............................................. $ 17,000
- -----------------------------------------------------------------------------
INSURANCE FUNDING AGREEMENTS - 2.4%
FINANCIAL SERVICES - 2.4%
Allstate (A)
5.745%, 07/01/97 ...................... $5,000 5,000
--------
TOTAL INSURANCE FUNDING AGREEMENTS
(Cost $5,000) ............................................... 5,000
- -----------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 7.2% BANKING - 7.2% National Westminster Bank PLC
5.940%, 06/26/98 ...................... 5,000 4,997
Societe Generale
6.080%, 06/09/98 ...................... 5,000 4,998
Swiss Bank
6.020%, 06/12/98 ...................... 5,000 5,002
--------
Total Banking 14,997
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $14,997) .............................................. 14,997
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.4%
Swiss Bank 5.95%, dated 06/30/97, matures
07/01/97, repurchase price $5,000,826 (collateralized by U.S. Treasury
Note, par value $5,025,000, 6.50%, 04/30/99;
market value $5,121,480) ................. 5,000 5,000
--------
TOTAL REPURCHASE AGREEMENT
(Cost $5,000) ............................................... 5,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.3%
(Cost $207,520) ................................................ 207,520
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.3%) ........................ (533)
- -----------------------------------------------------------------------------
4
<PAGE>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
VALUE
ELITE CASH RESERVE (000)
- ----------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 750 million authorized) based on
206,990,198 outstanding shares ................................. $206,990
Accumulated net realized loss on investments (3)
- -----------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ......................................... $206,987
- -----------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE .................... $1.00
- -----------------------------------------------------------------------------
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
PLC -- PUBLIC LIMITED COMPANY
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
5
<PAGE>
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the year ended June 30, 1997
ELITE CASH RESERVE+
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ................................................. $19,367
-------
EXPENSES:
Investment advisory fees .................................... 710
Less investment advisory fees waived ........................ (659)
Administrative fees ......................................... 888
Less administrative fees waived ............................. (521)
Transfer agent fees & expenses .............................. 57
Registration & filing fees .................................. 35
Printing .................................................... 32
Professional fees ........................................... 29
Directors fees .............................................. 10
Insurance ................................................... 4
Miscellaneous ............................................... 15
-------
Total expenses .................................................... 600
-------
NET INVESTMENT INCOME ............................................. 18,767
-------
NET REALIZED LOSS ON INVESTMENTS .................................. (3)
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $18,764
=======
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY RESERVE.
See accompanying notes to financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the years ended June 30
ELITE CASH RESERVE+
- --------------------------------------------------------------------------------
1997 1996
----------- --------
OPERATIONS:
Net investment income ................ $ 18,767 $ 21,639
Net realized loss on securities sold . (3) --
----------- --------
Net increase in net assets resulting
from operations ................... 18,764 21,639
----------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ................ (18,767) (21,639)
----------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued .......... 825,899 596,669
Cost of shares redeemed .............. (1,003,355) (618,820)
----------- --------
Decrease in net assets derived from
capital share transactions ........ (177,456) (22,151)
----------- --------
NET DECREASE IN NET ASSETS: ................ (177,459) (22,151)
NET ASSETS:
Beginning of period .................. 384,446 406,597
----------- --------
End of period ........................ 206,987 $384,446
=========== ========
SHARES ISSUED AND REDEEMED:
Shares issued ........................ 825,899 596,669
Shares redeemed ...................... (1,003,355) (618,820)
----------- --------
Decrease in net shares derived from
capital share transactions ........ (177,456) (22,151)
----------- --------
OUTSTANDING SHARES:
Beginning of period .................. 384,446 406,597
----------- --------
End of period ........................ 206,990 384,446
=========== ========
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY RESERVE.
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 1997
ELITE CASH RESERVE+
- ------------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIB-
BUTIONS RATIO RATIO OF
NET FROM NET NET RATIO OF EXPENSES NET INCOME
ASSET NET NET ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE INVEST- INVEST- VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING MENT MENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ------ ------ --------- ------ -------- ---------- ---------- -------- --------
For the year ended
June 30, 1997 $1.00 0.05 (0.05) $1.00 5.43% $206,987 0.17% 5.28% 0.50% 4.94%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.62% $384,446 0.15% 5.46% 0.76% 4.85%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.46% $406,597 0.17% 5.35% 0.81% 4.71%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.31% $382,814 0.16% 3.24% 0.84% 2.56%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.29% $424,363 0.17% 3.25% 0.81% 2.61%
For the year ended
June 30, 1992 $1.00 0.05 (0.05) $1.00 5.04% $416,945 0.18% 4.96% 0.83% 4.31%
For the year ended
June 30, 1991 $1.00 0.07 (0.07) $1.00 7.49% $453,947 0.15% 7.05% 0.80% 6.40%
For the period ended
June 30, 1990 (1) $1.00 0.08 (0.08) $1.00 8.03%* $232,091 0.13% 8.42% 0.83% 7.72%
- -----------------
</TABLE>
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE ELITE CASH RESERVE COMMENCED OPERATIONS AUGUST 7, 1989.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY RESERVE.
See accompanying notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
1. ORGANIZATION
The CoreFund Elite Cash Reserve is a Fund offered by CoreFunds, Inc. (the
"Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Treasury Reserve
International Growth Fund Elite Cash Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
Short Term Income
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
The financial statements included herein present only those of the Elite Cash
Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Cash Reserve.
SECURITY VALUATION -- Investment securities of the Elite Cash Reserve are stated
at amortized cost which approximates market value. Under this valuation method,
purchase discounts and premiums are accreted and amortized ratably to maturity
and are included in interest income.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs 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 the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Cash
Reserve. For the year ended June 30, 1997, CoreStates Advisers earned $710,442
in investment advisory fees, of which $659,442 was voluntarily waived in order
to assist the Fund in maintaining a competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' 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 Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resources ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Fund's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Cash Reserve. Such a fee is computed daily and
paid monthly. For the year ended June 30, 1997, administrative fees totaled
$887,885 of which $521,130 was voluntarily waived in order to assist the Fund in
maintaining a competitive expense ratio.
Pursuant to a transfer agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS") a subsidiary of State Street Bank and Trust
Company acts as the Fund's Transfer Agent. As such, BFDS provides transfer
agency, dividend disbursing, shareholder servicing and administrative services
for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
11
<PAGE>
NOTICE TO SHAREHOLDERS OF COREFUNDS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for
informational purposes only.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, the Elite Cash Reserve is
designating long-term capital gains, qualifying dividends and exempt income with
regard to distributions paid during the year as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
--------- ------------ ------------- ------------- ------------ -------- ----------
Elite Cash Reserve 0% 100% 100% 0% 0% 0%
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE FUNDS'
TOTAL DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF
ORDINARY INCOME DISTRIBUTIONS OF THE PORTFOLIO.
Please consult your tax department for proper treatment of this information.
12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the CoreFund Elite
Cash Reserve of CoreFunds, Inc. (the "Fund") as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the years
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
audit.
We conducted our audit 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, 1997 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
audit provides 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, 1997, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for each of the years
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997 /S/Ernst & Young LLP
13
<PAGE>
<PAGE>
<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-056-02
<PAGE>
CoreFunds, Inc.
--------------
ELITE TREASURY RESERVE
ANNUAL REPORT
June 30, 1997
<PAGE>
<PAGE>
INVESTMENT ADVISER'S REPORT
COREFUND ELITE TREASURY RESERVE
JUNE 30, 1997
The CoreFund Elite Treasury Reserve returned 5.33% net of expenses for the
one-year period ended June 30, 1997. The Fund's assets decreased in size by
11.4% during the period from $24.5 million on June 30, 1996 to $21.7 million on
June 30, 1997. The average weighted maturity of the Fund increased from 58 to 63
days during the one-year period. The Fund significantly outperformed its
benchmark index, the IBC/Donoghue U.S. Treasury and Repo Average, which returned
4.78% for the same period.
<PAGE>
<PAGE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
<TABLE>
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 35.7%
U.S. Treasury Bills+
5.901%, 08/21/97 .......................................................... $ 500 $ 496
5.589%, 10/16/97 .......................................................... 500 492
5.508%, 11/13/97 .......................................................... 500 490
5.564%, 11/13/97 .......................................................... 500 490
5.648%, 03/05/98 .......................................................... 500 481
5.806%, 04/02/98 .......................................................... 500 479
5.796%, 04/30/98 .......................................................... 500 477
5.587%, 05/28/98 .......................................................... 500 476
U.S. Treasury Notes
5.500%, 07/31/97 .......................................................... 400 400
5.750%, 10/31/97 .......................................................... 500 500
5.250%, 12/31/97 .......................................................... 500 499
5.625%, 01/31/98 .......................................................... 900 900
U.S. Treasury STRIPS+
5.400%, 08/15/97 .......................................................... 500 497
5.684%, 11/15/97 .......................................................... 700 686
5.725%, 05/15/98 .......................................................... 400 381
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,744) .................................................................................... 7,744
- -------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 64.7%
Aubrey Lanston 5.90%, dated 06/30/97, matures 07/01/97, repurchase price
$5,000,819 (collateralized by U.S. Treasury Note, par value $5,020,000,
6.00%, 09/30/98;
market value $5,100,320) ..................................................... 5,000 5,000
First National Bank of Chicago 5.95%, dated 06/30/97, matures 07/01/97,
repurchase price $1,007,166 (collateralized by U.S. Treasury Note, par
value $1,035,000,
5.75%, 10/31/00; market value $1,030,550) .................................... 1,007 1,007
Goldman Sachs 5.80%, dated 06/30/97, matures 07/01/97,
repurchase price $900,145 (collateralized by U.S. Treasury
Note, par value $865,000, 9.125%, 05/15/99;
market value $921,484) ....................................................... 900 900
Hong Kong Shanghai Bank 5.80%, dated 06/30/97, matures 07/01/97, repurchase
price $600,097 (collateralized by U.S. Treasury Note, par value $585,000,
7.25%, 05/15/04;
market value $617,643) ....................................................... 600 600
</TABLE>
1
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch 5.60%, dated 06/30/97, matures 07/01/97, repurchase price
$900,140 (collateralized by U.S. Treasury Note, par value $910,000,
6.125%, 05/15/98;
market value $919,646) ...................................................... $ 900 $ 900
Sanwa Bank 5.85%, dated 06/30/97, matures 07/01/97,
repurchase price $5,000,813 (collateralized by U.S.
Treasury Note, par value $4,985,000, 6.125%, 08/31/98;
market value $5,100,154) .................................................... 5,000 5,000
Swiss Bank 5.875%, dated 06/30/97, matures 07/01/97,
repurchase price $600,098 (collateralized by U.S. Treasury
Note, par value $625,000, 5.625%, 11/30/00;
market value $616,438) ...................................................... 600 600
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $14,007) .................................................................................. 14,007
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.4%
(Cost $21,751) ..................................................................................... 21,751
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.4%) ............................................................ (84)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 250 million authorized shares)
based on 21,666,504 outstanding shares ............................................................. 21,667
- -------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ............................................................................. $21,667
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ........................................................ $1.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ EFFECTIVE YIELD
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
See accompanying notes to financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- ----------------------------------------------------------------------
For the year ended June 30, 1997
ELITE TREASURY RESERVE+
- ----------------------------------------------------------------------
NVESTMENT INCOME:
Interest ........................................... $1,392
------
EXPENSES:
Investment advisory fees .............................. 52
Less investment advisory fees waived .................. (47)
Administrative fees ................................... 64
Less administrative fees waived ....................... (39)
Transfer agent fees & expenses ........................ 18
Professional fees ..................................... 2
Registration & filing fees ............................ (9)
Printing .............................................. 4
------
Total expenses .............................................. 45
------
NET INVESTMENT INCOME ....................................... 1,347
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $1,347
======
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
See accompanying notes to financial statements.
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the years ended June 30
ELITE TREASURY RESERVE+
- --------------------------------------------------------------------------------
1997 1996
---- ----
OPERATIONS:
Net investment income ................. $ 1,347 $ 1,112
--------- ---------
Net increase in net assets resulting
from operations .................... 1,347 1,112
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ................. (1,347) (1,112)
--------- ---------
Total dividends distributed ........... (1,347) (1,112)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ........... 40,896 26,668
Cost of shares redeemed ............... (43,727) (20,565)
--------- ---------
Increase (decrease) in net assets derived from
capital share transactions ......... (2,831) 6,103
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ....... (2,831) 6,102
NET ASSETS:
Beginning of period ................... 24,498 18,396
--------- ---------
End of period ......................... $21,667 $ 24,498
========= =========
SHARES ISSUED AND REDEEMED:
Shares issued ......................... 40,896 26,668
Shares redeemed ....................... (43,727) (20,565)
--------- ---------
Increase (decrease) in net shares derived from
capital share transactions ......... (2,831) 6,103
--------- ---------
OUTSTANDING SHARES:
Beginning of period ................... 24,498 18,395
--------- ---------
End of period ......................... 21,667 24,498
========= =========
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 1997
ELITE TREASURY RESERVE+
- ------------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO RATIO
NET DISTRIBUTIONS NET NET RATIO OF EXPENSES NET INCOME
ASSET NET FROM NET ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE INVEST- INVEST- VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING MENT MENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ------ ------ --------- ------ --------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended
June 30, 1997 $1.00 0.05 (0.05) $1.00 5.33% $21,667 0.17% 5.20% 0.50% 4.87%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.54% $24,498 0.19% 5.39% 0.80% 4.78%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.24% $18,396 0.23% 5.09% 0.87% 4.45%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.10% $20,363 0.28% 3.03% 0.91% 2.40%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.17% $27,614 0.18% 3.19% 0.85% 2.52%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 2.00%* $49,328 0.05% 3.95% 0.80% 3.20%
</TABLE>
- --------------------------------------------------------------------------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE ELITE TREASURY RESERVE COMMENCED OPERATIONS ON DECEMBER 10, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
See accompanying notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
1. ORGANIZATION
The CoreFund Elite Treasury Reserve is a Fund offered by CoreFunds, Inc. (the
"Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Treasury Reserve
International Growth Fund Elite Cash Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
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
The financial statements included herein present only those of the Elite
Treasury Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Treasury Reserve.
SECURITY VALUATION -- Investment securities of the Elite Treasury Reserve are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs 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 the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of the collateral
by the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Treasury
Reserve. For the year ended June 30, 1997, CoreStates Advisers earned $51,711 in
investment advisory fees, of which $46,509 was voluntarily waived in order to
assist the Fund in maintaining a competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' 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 Funds investing exclusively in the
United States and may, with the Funds'
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
Board approval and at the expense of the Funds, employ sub-custodians on behalf
of the Funds who invest in foreign countries provided that CoreStates Bank shall
remain liable for the performance of all of its duties under the Custodian
Agreement.
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resource ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Fund's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Treasury Reserve. Such a fee is computed daily and
paid monthly. For the year ended June 30, 1997, administrative fees totaled
$64,633 of which $38,795 was voluntarily waived in order to assist the Fund in
maintaining a competitive expense ratio.
Pursuant to a transfer agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS") a subsidiary of State Street Bank and Trust
Company acts as the Fund's Transfer Agent. As such, BFDS provides transfer
agency, dividend disbursing, and shareholder servicing for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
8
<PAGE>
NOTICE TO SHAREHOLDERS OF COREFUNDS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for
informational purposes only.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, the Elite Treasury Reserve Fund
is designating long-term capital gains, qualifying dividends and exempt income
with regard to distributions paid during the year as follows:
<TABLE>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
------------ ------------ ------------ ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Elite Treasury Reserve 0% 100% 100% 0% 0% 0%
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE
PORTFOLIOS' TOTAL DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A
PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS OF THE PORTFOLIO.
Please consult your tax department for proper treatment of this information.
9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the CoreFund Elite
Treasury Reserve of CoreFunds, Inc. (the "Fund") as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the years
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
audit.
We conducted our audit 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, 1997 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
audit provides 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, 1997, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for each of the years
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997 /S/ERNST & YOUNG LLP
10
<PAGE>
NOTES
<PAGE>
<PAGE>
<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-057-02
<PAGE>
CoreFunds,Inc.
-------------
ELITE TAX-FREE RESERVE
ANNUAL REPORT
June 30, 1997
<PAGE>
<PAGE>
INVESTMENT ADVISER'S REPORT
COREFUND ELITE TAX-FREE RESERVE
JUNE 30, 1997
The CoreFund Elite Tax-Free Reserve returned 3.42% for the one-year period ended
June 30, 1997. This compared with a return of 3.03% for the Benchmark Index, the
IBC/Donoghue Tax Free Average, for the same period. The Fund grew by 70.3%
during the period from $86.5 million on June 30, 1996 to $147.3 million on June
30, 1997.
The average weighed maturity of the Tax-Free Reserve was 41 days during the
year. And, the Fund's one year effective yield was 3.42%, as the Fund
outperformed its benchmark.
During the first six months of this period we experienced normal patterns in the
tax-free money market securities market. The market is driven by seasonality in
terms of the amount of cash in the market. Typically during January, June, and
July, yields fall due to an abundance of cash in the market. However, in January
of 1997, a new pattern emerged as a strong decline in prerefunded bonds took
cash out of the market. As a result, supply was adequate and yields were
fabulous.
Throughout the first half of 1997, conditions have remained positive for the
Fund. For a few days in June, the tax-exempt rate was equal to the taxable rate.
We're seeing changes to the fundamentals of the market that are resulting in
higher yields. And, the trend should continue. It appears that supply should
remain strong and, with more availability comes higher yields.
Our strategy will remain steady as we keep the average maturity of the Fund
between 40 and 60 days. We will extend out on the yield curve when we see an
issue of high value. We will also continue to utilize commercial paper and
smaller note deals as appropriate. Our challenge will be to research and
identify new cash flow patterns and take advantage of them in the coming months.
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS - 101.4%
ALABAMA - 3.9%
Montgomery, Alabama TECP
3.500%, 08/13/97 ........................................................... $2,000 $ 2,000
North Alabama Environmental Improvement Authority Revenue
Bond for Reynold Metals Project (A) (B) (C)
4.100%, 07/01/97 ........................................................... 1,300 1,300
Winfield, Alabama Industrial Development Authority Revenue
Bond for Union Underwear Project (A) (B) (C)
4.000%, 12/01/97 ........................................................... 2,400 2,400
--------
Total Alabama 5,700
--------
ALASKA - 2.1%
Valdez, Alaska TECP
3.650%, 08/08/97 ........................................................... 3,075 3,075
--------
ARIZONA - 1.9%
Arizona Agriculture Improvement and Power District Electric
Revenue Bond for Salt River Project, Series E
Pre-Refunded @ 100 (D)
8.250%, 01/01/98 ........................................................... 2,710 2,773
--------
CALIFORNIA - 1.5%
Sonoma County, California TRAN
4.500%, 01/29/98 ........................................................... 2,200 2,212
--------
COLORADO - 1.0%
Moffat County, Colorado Pollution Control Revenue Bond (A) (B)
4.200%, 07/01/97 ........................................................... 1,400 1,400
--------
DELAWARE - 0.7%
Wilmington, Delaware Franciscan Health System Hospital
Revenue Bond (A) (B)
4.100%, 07/01/97 ........................................................... 400 400
Wilmington, Delaware Hospital Revenue Bond for Franciscan
Health Systems Project, Series A (A) (B) (C)
4.100%, 07/01/97 ........................................................... 700 700
--------
Total Delaware 1,100
--------
</TABLE>
1
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
<S> <C> <C>
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
FLORIDA - 3.7%
Dade County, Florida Fixed Capital Asset Acquisition Revenue
Bond, Series 1990 (A) (B) (C)
4.450%, 07/01/97 ........................................................... $1,200 $ 1,200
Florida State Housing Finance Agency Revenue Bond for Carlton
Project, Series EEE (A) (B) (C)
4.200%, 07/01/97 ........................................................... 1,020 1,020
Florida State Housing Finance Agency Revenue Bond for
Huntington Project (A) (B) (C)
4.300%, 07/01/97 ........................................................... 200 200
Jacksonville, Florida Hospital Revenue Bond for Methodist
Hospital Project Pre-Refunded @ 102 (D)
10.500%, 10/01/97 .......................................................... 2,000 2,073
Sunshine State, Florida TECP
3.700%, 08/12/97 ........................................................... 1,000 1,000
--------
Total Florida 5,493
--------
GEORGIA - 0.9%
Georgia Municipal Electric Authority Revenue Bond,
Series B Pre-Refunded @ 102 (A) (B) (D)
8.000%, 01/01/98 ........................................................... 1,000 1,041
Hapeville, Georgia Industrial Development Authority
Revenue Bond for Hapeville Hotel Project (A) (B) (C)
4.150%, 07/01/97 ........................................................... 300 300
--------
Total Georgia 1,341
--------
ILLINOIS - 3.3%
Chicago, Illinois Equipment Notes
3.600%, 12/04/97 ........................................................... 2,500 2,500
Chicago, Illinois O'Hare Airport Revenue Bond (A) (B) (C)
4.200%, 07/01/97 ........................................................... 300 300
Illinois Development Financial Authority Pollution Control
Revenue Bond for Amoco Oil Company Project (A) (B)
4.000%, 07/01/97 ........................................................... 600 600
Illinois State Toll Highway Authority Revenue Bond,
Series B MBIA (A) (B)
4.150%, 07/01/97 ........................................................... 1,400 1,400
--------
Total Illinois 4,800
--------
</TABLE>
2
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
<S> <C> <C>
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
INDIANA - 4.6%
Gary, Indiana Environmental Improvement Revenue Bond for
U.S. Steel Project (A) (B) (C)
4.100%, 07/15/97 ........................................................... $ 700 $ 700
MT Vernon, Indiana TECP
3.450%, 07/16/97 ........................................................... 735 735
Sullivan, Indiana TECP
3.950%, 07/02/97 ........................................................... 1,950 1,950
3.500%, 07/16/97 ........................................................... 1,300 1,300
3.550%, 09/09/97 ........................................................... 1,000 1,000
3.800%, 09/19/97 ........................................................... 1,050 1,050
--------
Total Indiana 6,735
--------
KANSAS - 2.1%
Burlington, Kansas TECP
3.800%, 07/18/97 ........................................................... 1,500 1,500
3.800%, 08/14/97 ........................................................... 1,200 1,200
Kansas City, Kansas Industrial Development Revenue Bond
for PQ Corporation Project (A) (B) (C)
4.200%, 07/01/97 ........................................................... 100 100
Wichita, Kansas Health Facilities Revenue Bond for Wichita
Health Systems Project, Series XXV (A) (B) (C)
4.350%, 07/02/97 ........................................................... 300 300
--------
Total Kansas 3,100
--------
KENTUCKY - 2.0%
Pendelton, Kentucky TECP
3.750%, 07/22/97 ........................................................... 3,000 3,000
--------
LOUISIANA - 1.1%
Louisiana State Public Facilities Authority Revenue Bond for
Kenner Hotel Project (A) (B) (C)
4.150%, 07/01/97 ........................................................... 600 600
Louisiana State Recovery District Sales Tax Revenue Bond FGIC
3.900%, 07/01/97 ........................................................... 1,000 1,000
--------
Total Louisiana 1,600
--------
</TABLE>
3
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
<S> <C> <C>
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- --------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 0.9%
Massachusetts State GO Series B, (A) (B) (C)
4.000%, 12/01/97 ........................................................... $ 350 $ 350
Massachusetts State Health and Educational Facilities Lahey
Clinic Project, Series A 1 Pre-Refunded
07/01/98 @ 102 MBIA
7.625%, 07/01/98 ........................................................... 950 1,003
--------
Total Massachusetts 1,353
--------
MICHIGAN - 1.8%
Cornell Township, Michigan Economic Development
Corporation Revenue Bond for Environmental
Improvement (A) (B) (C)
4.000%, 07/01/97 ........................................................... 1,900 1,900
Delta County, Michigan Environmental Improvement Revenue
Bond for Mead Escambia Paper Project, Series C (A) (B) (C)
4.100%, 07/01/97 ........................................................... 600 600
Michigan State Strategic Fund Pollution Control Revenue Bond
for Consumer Power Project (A) (B) (C)
4.050%, 07/01/97 ........................................................... 100 100
--------
Total Michigan 2,600
--------
MISSISSIPPI - 1.6%
Claiborne County, Mississippi TECP
3.700%, 07/25/97 ........................................................... 1,000 1,000
Jackson County, Port Facility Revenue Bond for Mississippi
Chevron USA Project, Series A AMBAC (A) (B) (C)
4.000%, 07/01/97 ........................................................... 1,400 1,400
--------
Total Mississippi 2,400
--------
MISSOURI - 2.1%
Claireborne, Missouri TECP
3.800%, 07/18/97 ........................................................... 800 800
Missouri State Health and Educational Facilities Authority
Revenue Bond for Washington University, Series A (A) (B)
4.100%, 07/01/97 ........................................................... 2,300 2,300
--------
Total Missouri 3,100
--------
</TABLE>
4
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MONTANA - 2.0%
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project (A) (B) (C)
4.150%, 07/01/97 ........................................................... $1,000 $ 1,000
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project, Series A (A) (B) (C)
4.150%, 07/01/97 ........................................................... 2,000 2,000
--------
Total Montana 3,000
--------
NEVADA - 3.5%
Clark County, Nevada Industrial Development
Revenue Bond Series C (A) (B)
4.200%, 07/01/97 ........................................................... 3,000 3,000
Nevada State Housing Authority Revenue Bond for Multi-
Unit Park Project, Series A (A) (B) (C)
4.250%, 07/01/97 ........................................................... 2,200 2,200
--------
Total Nevada 5,200
--------
NEW HAMPSHIRE - 0.4%
New Hampshire State Industrial Development Revenue Bond
for Oerlikon-Burlhe Project (A) (B) (C)
3.800%, 07/01/97 ........................................................... 600 600
--------
NEW YORK - 4.6%
New York City, New York GO (A) (B) (C)
5.500%, 07/01/97 ........................................................... 2,400 2,400
New York State Urban Development Corporate Revenue Bond
for Correctional Facilities Project Series C,
Pre-Refunded @ 102 AMBAC (D)
7.625%, 01/01/98 ........................................................... 1,175 1,220
New York State Energy Research and Development Authority
Pollution Control Revenue Bond (A) (B) (C)
3.600%, 12/01/97 ........................................................... 1,500 1,500
New York State Energy Research and Development Authority
Pollution Control Revenue Bond for Niagara Mohawk
Power Project Series A (A) (B)
5.450%, 07/01/97 ........................................................... 400 400
New York, New York General Obligation Series C (A) (B) (C)
5.500%, 07/01/97 ........................................................... 1,300 1,300
--------
Total New York 6,820
--------
</TABLE>
5
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA - 4.0%
Lexington, North Carolina Medical Care Community Hospital
Revenue Bond for Memorial Hospital Project (A) (B)
4.200%, 07/01/97 ........................................................... $5,900 $ 5,900
--------
OHIO - 2.0%
Evandale, Ohio Industrial Development Authority
Revenue Bond (A) (B) (C)
3.900%, 07/01/97 ........................................................... 1,600 1,600
Ohio State Air Quality Revenue Bond (A) (B) (C)
4.000%, 07/01/97 ........................................................... 100 100
Ohio State Air Quality Revenue Bond, Series B (A) (B) (C)
5.500%, 07/01/97 ........................................................... 1,300 1,300
--------
Total Ohio 3,000
--------
OREGON - 3.5%
Port of Portland, Oregon Pollution Control Revenue Bond
for Reynold Metals Project (A) (B) (C)
4.100%, 07/01/97 ........................................................... 1,800 1,800
Port of St. Helens, Oregon Pollution Control
Revenue Bond (A) (B) (C)
4.050%, 07/01/97 ........................................................... 2,800 2,800
Umatilla County, Oregon Franciscan Health System
Revenue Bond, Series A (A) (B) (C)
4.100%, 07/01/97 ........................................................... 300 300
Umatilla County, Oregon Franciscan Health System
Revenue Bond, Series B (A) (B) (C)
4.100%, 07/01/97 ........................................................... 200 200
--------
Total Oregon 5,100
--------
PENNSYLVANIA - 19.6%
Allegheny County, Pennsylvania Revenue Bond for
Presbyterian University Hospital (A) (B)
4.200%, 07/01/97 ........................................................... 5,115 5,115
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series A (A) (B) (C)
4.050%, 07/01/97 ........................................................... 1,000 1,000
</TABLE>
6
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series B (A) (B) (C)
4.050%, 07/01/97 ........................................................... $1,100 $1,100
Curwensville, School District TRAN
4.160%, 06/30/98 ........................................................... 840 841
Langhorne, Pennsylvania Saint Mary Hospital Authority Revenue
Bond for Franciscan Health Systems Project, Series C (A) (B)
4.000%, 07/01/97 ........................................................... 1,100 1,100
Langhorne, Pennsylvania Saint Mary Hospital Authority Revenue
Bond for Franciscan Health Systems, Series C (A) (B)
4.000%, 07/01/97 ........................................................... 600 600
Lehigh County, Pennsylvania Industrial Development Authority
Revenue Bond for Allegheny Electric Project, Series A (A) (B) (C)
4.000%, 07/01/97 ........................................................... 500 500
Montgomery County, Pennsylvania Series B GO
3.600%, 10/15/97 ........................................................... 315 315
North Penn, Pennsylvania School District GO
3.750%, 09/01/97 ........................................................... 1,615 1,615
Parkland School District, Pennsylvania GO (C)
4.000%, 09/01/97 ........................................................... 380 380
Pennsylvania State Higher Education Facilities Authority Revenue
Bond for Carnegie Mellon University Project, Series B (A) (B)
4.150%, 07/01/97 ........................................................... 800 800
Pennsylvania State Higher Educational Facilities Authority Revenue
Bond for Carnegie Mellon University Project, Series A (A) (B)
4.150%, 07/01/97 ........................................................... 1,500 1,500
Pennsylvania State University Revenue Bond, Series A
4.500%, 11/25/97 ........................................................... 1,750 1,756
Souderton, Pennsylvania Area School District Bond GO FGIC
3.750%, 09/01/97 ........................................................... 1,095 1,095
Temple University, Pennsylvania Commonwealth
System of Higher Education GO
4.750%, 05/18/98 ........................................................... 1,000 1,007
Upper Darby, School District TRAN
4.170%, 06/30/98 ........................................................... 1,756 1,759
</TABLE>
7
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Washington County, Pennsylvania Industrial Development
Authority Revenue Bond for Werrerau
Finance Company Project (A) (B) (C)
4.250%, 07/01/97 ........................................................... $2,500 $ 2,500
Washington County, Pennsylvania Lease Revenue Bond (A) (B) (C)
4.200%, 07/01/97 ........................................................... 1,500 1,500
York, Pennsylvania General Authority
Pooled Revenue Bond (A) (B) (C)
4.150%, 07/01/97 ........................................................... 4,350 4,350
--------
Total Pennsylvania 28,833
--------
PUERTO RICO - 1.2%
Puerto Rico Commonwealth TRAN, Series A
4.000%, 07/30/97 ........................................................... 1,800 1,801
--------
TEXAS - 9.6%
Grapevine, Texas Industrial Development Authority Revenue Bond
for American Airlines Project, Series B4 (A) (B) (C)
4.100%, 07/01/97 ........................................................... 100 100
Grapevine, Texas Industrial Development Corporation Revenue
Bond for American Airlines Project, Series B2 (A) (B)
4.100%, 07/01/97 ........................................................... 200 200
North Central, Texas Health Facility Development Corporation
Revenue Bond MBIA (A) (B)
4.100%, 07/01/97 ........................................................... 200 200
Nueces County, Texas Health Facilities Authority Revenue Bond
for Driscoll Children's Foundation Project (A) (B) (C)
4.200%, 07/01/97 ........................................................... 600 600
Port Corpus Christi Texas Industrial Development Corporation
Revenue Bond, Series A (A) (B) (C)
4.200%, 07/01/97 ........................................................... 2,000 2,000
Tarrant County, Texas Housing Finance Authority Revenue
Bond for Windcastle Project (A) (B) (C)
4.300%, 07/01/97 ........................................................... 1,034 1,034
Texas State Southwest, Texas Higher Education Authority
Revenue Bond for Southern Methodist University (A) (B) (C)
4.100%, 07/01/97 ........................................................... 5,000 5,000
Texas State TAN
4.750%, 08/29/97 ........................................................... 5,000 5,006
--------
Total Texas 14,140
--------
</TABLE>
8
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VERMONT - 0.8%
Vermont State Student Loan Revenue Bond, Student Loan
Assistance Corporation Project (A) (B) (C)
3.800%, 07/01/97 ........................................................... $1,240 $ 1,240
--------
VIRGINIA - 5.3%
Virginia State Housing Revenue Bond
3.800%, 06/10/98 ........................................................... 3,000 3,000
Virginia State Peninsula Port Authority Revenue Bond for
Dominion Terminal Project, Series 1987C (A) (B) (C)
4.000%, 07/01/97 ........................................................... 2,005 2,005
Virginia State Peninsula Port Authority Revenue Bond for
Dominion Terminal Project, Series D (A) (B)
4.100%, 07/01/97 ........................................................... 2,100 2,100
Waynesboro, Virginia Residential Care Facilities
Revenue Bond (A) (B)
4.200%, 07/01/97 ........................................................... 775 775
--------
Total Virginia 7,880
--------
WEST VIRGINIA - 0.9%
Putnam County, West Virginia Industrial Development
Authority Revenue Bond for FMC
Corporation Project (A) (B) (C)
3.800%, 07/01/97 ........................................................... 1,300 1,300
--------
WYOMING - 8.8%
Gillette County, Wyoming TECP
3.650%, 07/07/97 ........................................................... 3,000 3,000
3.800%, 07/11/97 ........................................................... 1,200 1,200
3.800%, 09/10/97 ........................................................... 1,400 1,400
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project (A) (B)
4.000%, 07/01/97 ........................................................... 4,200 4,200
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project, Series D (A) (B)
4.100%, 07/01/97 ........................................................... 1,800 1,800
Lincoln County, Wyoming Resource Recovery Revenue Bond
for Exxon Project, Series C (A) (B) (C)
4.100%, 07/01/97 ........................................................... 300 300
Platte County, Wyoming Pollution Control
Revenue Bond, Series A (A) (B) (C)
4.200%, 07/01/97 ........................................................... 900 900
</TABLE>
9
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- -------------------------------------------------------------------------------------------------------------------
June 30, 1997
FACE MARKET
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Platte County, Wyoming Pollution Control
Revenue Bond, Series B (A) (B) (C)
4.200%, 07/01/97 ........................................................... $100 $ 100
--------
Total Wyoming 12,900
--------
TOTAL MUNICIPAL BONDS
(Cost $149,496) ................................................................................ 149,496
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.4%
(Cost $149,496) ................................................................................... 149,496
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (1.4%) ........................................................... (2,185)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 250 million authorized) based
on 147,340,849 outstanding shares ................................................................. 147,341
Accumulated net realized loss on investments ......................................................... (30)
- -------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ............................................................................ $147,311
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ....................................................... $1.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FIANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
TECP -- TAX-EXEMPT COMMERCIAL PAPER
TAN -- TAX ANTICIPATION NOTES
TRAN -- TAX AND REVENUE ANTICIPATION NOTES
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON JUNE 30, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSER OF THE
PUT DEMAND DATE OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK.
(D) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
See accompanying notes to financial statements.
10
<PAGE>
STATEMENT OF OPERATIONS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the year ended June 30, 1997
ELITE TAX-FREE RESERVE+
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ................................................... $3,966
------
EXPENSES:
Investment advisory fees ...................................... 222
Less investment advisory fees waived .......................... (196)
Administrative fees ........................................... 278
Less administrative fees waived ............................... (169)
Registration & filing fees .................................... 24
Printing ...................................................... 11
Taxes - other than income ..................................... 7
Professional fees ............................................. 6
Directors fees ................................................ 3
Transfer agent fees & expenses ................................ 2
Miscellaneous ................................................. 4
------
Total expenses ...................................................... 192
------
NET INVESTMENT INCOME ............................................... 3,774
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $3,774
======
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
See accompanying notes to financial statements.
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
For the years ended June 30
ELITE TAX-FREE RESERVE+
- --------------------------------------------------------------------------------
1997 1996
---------- --------
OPERATIONS:
Net investment income .................. $ 3,774 $ 3,012
Net realized loss on securities sold ... -- (5)
---------- ---------
Net increase in net assets resulting
from operations ..................... 3,774 3,007
---------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income .................. (3,774) (3,012)
Net realized gains ..................... -- --
---------- ---------
Total dividends distributed ............ (3,774) (3,012)
---------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ............ 226,783 224,591
Cost of shares redeemed ................ (165,949) (210,702)
---------- ---------
Increase in net assets derived from
capital share transactions .......... 60,834 13,889
---------- ---------
NET INCREASE IN NET ASSETS ................... 60,834 13,884
NET ASSETS:
Beginning of period .................... 86,477 72,593
---------- ---------
End of period .......................... $147,311 $ 86,477
========== ---------
SHARES ISSUED AND REDEEMED:
Shares issued .......................... 226,783 224,591
Shares redeemed ........................ (165,949) (210,702)
---------- ---------
Increase in net shares derived from
capital share transactions .......... 60,834 13,889
---------- ---------
OUTSTANDING SHARES:
Beginning of period .................... 86,507 72,618
---------- ---------
End of period .......................... 147,341 86,507
========== =========
+THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS COREFUND MONEY MARKET FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 1997
ELITE TAX-FREE RESERVE+
- ------------------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO RATIO
NET NET NET RATIO OF EXPENSES NET INCOME
ASSET DISTRIBUTIONS ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ----------- --------- ------ --------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended
June 30, 1997 $1.00 0.03 (0.03) $1.00 3.42% $147,311 0.17% 3.39% 0.50% 3.06%
For the year ended
June 30, 1996 $1.00 0.03 (0.03) $1.00 3.51% $ 86,477 0.16% 3.44% 0.76% 2.84%
For the year ended
June 30, 1995 $1.00 0.03 (0.03) $1.00 3.41% $ 72,593 0.19% 3.37% 0.83% 2.73%
For the year ended
June 30, 1994 $1.00 0.02 (0.02) $1.00 2.32% $ 78,219 0.17% 2.29% 0.82% 1.64%
For the year ended
June 30, 1993 $1.00 0.02 (0.02) $1.00 2.48% $ 48,424 0.19% 2.45% 0.83% 1.81%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 1.50%* $66,158 0.17% 3.00% 0.89% 2.28%
- ---------------------
</TABLE>
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
(1) THE ELITE TAX-FREE RESERVE COMMENCED OPERATIONS ON NOVEMBER 19, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
See accompanying notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
1. ORGANIZATION
The CoreFund Elite Tax-Free Reserve is a Fund offered by CoreFunds, Inc. (the
"Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
Equity Index Fund Treasury Reserve
Core Equity Fund Cash Reserve
Growth Equity Fund Tax-Free Reserve
Special Equity Fund Elite Treasury Reserve
International Growth Fund Elite Cash Reserve
Balanced Fund Elite Tax-Free Reserve
FIXED INCOME FUNDS:
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
The financial statements included herein present only those of the Elite
Tax-Free Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Tax-Free Reserve.
SECURITY VALUATION -- Investment securities of the Elite Tax-Free Reserve are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs 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
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
and amortization of the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Tax-Free
Reserve. For the year ended June 30, 1997, CoreStates Advisers earned $222,334
in investment advisory fees, of which $196,321 was voluntarily waived in order
to assist the Portfolio in maintaining a competitive expense ratio.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' 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 Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resources ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Fund's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Tax-Free Reserve. Such a fee is computed daily and
paid monthly. For the year ended June 30, 1997, administrative fees totaled
$277,939 of which $168,848 was voluntarily waived in order to assist the Fund in
maintaining a competitive expense ratio.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
June 30, 1997
Pursuant to a transfer agency agreement dated November 16, 1995, Boston
Financial Data Services ("BFDS") a subsidiary of State Street Bank and Trust
Company acts as the Fund's Transfer Agent. As such, BFDS provides transfer
agency, dividend disbursing, and shareholder servicing for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
5. INVESTMENT COMPOSITION
The Fund invests in securities which include revenue and general obligation
instruments.
At June 30,1997, the revenue sources by purpose were as follows:
% OF PORTFOLIO
INVESTMENTS
--------------
REVENUE INSTRUMENTS
Education Bonds ....................... 10%
Hospital & Health Care Bonds .......... 12
Housing Bonds ......................... 5
Industrial Bonds ...................... 10
Other Bonds ........................... 11
Pollution Control Bonds ............... 12
Transportation Bonds .................. 4
Utility Bonds ......................... 3
TAX EXEMPT COMMERCIAL PAPER .................... 17
GENERAL OBLIGATIONS ............................ 6
TAX & REVENUE ANTICIPATION NOTES ............... 10
----
100%
====
In addition, certain investments are covered by insurance issued by several
private issuers who guarantee the payment of interest and principal at final
maturity in the event of default. Such insurance, however, does not guarantee
the market value of the securities or the value of the Fund's shares.
16
<PAGE>
NOTICE TO SHAREHOLDERS OF COREFUNDS
(UNAUDITED)
For taxpayers filing on a calendar year basis, this notice is for
informational purposes only.
Dear CoreFund Shareholders:
For the fiscal year ended June 30, 1997, the Elite Tax-Free Reserve Fund
is designating long-term capital gains, qualifying dividends and exempt income
with regard to distributions paid during the year as follows:
<TABLE>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
------------ ------------ ------------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Elite Tax-Free Reserve 0% 100% 100% 0% 100% 0%
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE
PORTFOLIOS' TOTAL DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME
DISTRIBUTIONS OF THE PORTFOLIO.
Please consult your tax department for proper treatment of this information.
17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
CoreFunds, Inc.
We have audited the accompanying statement of net assets of the CoreFund Elite
Tax-Free Reserve of CoreFunds, Inc. (the "Fund") as of June 30, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the years
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
audit.
We conducted our audit 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, 1997 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
audit provides 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, 1997, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for each of the years
presented herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania
August 12, 1997 /S/Ernst & Young LLP
18
<PAGE>
NOTES
<PAGE>
<PAGE>
<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-058-02
<PAGE>
[SQUARE BULLET]
COREFUND[REGISTERED MARK]
FAMILY OF MUTUAL FUNDS
- -------------------------
1997
SEMI-ANNUAL REPORT
TO OUR
SHAREHOLDERS
FOR SIX MONTHS ENDING
DECEMBER 31, 1997
[GRAPHIC OF POINTER]
COREFUNDS...INVESTING OUR EXPERIENCE IN YOUR FUTURE.
<PAGE>
COREFUND
PORTFOLIOS
BY
ASSET
CLASS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
FUND TRADING SYMBOL
----------------------------------
(A/C SHARES) (Y SHARES)
EQUITY FUNDS-----------------------------------------------------------------
[SQUARE BULLET] Equity Index -- VEIFX
[SQUARE BULLET] Core Equity CVERX CVEAX
[SQUARE BULLET] Growth Equity CRQAX CRGEX
[SQUARE BULLET] Special Equity CSPAX CSEQX
[SQUARE BULLET] International Growth CROAX CFIGX
BALANCED FUNDS---------------------------------------------------------------
[SQUARE BULLET] Balanced COBAX CBAAX
FIXED INCOME FUNDS-----------------------------------------------------------
[SQUARE BULLET] Short Term Income -- COSTX
[SQUARE BULLET] Short-Intermediate Bond CSIAX CFBDX
[SQUARE BULLET] Government Income CRIAX CRYIX
[SQUARE BULLET] Bond CBOAX CONIX
[SQUARE BULLET] Global Bond CRGAX CGBIX
TAX-EXEMPT INCOME FUNDS------------------------------------------------------
[SQUARE BULLET] Intermediate Municipal Bond CRMAX CRMYX
[SQUARE BULLET] Pennsylvania Municipal Bond CPAAX CPAYX
[SQUARE BULLET] New Jersey Municipal Bond CNJAX CNJYX
MONEY MARKET FUNDS-----------------------------------------------------------
[SQUARE BULLET] Treasury Reserve CTRXX CRTXX
[SQUARE BULLET] Cash Reserve -- CRCXX
[SQUARE BULLET] Tax-Free Reserve CXCXX CRXXX
TABLE OF CONTENTS
---------------------------
MESSAGE TO OUR SHAREHOLDERS
1
INVESTING FOR THE LONG TERM
2
HOW TO USE YOUR
SEMI-ANNUAL REPORT
4
GLOSSARY OF TERMS
6
CHOOSING THE RIGHT FUNDS
8
FUND DESCRIPTIONS
10
INVESTMENT ADVISERS' REVIEW
14
MANAGERS' DISCUSSIONS OF
FUND PERFORMANCE
18
FINANCIAL STATEMENTS
47
[GRAPHIC OF POINTER]
SHAREHOLDER SERVICES
-------------------------------
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) OR
REFER TO YOUR FUND PROSPECTUS.
<PAGE>
MESSAGE
TO OUR
SHAREHOLDERS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
CoreFund shareholders earned overall positive returns for the semi-annual
period ending December 31, 1997 in spite of pockets of market volatility. A
significant stock market decline in October, a correction in technology stock
prices, and turbulence in the Asian markets caused some bumps in the road.
However, with the exception of Asia, good, strong economic fundamentals
continued. Healthy economic growth in the U.S., low inflation, and declining
interest rates supported a stable economy, providing an encouraging outlook for
long-term investors.
MAXIMIZING OPPORTUNITIES Also during the six-month period, CoreFunds
introduced a new B Class of shares for seven Funds, which gives individual
investors the option of a contingent deferred sales charge rather than an
up-front sales charge. We also debuted our new Elite Money Market Funds. And, we
now offer a Systematic Exchange Plan, as well as weekly and overnight sweep
privileges from some checking accounts. These products are all designed to
increase shareholders' options and flexibility while providing fee efficiencies.
As always, CoreFund urges you to invest for the long term. Recent changes
in IRA tax legislation and the creation of the Roth IRA offer investors still
additional incentives for committing to a long-term investment plan. Investors
are realizing the value of staying with their strategy over the long haul.
OUR DUTY TO YOU Many of you have read about the proposed merger between
CoreStates and First Union. Your board will be considering the impact of the
transaction on the Funds and you may rest assured that we will be guided by the
best interests of CoreFund shareholders. Our number one job is to make sure that
your best interests are served. We thank you for your confidence.
[PHOTO OF EMIL MIKITY OMITTED]
/S/ SIGNATURE
EMIL J. MIKITY
CHAIRMAN
1
<PAGE>
INVESTING FOR THE
LONG TERM
- --------------------------------------------------------------------------------
A LITTLE BIT TODAY
CAN TAKE YOU
A LONG WAY.
[GRAPHIC OF POINTER]
Throughout this report, we talk about investing for the long term --
setting financial goals, choosing your funds, and then staying with your plan
over a period of years. Why is this important? Because long-term investing can
truly help you reach your financial goals.
Whether you're investing for your retirement, a child's education, a
vacation home, or some other goal, the key is to start early. This way, you can
actually reduce the total amount you will need to save. That's because your
money will work for you as it compounds over the years. The more time you have,
the more you will benefit from compounding.
In addition, when you stay with your plan over time, you can minimize
the impact of short-term fluctuations in the market. Historically, the longer an
investment is held, the less it is affected by market ups and downs.
Finally, by investing the same amount each month, you can reduce the
average cost you pay per share. Your money will buy more shares when the price
is low and fewer shares when the price is high. This is a proven technique for
obtaining the best possible price.
STOCKS HAVE OUTPERFORMED OVER THE LONG TERM.
HISTORICALLY, STOCKS HAVE EXPERIENCED GREATER SHORT-TERM VOLATILITY, BUT OVER
THE LONGER TERM, THEY HAVE OUTPERFORMED BONDS AND OTHER FIXED-INCOME
INVESTMENTS.
TIME CAN SMOOTH THE BUMPS ALONG THE WAY.
THE LONGER YOU HOLD YOUR INVESTMENT, THE LESS IT WILL BE IMPACTED BY SHORT-TERM
MARKET FLUCTUATIONS. THIS CHART ILLUSTRATES THE MAXIMUM AND MINIMUM RETURNS FOR
DIFFERENT INVESTMENT PERIODS. AN INVESTOR WITH A LONGER TIME HORIZON CAN AFFORD
TO ASSUME GREATER RISK IN EXCHANGE FOR POTENTIALLY GREATER LONG-TERM REWARDS.
REGULAR INVESTING IS A SIMPLE STRATEGY THAT WORKS OVER TIME.
THIS HYPOTHETICAL EXAMPLE ASSUMES MONTHLY INVESTMENTS OF $100, $300, AND $500,
RESPECTIVELY, GROWING AT A COMPOUNDED ANNUAL RATE OF RETURN OF 8%.
2
<PAGE>
Growth of $10,000 since 1973
[LINE GRAPH DEPICTING GROWTH OF $10,000 SINCE 1973]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON LONG TERM GOV'T BOND INDEX, IBBOTSON
30 DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT A PARTICULAR COREFUND. PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
[BAR GRAPH DEPICTING REDUCTION OF RISK OVER TIME]
SOURCE: SEI RESEARCH (S&P 500, IBBOTSON INTERMEDIATE GOV'T BOND INDEX, IBBOTSON
30 DAY T-BILL INDEX). THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT A PARTICULAR COREFUND. PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
[CHART DEPICTING REGULAR INVESTING CAN HELP YOU REACH YOUR GOALS]
MONTHLY 10 15 20 25 30
INVESTMENT YEARS YEARS YEARS YEARS YEARS
$100 $18,012 $33,761 $56,900 $90,899 $140,855
$300 $54,037 $101,282 $170,700 $272,697 $422,565
$500 $90,062 $158,803 $284,500 $454,495 $704,275
SOURCE: SEI RESEARCH. THIS ILLUSTRATION IS FOR HYPOTHETICAL PURPOSES ONLY AND
DOES NOT REPRESENT A PARTICULAR COREFUND.
3
<PAGE>
HOW TO USE YOUR
SEMI-ANNUAL
REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OF POINTER]
COREFUND SHARES ARE
CURRENTLY AVAILABLE IN
FOUR DIFFERENT CLASSES:
CLASS Y SHARES
ARE FOR INSTITUTIONAL INVESTORS.
CLASS A SHARES
ARE FRONT-END LOADED FUNDS
FOR INDIVIDUALS INVESTING IN EQUITY AND FIXED-INCOME FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
CLASS B SHARES
ARE FOR INDIVIDUAL INVESTORS,
OFFERING AN ALTERNATIVE
PRICING STRUCTURE FOR THE EQUITY CLASS A SHARES AND
MONEY MARKET CLASS C SHARES.
CLASS C SHARES
ARE FOR INDIVIDUALS INVESTING
IN MONEY MARKET FUNDS.
THEY OFFER A VARIETY OF SHAREHOLDER
SERVICING FEATURES, AS WELL AS
SOME ADDITIONAL FEES.
THE COREFUND 1997 SEMI-ANNUAL REPORT In the pages that follow, you will
read about your specific funds, the economic trends of the past year, and the
outlook going forward. But the most significant message of this 1997 Semi-Annual
Report has nothing to do with market conditions, new products, or economic
forecasts. Instead, we want to stress the importance of staying with your sound,
long-term investment plan through all economic cycles.
On pages two and three, we discuss the reasons why investing over a period of
many years can help you reduce the amount of money you will need to reach your
goal, and how long-term investing can limit the impact of short-term market
fluctuations on your investment. Don't underestimate the importance of starting
your investment program early and saving on a regular basis. Take a few minutes
and read this section. It may help you learn about new ways to reach your
financial goals.
Also in this Semi-Annual Report, you will find CoreStates Investment Advisers'
insights into current economic conditions and a global investment outlook. You
will find a Manager's Discussion of Fund Performance for each fund in the
CoreFund Family of Funds. Each manager's commentary presents a snapshot of fund
performance for the 6-month period ending December 31, 1997. The managers offer
you insights into the investment strategies they are employing and examine the
current climate of specific markets, as well as the market forces that are
expected to prevail into 1998.
WHAT
YOU NEED
TO KNOW
[SQUARE BOX]
4
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
QUICK FUND FACTS
Accompanying each commentary are boxes highlighting important fund
information:
[SQUARE BULLET] When a fund was opened
[SQUARE BULLET] Portfolio size
[SQUARE BULLET] Number of shares outstanding
[SQUARE BULLET] Average weighted maturity of a fund's fixed-income holdings
(where applicable)
[SQUARE BULLET] Seven-day effective yield (where applicable)
PORTFOLIO COMPOSITION
For funds with equity holdings, the individual reports include listings of
the top five holdings and the percentage of the total fund invested in these
holdings.
For funds with only fixed-income or money market holdings, the reports
include pie charts that show how these holdings are divided according to quality
ratings, or maturity.
PERFORMANCE DATA EQUITY AND FIXED-INCOME FUNDS
The performance box shows the six-month total return for the retail Class A
and B shares (shown with and without the sales charge) and the institutional
Class Y shares. Also, a bar chart shows each Fund's six-month total return and
30-day yield as compared with a commonly used industry index.
For the CoreFund Class A and B shares, the performance information has been
adjusted to reflect the 12b-1 fee associated with these shares. The data has
also been divided to show performance with and without the assessment of a sales
charge, also known as the load.
PERFORMANCE DATA MONEY MARKET FUNDS
The performance boxes show the six-month cumulative total return, 7-day and
30-day yields for each class as compared to the industry benchmark that the fund
manager uses to measure performance. Also, a bar chart shows each Fund's
six-month total return and 7-day yield compared with a commonly used industry
index.
UNDERSTANDING FUND PERFORMANCE
[SQUARE BULLET]
As you review the information in these fund reports, please remember that past
performance of the portfolios does not predict future results. Also, investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
[GRAPHIC OF POINTER]
5
<PAGE>
GLOSSARY
OF TERMS
- --------------------------------------------------------------------------------
[GRAPHIC OF POINTER]
Various terms used in the fund reports are defined as follows:
CLASS Y, A, B & C CoreFund shares are currently offered in these classes. Class
Y shares are for institutional investors. Class A, B & C shares are for
individuals. Class A, B & C shares include added features such as shareholder
servicing and automatic and systematic investment plans, as well as some
additional fees. Class C shares also offer checkwriting privileges.
DISTRIBUTIONS are the payments of income and capital gains to shareholders of a
mutual fund. For tax purposes, capital gains distributions are calculated
separately from interest income or dividends.
DIVERSIFICATION is the spreading of investment risk by putting assets in a
wide-ranging portfolio of securities, such as a mutual fund.
DOLLAR-COST AVERAGING is an installment-purchase technique that involves
investing a fixed amount of money in mutual fund shares at regular intervals
rather than all at once. The objective is to buy fewer shares when prices are
high and more shares when prices are low.
EXPENSE RATIO is the amount, expressed as a percentage of average assets, that
shareholders paid in the past year for mutual fund operating expenses and
management fees.
FACE VALUE is the amount the bondholder receives when the bonds are redeemed at
maturity. Interest payments are based on the face value (also called "par
value").
HEDGE is a defensive investment strategy, often involving the buying or selling
of options, to offset possible losses and thereby to reduce risk.
INDEX is a statistical composite of selected stocks or bonds that is used to
measure price fluctuations in these markets. For example, Standard & Poor's 500
Composite Index (S&P 500) is a popular measure of the stock market's performance
based on prices of 500 common stocks listed on the New York and American stock
exchanges or traded over the counter.
6
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
LOAD refers to sales charges that may be associated with a particular fund.
Where loads are shown, both sales charges (incurred when purchasing shares) and
12b-1 fees have been included. The 12b-1 fee, named after the Securities and
Exchange Commission rule that permits it, is sometimes assessed to recover costs
incurred through advertising, commission payments to brokers, or other expenses
associated with marketing and distributing a fund. CoreFunds offer both
front-end loaded and back-end loaded funds.
MATURITY refers to the period over which a bond or other fixed income security
must be held to earn the full yield offered by the issuer of the security.
Average weighted maturity describes the average period of maturity in a
portfolio that contains fixed income securities of varying maturities.
NET ASSET VALUE (NAV) reflects the market value of one share of the fund on the
date listed. This figure is determined by taking the fund's total assets --
securities, cash, and any accrued earnings -- and then deducting liabilities and
dividing by the number of shares outstanding.
Money market funds seek to maintain a stable NAV of $1.00, although there
is no guarantee they will always do so. There are three money market portfolios
in the CoreFund Family of Mutual Funds: Cash Reserve, Treasury Reserve, and
Tax-Free Reserve.
SWEEP ACCOUNTS allow excess checking account balances to be invested regularly
in higher-yielding money market mutual fund accounts.
TOTAL RETURN shows how the value of an investment has changed from the beginning
to the end of a period, assuming that dividends and capital gains have been
reinvested. In the performance tables for equity and fixed income funds, total
return is shown on an "annualized" basis -- it assumes performance at a constant
rate for each year. In the performance boxes for money market funds, the
six-month total return is shown on a "cumulative" basis -- i.e., the total
return for the period from July 1, 1997 to December 31, 1997.
VOLATILITY is a description of how much the price of securities, such as mutual
funds, moves up or down within a given period.
YIELD refers to the rate of return for an investment portfolio, expressed as a
percentage. Yield for mutual funds is established by a formula set by the
Securities and Exchange Commission. A fund's yield will fluctuate and reflect
the portfolio's net earning power after fund expenses have been paid.
DEFINING THE TERMS
[SQUARE BULLET]
7
<PAGE>
CHOOSING
THE
RIGHT FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC OF POINTER]
The CoreFund Family offers a diverse range of high-quality mutual fund
investment options designed to help you reach your financial goals.
These include: the capital appreciation potential of equity and
balanced funds, the income potential of fixed-income funds, the tax advantages
of municipal bond funds, the stability of money market funds, and the expanded
reach and potential of international funds. By allowing free exchange among all
funds, CoreFund makes it easy for you to adapt your individual investment
program to your changing needs.
THE RIGHT CHOICES FOR A WELL-ROUNDED INVESTMENT PLAN.
Each investor has a unique notion of what the "right" mix of risk and
reward should be. You may, for example, be an investor who seeks to maintain the
highest possible degree of stability in your portfolio, and therefore favor
money market securities. Or, you may be at the opposite end of the spectrum --
someone who is willing to accept and tolerate higher degrees of risk in exchange
for the potential of higher returns offered by stocks. Because higher returns
generally mean greater price fluctuations, investment decisions will always
revolve around this tradeoff.
FINDING THE RIGHT MIX OF RISK AND REWARD.
To help you align your portfolio's particular blend of stability and
return with your investment preferences, CoreFunds offers a broad array of
investment options.
DIVERSIFICATION
IS A WAY TO
MODERATE
YOUR RISK.
As illustrated at right, these funds fall into distinct categories that match
up with the various stages of the risk/return spectrum. By taking these factors
into consideration, you can fashion a well-rounded, diversified portfolio that
will help you achieve your individual investment goals while maintaining a
comfortable level of risk. In this way, CoreFunds' expertise and experience can
best be used to shape your investment future.
8
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
<TABLE>
MUTUAL FUND CATEGORIES
LOWER HIGHER
RETURN RETURN
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH [SQUARE BULLET] INTERNATIONAL GROWTH
INTERNATIONAL STOCK FUNDS
OFFER POTENTIALLY HIGHER
RETURNS, BUT CARRY SPECIAL
RISKS. THESE RISKS ARE
OUTLINED IN YOUR PROSPECTUS.
GROWTH [SQUARE BULLET] SPECIAL EQUITY
[SQUARE BULLET] GROWTH EQUITY
STOCK AND BALANCED FUNDS [SQUARE BULLET] CORE EQUITY
PURSUE LONG-TERM GROWTH. [SQUARE BULLET] EQUITY INDEX
THEY OFFER THE GREATEST GROWTH [SQUARE BULLET] BALANCED
POTENTIAL, BUT FLUCTUATE MORE
IN PRICE.
INTERNATIONAL INCOME [SQUARE BULLET] GLOBAL BOND
GLOBAL BOND FUNDS SEEK GROWTH AND
INCOME OFFERING POTENTIALLY HIGHER RETURNS
THAN DOMESTIC BONDS, BUT WITH LESS
STABILITY OF PRINCIPAL.
INCOME [SQUARE BULLET] BOND
[SQUARE BULLET] GOVERNMENT INCOME
INTERMEDIATE- AND LONG-TERM TAXABLE BOND [SQUARE BULLET] SHORT-INTERMEDIATE BOND
FUNDS SEEK A MODERATE-TO-HIGH LEVEL OF [SQUARE BULLET] SHORT TERM INCOME
INCOME AND PRESERVATION OF CAPITAL.
TAX-FREE INCOME [SQUARE BULLET] INTERMEDIATE MUNICIPAL BOND
[SQUARE BULLET] PENNSYLVANIA MUNICIPAL BOND
THESE FUNDS SEEK TO PROVIDE INCOME THAT [SQUARE BULLET] NEW JERSEY MUNICIPAL BOND
IS GENERALLY EXEMPT FROM INCOME TAX,
WHILE PRESERVING CAPITAL.
STABILITY [SQUARE BULLET] TREASURY RESERVE
[SQUARE BULLET] CASH RESERVE
MONEY MARKET FUNDS SEEK GREATER SAFETY [SQUARE BULLET] TAX-FREE RESERVE
AND STABILITY OF PRINCIPAL WHILE
PROVIDING INCOME.
LOWER HIGHER
RISK RISK
RISK/RETURN SPECTRUM
</TABLE>
9
<PAGE>
FUND
DESCRIPTIONS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
[SQUARE BULLET] EQUITY (STOCK) FUNDS
INVEST PRIMARILY IN SECURITIES SUCH AS COMMON STOCKS. THESE FUNDS SEEK MAXIMUM
LONG-TERM GAINS THROUGH CAPITAL APPRECIATION.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] EQUITY Seeks to achieve price and yield ...results substantially in line with the performance
INDEX FUND performance similar to the S&P 500 of the stock market as a whole.
Composite Index.
[SQUARE BULLET] CORE EQUITY Seeks growth of capital by investing ...growth of capital and is willing to take higher
FUND primarily in a diversified portfolio risk for potentially higher returns.
of common stocks.
[SQUARE BULLET] GROWTH Seeks growth of capital and an ...capital appreciation and is willing to take higher
EQUITY FUND increasing flow of dividends from risk for potentially higher returns.
a diversified portfolio of common
stocks.
[SQUARE BULLET] SPECIAL Seeks capital growth by investing ...growth of capital and is willing to take higher risk
EQUITY FUND principally in a diversified and experience greater volatility for potentially higher
portfolio of common stocks. returns.
[SQUARE BULLET] INTERNATIONAL Seeks long-term growth of capital ...growth of capital and is willing to assume the
GROWTH FUND by investing in a portfolio of additional risks inherent in foreign investing in
common stocks diversified by country exchange for potentially higher returns.
and industry.
</TABLE>
10
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
[SQUARE BULLET] BALANCED FUND
INVESTING IN BOTH COMMON STOCKS AND FIXED INCOME. THIS FUND SEEKS TO PROVIDE
TOTAL RETURN WHILE PRESERVING CAPITAL.
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] BALANCED FUND Seeks to provide total return while ...participation in a diversified portfolio program
preserving capital. that is continuously and professionally managed and is
willing to take higher risk for potentially higher returns.
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS
INVEST PRIMARILY IN INTEREST-PAYING SECURITIES ISSUED BY THE U.S. GOVERNMENT AND
ITS AGENCIES AS WELL AS CORPORATE BONDS AND COMMERCIAL PAPER. THESE FUNDS SEEK
TO PROVIDE A REGULAR STREAM OF CURRENT INCOME.
[SQUARE BULLET] SHORT TERM Seeks consistent current income ...higher yield than can be expected from either cash
INCOME FUND and relative stability of principal by management funds or other short-term investments,
investing primarily in a diversified but with less volatility than most longer-term bond funds.
portfolio of investment-grade debt
securities with remaining maturities
of three years or less.
[SQUARE BULLET] SHORT- Seeks consistent current income by ...higher yield than can be expected from other
INTERMEDIATE investing principally in a short-term investments but without the wide swings
BOND FUND diversified portfolio of debt normally attributable to long-term bond funds.
securities with an average weighted
maturity of two to five years.
</TABLE>
11
<PAGE>
FUND
DESCRIPTIONS
(CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
[SQUARE BULLET] FIXED INCOME (BOND) FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] GOVERNMENT Seeks to provide current income while ...investment performance and can tolerate the risk
INCOME FUND preserving principal value and from an actively managed portfolio of taxable fixed-income
maintaining liquidity. securities without credit risk.
[SQUARE BULLET] BOND FUND Seeks to maximize long-term total ...investment performance and can tolerate the associated
return by investing principally in a risk from an actively managed portfolio of taxable fixed
diversified portfolio of debt income securities.
securities.
[SQUARE BULLET] GLOBAL Seeks to provide capital appreciation ...capital appreciation and current income over the
BOND FUND and current income through investment long term, and is willing to assume the additional
in fixed income securities of the risks of foreign investing for potentially higher returns,
United States and foreign issuers. and seeks benefits of international diversification.
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS
INVEST IN GENERAL OBLIGATION BONDS, REVENUE BONDS, AND MUNICIPAL NOTES, ALL OF
WHICH FINANCE PUBLIC WORKS AND SERVICES. THESE FUNDS SEEK TO PROVIDE INCOME THAT
IS GENERALLY EXEMPT FROM FEDERAL INCOME TAX AND IN SOME CASES FROM STATE AND
LOCAL TAXES.
[SQUARE BULLET] INTERMEDIATE Seeks a high level of income exempt ...a conservative investment and seeks after-tax
MUNICIPAL from federal income tax consistent yields while protecting principal.
BOND FUND with the preservation of capital.
[SQUARE BULLET] PENNSYLVANIA Seeks a high level of current income, ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from PA state enhanced investment performance of an actively managed
and local personal income tax. portfolio of tax-free securities.
</TABLE>
12
<PAGE>
[SQUARE BULLET] COREFUND FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
[SQUARE BULLET] TAX-EXEMPT INCOME FUNDS (CONTINUED)
<TABLE>
OBJECTIVE FOR A LONG-TERM INVESTOR WHO IS LOOKING FOR...
<S> <C> <C>
[SQUARE BULLET] NEW JERSEY Seeks a high level of current income ...a moderate rate of tax-free income with less price
MUNICIPAL consistent with the preservation of volatility than long-term municipal bonds and the
BOND FUND capital, that is exempt from New Jersey enhanced investment performance of an actively managed
state and local personal income tax. portfolio of tax-free securities.
[SQUARE BULLET] MONEY MARKET FUNDS
INVEST PRIMARILY IN QUALITY SHORT-TERM SECURITIES OF THE U.S. GOVERNMENT AND ITS
AGENCIES, COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT, AND REPURCHASE AGREEMENTS.
THESE FUNDS SEEK TO MAINTAIN A CONSTANT SHARE PRICE OF $1.00 WITH INCOME VARYING
ACCORDING TO MARKET CONDITIONS AND INTEREST RATES. HOWEVER, MONEY MARKET FUNDS
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO
ASSURANCE THAT THESE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00.
[SQUARE BULLET] TREASURY Seeks current income with liquidity ...liquidity of assets, current income, and
RESERVE and stability of principal, with stability of principal.
investments exclusively in U.S.
Treasury obligations.
[SQUARE BULLET] CASH RESERVE Seeks current income with liquidity ...liquidity of assets, current income, and
and stability of principal. stability of principal.
[SQUARE BULLET] TAX-FREE Seeks current income that is exempt ...current income exempt from federal income taxes,
RESERVE from regular income tax with stability of principal, and liquidity of assets.
liquidity and stability of principal.
</TABLE>
13
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
ABOUT CORESTATES
INVESTMENT ADVISERS
(CSIA)
[SQUARE BULLET] INVESTMENT MANAGERS FOR THE
COREFUND FAMILY OF MUTUAL
FUNDS.
[SQUARE BULLET] AN AFFILIATE OF CORESTATES
FINANCIAL CORP, ONE OF THE
NATION'S LARGEST AND MOST
RESPECTED BANKING INSTITUTIONS.
[SQUARE BULLET] DEDICATED TO PROVIDING ITS
INVESTORS WITH PROFESSIONAL
INVESTMENT MANAGEMENT.
[SQUARE BULLET] SERVING THE NEEDS OF INSTITUTIONS,
CORPORATIONS, MUNICIPALITIES, AND
INDIVIDUAL INVESTORS.
[SQUARE BULLET] MANAGING MORE THAN $18 BILLION
IN ASSETS, INCLUDING MORE THAN
$4 BILLION IN COREFUNDS.
[SQUARE BULLET] SUPPORTING YOU WITH INVESTMENT
EXPERTISE FOR THE LONG TERM.
COREFUND INVESTMENT REVIEW
Q: How did the economic climate over the last six months of 1997 impact the
world's markets?
[PHOTO OF MARK STALNECKER OMITTED]
A: The U.S. economy was strong and stable through the period and continued
to grow at a real rate of nearly 4%. In addition, inflation, as measured by the
Consumer Price Index, was less than 2%, despite tighter labor markets, strong
consumer confidence and nearly double-digit growth in corporate profits.
[PHOTO OF MARK STALNECKER OMITTED]
During the six months, fears that the Federal Reserve would again move to
restrict monetary growth never became a reality. Subsequently, the inflation
picture remained favorable and short-term interest rates remained relatively
stable. Given the improved inflation outlook, intermediate and long-term U.S.
interest rates have declined. In fact, by year-end the 30-year U.S. Treasury
bond rate was below 6%.
Toward the end of the period, serious problems throughout the Southeast
Asian economy negatively impacted the world markets. International equities
underperformed the domestic markets. International bonds also had a challenging
six months.
[PHOTO OF MARK STALNECKER OMITTED]
Q: How did the CoreFunds perform overall during their semi-annual period?
[GRAPHIC OF POINTER OMITTED]
A: We are pleased to report that for the six-month period ending December
31, 1997, your fund managers produced largely positive returns for CoreFund
investors in spite of periods of volatility throughout the world economy.
Q: Why did equity investors experience such sudden market fluctuations
during the period?
A: Recent difficulties in the overseas market, and in Southeast Asia in
particular,
14
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
caused market uncertainty in late October, triggering a sudden sharp price drop
followed by a vigorous recovery.
However, for the full calendar year 1997, the broad U.S. stock market saw
solid gains as it continued to make bull market history. The large
capitalization S&P 500 Index (S&P) produced a total return of 33.36%. Most of
this return, 20.6%, was realized in the first half of 1997. For the last half of
the year (the first six-months of the funds' fiscal year), the market produced a
return of 10.58%.
[PHOTO OF MARK STALNECKER OMITTED]
Smaller capitalization stocks continued to provide investors with more
modest returns than the S&P 500 in 1997. The Russell 3000 Equal Weighted Index,
which includes both mid-cap and small-cap stocks, produced a return of 25.35%
for the full year 1997, including a return of 12.76% in the last six months. All
in all, U.S. stock prices benefited from lower interest rates and strong profit
growth. Expectations are that 1998 will bring slower profit growth.
And, if uncertainties continue in the international markets, it will be
unlikely that stock market conditions in 1998 will match those of 1997.
Q: How did uncertainties in the equity market affect U.S. bonds and money
market instruments?
A: After rising modestly in the first quarter of 1997, money market rates
stabilized. Asian economic worries and lower than anticipated inflation (the two
are not unrelated) allayed fears of Federal Reserve "tightening." In fact, by
year-end 1997, most market experts expected that the next policy action by the
Federal Reserve would be to "ease" money market rates rather than to raise them.
As long-term interest rates fell in response to these changed expectations,
the return on bond investments rose. For the full-year 1997, the bond market, as
measured by the Salomon
(CONTINUED)
[BAR GRAPH DEPICTING CAPITAL MARKET RETURNS]
CAPITAL MARKET RETURNS
(% OF TOTAL RETURN)
FULL YEAR (1/97-1/98) LAST SIX MONTHS `97
DJIA 24.94 4.01
S&P 500 33.36 10.58
SBBI 9.62 6.37
JPMGB 1.40 2.52
EAFE 1.78 (8.48)
DJIA = DOW JONES INDUSTRIAL AVERAGE
S&P 500 = STANDARD & POOR'S COMPOSITE INDEX
SBBI = SALOMON BROTHERS BROAD BOND INDEX
JPMGB = JP MORGAN GLOBAL BOND INDEX, US$ HEDGED
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
[LINE GRAPH DEPICTING CHANGES IN THE YIELD CURVE OMITTED]
CHANGES IN THE YIELD CURVE
(US TREASURY SECURITIES)
6/30/97 12/31/97
3 MO 5.172% 5.342%
6 MO 5.251% 5.435%
1 YR 5.651% 5.476%
2 YR 6.059% 5.642%
3 YR 6.209% 5.669%
5 YR 6.372% 5.705%
10 YR 6.491% 5.741%
30 YR 6.780% 5.924%
15
<PAGE>
CORESTATES
INVESTMENT
ADVISERS'
REVIEW
(CONCLUDED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
[BAR GRAPH DEPICTING STOCKS -- INTERNATIONAL VS. DOMESTIC]
STOCKS -- INTERNATIONAL VS. DOMESTIC
(% OF TOTAL RETURN AS OF 12/97)
S&P 500 EAFE
1 YR. 33.36 1.78
2 YR. 28.05 3.90
3 YR. 31.13 6.28
4 YR. 22.94 6.65
5 YR. 20.25 11.39
S&P 500 = STANDARD & POOR'S 500 COMPOSITE INDEX
EAFE = MORGAN STANLEY EUROPE, AUSTRALIA AND FAR EAST INDEX
Brothers Broad Index, earned a total return of 9.62%. The Index return for the
first half of the year was 3.06%, and for the second half of the year was 6.37%.
With falling commodity prices, a strong U.S. dollar, and weaker international
economies, the outlook for U.S. interest rates remains optimistic.
[PHOTO OF MARK STALNECKER OMITTED]
Q: How have the international equity markets performed given the recent
conditions?
A: By and large, foreign equities continued to underperform domestic
equities. Troubles in Asia, generally disappointing growth, and weaker
currencies against the dollar all hurt returns. For the full-year 1997,
international equity returns (in U.S. dollar terms), as represented by the
Morgan Stanley EAFE Index, were 1.78%. For the first six months of the funds'
fiscal year, the return was (8.48)%, compared to 11.21% for the six months
ending June 30, 1997.
Q: What is the economic outlook for 1998?
A: While signs point to a continuing strong economy in the U.S. in 1998,
major uncertainty hangs over the markets. Distress in Asian markets, including
Japan, together with a drop in their foreign exchange rates could again have an
impact on domestic markets. Given the current high valuation of U.S. equities,
the market continues to remain vulnerable to negative surprises. While market
expectations are that the worst is now behind us, and while we believe the aid
packages put in place by international agencies to help Southeast Asia will
suffice, there remains a risk that this economic "flu" will spread and damage
the U.S. and other economies.
[PHOTO OF MARK STALNECKER OMITTED]
16
<PAGE>
[SQUARE BULLET] CORE FUND
- --------------------------------------------------------------------------------
Q: What advice do you have for CoreFund investors given current conditions?
A: Solid, long-term real returns can be realized by investors who stay with
their long-term investment plans through market cycles. Investors should view
any short-term market declines within the context of the returns earned during
the past decade. Investors should remain committed to their long-term investment
plan and not attempt to try to "time" market movements.
Thank you for your continued confidence in the CoreFund Family of Mutual
Funds. We are committed to providing investors with strong returns across all
investment objectives. For additional information concerning your fund(s), I
direct your attention to the comments by the fund portfolio managers.
[PHOTO OF MARK STALNECKER OMITTED]
/S/ SIGNATURE
MARK STALNECKER
CHAIRMAN, CSIA
17
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
COREFUND EQUITY MANAGERS
LARY AASHEIM
EQUITY INDEX
STEPHEN DALTON
GROWTH EQUITY AND BALANCED
(MANAGERS NOT SHOWN)
JOSEPH STOCKE
CORE EQUITY & SPECIAL EQUITY
MICHAEL GIBSON
MARTIN CURRIE, INC.
AND
BEVERLY HENDRY
ABERDEEN MANAGERS
INTERNATIONAL GROWTH
[PHOTO OF LARY AASHEIM AND STEPHEN DALTON OMITTED]
[SQUARE BULLET] EQUITY INDEX FUND
SEMI-ANNUAL RESULTS
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] This Fund returned 10.12% after expenses for the six months
ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Composite Index (S&P 500),
returned 10.58% for the same period.
[SQUARE BULLET] Assets in the Fund grew 11% from$245.9 million to $272.7 million
during the six months.
COMMENTARY
The CoreFund Equity Index Fund is managed to mirror the S&P 500 Index. As it
reflects the performance of the overall stock market, the Fund offers investors
the potentially attractive long-term returns of the equity market, while
insulating them from the risks associated with any one investment management
style.
The Fund is invested in a well-diversified sampling of the 500 names of the S&P
500 Index. A quantitative model is used to make sure that sector weightings are
maintained in the same proportions as the Index. This minimizes the impact of
transaction costs which can have a negative impact on performance. We take
advantage of every opportunity to keep transaction costs as low as possible at
all times.
Even after taking out expenses, the Fund slightly underperformed the
Index for the semi-annual time period. One reason for this was the need to
maintain higher cash levels to support less predictable cash flows during this
period. The result was a slight drag on net performance which impacted the
Fund's ability to track, or match, Index performance.
Although the Fund is not managed in terms of market conditions, we closely
monitor the world economy. Looking ahead,
18
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
we expect market volatility to continue due to the Southeast Asia turmoil and
the strength of the U.S. dollar. On the bright side, the problems in Southeast
Asia have helped to lower interest rates. While corporate earnings are hurt by
Asian exposure, valuations are helped by the lower interest rates.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
S&P 500 INDEX EQUITY INDEX (CLASS Y)
10.58 10.12
PERFORMANCE
- ---------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 10.12% $37.39 $39.65
CLASS A W/O LOAD 2.74 37.37 39.66
CLASS A W/LOAD (2.90) 39.54 41.97
CLASS B W/O LOAD 3.37* -- 39.12
CLASS B W/LOAD (1.62)* -- --
S&P 500 INDEX 10.58 -- --
- ---------------------------------------------
*INCEPTION DATE 11/7/97
[SQUARE BULLET] CORE EQUITY FUND
[GRAPHIC OF POINTER]
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 11.87% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the S&P 500 Index, returned 10.58% for the
same period.
[SQUARE BULLET] Assets in the Fund grew 9% from$531.1 million to $576.8 million
during the six months.
COMMENTARY
During the last six months of 1997, the Core Equity Fund produced positive
results for shareholders and slightly outperformed its benchmark. Throughout the
period, we saw an equity market that was much more volatile than we've seen in
recent years.
There was a sell-off in October due to concern about the implications
of the situation in Asia on the United States A rebound followed, but the market
wasn't able to break through to new highs. As a result, we've entered a period
where the market is supported by low interest rates due to low inflation and a
strong dollar. But, these positives are being offset by the problems
EQUITY INDEX FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 14, 1985
PORTFOLIO SIZE:
$272.7 MILLION
SHARES OUTSTANDING:
6,877,433 (Y A&B COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
GENERAL ELECTRIC
3.2%
COCA-COLA
2.2%
MICROSOFT
2.0%
EXXON
2.0%
MERCK & COMPANY
1.7%
19
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
(CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
CORE EQUITY FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$576.8 MILLION
SHARES OUTSTANDING:
27,999,895 (Y, A&B COMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
WORLDCOM
3.8%
CENDANT
3.5%
AIRTOUCH COMMUNICATIONS
3.3%
MOBIL
3.2%
NABISCO CLASS A
3.1%
[SQUARE BULLET] CORE EQUITY (CONTINUED)
in Asia which may put pressure oncorporate profits.
Throughout the period we kept to our Fund strategy, using a bottom-up
approach that combines quantitative and qualitative analysis, to invest in a
diversified group of the most attractive large- and mid-capitalization
companies.Overall, sector weightings within the Fund remained consistent
throughout the period.
The Fund benefited from an overweighting within the communication sector
including strong performance from such stocks as Storage Technology and America
Online. Investments in Lowe's Company and General Nutrition within the retail
sector also helped performance. The Fund was hurt by weak performance in the
basic materials sector and the healthcare sector.
Looking ahead, we expect the market to continue to be choppy, reacting on
a daily basis to whatever news is coming out of the Asian countries and the most
current economic data. Although investors are being pushed into the bond market
due to concerns about Asia, they are also being pulled back to the stock market
because of low, and declining, interest rates. As a result, the market is not
making a lot of progress in either direction and we wouldn't be surprised to see
these conditions continue for a while longer.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
S&P 500 INDEX CORE EQUITY (CLASS Y)
10.58 11.87
PERFORMANCE
- ---------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 11.87% $21.11 $20.60
CLASS A W/O LOAD 11.70 21.13 20.61
CLASS A W/LOAD 5.56 22.36 21.81
CLASS B W/O LOAD (7.39)* -- 18.31
CLASS B W/LOAD (11.36)* -- --
S&P 500 INDEX 10.58 -- --
- ---------------------------------------------
*INCEPTION DATE 11/7/97
20
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] GROWTH EQUITY FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 14.11% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmarks, the Lipper Growth Funds Index and the S&P
500 returned 10.98% and 10.58% respectively for the six months.
[SQUARE BULLET] Assets in the Fund grew 11% from $152.4 million to $168.5
million during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund Growth Equity Fund outperformed its benchmarks while producing
positive returns for investors.
Sector leadership was rotational. Through October, the technology,
financial, and healthcare sectors led performance. In the second quarter,
electric utilities performed well, as did telecommunications services where we
saw strength based on consolidations and continued strong fundamentals.
Briefly, at the beginning of the period, smaller capitalization stocks
performed better than larger capitalization stocks. However, a flight to larger
capitalization, quality, domestic, and interest-sensitive sectors paced the
broader market's return in the second quarter. The stocks of companies perceived
to have significant Asian exposure or sectors containing stocks of companies
pre-announcing negative earnings surprises, such as oil service, technology, and
HMO's, were the weakest of the quarter.
The Fund benefited from better-than-expected earnings growth and
enjoyed great performance through September. However, the Fund's overweighting
in technology caused it to be negatively impacted by the Asian crisis the second
quarter.
Offsetting the weaker areas, an overweighting in financial stocks and
communications services helped performance. This was primarily due to
exceptional results by Teleport, McLeod, and Brooks Fiber Properties. During
this period we increased our holdings of consumer cyclicals, telecommunications
services, and financial stocks while reducing our energy and healthcare
holdings.
Looking ahead, we will remain fully invested with incremental buying in
domestically oriented sectors with strong growth characteristics, including
retail, media, food, and insurance. We will keep our lower
GROWTH EQUITY FUND
------------------
QUICK FUND FACTS
------------------
INCEPTION DATE:
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$168.5 MILLION
SHARES OUTSTANDING:
10,318,439 (Y, A&B COMBINED)
TOP FIVE HOLDINGS
------------------
(% OF FUND INVESTMENTS)
DAYTON HUDSON
3.0%
GAP
2.8%
HEALTH MANAGEMENT
ASSOCIATES
2.7%
BMCSOFTWARE
2.6%
ALLSTATE
2.5%
21
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] GROWTH EQUITY (CONTINUED)
technology weighting, until we see what impact the Asian economic crisis will
have on this sector. The Asian crisis may have a negative effect on selected
companies and modestly slow the U.S. expansion. However, the positive impact of
lower inflation and interest rates may have an overall beneficial impact on U.S.
financial assets. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
GROWTH EQUITY (CLASS Y) LIPPER GROWTH EQUITY INDEX S&P 500 INDEX
14.11 10.98 10.58
PERFORMANCE
- ----------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 14.11% $15.43 $16.33
CLASS A W/O LOAD 14.02 15.39 16.27
CLASS A W/LOAD 7.72 16.29 17.22
CLASS B W/O LOAD 0.85* -- 16.19
CLASS B W/LOAD (3.83)* -- --
LIPPER GROWTH 10.98 -- --
S&P 500 INDEX 10.58 -- --
- --------------------------------------------
*INCEPTION DATE 11/18/97
[SQUARE BULLET] SPECIAL EQUITY FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 8.14% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Russell 3000 Equal Weighted Index,
returned 12.76% for the same period.
[SQUARE BULLET] Assets in the Fund grew 4% from $74.3 million to $77.0 million
during the six months.
COMMENTARY
The CoreFund Special Equity Fund underperformed its benchmark during a volatile
period in its sector of the stock market. The underperformance was due primarily
to stock selection, profit taking, and an overall market gravitation away from
smaller companies to blue-chip companies as investors reacted to the crisis in
Asia.
There was a sell-off in October due to concerns about the implications
of the situation in Asia on the United States. A rebound followed, but the
market wasn't able to break through to new highs. As a result, we've entered a
period where the market is supported by low interest rates due to low
22
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
SPECIAL EQUITY (CLASS Y) RUSSELL 3000 (EW) INDEX
8.14 12.76
PERFORMANCE
- ----------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 14.11% $15.43 $16.33
CLASS A W/O LOAD 14.02 15.39 16.27
CLASS A W/LOAD 7.72 16.29 17.22
CLASS B W/O LOAD 0.85* -- 16.19
CLASS B W/LOAD (3.83)* -- --
LIPPER GROWTH 10.98 -- --
S&P 500 INDEX 10.58 -- --
- ----------------------------------------------
*INCEPTION DATE 11/7/97
inflation and a strong dollar. But, these positives are being offset by the
problems in Asia which may put pressure on corporate profits.
Throughout the period we kept to our Fund strategy, using a bottom-up
approach combining quantitative and qualitative analysis, to invest in a
diversified group of the most attractive mid- and small-capitalization
companies. Overall, sector weightings within the Fund remained consistent
throughout the period.
[SQUARE POINTER OMITTEED]
The Fund benefited from strong performance from such stocks as Bright
Horizons (a daycare franchise), Mac-Gray (a laundry services company) as well as
America Online, within the technology sector, and General Nutrition within the
retail sector. Financial stocks were among the best performers, led by declining
interest rates and continuing consolidation among banks and brokers. Overall,
technology stocks had a poor year as fourth quarter concerns over the growing
Asian crisis were particularly harmful.
Looking ahead, we expect the market to continue to be choppy, reacting
on a daily basis to whatever news is coming out of the Asian countries and the
most current economic data. Although investors are being pushed into the bond
market due to concerns about Asia, they are also being pulled back to the stock
market because of low, and declining, interest rates. As a result, the market is
not making a lot of progress in either direction and we wouldn't be surprised to
see these conditions continue for a while longer. [SQUARE BULLET]
- --------------------------------------------------------------------------------
SPECIAL EQUITY FUND
-------------------
QUICK FUND FACTS
-------------------
INCEPTION DATE:
MARCH 15, 1994
PORTFOLIO SIZE:
$77.0 MILLION
SHARES OUTSTANDING:
7,232,439 (Y, A&BCOMBINED)
TOP FIVE HOLDINGS
(% OF FUND INVESTMENTS)
SCIOS NOVA
3.4%
CENDANT
2.8%
AMBPROPERTY
2.1%
LUCENT TECHNOLOGIES
1.8%
KUHLMAN
1.7%
23
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
INTERNATIONAL GROWTH FUND
-------------------------
QUICK FUND FACTS
-------------------------
INCEPTION DATE:
FEBRUARY 12, 1990
PORTFOLIO SIZE:
$160.7 MILLION
SHARES OUTSTANDING:
12,101,514 (Y, A&BCOMBINED)
TOP FIVE HOLDINGS
-------------------------
(% OF FUND INVESTMENTS)
NOVARTIS AG
2.4%
VEBA
2.1%
EAUX
2.0%
ROCHE HOLDINGS
2.0%
CREDIT SUISSE GROUP
1.8%
[SQUARE BULLET] INTERNATIONAL GROWTH FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned (4.89)% for the six months ending December
31, 1997.
[SQUARE BULLET] The Fund's benchmark, the Morgan Stanley Capital International
EAFE Index, returned (8.48)% for the same period.
[SQUARE BULLET] Assets in the Fund declined 2.9% from $165.5 million to $160.7
million during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund International Growth Fund beat its benchmark and provided investors
with strong relative performance during a very challenging economic period. The
Fund benefited from the added level of diversification gained by being
co-managed by Martin Currie, Inc. (80%) and Aberdeen Managers (20%).
The Fund's performance was primarily due to very good stock selection,
an underweighting of Japanese securities, a reduction of the Fund's overall
position in the Far East, and a higher than normal cash position. However, the
Fund was still significantly challenged by severe problems in Asia.
Overall, in the third quarter of 1997, the U.K and European markets
were very strong. The U.K. market rallied as interest rates fell. The pound
sterling was weak in the third quarter and strengthened in the fourth quarter.
In the fourth quarter, the U.K. was neutral and Europe was again strong. These
economies are being generally accepted as on track, which has had a positive
effect on investor psychology.
The stocks that performed best for the Fund were financials,
pharmaceutical, and utilities in the U.K. Similar performance was found in these
sectors of the European markets, and in stocks of companies experiencing
restructuring. In the third quarter, the Fund owned some companies with export
exposure, but sold them in the fourth quarter due to currency strengthening.
This move benefited the Fund.
Japan had a very difficult six months. It was down significantly in the
last half of 1997 due to wide spread economic weakness. The Fund is
significantly underweighted in Japan, and we are focusing primarily on those
Japanese companies that export to take advantage of the weak currency.
24
<PAGE>
[SQUARE BULLET] CORE FUND
- --------------------------------------------------------------------------------
Central and Latin America were not too severely impacted by Asian
problems during the third quarter, but caught a bit of the "flu" in the fourth
quarter. The Fund had strong exposure to Mexico and Brazil. But the Brazilian
exposure was reduced during the fourth quarter. We believe Mexico will continue
to do very well. We have excellent relative performance here and believe that
there is still opportunity as it is a more mature, and yet still emerging,
market.
The Asian market environment was very difficult and at times extremely
volatile throughout the period. The markets fell sharply due to severe currency
devaluation and some weakness in the economy. We believe the problems here are
going to take awhile to resolve themselves. In general, we started reducing our
exposure to this area when problems began to emerge at the end of 1996 and the
reduction continued throughout 1997.
Looking ahead, with the Economic Monetary Union still on track, we
expect continued growth in both the U.K. and Europe through 1998. The Fund will
remain focused on pharmaceuticals and financial companies, [BAR GRAPH OMITTED]
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
INTERNATIONAL GROWTH (CLASS Y) MSCI/EAFE INDEX
(8.48) (4.89)
PERFORMANCE
- ---------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y (4.89)% $14.72 $13.28
CLASS A W/O LOAD (4.98) 14.70 13.28
CLASS A W/LOAD (10.24) 15.56 14.05
CLASS B W/O LOAD 1.46* -- 13.28
CLASS B W/LOAD (3.35)* -- --
MSCI/EAFE (8.48) -- --
- ---------------------------------------------
*INCEPTION DATE 11/24/97
while reducing exposure to manufacturers with exports as a significant part of
their business.
As for the Asian markets, currently we're looking for buying opportunities.
With 70% of the world's population in this region, values are being created. We
will be closely focusing on the well-managed, well-financed companies which
survive and emerge strongly thereafter. [SQUARE BULLET]
- --------------------------------------------------------------------------------
25
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
BALANCED FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
JANUARY 4, 1993
PORTFOLIO SIZE:
$127.4 MILLION
SHARES OUTSTANDING:
9,369,442 (Y, A&BCOMBINED)
TOP FIVE HOLDINGS
----------------
(% OF FUND INVESTMENTS)
HEALTH MANAGEMENT ASSOCIATES
1.5%
CRESTAR FINANCIAL
1.5%
BMCSOFTWARE
1.5%
HBO
1.5%
SCHERING PLOUGH
1.4%
[SQUARE BULLET] BALANCED FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 7.31% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmarks, the S&P 500 Index and the Lehman Brothers
Intermediate Government/Corporate Bond Index returned 10.58%
and 4.90%, respectively, for the same period.
[SQUARE BULLET] Assets in the Fund grew 8% from $117.8 million to $127.4 million
during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund Balanced Fund produced positive returns for investors for the
semi-annual period. The period was volatile, characterized by
better-than-expected earnings growth, as well as peaking and declining interest
rates. We also saw overwhelming concern about the Southeast Asian economic
crisis which seemed to rule the market and add additional volatility on the
downside to equities, and on the upside to bond yields.
On the equity side, sector leadership was rotational. In the first quarter
(through September), the technology, financial, and healthcare sectors led
performance. In the second quarter electric utilities performed well, as did
telecommunications services where we saw strength based on consolidations and
continued strong fundamentals both in the competitive local exchange carrier and
second-tier long distance stocks.
Briefly, at the beginning of the period, smaller capitalization stocks
performed better than larger capitalization stocks. However, a flight to larger
capitalization, quality, domestic, and interest-sensitive sectors paced the
broader market's return in the second quarter. The stocks of companies perceived
to have significant Asian exposure, and those sectors containing stocks of
companies preannouncing negative earnings surprises, including oil service,
technology and HMO's were the weakest of the quarter. We are now decreasing our
overweighting in energy stocks while increasing our underweighting in financial
stocks which we believe will improve performance.
On the bond side, we saw a peaking of yields at the beginning of this
period and a general decline that accelerated through the end of December. The
flight to quality coupled with the rally in the long bond made
26
<PAGE>
[SQUARE BULLET] CORE FUND
- --------------------------------------------------------------------------------
the 30-year U.S. Treasuries the best performing bonds. The bond portion of the
Fund (30%) underperformed it's index due to having a shorter average duration
than the index.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
- ----------------------
BALANCED (CLASS Y) S&P 500 INDEX LEHMAN INT. GOV'T/CORP INDEX
7.31 10.58 4.90
PERFORMANCE
- -----------------------------------------------
6-MONTH NAV NAV
TOTAL RETURN 6/30/97 12/31/97
(CUMULATIVE)
- -----------------------------------------------
CLASS Y 7.31% $13.52 $13.60
CLASS A W/O LOAD 7.19 13.52 13.60
CLASS A W/LOAD 1.27 14.31 14.39
CLASS B W/O LOAD (0.45)* -- 13.51
CLASS B W/LOAD (5.14)* -- --
S&P 500 INDEX 10.58 -- --
LEHMAN INT.
GOV'T/CORP.
BOND INDEX 4.90 -- --
- -----------------------------------------------
*INCEPTION DATE 11/5/97
[GRAPHIC OF POINTER OMITTED]
The Fund's asset allocation is currently 64% stocks, 30% bonds, and 6%
cash. Given current conditions, we plan to keep this breakdown consistent.
Looking ahead, the U.S. economy and corporate profits will be further impacted
by the Asian crisis. Negatively, Asian demand will probably decline for products
used in large projects and big ticket items. On the positive side, inflation,
interest rates, and economic activity in the U.S. should remain below current
expectations, which is beneficial for financial assets. We will thus focus on
domestically-oriented growth issues in equities, while looking to pick up yield
in the bond market. [SQUARE BULLET]
- --------------------------------------------------------------------------------
27
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
SHORT TERM INCOME FUND
----------------------
QUICK FUND FACTS
----------------------
INCEPTION DATE:
MAY 15, 1995
PORTFOLIO SIZE:
$37.8 MILLION
SHARES OUTSTANDING:
3,782,284 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
0.96 YEARS
QUALITY DIVERSIFICATION
[PIE CHART OMITTED]
AAA 53%
AA 4%
A 31%
BBB 6%
OTHER 6%
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] SHORT TERM INCOME FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 3.00% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-year Treasury Bill
Index, returned 2.92% for the same period.
[SQUARE BULLET] Assets in the Fund grew 1% from $37.5 million to $37.8 million
during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund Short Term Income Fund provided investors with positive returns for
the year. The Fund's asset allocation is about 40% Treasuries, 40% corporates,
and 20% asset-backed securities. Duration matched Index throughout the period
with the exception of the end of the fourth quarter when duration was lengthened
slightly as year-end trades increased. This strategy benefited the Fund's
performance.
During the third quarter of 1997, inflation fears subsided and the
yield curve on short-term securities flattened in reaction to dampened concerns
about an impending increase in the Federal funds rate. Also, as the U.S. moves
closer to a budget surplus, there was a reduction in the supply of Treasury
securities coupled with a healthy demand, causing rates to drop. Corporates were
tightening to Treasuries in the third quarter.
In the fourth quarter, the Asian crisis impacted the market and corporates
began to widen as investors looking for stability moved money into Treasuries.
Events in Asia unraveled, causing investors to reassess value and risk factors
in the market in general. Also
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
SHORT TERM INCOME (CLASS Y) MERRILL LYNCH 1-YEAR T-BILL INDEX
3.00 2.92
YIELD 30-DAY %
--------------
SHORT TERM INCOME (CLASS Y) MERRILL LYNCH 1-YEAR T-BILL INDEX
5.46 5.49
PERFORMANCE
- -----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- -----------------------------------------------
CLASS Y 3.00% 5.46% $ 9.99
CLASS A W/O LOAD 2.87 5.46 9.98
CLASS A W/LOAD (0.43) 5.04 10.32
MERRILL LYNCH
1-YEAR T-BILL
INDEX 2.92 5.49 --
- -----------------------------------------------
28
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
in this quarter, U.S. Dollar short-term LIBOR Rates were driven higher and the
supply of Treasury Bills increased. Focus has shifted from LIBOR floater bonds
to Federal Fund-based and Prime-based floater bonds, since these securities tend
to fluctuate less.
Looking forward, we believe uncertainty due to the Asian crisis will
continue, which will keep money moving into the fixed-income market. However,
the impact of the crisis on domestic corporations is still unknown. We will
increase our emphasis on credit quality while maintaining our current neutral
duration structure. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[SQUARE BULLET] SHORT-INTERMEDIATE BOND
SEMI-ANNUAL RESULTS
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] This Fund returned 4.25% for the six month ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Merrill Lynch 1-3 year Treasury Index
returned 4.90% for the same period.
[SQUARE BULLET] Assets in the Fund grew 4% from $165.9 million to $172.8 million
during the six months.
COMMENTARY
The CoreFund Short-Intermediate Bond Fund outperformed it's benchmark and
provided investors with positive returns for the year. During the semi-annual
period, there was a significant rally in the bond market. The yield curve
declined, largely led by the 30-year Treasury. However, shorter-term securities
did not participate in the rally as much as longer-term bonds.
Treasury securities outperformed all other bonds throughout the period.
Events in Asia unraveled during the second half of the year, causing investors
to reassess value and risk factors in the market in general. As a result, more
money was shifted toward the Treasury market.
SHORT-INTERMEDIATE BOND FUND
----------------------------
QUICK FUND FACTS
----------------------------
INCEPTION DATE:
FEBRUARY 3, 1992
PORTFOLIO SIZE:
$172.8 MILLION
SHARES OUTSTANDING:
17,360,703 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
3.97 YEARS
QUALITY DIVERSIFICATION
AAA 65%
AA 13%
A 10%
BBB 8%
BB 1%
OTHER 3%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
29
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] SHORT-INTERMEDIATE (CONTINUED)
Coming into the second half of 1997, the Fund's duration was slightly
longer than the Index, which helped performance. The superior performance
resulting from the longer duration was somewhat offset by the Fund's
underweighting in Treasury securities relative to the 100% Treasury Index.
Duration was scaled back to more closely match the Index over the final quarter
of 1997.
COREFUND FIXED INCOME MANAGERS
[PHOTO OMITTED]
(LEFT TO RIGHT)
JOSEPH BAXTER
INTERMEDIATE, PA & NJ MUNI BONDS
DAN TAYLOR
SHORT-INTERMEDIATE BOND
BRIAN SNYDER
INTERMEDIATE, PA & NJ MUNI BONDS
JOHN ACKLER
SHORT TERM INCOME
WILLIAM LAWRENCE
GOVERNMENT INCOME & BOND
(MANAGER NOT SHOWN)
GEORGE MCNEILL
GLOBAL BOND
The yield advantage provided by the Fund's mortgage-backed and
asset-backed securities also added incremental return to the portfolio. However,
the higher yields were offset by the widening of these sectors, in the fourth
quarter of 1997. The Fund took advantage of historically wide asset-backed
securities spreads at year end to increase allocation to that sector.
Within the corporate sector the Fund has focused on banks and financial
companies with an emphasis on takeover themes and strong fundamentals.
Looking ahead to 1998, we will continue to work to add value through
security selection and sector allocation. We expect investors will continue to
be concerned about the impact of the Asian crisis. Accordingly, the high grade
segments of the fixed-income markets should continue to perform well. In
addition, prepayment protection in the mortgage-backed and asset-backed sectors
will become increasingly important the longer Treasury yields remain at these
historically low levels. We will likely lower the Fund's duration as short-term
Treasury yields continue their decline below the Federal Reserve's target
overnight rate. We will also continue to minimize prepayment risk in the Fund's
mortgage and asset-backed holdings. [SQUARE BULLET]
- --------------------------------------------------------------------------------
30
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND FUND
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
SHORT-INTERMEDIATE (CLASS Y) MERRILL LYNCH 1-3 YR TREASURY INDEX
4.25 4.90
YIELD 30-DAY %
--------------
SHORT-INTERMEDIATE (CLASS Y) MERRILL LYNCH 1-3 YR TREASURY INDEX
5.65 5.91
PERFORMANCE
- ----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 4.25% 5.65% $ 9.95
CLASS A W/O LOAD 4.14 5.65 9.95
CLASS A W/LOAD 0.76 5.29 10.28
MERRILL LYNCH
1-3 YR. TREASURY 4.90 5.91 --
- ----------------------------------------------
[SQUARE BULLET] GOVERNMENT INCOME FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.00% after expenses for the six months
ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmarks, the Lehman Brothers Aggregate Bond Index
and the Salomon Brothers Broad Bond Index returned 6.38% and
6.37% respectively for the same period.
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] Assets in the Fund grew 11% from $20.7 million to $22.9 million
during the six months.
COMMENTARY
The CoreFund Government Income Fund produced positive results for shareholders
while nearly matching its benchmark. Throughout the third quarter of the
calendar year moderating retail sales and excellent inflation data were combined
with an improving Federal deficit and a decline in the number of Treasury
securities being auctioned.
In the fourth quarter of 1997, this rally continued but, for different
reasons. The Asian crisis dominated this period, fueling a global flight to
quality which helped both the U.S. Dollar and U.S. Treasury securities.
GOVERNMENT INCOME FUND
----------------------
QUICK FUND FACTS
----------------------
INCEPTION DATE:
APRIL 1, 1993
PORTFOLIO SIZE:
$22.9 MILLION
SHARES OUTSTANDING:
2,279,366 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
8.47 YEARS
MATURITY DIVERSIFICATION
UNDER 1 YEAR 2%
1-5 YEARS 49%
6-10 YEARS 36%
OVER 20 YEARS 13%
[PIE CHART OMITTED]
MATURITY IN YEARS -- % OF FUND INVESTMENTS.
31
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
GOVERNMENT INCOME FUND
----------------------
QUICK FUND FACTS
----------------------
INCEPTION DATE:
APRIL 1, 1993
PORTFOLIO SIZE:
$22.9 MILLION
SHARES OUTSTANDING:
2,279,366 (Y&ACOMBINED)
AVERAGE WEIGHTED MATURITY:
8.47 YEARS
MATURITY DIVERSIFICATION
UNDER 1 YEAR 2%
1-5 YEARS 49%
6-10 YEARS 36%
OVER 20 YEARS 13%
[PIE CHART OMITTED]
MATURITY IN YEARS --% OF FUND INVESTMENTS
The Fund began the period heavily invested in mortgage-backed
securities with the balance in U.S. Treasuries. The Fund's average duration was
slightly longer than the Index. As the market rallied, the percent of Treasury
holdings was increased, but the Fund was still underweighted in this area. The
duration of the Treasury holdings was extended to offset the prepayment aspects
of the Fund's mortgage holdings. And, the Fund overall finished the year
slightly longer than the Index duration.
Fund performance was enhanced by the yield advantage of its mortgage
holdings and its duration structure. But, the underweighting in Treasuries and
overweighting in mortgages hurt the Fund's relative performance versus the
Index.
Investors should note that this was a very good period for high grade bond
investors. Looking forward, we believe that for at least the first half of 1998,
concern about the Asian crisis will result in investors being more risk opposed,
emphasizing credit quality and liquidity. The Fund should continue to benefit
from its large Treasury holdings. The Federal Reserve may ease interest rates
possibly resulting in the Treasury market becoming overpriced.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
GOVERNMENT INCOME LEHMAN AGGREGATE SALOMON BROTHERS
(CLASS Y) BOND INDEX BOND INDEX
6.00 6.38 6.37
YIELD 30-DAY %
--------------
GOVERNMENT INCOME LEHMAN AGGREGATE SALOMON BROTHERS
(CLASS Y) BOND INDEX BOND INDEX
5.94 6.24 6.30
PERFORMANCE
- ----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 6.00% 5.94% $10.03
CLASS A W/O LOAD 5.86 5.94 10.03
CLASS A W/LOAD 2.40 5.50 10.37
LEHMAN
AGGREGATE BOND 6.38 6.24 --
SALOMON
BROAD BOND 6.37 6.30 --
- ----------------------------------------------
The Fund will retain its fully invested posture and work to minimize
prepayment risk in its mortgage holdings. Mortgaged pass-through securities will
be utilized as a source of higher yield. [SQUARE BULLET]
- --------------------------------------------------------------------------------
32
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 6.06% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers Aggregate Bond Index,
returned 6.38% for the same period.
[SQUARE BULLET] Assets in the Fund declined 5% from $184.0 million to $175.6
million during the six months.
COMMENTARY
During the last year, CoreFund Bond Fund produced positive returns for investors
while nearly matching the performance of its benchmark. Throughout the third
quarter of the calendar year moderating retail sales and excellent inflation
data were combined with an improving Federal deficit and a decline in the number
of Treasury securities being auctioned.
In the fourth quarter of 1997, the rally continued, but, it did so for
different reasons. The Asian crisis dominated this period fueling a global
flight to quality which helped both the U.S. dollar and U.S. Treasury
securities. Also, with the Asian currencies dropping and their economies
weakening, import goods cheapened and global demand softened, giving us an
excellent inflation outlook.
The corporate bond market came under a lot of pressure as a result of the
Asian crisis. In particular, the emerging market subsector dramatically
underperformed in the fourth quarter as the markets of Malaysia, Thailand,
Indonesia, and Korea took hard hits. Domestic corporates also lagged the rally,
especially those companies that have a direct link to the Asian economy.
[GRAPHIC OF POINTER OMITTED]
The Fund's performance was helped by a maturity structure that was
longer than the Index. Early in the period, the Fund benefited from certain
corporate holdings in the finance sector (Salomon Brothers, Lehman Bros.,
BankBoston) due to the ongoing consolidation in the banking and securities
industries. Holdings in TCI and Time Warner also contributed to performance.
Performance was hurt by an underweighting in the U.S. Treasury sector and an
overweighting in the asset-backed sector.
Investors should note that this was a very good period for high grade
bond investors. Looking forward, we believe that
BOND FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 28, 1990
PORTFOLIO SIZE:
$175.6 MILLION
SHARES OUTSTANDING:
16,670,007 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.23 YEARS
QUALITY DIVERSIFICATION
AAA 64%
AA 3%
A 8%
BBB 12%
OTHER 13%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
33
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] BOND FUND (CONTINUED)
for at least the first half of 1998, investors will continue to be concerned
about the Asian crisis. As a result, they will be more risk opposed, emphasizing
credit quality and liquidity. The Fund should continue to benefit from its
Treasury holdings. The Federal Reserve may ease interest rates, but probably not
until later in the second quarter. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[BAR GRAPH]
6-MONTH TOTAL RETURN %
----------------------
BOND (CLASS Y) LEHMAN AGGREGATE BOND INDEX
6.06 6.38
YIELD 30-DAY %
--------------
BOND (CLASS Y) LEHMAN AGGREGATE BOND INDEX
6.02 6.24
PERFORMANCE
- ------------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ------------------------------------------------
CLASS Y 6.06% 6.02% $10.53
CLASS A W/O LOAD 5.93 6.02 10.53
CLASS A W/LOAD 0.91 5.52 11.06
LEHMAN
AGGREGATE BOND 6.38 6.24 --
- ------------------------------------------------
[SQUARE BULLET] GLOBAL BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 2.06% for the year ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmark, the J.P. Morgan Global Bond Index,
returned 2.52% for the same period.
[SQUARE BULLET] Assets in the Fund grew 3% from $34.8 million to $35.9 million
during the six months.
COMMENTARY
During the past year, the Global Bond Fund reported modest positive returns for
investors within the context of a challenging economic environment. As the
period began, there were indications that the U.S. and the U.K. economies were
overheating and that, while there was no evidence of inflationary pressure,
labor markets were becoming tight.
Higher interest rates became a possibility, and the bond markets began
to look overvalued. The markets in Continental Europe also appeared to be
overvalued as they responded to difficult convergence criteria in advance of the
European Monetary Union. As the period progressed, these pressures increased. In
response, your managers took
34
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
GLOBAL BOND (CLASS Y) JPM GLOBAL BOND U.S. INDEX
2.06 2.52
YIELD 30-DAY %
--------------
GLOBAL BOND (CLASS Y)
4.95
PERFORMANCE
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
CLASS Y 2.06% 4.95% $9.33
CLASS A W/O LOAD 2.05 4.95 9.32
CLASS A W/LOAD (2.75) 4.47 9.78
JPM GLOBAL BOND 2.52 N/A --
a low risk strategy with a relatively short maturity profile, while keeping some
interest rate hedges to provide for the possibility of further overheating.
The market became even more challenging during the last three months of
1997 as the period was dominated by troubles in a number of the Far East
economies. Over borrowing, overproduction, and unsound financial structures led
to huge devaluations of currencies. The outlook for the bigger economies of
Japan and China is still unclear. One of the consequences of these conditions
was the downgrading of growth forecasts for the developed economies. This
happens as exporting prospects to the Far East were reduced and the prospect of
an inflow of cheaper goods from the Far East was taken into account. Although
these events gave developed bond markets an additional boost as they became a
safe haven from the uncertainties and disasters elsewhere, it also made them
even more overvalued in fundamental terms.
[GRAPHIC OF POINTER OMITTED]
Currently, all the good news is in the market. Short term, nearly all the
markets look vulnerable. However, the bigger picture, looking slightly into the
future, is very encouraging. The U.S. may be close to the limits of domestically
inspired growth, as is the U.K. with its strong currency. European growth will
suffer from downgraded export prospects. Ignoring the impact of the Far East, we
have a sound bond environment. [SQUARE BULLET]
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
FEBRUARY 15, 1993
PORTFOLIO SIZE:
$35.9 MILLION
SHARES OUTSTANDING:
3,843,846 (Y&ACOMBINED)
AVERAGE WEIGHTED MATURITY:
9.2 YEARS
QUALITY DIVERSIFICATION
AAA 89%
AA 10%
NOT RATED 1%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
35
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
--------------------------------
INCEPTION DATE:
MARCH 3, 1993
PORTFOLIO SIZE:
$1.9 MILLION
SHARES OUTSTANDING:
182,592 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
6.2 YEARS
QUALITY DIVERSIFICATION
AAA 71%
AA 23%
A 3%
NOT RATED 3%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] INTERMEDIATE MUNI BOND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 4.13% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers 7-Year Municipal Bond
Index, returned 4.91% for the same period.
[SQUARE BULLET] Assets in the Fund declined 5% from $2.0 million to $1.9 million
during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
During the semi-annual period, CoreFund Intermediate Municipal Bond Fund
provided investors with positive returns as it outperformed its benchmark.
In general, the municipal bond market lagged the rally in U.S.
Treasuries during the last six months of 1997. During the Fund's first quarter
(through September) bond markets fluctuated in reaction to various economic
releases, inflation reports, and concerns about interest rates. In July,
favorable employment and inflation reports led to strong rallies and lower
municipal bond yields. Evidence of stronger economic growth and a weaker dollar
followed in August.
In September, new issues flooded the market as many municipalities
chose to refinance existing bonds to take advantage of the low rates. On the
positive side, legislation did not repeal the De Minimis exemption. This repeal
would have made it less attractive for corporations to invest in municipals, and
therefore may have resulted in the loss of key corporate support.
After reacting to inflation fears in October, bond market yields moved
lower on
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
INTERMEDIATE MUNI (CLASS Y) LEHMAN 7-YEAR MUNI INDEX
4.13 4.91
YIELD 30-DAY %
--------------
INTERMEDIATE MUNI (CLASS Y) LEHMAN 7-YEAR MUNI INDEX
3.86 4.37
PERFORMANCE
- ----------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ----------------------------------------------
CLASS Y 4.13% 3.86% $10.25
CLASS A W/O LOAD 4.00 3.86 10.25
CLASS A W/LOAD 0.60 3.49 10.59
LEHMAN 7-YEAR 4.91 4.37 --
- ----------------------------------------------
36
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
expectations that the Asian crisis would slow the U.S. economy and the belief
that the Federal Reserve would not tighten credit. As government bonds rallied,
municipals lagged due to heavy new issuance.
For the six months, issuance was 31% higher vs. 1996, causing municipals to
consistently underperform U.S. Treasuries. As Treasuries benefited from a
world-wide flight to quality, the oversupply within the municipal market kept a
ceiling on how far prices could rise.
Throughout this period, a reduction in Fund assets kept the Fund's duration
slightly shorter than the Index.
Looking ahead, we expect interest rates to remain stable, municipal bond
supply to come down, and municipal yields to tighten. Our strategy is to manage
duration to maximize opportunities. We will continue to manage cash flow. We
will also work to replace bonds that have reached their call prices with new
bonds. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[SQUARE BULLET] PA MUNICIPAL BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.51% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers Pennsylvania Bond
Index, returned 5.54% for the same period.
[SQUARE BULLET] Assets in the Fund grew 43% from $12.2 million to $17.5 million
during the six months.
COMMENTARY
The CoreFund Pennsylvania Municipal Fund nearly mirrored the performance of its
benchmark for the semi-annual period, providing investors with positive tax-free
returns. Through October, the Fund received a 5-Star, rating from Morningstar on
its 1-year return and its assets grew significantly.
[GRAPHIC OF POINTER OMITTED]
In general, the municipal bond market lagged the rally in U.S. Treasuries
during the last six months of 1997. During the first quarter (through September)
bond markets fluctuated in reaction to various economic releases, inflation
reports, and concerns about interest rates. In July, favorable
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
QUICK FUND FACTS
--------------------------------
INCEPTION DATE:
MAY 16, 1994
PORTFOLIO SIZE:
$17.5 MILLION
SHARES OUTSTANDING:
1,624,413 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.6 YEARS
QUALITY DIVERSIFICATION
AAA 65%
AA 19%
A 6%
OTHER 10%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
37
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] PA MUNICIPAL BOND (CON'T.)
employment and inflation reports led to strong rallies and lower municipal bond
yields. Evidence of stronger economic growth and a weaker dollar followed in
August.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
PA MUNICIPAL (CLASS Y) LEHMAN BROS. PA BOND INDEX
5.51 5.54
YIELD 30-DAY %
--------------
PA MUNICIPAL (CLASS Y) LEHMAN BROS. PA BOND INDEX
4.70 4.71
PERFORMANCE
- ---------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 5.51% 4.70% $10.77
CLASS A W/O LOAD 5.47 4.70 10.78
CLASS A W/LOAD 0.48 4.25 11.32
LEHMAN BROS.
PA BOND 5.54 4.71 --
- ---------------------------------------------
In September, new issues flooded the market as many municipalities
chose to refinance existing bonds to take advantage of the low rates. On the
positive side, legislation did not repeal the De Minimis exemption. This repeal
would have made it less attractive for corporations to invest in municipals, and
therefore may have resulted in the loss of key corporate support.
After reacting to inflation fears in October, bond market yields moved
lower on expectations that the Asian crisis would slow the U.S. economy and the
belief that the Federal Reserve would not tighten credit. As government bonds
rallied, municipals lagged due to heavy new issuance.
For the six months, issuance was 31% higher vs. 1996, causing
municipals to consistently underperform U.S. Treasuries. As Treasuries benefited
from a world-wide flight to quality, the oversupply within the municipal market
kept a ceiling on how far prices could rise.
Looking ahead, we expect interest rates to remain stable, municipal
supply to come down, and municipal yields to tighten. Our duration strategy has
been to stay slightly longer than the Index -- however, we plan to start
bringing it down to neutral with the Index in light of current conditions. We
38
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
will continue to work to replace bonds that have reached their call prices with
newer bonds. [SQUARE BULLET]
[SQUARE BULLET] NJ MUNICIPAL BOND FUND
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 5.55% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the Lehman Brothers New Jersey Bond Index,
returned 5.54% for the same period.
[SQUARE BULLET] Assets in the Fund grew 11% from $1.9 to $2.1 million during the
six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The CoreFund NJ Municipal Fund provided investors with positive tax-free returns
for the semi-annual period while outperforming its benchmark.
In general, the municipal bond market lagged the rally in U.S. Treasuries
during the last six months of 1997. During the first quarter (through September)
bond markets fluctuated in reaction to various economic releases, inflation
reports, and concerns about interest rates. In July, favorable employment and
inflation reports led to strong rallies and lower municipal bond yields.
Evidence of stronger economic growth and a weaker dollar followed in August.
In September, new issues flooded the market as many municipalities chose to
NEW JERSEY MUNICIPAL BOND FUND
------------------------------
QUICK FUND FACTS
------------------------------
INCEPTION DATE:
MAY 16, 1994
PORTFOLIO SIZE:
$2.1 MILLION
SHARES OUTSTANDING:
202,830 (Y&A COMBINED)
AVERAGE WEIGHTED MATURITY:
10.6 YEARS
QUALITY DIVERSIFICATION
AAA 47%
AA 25%
NOT RATED 28%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
39
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] NJ MUNICIPAL BOND (CON'T.)
refinance existing bonds to take advantage of the low rates. On the positive
side, legislation did not repeal the De Minimis exemption. This repeal would
have made it less attractive for corporations to invest in municipals, and
therefore may have resulted in the loss of key corporate support.
After reacting to inflation fears in October, bond market yields moved
lower on expectations that the Asian crisis would slow the U.S. economy and the
belief that the Federal Reserve would not tighten credit. As government bonds
rallied, municipals lagged due to heavy new issuance.
For the six months, issuance was 31% higher vs. 1996, causing municipals to
consistently underperform U.S. Treasuries. As Treasuries benefited from a
world-wide flight to quality, the oversupply within the municipal market kept a
ceiling on how far prices could rise.
Looking ahead, we expect interest rates to remain stable, municipal
supply to come down, and municipal yields to tighten.
[BAR GRAPH]
6-MONTH TOTAL RETURN %
----------------------
NJ MUNICIPAL (CLASS Y) LEHMAN BROS. NJ BOND INDEX
5.55 5.54
YIELD 30-DAY %
--------------
NJ MUNICIPAL (CLASS Y) LEHMAN BROS. NJ BOND INDEX
4.72 4.32
PERFORMANCE
- ---------------------------------------------
6-MONTH YIELD NAV
TOTAL RETURN 30-DAY 12/31/97
(CUMULATIVE)
- ---------------------------------------------
CLASS Y 5.55% 4.72% $10.46
CLASS A W/O LOAD 5.42 4.72 10.45
CLASS A W/LOAD 0.37 4.26 10.97
LEHMAN BROS.
NJ BOND 5.54 4.32 --
- ---------------------------------------------
Our strategy is to manage duration to maximize opportunities. We will continue
to work to replace bonds that have reached their call prices with newer bonds.
[SQUARE BULLET]
- --------------------------------------------------------------------------------
40
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] TREASURY RESERVE
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 2.57% net of expenses for the six months
ending December 31, 1997.
[SQUARE BULLET] The Fund's benchmark, the IBC Financial U.S. Treasury & REPO
Average, returned 2.47%, net of expenses, for the same period.
[SQUARE BULLET] Assets in the Fund declined 2% from $847.5 million to $831.3
million during the six months.
COMMENTARY
[GRAPHIC OF POINTER OMITTED]
The average weighted maturity of the CoreFund Treasury Reserve remained stable
at 55 days during the semi-annual period. The Fund modestly outperformed its
benchmark, providing conservative money market investors with a competitive
yield.
Throughout the period, the one-year Treasury bill followed the rally in
the coupon sector. Tight supply and strong demand kept the T-bill market at very
rich levels. Three- and six-month bills decreased to their lowest yields since
February 1996. Stock market volatility, the Asian crisis, and the strong buying
of Central Banks have all contributed to the flight to quality and strong demand
for the short-term bills. During the period the dealer community and the central
banks controlled the bill market as there was very little retail buying.
Increases were made during the period to the percentage of holdings of
Treasury-bill alternatives such as old coupon notes and STRIPS, because they
offered a better spread over bills. The Fund also took advantage of higher
overnight yields by increasing its holdings in repurchase agreements.
The Treasury bill market should remain at very rich levels during the
first quarter of 1998. The tight supply/strong
COREFUND MONEY MARKET MANAGERS
[PHOTO OMITTED]
(LEFT TO RIGHT)
JOHN ACKLER
CASH RESERVE
FOLU ABIONA
TAX-FREE RESERVE
RONALD BRASTEN
TREASURY RESERVE
41
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
TREASURY RESERVE
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
NOVEMBER 21, 1988
PORTFOLIO SIZE:
$831.3 MILLION
AVERAGE WEIGHTED MATURITY:
55 DAYS
QUALITY DIVERSIFICATION
AAA 33%
NOT RATED 67%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
[SQUARE BULLET] TREASURY RESERVE (CON'T.)
demand scenario we have experienced the past several months will continue to be
a factor in the money markets. Other factors, such as the financial crises in
Asia and Federal Reserve Chairman Alan Greenspan's recent comments about the
possibility of deflation, have led the market to believe that the Fed may have
shifted their bias toward an easing in monetary policy. The Fund will continue
its strategy of purchasing Treasury bill alternatives where there are
opportunities. When the technical factors subside and yields rise, the Fund will
go back to its proven laddered approach to investing. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
TREASURY RESERVE (CLASS Y) IBC FINANCIAL TREASURY & REPO INDEX
2.57 2.47
YIELD 7-DAY %
-------------
TREASURY RESERVE (CLASS Y) IBC FINANCIAL TREASURY & REPO INDEX
5.11 4.88
PERFORMANCE
- -------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)
- -------------------------------------------
CLASS Y 2.57% 5.11% 5.08%
CLASS C 2.44 4.86 4.83
IBC TREASURY/
REPO 2.47 4.88 4.89
- -------------------------------------------
42
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[SQUARE BULLET] CASH RESERVE
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 2.65% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the IBC Financial All-Taxable Money Fund
Average, returned 2.57% for the same period.
[SQUARE BULLET] Assets in the Fund grew 13% from $913.9 million to $1.04 billion
during the six months.
COMMENTARY
The CoreFund Cash Reserve provided money market investors with positive returns
for the semi-annual period. During the third quarter of 1997, inflation fears
subsided and the yield curve on short-term securities flattened in reaction to
dampened concerns about an impending increase in the Federal funds rate. Also,
as the U.S. moved closer to a budget surplus, there was a reduction in the
supply of Treasury securities coupled with a healthy demand, causing rates to
drop.
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
CASH RESERVE (CLASS Y) IBC FINANCIAL ALL-TAXABLE INDEX
2.65 2.57
YIELD 7-DAY %
-------------
CASH RESERVE (CLASS Y) IBC FINANCIAL ALL-TAXABLE INDEX
2.65 2.57
PERFORMANCE
- --------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)
- --------------------------------------------
CLASS Y 2.65% 5.28% 5.27%
CLASS C 2.52 5.03 5.02
CLASS B* 0.50 4.30 4.28
IBC TAXABLE 2.57 5.12 5.10
- --------------------------------------------
*INCEPTION DATE 11/18/97
However, in anticipation of this drop and the further increased demand
for year-end liquidity trades, dealers purchased large blocks of Treasury bills,
further tightening yields. Also, foreign investors found dollar-denominated
securities attractive due to the strong U.S. currency and high real interest
rates relative to their own.
[GRAPHIC OF POINTER OMITTED]
During the fourth quarter, yields on money market securities were
driven up significantly by the financial crisis in Asia, an increased supply in
the Treasury market, and the anticipation of tight funds over year end. Also in
this quarter, U.S. Dollar short-term LIBOR Rates were driven higher and the
supply of Treasury Bills increased. Focus has been shifted from LIBOR floater
bonds to Federal Fund-based and Prime-based floater
CASH RESERVE
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
AUGUST 16, 1985
PORTFOLIO SIZE:
$1.04 BILLION
AVERAGE WEIGHTED MATURITY:
68 DAYS
QUALITY DIVERSIFICATION
AAA 2%
AA 7%
A 84%
NOT RATED 7%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
43
<PAGE>
MANAGERS'
DISCUSSION
OF
FUND
PERFORMANCE
- --------------------------------------------------------------------------------
(CONTINUED)
DECEMBER 31, 1997
[SQUARE BULLET] CASH RESERVE (CONTINUED)
bonds since these securities tend to fluctuate less. By the end of year the
market offered great opportunity for investors to buy.
Given these conditions, the Fund's strategy has been to maintain an
average weighted laddered maturity between 65 and 70 days while seeking products
that offer incremental yield. In anticipation of the flurry of year-end
liquidity trades, we placed securities to mature in December, making it possible
for us to buy a lot of longer-term paper during this favorable market.
Looking forward, we believe uncertainty due to the Asian crisis will
continue, which will keep money moving into the fixed-income market. However,
the impact of the crisis on domestic corporations is still unknown. We think
that economic conditions will cause money market yields to trend lower
throughout 1998. We will also increase our emphasis on credit quality while
maintaining our current duration structure. [SQUARE BULLET]
- --------------------------------------------------------------------------------
[SQUARE BULLET] TAX-FREE RESERVE (CONTINUED)
SEMI-ANNUAL RESULTS
[SQUARE BULLET] This Fund returned 1.63% for the six months ending December 31,
1997.
[SQUARE BULLET] The Fund's benchmark, the IBC Financial Tax-Free Average,
returned 1.59% for the same period.
[GRAPHIC OF POINTER OMITTED]
[SQUARE BULLET] Assets in the Fund grew 35% from $122.8 million to $165.2
million during the six months.
COMMENTARY
Moderately outperforming its benchmark, the Tax-Free Reserve provided positive
tax-free returns to shareholders during this semi-annual period. The 7-day yield
for Class Y shares as of December 31, 1997 was 3.32%. At the end of the period,
the Fund had an average weighted maturity of 48 days.
Throughout the six months, we saw a continuation of the trend toward
changing money market volume seasonality patterns. Rates overall were lower due
to volatility.
Yields were unusually attractive in July. In August, yields were lower
as there was an increase in money moving into the
44
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
[BAR GRAPH OMITTED]
6-MONTH TOTAL RETURN %
----------------------
TAX-FREE RESERVE (CLASS Y) IBC FINANCIAL TAX-FREE INDEX
1.63 1.59
YIELD 7-DAY %
-------------
TAX-FREE RESERVE (CLASS Y) IBC FINANCIAL TAX-FREE INDEX
3.32 3.38
PERFORMANCE
- ------------------------------------------
6-MONTH YIELD YIELD
TOTAL RETURN 7-DAY 30-DAY
(CUMULATIVE)
- ------------------------------------------
CLASS Y 1.63% 3.32% 3.23%
CLASS C 1.49 3.22 2.97
IBC TAX-FREE 1.59 3.38 3.21
- ------------------------------------------
short tax-exempt market in reaction to volatility in both the stock and bond
markets.
In October, strength in the Treasury market, coupled with troubles in the
Asian economies, caused more money to move into the short tax-exempt market at
an unexpected time. We took advantage of opportunities for maturity extension in
November. In December, the market was more challenging due to light supply.
Looking into 1998, we plan to maintain our current longer duration
strategy. We believe rates will move lower as the Asian crisis drags on the U.S.
economy and we will work to take advantage of any opportunities created by the
market volatility. [SQUARE BULLET]
- --------------------------------------------------------------------------------
TAX-FREE RESERVE
----------------
QUICK FUND FACTS
----------------
INCEPTION DATE:
APRIL 16, 1991
PORTFOLIO SIZE:
$165.2 MILLION
AVERAGE WEIGHTED MATURITY:
48 DAYS
QUALITY DIVERSIFICATION
AAA 13%
AA 9%
A 53%
NOT RATED 25%
[PIE CHART OMITTED]
INVESTMENT QUALITY RATINGS AS RATED BY MOODY'S
45
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
STATEMENT
OF
NET ASSETS
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND
[PIT CHART OMITTED]
MISCELLANEOUS 8%
UTILITIES 9%
RETAIL 7%
OIL-ENERGY 7%
FINANCIAL 17%
CHEMICALS & DRUGS 13%
CONSUMER PRODUCTS 13%
DURABLE GOODS 26%
% OF TOTAL PORTFOLIO INVESTMENTS
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMON STOCKS -- 99.9%
AEROSPACE & DEFENSE -- 0.9%
Lockheed Martin 6,800 $ 670
Northrop Grumman 1,700 195
Raytheon Company, Class B* 8,900 449
Rockwell International 8,763 458
United Technologies 8,600 626
-----------
2,398
-----------
AGRICULTURE -- 0.1%
Pioneer Hi-Bred International 3,000 322
-----------
AIR TRANSPORTATION -- 0.5%
AMR* 2,800 360
Delta Air Lines 2,500 297
Federal Express* 4,000 244
US Air Group* 7,800 487
-----------
1,388
-----------
AIRCRAFT -- 0.9%
Boeing 38,470 1,883
General Dynamics 1,500 130
Textron 8,000 500
-----------
2,513
-----------
APPAREL/TEXTILES -- 0.3%
Liz Claiborne 5,000 209
Nike, Class B 10,000 392
Russell 3,100 82
-----------
683
-----------
AUTOMOTIVE -- 2.4%
Allied Signal 18,200 709
Chrysler 26,200 922
Dana 6,500 309
Echlin 8,300 300
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Ford Motor 43,400 $ 2,113
General Motors 27,600 1,673
Paccar 3,000 157
TRW 5,000 267
-----------
6,450
-----------
BANKS -- 8.6%
Banc One 20,944 1,138
Bank of New York 13,000 752
BankAmerica 25,600 1,869
BankBoston 4,500 423
Bankers Trust New York 3,800 427
Barnett Banks of Florida 6,800 489
BB&T 5,000 320
Chase Manhattan 15,766 1,726
Citicorp 16,800 2,124
Comerica 3,700 334
Fifth Third Bancorp 4,500 368
First Chicago 12,701 1,061
First Union 21,060 1,079
Fleet Financial Group 9,801 734
Golden West Financial 2,000 196
H.F. Ahmanson 2,000 134
J.P. Morgan 6,000 677
Keycorp 7,800 552
MBNA 17,887 489
National City 6,800 447
NationsBank 27,000 1,642
Norwest 30,600 1,182
PNC Bank 13,900 793
Providian Financial 2,300 104
State Street 6,000 349
Suntrust Banks 8,400 600
Synovus Financial 3,000 98
U.S. Bancorp 8,746 979
Wachovia 7,100 576
Washington Mutual 9,100 581
Wells Fargo 3,433 1,165
-----------
23,408
-----------
BEAUTY PRODUCTS -- 2.7%
Avon Products 3,200 196
Colgate Palmolive 10,492 771
Ecolab 5,000 277
Gillette 20,500 2,059
Procter & Gamble 50,800 4,054
-----------
7,357
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 1.0%
CBS 21,500 633
Clear Channel Communications* 2,000 159
Comcast, Class A 14,200 448
Tele-Communications, Class A* 18,424 515
U.S. West Media Group* 21,800 629
Viacom, Class B* 10,526 436
-----------
2,820
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.3%
Centex 2,400 $ 151
Fluor 1,900 71
Foster Wheeler 3,300 89
Halliburton 9,200 478
McDermott International 3,400 125
-----------
914
-----------
BUILDING MATERIALS -- 0.0%
Owens Corning 2,800 96
-----------
CHEMICALS -- 2.3%
Air Products & Chemical 3,100 255
Dow Chemical 8,150 827
E.I. DuPont de Nemours 40,000 2,402
Eastman Chemical 5,700 340
FMC* 2,200 148
Great Lakes Chemical 300 13
Hercules 2,700 135
Monsanto 19,500 819
Morton International 1,600 55
Nalco Chemical 5,700 226
Praxair 5,500 247
Rohm & Haas 2,500 239
Sigma Aldrich 10,600 421
W.R. Grace & Company 3,100 249
-----------
6,376
-----------
COMMUNICATIONS EQUIPMENT -- 2.6%
Andrew * 9,000 216
Cabletron Systems* 5,800 87
Cisco Systems* 36,900 2,057
ITT Industries 7,000 220
ITT* 3,600 298
Lucent Technologies 23,300 1,861
Motorola 20,600 1,175
NextLevel Systems* 5,800 104
Northern Telecom 8,300 739
Tellabs* 6,200 328
-----------
7,085
-----------
COMPUTERS, SOFTWARE & SERVICES-- 7.7%
3COM* 12,000 419
Adobe Systems 4,000 165
Automatic Data Processing 9,400 577
Bay Networks* 9,000 230
Ceridian* 3,400 156
Compaq Computer* 26,250 1,481
Computer Associates
International 18,075 956
Computer Sciences* 1,900 159
Dell Computer* 12,400 1,042
Digital Equipment* 3,900 144
EMC* 14,200 390
Equifax 6,000 213
First Data 15,400 450
Harris Computer Systems 3,200 147
Hewlett Packard 37,300 2,331
International Business Machines 35,000 3,660
Microsoft* 43,100 5,571
Novell* 29,300 220
Oracle Systems* 36,862 822
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
Parametric Technology* 5,000 $ 237
Pitney Bowes 5,000 450
Seagate Technology* 7,200 139
Shared Medical Systems 2,400 158
Silicon Graphics* 21,000 261
Sun Microsystems* 11,200 447
Tandy 4,000 154
-----------
20,979
-----------
CONTAINERS & PACKAGING -- 0.2%
Crown Cork & Seal 3,700 185
Owens-Illinois* 9,000 341
-----------
526
-----------
DRUGS -- 8.4%
Abbott Labs 28,000 1,836
Allergan 4,300 144
American Home Products 22,800 1,744
Amgen* 9,600 520
Baxter International 9,800 494
Bristol-Myers Squibb 37,040 3,505
Eli Lilly 39,800 2,771
Merck 44,400 4,717
Pfizer 48,200 3,594
Pharmacia & Upjohn 16,255 595
Schering Plough 27,200 1,690
Warner Lambert 9,400 1,166
-----------
22,776
-----------
ELECTRICAL EQUIPMENT -- 3.5%
Emerson Electric 14,600 824
General Electric 117,700 8,636
W.W. Grainger 2,000 194
-----------
9,654
-----------
ELECTRICAL SERVICES -- 2.6%
American Electric Power 5,300 274
Baltimore Gas & Electric 4,700 160
Carolina Power & Light 10,600 450
Central & South West 5,400 146
Cinergy 4,600 176
Consolidated Edison of New York 5,300 217
Dominion Resources of Virginia 5,500 234
DTE Energy 4,200 146
Duke Power 12,986 719
Edison International 13,400 364
Entergy 10,200 305
Firstenergy* 5,000 145
FPL Group 6,100 361
GPU 4,200 177
Houston Industries 13,343 356
Niagara Mohawk Power* 26,200 275
Pacificorp 6,400 175
PECO Energy 16,000 388
PG&E 15,500 472
PP&L Resources 5,500 132
Public Service Enterprise Group 5,500 174
Southern 20,100 520
Texas Utilities 8,785 365
Unicom 4,800 148
Union Electric Power 4,300 186
-----------
7,065
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ENTERTAINMENT -- 1.1%
King World Productions 6,600 $ 381
Walt Disney 24,926 2,469
-----------
2,850
-----------
ENVIRONMENTAL SERVICES -- 0.3%
Browning Ferris Industries 5,900 218
Laidlaw 14,000 191
Waste Management 15,200 418
-----------
827
-----------
FINANCIAL SERVICES -- 3.9%
Allstate 15,700 1,427
American Express 16,600 1,482
Beneficial 2,400 199
Charles Schwab 9,600 403
Countrywide Credit Industries 6,000 257
FHLMC 30,200 1,267
FNMA 38,800 2,214
Green Tree Financial 5,900 155
Household International 4,100 523
Mellon Bank 11,400 691
Merrill Lynch 11,200 817
Morgan Stanley, Dean Witter,
Discover 19,330 1,143
-----------
10,578
-----------
FOOD, BEVERAGE & TOBACCO -- 8.0%
Anheuser Busch 16,400 722
Archer Daniels Midland 17,277 375
Campbell Soup 16,200 942
Coca Cola 91,600 6,103
ConAgra 14,600 479
Coors, Adolph, Class B 5,600 186
CPC International 5,400 583
Fortune Brands 6,700 248
General Mills 5,900 423
H.J. Heinz 16,650 846
Hershey Foods 4,000 248
Kellogg 15,200 754
Pepsico 56,800 2,070
Philip Morris 89,400 4,051
Ralston-Purina Group 3,900 362
Sara Lee 16,900 952
Seagram 12,300 397
Unilever 23,600 1,474
UST 10,200 377
Wrigley, William Jr. 4,000 318
-----------
21,910
-----------
GAS/NATURAL GAS -- 0.9%
Coastal 2,500 155
Columbia Gas Systems 3,500 275
Consolidated Natural Gas 6,000 363
Enron 11,200 465
Nicor 3,700 156
Oneok 5,900 238
Pacific Enterprises 3,800 143
Peoples Energy 4,100 161
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Sonat 6,800 $ 311
Williams 7,500 213
-----------
2,480
-----------
GLASS PRODUCTS -- 0.3%
Corning 7,300 271
PPG Industries 7,300 417
-----------
688
-----------
HOTELS & LODGING -- 0.2%
Harrah's Entertainment* 10,000 189
Hilton Hotels 8,500 253
Marriott International 2,900 201
-----------
643
-----------
HOUSEHOLD FURNITURE & FIXTURES-- 0.2%
Armstrong World Industries 1,600 120
Masco 3,500 178
Newell 3,600 153
Sherwin Williams 4,600 128
-----------
579
-----------
HOUSEHOLD PRODUCTS -- 0.3%
Clorox 5,800 459
Whirlpool 5,700 313
-----------
772
-----------
INSURANCE -- 4.6%
Aetna 5,308 375
American General 9,716 525
American International Group 25,500 2,773
AON 5,250 308
Chubb 6,600 499
Cigna 2,900 502
Cincinnati Financial 3,000 422
Conseco 5,600 254
General Re 2,400 509
Hartford Financial Services Group 3,100 290
Jefferson-Pilot 4,500 350
Lincoln National 2,100 164
Loews 3,400 361
Marsh and McLennan 7,400 552
MBIA 3,800 254
MGIC Investment 5,000 332
Progressive of Ohio 2,200 264
Safeco 8,400 409
Sunamerica 6,750 289
Transamerica 2,000 213
Travelers 39,579 2,132
United Healthcare 5,100 253
Unum 6,000 326
USF&G 13,500 298
-----------
12,654
-----------
LUMBER & WOOD PRODUCTS -- 0.1%
Georgia Pacific 2,700 164
Potlatch 2,100 90
Timber Group* 2,700 61
-----------
315
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
MACHINERY -- 1.8%
Baker Hughes 6,000 $ 262
Black & Decker 3,500 137
Brunswick 9,500 288
Case 3,000 181
Caterpillar 13,800 670
Crane 4,650 202
Deere 7,800 455
Dover 5,600 202
Dresser Industries 4,500 189
Eaton 2,000 179
Illinois Tool Works 8,200 493
Ingersoll Rand 3,600 146
Snap-On Tools 4,050 177
Stanley Works 3,600 170
Tenneco 5,000 198
Timken 5,000 172
Tyco International Limited 17,800 802
-----------
4,923
-----------
MEASURING DEVICES -- 0.6%
Honeywell 4,400 301
Johnson Controls 9,000 430
KLA-Tencor* 3,000 116
Millipore 3,400 115
Parker Hannifin 4,275 196
Perkin Elmer 2,000 142
Tektronix 5,250 208
Thermo Electron* 5,100 227
-----------
1,735
-----------
MEDICAL INFORMATION SYSTEMS-- 0.1%
HBO 7,500 360
-----------
MEDICAL PRODUCTS & SERVICES-- 2.7%
Bausch & Lomb 2,000 79
Biomet* 7,400 190
Boston Scientific* 5,800 266
Cardinal Health 4,000 301
Columbia/HCA Healthcare 22,850 677
Guidant 5,000 311
Healthsouth* 11,000 305
Humana* 8,500 176
Johnson & Johnson 48,000 3,162
Mallinckrodt 4,500 171
Medtronic 16,000 837
St. Jude Medical* 7,000 214
Tenet Healthcare* 12,900 427
U.S. Surgical 6,000 176
-----------
7,292
-----------
METALS & MINING -- 0.6%
Alcan Aluminum 7,700 213
Aluminum Company of America 5,200 366
Asarco 3,300 74
Cyprus AMAX Minerals 7,400 114
Freeport-McMoran Copper
and Gold, Class B 6,000 95
Inco 7,600 129
Newmont Mining 10,770 316
Phelps Dodge 1,600 100
Reynolds Metals 3,500 210
-----------
1,617
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES-- 0.4%
Cendant* 28,502 $ 980
National Service Industries 3,000 149
-----------
1,129
-----------
MISCELLANEOUS CHEMICAL PRODUCTS-- 0.1%
Raychem 3,800 164
-----------
MISCELLANEOUS CONSUMER SERVICES-- 0.2%
H&R Block 7,000 314
Service International 5,800 214
-----------
528
-----------
MISCELLANEOUS MANUFACTURING-- 0.2%
Hasbro 3,600 113
Mattel 8,250 307
-----------
420
-----------
PAPER & PAPER PRODUCTS -- 1.7%
Avery Dennison 4,600 206
Champion International 2,200 100
Fort James 6,700 256
International Paper 12,035 519
Kimberly Clark 23,704 1,169
Mead 6,600 185
Minnesota Mining
& Manufacturing 14,600 1,198
Stone Container* 3,800 40
Temple Inland 1,000 52
Union Camp 4,750 255
Westvaco 3,150 99
Weyerhaeuser 6,006 295
Willamette Industries 3,800 122
-----------
4,496
-----------
PETROLEUM REFINING -- 8.0%
Amerada Hess 2,100 115
Amoco 17,400 1,481
Ashland 4,300 231
Atlantic Richfield 12,000 962
Burlington Resources 6,400 287
Chevron 23,300 1,794
Exxon 90,600 5,544
Helmerich and Payne 3,300 224
Mobil 28,800 2,079
Occidental Petroleum 9,900 290
Oryx Energy* 8,400 214
Phillips Petroleum 7,200 350
Rowan Companies* 10,000 305
Royal Dutch Petro 75,500 4,091
Schlumberger 17,800 1,433
Sun 8,200 345
Texaco 18,600 1,011
Union Pacific Resources Group 8,629 209
Unocal 8,900 345
USX Marathon Group 9,500 321
Western Atlas* 3,000 222
-----------
21,853
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES-- 0.6%
Eastman Kodak 11,300 $ 687
Polaroid 3,000 146
Xerox 10,800 797
-----------
1,630
-----------
PRECIOUS METALS -- 0.1%
Barrick Gold 12,000 224
Echo Bay Mines* 9,100 22
Placer Dome Group 5,400 69
-----------
315
-----------
PRINTING & PUBLISHING -- 1.3%
Deluxe 2,500 86
Donnelly R.R. & Sons 9,200 343
Gannett 9,600 593
Knight-Ridder 3,000 156
McGraw-Hill 2,200 163
Meredith 6,000 214
New York Times, Class A 3,200 212
Time Warner, Class A 19,800 1,228
Times Mirror, Class A 5,900 363
Tribune 3,000 187
-----------
3,545
-----------
PROFESSIONAL SERVICES -- 0.2%
Cognizant 11,000 490
Dun & Bradstreet 4,700 145
-----------
635
-----------
RAILROADS -- 0.7%
Burlington Northern Santa Fe 5,464 508
CSX 8,200 443
Norfolk Southern 13,800 425
Union Pacific 8,300 518
-----------
1,894
-----------
RESTAURANTS -- 0.6%
Darden Restaurants 11,800 148
McDonald's 24,900 1,189
Tricon Global Restaurants* 4,000 116
Wendy's International 5,900 142
-----------
1,595
-----------
RETAIL -- 4.8%
Albertson's 8,400 398
American Stores 6,400 132
Autozone* 10,000 290
Charming Shoppes* 20,000 94
Costco Companies* 10,900 486
CVS 6,400 410
Dayton-Hudson 7,800 527
Dillards, Class A 9,700 342
Federated Department Stores* 5,700 245
Gap 14,700 521
Giant Food, Class A 3,900 131
Harcourt General 5,300 290
Home Depot 25,599 1,507
J.C. Penney 8,600 519
K Mart* 16,950 196
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Kroger* 6,200 $ 229
Limited 9,500 242
Lowes 5,500 262
May Department Stores 6,900 364
Mercantile Stores 500 30
Nordstrom 6,000 362
Rite Aid 3,700 217
Sears Roebuck 13,500 611
TJX Companies 9,000 309
Toys R Us* 9,800 308
Wal Mart Stores 82,600 3,258
Walgreen 15,200 477
Winn Dixie Stores 5,000 218
Woolworth* 7,500 153
-----------
13,128
-----------
RUBBER & PLASTIC -- 0.3%
Goodyear Tire & Rubber 5,380 342
Reebok International 7,300 210
Rubbermaid 8,500 213
Tupperware 5,700 159
-----------
924
-----------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.3%
Advanced Micro Devices* 7,500 135
AMP 6,200 260
Applied Materials* 13,200 398
Intel 60,200 4,229
LSI Logic* 10,000 198
National Semiconductor* 5,600 145
Texas Instruments 13,200 594
Thomas & Betts 5,000 236
-----------
6,195
-----------
SPECIALTY MACHINERY -- 0.1%
Cooper Industries 6,000 294
-----------
STEEL & STEEL WORKS -- 0.2%
Allegheny Teledyne 8,300 215
Nucor 6,000 290
USX U.S. Steel Group 1,900 59
-----------
564
-----------
TELEPHONES & TELECOMMUNICATION-- 7.0%
AT&T 58,736 3,598
Airtouch Communications* 19,100 794
Alltel 6,000 246
Ameritech 21,800 1,755
Bell Atlantic 28,612 2,604
Bellsouth 36,100 2,033
GTE 33,600 1,756
MCI Communications 24,458 1,047
SBC Telecommunications 33,586 2,460
Sprint 14,000 821
US West 17,600 794
Worldcom* 36,500 1,104
-----------
19,012
-----------
TRUCKING -- 0.1%
Ryder System 5,000 164
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
EQUITY INDEX FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- --------------------------------------------------------
WHOLESALE -- 0.3%
Ikon Office Solutions 10,000 $ 281
Sysco 10,000 456
-----------
737
-----------
TOTAL COMMON STOCKS
(Cost $155,836) 272,255
-----------
REPURCHASE AGREEMENT -- 0.3%
Aubrey Lanston
6.50%, dated 12/31/97,
matures 01/02/98,
repurchase price $856,309
(collateralized by various U.S.
Treasury Notes, ranging
in par value $415,000-$440,000,
5.625%-8.25%, 07/15/98-
12/31/99; total market
value $876,803) $856 856
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $856) 856
-----------
TOTAL INVESTMENTS -- 100.2%
(Cost $156,692) 273,111
-----------
OTHER ASSETS AND LIABILITIES,
NET-- (0.2%) (425)
-----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 500 million authorized)
based on 6,628,613 outstanding shares 146,711
Portfolio Shares -- Class A ($0.001 par
value -- 500 million authorized)
based on 229,839 outstanding shares 8,338
Portfolio Shares -- Class B ($0.001 par
value -- 500 million authorized)
based on 18,981 outstanding shares 745
Accumulated Net Realized Gain
on Investments 469
Net Unrealized Appreciation
on Investments 116,419
Undistributed Net Investment Income 4
-----------
TOTAL NET ASSETS-- 100.0% $272,686
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $39.65
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $39.66
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $39.12
===========
* NON INCOME PRODUCING SECURITY
ADR --AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CORE EQUITY FUND
[PIE CHART OMITTED]
MISCELLANEOUS 9%
UTILITIES 9%
REAL ESTATE INVESTMENT TRUST 3%
OIL-ENERGY 7%
FINANCIAL 13%
CHEMICALS & DRUGS 8%
CONSUMER PRODUCTS 12%
DURABLE GOODS 39%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 99.5%
AIRCRAFT -- 2.1%
Boeing 165,500 $ 8,099
Textron 60,000 3,750
-----------
11,849
-----------
AEROSPACE & DEFENSE -- 0.0%
Raytheon Company, Class A* 1,434 71
-----------
AUTOMOTIVE -- 2.4%
Allied Signal 120,000 4,672
Ford Motor 155,000 7,547
General Motors 22,500 1,364
-----------
13,583
-----------
BANKS -- 2.1%
BankAmerica 42,000 3,066
NationsBank 153,200 9,316
-----------
12,382
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 0.6%
Emmis Broadcasting* 77,500 3,536
-----------
BUILDING & CONSTRUCTION -- 1.1%
Clayton Homes 250,000 4,500
Foster Wheeler 62,500 1,691
-----------
6,191
-----------
CHEMICALS -- 2.8%
Hercules 20,000 1,001
IMC Global 115,000 3,766
Monsanto 99,000 4,158
Praxair 155,000 6,975
-----------
15,900
CLEANING PRODUCTS -- 0.1%
USA Detergents* 56,500 459
-----------
52
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- -------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- -------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.2%
Lucent Technologies 89,000 $ 7,109
-----------
COMPUTERS, SOFTWARE & SERVICES -- 8.4%
3COM* 147,500 5,153
America Online* 35,000 3,122
Cabletron Systems* 86,000 1,290
Computer Associates
International 97,500 5,155
International Business
Machines 142,500 14,900
Microsoft* 93,000 12,020
Storage Technology* 111,400 6,900
-----------
48,540
-----------
CONTAINERS & PACKAGING -- 1.1%
Crown Cork & Seal 125,000 6,266
-----------
DRUGS -- 3.3%
Biogen* 165,000 6,002
Eli Lilly & Co. 109,400 7,617
Mylan Laboratories 265,000 5,548
-----------
19,167
-----------
ELECTRICAL SERVICES -- 2.1%
FPL Group 52,500 3,107
Pinnacle West Capital 125,000 5,297
Unicom 120,000 3,690
-----------
12,094
-----------
ENVIRONMENTAL SERVICES -- 1.5%
Browning Ferris Industries 240,000 8,880
-----------
FOOD, BEVERAGE & TOBACCO -- 9.2%
Canandaigua Wine, Class A* 195,005 10,798
Chiquita Brands International 700,000 11,419
Nabisco Holdings, Class A 375,400 18,183
Philip Morris 75,500 3,421
RJR Nabisco Holdings 249,300 9,349
-----------
53,170
-----------
GAS/NATURAL GAS -- 0.4%
Sonat 47,700 2,182
-----------
HEALTHCARE SERVICES -- 2.2%
Medpartners* 579,700 12,971
-----------
HOTELS & LODGING -- 1.7%
Felcor Suite Hotels 145,000 5,147
Hilton Hotels 150,000 4,463
-----------
9,610
-----------
INSURANCE -- 11.9%
Aetna 85,000 5,998
Conseco 270,000 12,268
Everest Reinsurance Holdings 284,000 11,715
General Re 34,000 7,208
Hartford Financial
Services Group 127,300 11,911
Hartford Life, Class A 108,000 4,894
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Travelers 170,000 $ 9,159
Travelers Property Casualty 119,500 5,258
-----------
68,411
-----------
MACHINERY -- 2.1%
Case 45,000 2,720
Cummins Engine 51,800 3,059
Harnischfeger Industries 95,000 3,355
Thermo Electron* 65,000 2,893
-----------
12,027
-----------
MEDICAL PRODUCTS & SERVICES-- 3.2%
Alza* 175,000 5,567
Boston Scientific* 140,200 6,432
Human Genome Sciences* 43,600 1,733
United States Surgical 156,400 4,584
-----------
18,316
-----------
METALS & MINING -- 1.1%
Freeport-McMoran Copper and
Gold, Class B 130,000 2,048
Potash of Saskatchewan 54,000 4,482
-----------
6,530
-----------
MISCELLANEOUS BUSINESS SERVICES -- 3.5%
Cendant 589,006 20,247
-----------
MISCELLANEOUS MANUFACTURING -- 3.3%
Metromedia International
Group* 275,000 2,613
General Electric 207,500 15,225
ITT Industries 47,500 1,490
-----------
19,328
-----------
PETROLEUM & FUEL PRODUCTS -- 3.2%
Apache 80,000 2,805
Reading & Bates* 70,000 2,931
Repsol ADR 18,800 800
Tidewater 75,000 4,134
Triton Energy* 70,000 2,043
USX Marathon Group 165,000 5,569
-----------
18,282
-----------
PETROLEUM REFINING -- 6.0%
Ashland 60,000 3,221
British Petroleum ADR 138,176 11,011
Mobil 245,000 17,686
Texaco 55,000 2,991
-----------
34,909
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.0%
Xerox 1,600 118
-----------
PRINTING & PUBLISHING -- 0.7%
Central Newspaper 21,500 1,590
News ADR 110,000 2,186
-----------
3,776
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
CORE EQUITY FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
RAILROADS -- 0.6%
CSX 37,000 $ 1,998
Union Pacific 25,000 1,561
-----------
3,559
-----------
REAL ESTATE -- 2.5%
Equity Residential
Properties Trust 105,000 5,309
Glenborough Realty Trust 202,400 5,996
Prentiss Properties Trust 110,000 3,073
-----------
14,378
-----------
RESTAURANTS -- 1.0%
Darden Restaurants 399,700 4,996
Lone Star Steakhouse
& Saloon* 45,000 788
-----------
5,784
-----------
RETAIL -- 4.7%
CML Group 275,000 911
Corporate Express* 95,000 1,223
Dillards, Class A 37,500 1,322
General Nutrition* 287,100 9,761
Lowes 110,000 5,246
Pep Boys - Manny,
Moe & Jack 185,000 4,417
Saks Holdings* 175,000 3,620
Staples* 15,100 419
-----------
26,919
-----------
RUBBER & PLASTIC -- 0.8%
Goodyear Tire & Rubber 70,000 4,454
-----------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.9%
Intel 150,000 10,538
National Semiconductor* 127,500 3,307
VLSI Technology* 135,000 3,189
-----------
17,034
-----------
TELEPHONES & TELECOMMUNICATION -- 8.7%
Airtouch Communications* 460,000 19,119
McLeodUSA, Class A* 127,500 4,080
Qualcomm* 101,800 5,141
Worldcom* 726,000 21,962
-----------
50,302
-----------
WATER TREATMENT -- 1.0%
U.S. Filter* 190,000 5,688
-----------
TOTAL COMMON STOCKS
(Cost $441,850) 574,022
-----------
TOTAL INVESTMENTS -- 99.5%
(Cost $441,851) 574,022
-----------
OTHER ASSETS AND LIABILITIES,
NET-- 0.5% 2,747
-----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 50 million authorized) based on
27,068,563 outstanding shares $ 415,785
Portfolio Shares -- Class A ($0.001 par
value -- 50 million authorized) based on
924,049 outstanding shares 13,559
Portfolio Shares -- Class B ($0.001 par
value -- 50 million authorized) based on
7,283 outstanding shares 149
Accumulated Net Realized Gain
on Investments 15,119
Net Unrealized Appreciation
on Investments 132,172
Distributions in Excess of Net
Investment Income (15)
-----------
TOTAL NET ASSETS-- 100.0% $576,769
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $20.60
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $20.61
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $18.31
===========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
[PIE CHART OMITTED]
Miscellaneous 5%
Utilities 2%
Retail 12%
Oil-Energy 3%
Financial 19%
Cash Equivalents 3%
Chemicals & Drugs 14%
Consumer Products 6%
Durable Goods 36%
% OF TOTAL INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 98.9%
BANKS -- 8.3%
BankAmerica 24,000 $ 1,752
Barnett Banks of Florida 50,000 3,594
Citicorp 13,643 1,725
Crestar Financial 73,000 4,161
Norwest 70,000 2,704
-----------
13,936
-----------
BEAUTY PRODUCTS -- 2.2%
Colgate Palmolive 24,400 1,793
Gillette 18,600 1,868
-----------
3,661
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 1.2%
CBS 70,400 2,072
-----------
COMMUNICATIONS EQUIPMENT -- 2.2%
Cisco Systems* 65,850 3,671
-----------
COMPUTERS, SOFTWARE & SERVICES-- 12.2%
America Online* 45,800 4,085
BMC Software* 68,000 4,463
Compaq Computer* 54,100 3,053
Computer Associates
International 65,889 3,484
Microsoft* 11,932 1,542
Peoplesoft* 100,000 3,900
-----------
20,527
-----------
DRUGS -- 7.3%
Johnson & Johnson 49,000 3,228
Merck 16,000 1,700
Schering Plough 56,000 3,479
SmithKline Beecham ADR 77,100 3,966
-----------
12,373
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ELECTRICAL EQUIPMENT -- 5.4%
General Electric 47,178 $ 3,462
Honeywell 47,500 3,254
Illinois Tool Works 40,000 2,405
-----------
9,121
-----------
FINANCIAL SERVICES -- 4.6%
FHLMC 85,000 3,565
FNMA 74,656 4,260
-----------
7,825
-----------
FOOD, BEVERAGE & TOBACCO -- 4.9%
ConAgra 89,000 2,920
CPC International* 16,300 1,760
Hershey Foods 56,900 3,524
-----------
8,204
-----------
HEALTHCARE SERVICES -- 2.8%
Health Management
Associates* 186,037 4,697
-----------
HOUSEHOLD PRODUCTS -- 1.6%
Sunbeam Oster 62,100 2,616
-----------
INSURANCE -- 4.3%
Allstate 47,400 4,307
American International Group 27,600 3,002
-----------
7,309
-----------
MEDICAL INFORMATION SYSTEMS -- 2.2%
HBO 77,000 3,696
-----------
MEDICAL PRODUCTS & SERVICES-- 4.3%
Cardinal Health 51,600 3,876
Guidant 27,000 1,681
Medtronic 33,000 1,726
-----------
7,283
-----------
MISCELLANEOUS CHEMICAL PRODUCTS-- 0.1%
Solutia* 6,820 182
-----------
MISCELLANEOUS CONSUMER SERVICES -- 0.9%
Corestaff* 54,000 1,431
-----------
PETROLEUM REFINING -- 3.5%
Halliburton 65,000 3,376
Schlumberger 30,200 2,431
-----------
5,807
-----------
PRINTING & PUBLISHING -- 2.1%
Gannett 58,500 3,616
-----------
RETAIL -- 14.4%
Costco* 82,000 3,659
Dayton-Hudson 76,500 5,164
Gap 135,000 4,784
Home Depot 61,000 3,591
Nordstrom 55,000 3,321
Walgreen 122,000 3,828
-----------
24,347
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
GROWTH EQUITY FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- --------------------------------------------------------
TECHNOLOGY, SERVICES -- 4.3%
Automatic Data Processing 60,400 $ 3,707
Paychex 69,000 3,493
-----------
7,200
-----------
TELEPHONES & TELECOMMUNICATION-- 10.1%
Brooks Fiber Properties* 60,459 3,325
ICG Communications* 68,100 1,856
McLeod USA, Class A* 82,000 2,624
Qualcomm* 53,000 2,677
Qwest Communications Int'l* 6,565 391
Teleport Communications
Group* 58,200 3,194
Worldcom* 100,300 3,034
-----------
17,101
-----------
TOTAL COMMON STOCKS
(Cost $111,339) 166,675
-----------
REPURCHASE AGREEMENTS -- 2.7%
Aubrey Lanston
6.50%, dated 12/31/97,
matures 01/02/98,
repurchase price $1,516,547
(collateralized by U.S. Treasury
Note, par value $1,550,000,
5.625%, 12/31/99; market
value $1,550,930) $1,516 1,516
Hong Kong Shanghai Bank
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$1,516,539 (collateralized by
U.S. Treasury Note, par value
$1,470,000, 6.625%, 07/31/01;
market value $1,554,819) 1,516 1,516
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $1,516,522
(collateralized by U.S. Treasury
Note, par value $1,555,000,
5.50%, 12/31/00; market
value $1,549,247) 1,516 1,516
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $4,548) 4,548
-----------
TOTAL INVESTMENTS -- 101.6%
(Cost $115,887) 171,223
-----------
OTHER ASSETS AND LIABILITIES,
NET-- (1.6%) (2,725)
-----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 9,962,047 outstanding shares $103,338
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 350,144 outstanding shares 4,018
Portfolio Shares -- Class B ($0.001 par
value -- 100 million authorized) based
on 6,248 outstanding shares 109
Accumulated Net Realized Gain
on Investments 5,833
Net Unrealized Appreciation
on Investments 55,336
Distributions in Excess of Net
Investment Income (136)
-----------
TOTAL NET ASSETS-- 100.0% $168,498
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $16.33
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $16.27
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $16.19
===========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
SPECIAL EQUITY FUND
[PIE CHART OMITTED]
Miscellaneous 11%
Utilities 3%
Retail 1%
Real Estate Investment Trust 6%
Financial 4%
Cash Equivalents 3%
Chemicals & Drugs 8%
Consumer Products 7%
Durable Goods 57%
% OF TOTAL INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 96.7%
AIR TRANSPORTATION -- 0.9%
Midway Airlines 46,500 $ 703
---------
AIRCRAFT -- 0.4%
Boeing 6,750 330
---------
APPAREL/TEXTILES -- 0.6%
Haggar 20,000 315
Mothers Work* 17,500 138
---------
453
---------
AUTOMOTIVE -- 1.9%
Earl Scheib* 4,900 39
Ford Motor 20,000 974
Noble International* 46,500 416
Walbro 3,000 40
---------
1,469
---------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 0.1%
@entertainment, Inc* 4,400 49
---------
BUILDING & CONSTRUCTION -- 3.9%
Comfort Systems USA Inc* 14,500 286
Foster Wheeler 20,000 541
Jacobs Engineering Group* 29,500 749
Royal Group Technologies Ltd* 27,500 638
Shaw Group* 35,000 805
---------
3,019
---------
CHEMICALS -- 0.2%
Kinark* 57,500 172
---------
COMMUNICATIONS EQUIPMENT -- 3.2%
Ciena* 10,700 654
ITT Industries 5,000 157
Scientific-Atlanta 31,000 519
VDI Media* 120,000 1,155
---------
2,485
---------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMPUTERS, SOFTWARE & SERVICES-- 4.6%
America Online* 8,000 $ 713
Box Hill Systems* 27,900 291
Cabletron Systems* 20,000 300
Computer Associates
International 6,000 317
Gametek* 10,000 --
International Business
Machines 4,500 471
Mecon* 62,000 442
Mylex* 75,000 675
Storage Technology* 4,900 303
---------
3,512
---------
CONTAINERS & PACKAGING -- 0.2%
Cronos Group* 25,900 129
Silgan Holdings* 1,000 32
---------
161
---------
DRUGS -- 9.9%
Anesta* 45,200 740
Aphton* 52,500 532
Cellegy Pharmaceuticals Inc* 46,500 389
ChiRex* 42,000 740
Collagenex Pharmaceuticals* 46,300 579
Flamel Technologies (ADR)* 97,700 177
Guilford Pharmaceuticals* 40,500 815
Hybridon* 4,500 13
Ilex Oncology* 31,500 232
Isis Pharmaceutical* 27,300 336
Megabios Corp* 41,850 596
Pharmaceutical Resources* 105,000 157
Roberts Pharmaceuticals* 12,500 120
Scios Nova* 218,200 2,182
---------
7,608
---------
ELECTRICAL EQUIPMENT -- 4.3%
Kuhlman 32,500 1,272
Magnetek* 65,000 1,268
UCAR International* 18,500 739
---------
3,279
---------
ELECTRONICS -- 0.5%
Lam Research* 12,700 371
Smartflex Systems* 2,300 22
---------
393
---------
ENTERTAINMENT -- 1.5%
Meridian Sports* 17,300 13
Mikohn Gaming* 110,000 784
Sports Club* 38,000 352
---------
1,149
---------
ENVIRONMENTAL SERVICES -- 1.1%
Harding Lawson
Associates Group* 40,300 413
Philip Services* 32,500 467
---------
880
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
SPECIAL EQUITY FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
FINANCIAL SERVICES -- 4.1%
Aames Financial 46,500 $ 602
Affiliated Managers Group* 11,160 324
Consolidation Cap Corp* 55,800 1,133
Delta Financial* 34,700 464
Imperial Credit* 41,800 611
---------
3,134
---------
FOOD, BEVERAGE & TOBACCO -- 0.9%
Cuisine Solutions* 21,000 21
Philip Morris 300 14
RJR Nabisco Holdings 16,700 626
---------
661
---------
HOTELS & LODGING -- 1.1%
American Skiing Corp* 4,650 69
John Q. Hammons Hotels* 9,600 86
Prime Hospitality* 31,500 642
U.S. Franchise Systems,
Class A* 4,500 45
---------
842
---------
HOUSEHOLD FURNISHINGS -- 1.4%
O'Sullivan 45,000 478
Winsloew Furniture* 44,180 641
---------
1,119
---------
INSURANCE -- 4.1%
Arm Financial 4,500 119
Conseco 14,000 636
Everest Reinsurance Holdings 21,300 879
Travelers 13,750 741
Travelers Property Casualty 18,100 796
---------
3,171
---------
MACHINERY -- 2.1%
Case 11,000 665
Cummins Engine 10,000 591
First Aviation* 45,000 335
---------
1,591
---------
MEASURING DEVICES -- 1.4%
Rofin-Sinar Technologies* 36,000 437
Teradyne* 21,300 682
---------
1,119
---------
MEDICAL PRODUCTS & SERVICES-- 10.4%
Acme United* 129,200 775
American Retirement 23,000 460
Centennial Heathcare 33,900 771
Computer Motion* 80,000 840
Emeritus* 27,000 344
Harborside Healthcare* 18,000 356
Innovasive Devices* 9,000 82
Genome Therapeutics* 45,000 284
Medpartners* 45,000 1,007
Metra Biosystems* 6,800 25
Molecular Dynamics* 1,400 23
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
Pace Health Management
Systems* 43,500 $ 16
Possis Medical* 22,600 249
Progenics Pharmaceuticals* 69,750 977
Quest Medical* 9,000 63
Resound* 47,400 261
Spectranetics* 27,000 84
U.S. Surgical 15,400 451
Urologix* 26,500 480
Vision Twenty-One* 46,500 430
---------
7,978
---------
METALS & MINING -- 1.0%
Freeport-McMoran Copper
and Gold, Class B 25,000 394
Potash of Saskatchewan 4,300 357
---------
751
---------
MISCELLANEOUS BUSINESS SERVICES -- 2.5%
Cendant 48,062 1,652
Mac-Gray* 18,600 291
---------
1,943
---------
MISCELLANEOUS MANUFACTURING-- 1.3%
RMI Titanium* 35,000 700
Toymax International* 37,200 321
---------
1,021
---------
PETROLEUM & FUEL PRODUCTS -- 2.3%
Bayard Drilling Technologies* 9,300 151
Callon Petroleum (A)* 9,000 147
IRI International* 19,100 267
Meridian Resource* 68,256 653
Tidewater 10,000 551
---------
1,769
---------
PRINTING & PUBLISHING -- 0.2%
CMP Media Inc., Class A* 9,100 157
---------
PROFESSIONAL SERVICES -- 0.1%
Bright Horizons Inc* 4,650 87
---------
RAILROADS -- 0.6%
Union Pacific 7,000 437
---------
REAL ESTATE -- 5.5%
AMB Property* 53,600 1,347
Agree Realty 9,400 204
Liberty Property Trust 25,800 737
Pacific Gulf Properties 31,400 746
Prentiss Properties Trust* 34,000 950
Trammell Crow* 9,300 239
---------
4,223
---------
RESTAURANTS/FOOD SERVICES -- 1.6%
Darden Restaurants 47,900 599
Uno Restaurant* 90,000 619
---------
1,218
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
RETAIL -- 6.0%
Bon-Ton Stores* 46,300 $ 695
Corporate Express* 27,500 354
Chicos* 4,500 30
CML Group 92,200 305
Cross-Continent Auto
Retailers* 65,000 544
Drug Emporium* 92,100 363
Friendly Ice Cream 9,300 108
General Nutrition* 33,000 1,122
Hot Topic* 4,400 100
Microage* 22,500 339
Paper Warehouse * 18,600 142
Paul Harris Stores* 41,500 418
Sportmart* 14,400 33
Sportmart, Class A* 14,400 34
Strouds* 19,000 33
---------
4,620
---------
SEMI-CONDUCTORS/INSTRUMENTS-- 2.1%
Ess Technology* 4,600 35
Intel 8,000 562
VLSI Technology* 45,000 1,063
---------
1,660
---------
SPECIALTY CONSTRUCTION -- 1.1%
Oakwood Homes 25,000 830
---------
STEEL & STEEL WORKS -- 0.5%
Ispat International PLC Nv,
Class A* 18,690 404
---------
TELEPHONES & TELECOMMUNICATION-- 12.1%
Airtouch Communications* 18,500 769
Amnex* 171,500 172
Clearnet, Class A* 40,000 455
Hybrid Networks* 44,600 496
Intermedia Communications
of Florida* 14,900 905
Lucent Technologies 16,500 1,318
McLeod, Class A* 15,000 480
Metrocall* 25,000 123
Metromedia Fiber Network* 46,500 773
Metronet Communication* 46,500 808
Nextlink Communications* 32,500 693
Qualcomm* 12,000 606
Viatel* 200,000 1,000
Worldcom* 25,000 756
---------
9,354
---------
WATER TREATMENT -- 1.0%
U.S. Filter* 25,000 748
---------
TOTAL COMMON STOCKS
(Cost $69,775) 74,499
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
REPURCHASE AGREEMENT -- 3.5%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $2,653,914
(collateralized by U.S. Treasury
Note, par value $2,725,000,
5.50%, 12/31/00; market
value $2,714,918) $2,653 $ 2,653
---------
TOTAL REPURCHASE AGREEMENT
(Cost $2,653) 2,653
---------
TOTAL INVESTMENTS -- 100.2%
(Cost $72,428) 77,152
---------
OTHER ASSETS AND LIABILITIES,
NET-- (0.2%) (147)
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 6,951,309 outstanding shares 67,555
Portfolio Shares -- Class A ($0.001 par
value -- 1 billion authorized) based
on 269,517 outstanding shares 2,885
Portfolio Shares -- Class B ($0.001 par
value -- 1 billion authorized) based
on 11,613 outstanding shares 139
Accumulated Net Realized Gain
on Investments 1,961
Net Unrealized Appreciation
on Investments 4,724
Distributions in Excess of Net
Investment Income (259)
---------
TOTAL NET ASSETS-- 100.0% $77,005
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.65
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.60
=========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $10.48
=========
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
PLC --PUBLIC LIMITED COMPANY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
INTERNATIONAL GROWTH FUND
[PIE CHART OMITTED]
Miscelleaneous 18%
United Kingdom 25%
Switzerland 7%
Spain 3%
Australia 3%
France 7%
Germany 11%
Italy 3%
Japan 14%
Mexico 4%
Netherlands 5%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
FOREIGN STOCKS -- 91.2%
ARGENTINA -- 0.5%
Banco Frances ADR 6,025 $ 165
Irsa GDR 2,400 90
Perez Companc, Series B 83,643 597
-----------
852
-----------
AUSTRALIA -- 2.2%
Australian Gas Light 80,000 558
John Fairfax Holdings 230,000 480
Lend Lease 25,000 489
Mayne Nickless 107,000 565
QBE Insurance 187,500 844
Telstra Installment Receipts* 139,000 293
Woodside Petroleum 39,300 277
-----------
3,506
-----------
AUSTRIA -- 0.7%
VA Technologie 7,800 1,185
-----------
BELGIUM -- 1.0%
Generale Banque 3,500 1,524
-----------
BRAZIL -- 1.4%
Centrais Electricas GDR 750 81
Companhia Paranese 10,000 137
Companhia Brasileira de
Distribuicao Grupo de
Acucar ADR 6,000 116
Electrobras ADR 38,500 957
Telebras ADR 7,820 911
-----------
2,202
-----------
CHILE -- 0.6%
Compania de Telecom de
Chile ADR 32,000 956
Santa Isabel ADR 2,100 37
-----------
993
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
DENMARK -- 1.6%
Novo-Nordisk, Class B 16,200 $ 2,317
Sydbank 3,124 178
-----------
2,495
-----------
FINLAND -- 0.1%
Nokia AB, Series A 3,080 219
-----------
FRANCE -- 6.9%
Air Liquide 8,750 1,370
AXA 31,195 2,414
Cie Financiere de Paribas,
Class A 5,350 465
Cie Generale des Eaux 21,948 3,064
Cie Generale des Eaux
Warrants* 2,000 1
Dassault Systems 8,000 244
France Telecom* 6,000 218
Rhone Poulenc 51,500 2,308
Schneider 4,000 217
Societe Nationale Elf Aquitaine 3,590 418
Valeo 4,970 337
-----------
11,056
-----------
GERMANY -- 9.7%
Allianz 7,600 1,961
Bayer 7,500 278
BMW 2,550 1,907
Deutsche Bank 34,100 2,385
Fried Krupp 665 122
Hoechst 2 --
Mannesmann 5,000 2,510
Preussag 5,000 1,537
SGL Carbon 10,100 1,292
Veba 45,449 3,095
Volkswagen 900 503
-----------
15,590
-----------
GREECE -- 0.5%
Alpha Credit Bank 15,000 875
-----------
HONG KONG -- 2.0%
China Light & Power 82,000 455
Citic Pacific 84,500 336
First Pacific 186,000 90
Giordano 650,000 224
HSBC Holdings 20,681 510
Hutchison Whampoa 78,000 489
National Mutual Asia 600,000 596
New World Development 149,000 515
-----------
3,215
-----------
HUNGARY -- 1.0%
Richter Gedeon 2,500 284
Matav ADR* 45,000 1,170
Pannoplast 3,200 168
-----------
1,622
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
INDIA -- 1.8%
Himilayan Fund* 75,918 $ 812
ICICI GDR 60,000 746
Indian Opportunities Fund* 41,981 354
Mahanagar Telephone
Nigam GDR* 33,000 512
Videsh Sanchar Nigam GDR* 35,000 491
-----------
2,915
-----------
INDONESIA -- 0.4%
Bank Bali "F" 600,000 81
Indosat "F" 275,000 519
-----------
600
-----------
ISRAEL -- 1.3%
Near East Opportunity Fund* 59,000 928
Tadarin Limited 8,032 287
Teva Pharmaceuticals ADR 20,000 946
-----------
2,161
-----------
ITALY -- 2.5%
Autogrill* 65,010 348
Bulgari 46,000 234
ENI 255,967 1,452
INA 850,000 1,724
Telecom Italia 46,595 298
-----------
4,056
-----------
JAPAN -- 11.7%
77th Bank 33,000 235
Canon 62,000 1,444
Eiden Sakakiya 25,000 93
Hitachi 149,000 1,062
Honda Motor 36,000 1,321
Hoya 8,000 251
Ito Yokado 27,000 1,376
Kao 21,000 302
Kyocera 4,000 181
Mabuchi Motor 10,000 508
Marui Company 36,000 560
Mitsubishi Heavy Industries 171,000 713
Mitsui Fudosan 54,000 521
Nippon Express 73,000 364
Riso Kagaku Corporation 5,100 292
Rohm Company 13,000 1,325
Secom 16,000 1,022
Shimachu 17,000 267
Shin-Etsu Chemical 42,000 801
Sony Corporation 22,000 1,955
Sumitomo Electric 53,000 723
Suzuki Motor 24,000 217
Taisho Pharmaceutical 25,000 638
Toppan Printing 73,000 951
Toyota Motor 28,000 802
Yamanouchi Pharmaceutical 41,000 880
-----------
18,804
-----------
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
MALAYSIA -- 0.3%
AMMB Holdings 58,000 $ 38
AMMB Holdings Warrants* 10,000 1
Malaysian Oxygen 200,000 448
-----------
487
-----------
MEXICO -- 3.3%
ALFA, Series A 61,945 419
Cifra, Series C 520,000 1,160
Cifra, Series V 550,000 1,350
Grupo Elektra 60,000 106
Grupo Financiero Banamex
Accival, Series B* 280,000 836
Grupo Modelo, Series C 17,000 143
Grupo Radio Centro ADR 6,600 94
Industrias CH, Series B* 30,000 178
Panamerican Beverage, Series A 6,000 196
Telefonos de Mexico ADR,
Series L 14,500 813
-----------
5,295
-----------
NETHERLANDS -- 4.6%
Baan Company* 8,680 284
Elsevier 128,000 2,071
Fortis Amev 6,500 283
Gucci Group, NY
Registered Shares 26,520 1,111
ING Groep 35,005 1,475
Phillips Electronics 26,200 1,571
Royal Dutch Petroleum 5,190 285
Vendex International 4,000 221
Wolters Kluwer 800 103
-----------
7,404
-----------
NORWAY -- 0.2%
Tomra Systems 13,500 302
-----------
PERU -- 0.1%
Credicorp 4,230 76
-----------
PHILIPPINES -- 0.4%
Ayala Land, Series B 1,000,000 400
Belle* 5,200,000 203
Belle Warrants* 800,000 1
-----------
604
-----------
POLAND -- 0.1%
Bank Handlowy GDR* 14,000 186
-----------
SINGAPORE -- 0.3%
Development Bank of
Singapore "F" 57,000 488
-----------
SOUTH AFRICA -- 0.2%
NBS Boland Group 121,500 301
-----------
SOUTH KOREA -- 0.0%
Samsung Electronics 2,463 14
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
INTERNATIONAL GROWTH FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
SPAIN -- 2.7%
Argentaria 3,200 $ 195
Banco de Santander 59,400 1,985
Corp Financiera Reunida* 37,000 198
Telefonica de Espana 68,000 1,942
-----------
4,320
-----------
SWEDEN -- 2.2%
Ericsson Telephone ADR 8,360 312
Incentive AB, Series A 19,000 1,712
Nordbanken Holding AB* 216,000 1,222
SSAB, Series A 20,000 328
-----------
3,574
-----------
SWITZERLAND -- 6.2%
Credit Suisse Group 18,000 2,785
Disetronic Holding 130 285
Novartis 2,217 3,597
Roche Holding 306 3,039
Swiss Bank 850 264
-----------
9,970
-----------
TAIWAN -- 0.5%
Standard Foods Taiwan GDR* 75,000 863
-----------
THAILAND -- 0.2%
Ruam Pattana Fund II* 1,281,000 131
Siam Commercial Bank 100,000 115
Siam Commercial
Bank Rights* 33,333 6
-----------
252
-----------
UNITED KINGDOM -- 23.5%
3i Group 35,130 291
Brit-Borneo Petroleum
Syndicate 52,248 363
British Aerospace 14,475 412
British Sky Broadcasting 24,100 180
Cable & Wireless 206,000 1,810
General Electric 158,000 1,024
GKN 74,500 1,526
Glaxo Wellcome 81,000 1,915
Granada Group 102,750 1,569
JJB Sports 34,200 366
Ladbroke 401,430 1,740
Lasmo 265,318 1,202
Lloyds TSB Group 212,900 2,751
Logica 24,342 463
Manchester United 115,400 299
Marks & Spencer 164,000 1,613
McKechnie 76,500 578
National Power 33,420 329
National Westminster Bank 100,000 1,658
Next 24,500 278
NFC 333,000 828
Prudential 28,100 339
Railtrack Group 28,090 446
Reckitt & Coleman 122,500 1,921
- --------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- --------------------------------------------------------
Rentokil Group 79,000 $ 349
Royal Bank of Scotland 149,000 1,891
Safeway 158,144 891
Scottish Power 212,000 1,873
Shell Transportation
& Trading 350,050 2,529
Smithkline Beecham 54,660 560
Smiths Industries 97,782 1,362
Standard Chartered Bank 22,340 238
Tesco 55,750 453
Unilever 228,800 1,957
Wassall 119,625 658
Wolseley 98,000 777
Zeneca Group 10,820 380
-----------
37,819
-----------
VENEZUELA -- 0.5%
Cia Anonima Telecom ADR 21,000 874
-----------
TOTAL FOREIGN STOCKS
(Cost $128,227) 146,699
-----------
FOREIGN PREFERRED STOCKS -- 1.3%
AUSTRALIA -- 0.4%
Newscorp 130,000 643
-----------
BRAZIL -- 0.6%
Eletrobras ADR 6,000 156
Petroleo Brasileira ADR 35,000 796
-----------
952
-----------
GERMANY -- 0.3%
Fresenius 888 162
Wella 450 330
-----------
492
-----------
TOTAL FOREIGN PREFERRED STOCKS
(Cost $1,902) 2,087
-----------
FOREIGN CONVERTIBLE BONDS -- 1.5%
JAPAN -- 1.5%
Mitsubishi Bank
3.000%, 11/30/02 $ 900 928
Namco
4.700%, 09/30/98 35,000 332
Nitto Denko
2.200%, 03/31/99 74,000 695
Sakura Finance
0.750%, 10/01/01 72,000 400
-----------
2,355
-----------
MALAYSIA -- 0.0%
AMMB Holdings ICULS
7.500%, 05/08/02 100 7
-----------
TOTAL FOREIGN CONVERTIBLE BONDS
(Cost $2,655) 2,362
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
FOREIGN BOND -- 0.0%
MALAYSIA -- 0.0%
AMMB Holdings
5.000%, 05/13/02 $ 100 $ 12
-----------
TOTAL FOREIGN BOND
(Cost $40) 12
-----------
DEMAND DEPOSIT -- 3.7%
Morgan Stanley
4.750%, 01/01/98 5,939 5,939
-----------
TOTAL DEMAND DEPOSIT
(Cost $5,939) 5,939
-----------
TOTAL INVESTMENTS -- 97.7%
(Cost $138,763) 157,099
-----------
OTHER ASSETS AND LIABILITIES,
NET-- 2.3% 3,647
-----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 25 million authorized) based
on 11,925,445 outstanding shares 142,047
Portfolio Shares -- Class A ($0.001 par
value -- 25 million authorized) based
on 175,016 outstanding shares 2,264
Portfolio Shares -- Class B ($0.001 par
value -- 25 million authorized) based
on 1,054 outstanding shares 15
Accumulated net realized loss
on investments (199)
Net unrealized depreciation on
forward foreign currency contracts,
foreign currency and translation
of other assets and liabilities
in foreign currency (15)
Net unrealized appreciation
on investments 18,336
Accumulated net investment loss (1,702)
-----------
TOTAL NET ASSETS-- 100.0% $160,746
===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE-- CLASS Y $13.28
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $13.28
===========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $13.28
===========
* NON-INCOME PRODUCING SECURITY
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
ADR -- AMERICAN DEPOSITORY RECEIPT
"F" -- FOREIGN SHARES
GDR -- GLOBAL DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
BALANCED FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 18%
U.S. GOVERNMENT BACKED OBLIGATIONS 4%
U.S. AGENCY BACKED OBLIGATIONS 1%
CORPORATE OBLIGATIONS 7%
CASH EQUIVALENTS 6%
COMMON STOCK 64%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
COMMON STOCKS -- 64.9%
BANKS -- 3.0%
BankAmerica 15,700 $ 1,146
Citicorp 6,000 759
Crestar Financial 34,000 1,938
-----------
3,843
-----------
BEAUTY PRODUCTS -- 1.9%
Colgate Palmolive 10,000 735
Gillette 9,200 924
Kimberly Clark 8 --
Procter & Gamble 10,000 798
-----------
2,457
-----------
BROADCASTING, CABLE TV, NEWSPAPERS
& ADVERTISING -- 2.3%
CBS 47,000 1,384
Comcast, Class A 50,000 1,578
TCI Satellite Entertainment* 4,300 30
-----------
2,992
-----------
COMMUNICATIONS EQUIPMENT -- 1.3%
Cisco Systems* 29,400 1,639
-----------
COMPUTERS & SERVICES -- 4.5%
America Online* 18,000 1,605
Compaq Computer 26,100 1,473
Microsoft* 6,000 775
Peoplesoft* 47,000 1,833
-----------
5,686
-----------
DRUGS -- 4.1%
Glaxo ADR 29,400 1,408
Merck 7,600 807
Schering Plough 30,000 1,864
SmithKline Beecham ADR 23,600 1,214
-----------
5,293
-----------
ELECTRICAL EQUIPMENT -- 3.1%
Emerson Electric 17,300 976
General Electric 20,200 1,482
Honeywell 22,000 1,507
-----------
3,965
-----------
63
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
BALANCED FUND (CONTINUED)
- --------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------
ENTERTAINMENT -- 0.7%
Walt Disney 8,500 $ 842
-----------
FINANCIAL SERVICES -- 2.7%
FHLMC 44,000 1,845
FNMA 28,000 1,598
-----------
3,443
-----------
FOOD, BEVERAGE & TOBACCO -- 4.4%
CPC International 8,000 864
ConAgra 45,000 1,477
Hershey Foods 29,000 1,796
Philip Morris 13,500 612
Sara Lee 15,000 845
-----------
5,594
-----------
HEALTHCARE SERVICES -- 1.5%
Health Management Associates* 78,448 1,981
-----------
HOUSEHOLD PRODUCTS -- 0.6%
Sunbeam Oster 19,000 800
-----------
INSURANCE -- 3.1%
Allstate 17,000 1,545
American International Group 12,000 1,305
General Re 5,000 1,060
-----------
3,910
-----------
MACHINERY -- 0.8%
Deere 17,500 1,020
-----------
MEDICAL INFORMATION SYSTEMS -- 1.5%
HBO 39,000 1,872
-----------
MEDICAL PRODUCTS & SERVICES-- 3.3%
Cardinal Health 22,850 1,717
Guidant 13,000 809
Johnson & Johnson 13,200 870
Medtronic 16,000 837
-----------
4,233
-----------
PETROLEUM REFINING -- 5.3%
Amoco 12,400 1,056
Atlantic Richfield 12,000 961
Chevron 17,100 1,317
Exxon 19,500 1,193
Mobil 16,200 1,169
Texaco 20,000 1,087
-----------
6,783
-----------
PETROLEUM SERVICES -- 1.9%
Halliburton 22,000 1,143
Schlumberger 15,400 1,240
-----------
2,383
-----------
PRINTING & PUBLISHING -- 1.3%
Gannett 26,000 1,607
-----------
- ---------------------------------------------------------
DESCRIPTION SHARES/PAR (000) VALUE (000)
- ---------------------------------------------------------
RETAIL -- 7.1%
Costco* 40,000 $ 1,785
Dayton-Hudson 38,000 2,565
Gap 45,000 1,595
Home Depot 26,400 1,554
Nordstrom 25,000 1,509
-----------
9,008
-----------
SOFTWARE -- 2.2%
BMC Software* 29,000 1,903
Computer Associates
International 18,000 952
-----------
2,855
-----------
TECHNOLOGY, SERVICES -- 3.4%
Automatic Data Processing 29,000 1,780
Corestaff* 28,000 742
Paychex 34,692 1,756
-----------
4,278
-----------
TELEPHONES & TELECOMMUNICATION-- 4.9%
ICG Communications* 29,300 798
McLeodUSA, Class A* 34,000 1,088
Qualcomm* 27,000 1,364
Qwest Communications Int'l* 3,623 216
Teleport Communications
Group* 28,000 1,537
Worldcom* 39,900 1,207
-----------
6,210
-----------
TESTING LABORATORIES -- 0.0%
Genzyme Corporation-
Tissue Repair* 900 6
-----------
TOTAL COMMON STOCKS
(Cost $60,675) 82,700
-----------
U.S. TREASURY OBLIGATIONS -- 16.0%
U.S. Treasury Bonds
6.000%, 08/15/99 $1,500 1,507
7.250%, 05/15/16 500 569
8.750%, 05/15/17 665 871
U.S. Treasury Notes
8.125%, 02/15/98 1,670 1,675
6.125%, 05/15/98 1,000 1,002
9.250%, 08/15/98 1,620 1,655
8.875%, 11/15/98 1,105 1,135
8.875%, 02/15/99 110 114
6.000%, 06/30/99 2,000 2,010
6.000%, 10/15/99 500 503
5.875%, 11/15/99 2,000 2,007
7.750%, 11/30/99 700 726
6.375%, 01/15/00 500 507
7.500%, 11/15/01 3,235 3,429
6.625%, 03/31/02 1,000 1,032
7.500%, 02/15/05 600 659
6.500%, 08/15/05 500 522
6.875%, 05/15/06 500 535
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $20,239) 20,458
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.4%
FHLMC
6.440%, 01/28/00 $ 500 $ 506
8.025%, 09/15/06 1,000 1,010
8.055%, 09/30/11 1,000 1,009
FNMA
5.940%, 12/12/05 500 497
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,998) 3,022
----------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 4.8%
FHLMC
6.000%, 05/01/08 640 630
5.500%, 11/01/08 546 527
FNMA
6.500%, 08/01/10 219 220
6.500%, 09/01/10 283 284
6.500%, 11/01/24 445 440
GNMA
7.500%, 10/15/11 2,273 2,342
9.000%, 10/15/19 146 156
7.500%, 03/15/26 1,471 1,507
----------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $6,023) 6,106
----------
CORPORATE OBLIGATIONS -- 6.6%
BANKS -- 1.3%
First Bank System
6.875%, 09/15/07 500 511
Midland Bank
6.950%, 03/15/11 200 205
NationsBank
6.500%, 03/15/06 200 201
Provident Bank
6.125%, 12/15/00 25 25
Royal Bank of Scotland
6.375%, 02/01/11 205 200
U.S. Bancorp
6.750%, 10/15/05 500 508
----------
1,650
----------
FINANCIAL SERVICES -- 2.9%
Chrysler Financial
6.950%, 03/25/02 500 512
CSR Finance
7.700%, 07/21/25 200 221
Donaldson Lufkin & Jenrette
6.875%, 11/01/05 185 189
Ford Motor Credit
6.375%, 04/15/00 500 504
6.250%, 11/08/00 500 501
7.500%, 01/15/03 1,000 1,053
MBNA
7.250%, 09/15/02 185 190
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Merrill Lynch
7.000%, 04/27/08 $ 250 $ 261
Noranda
8.125%, 06/15/04 195 211
Santander
7.250%, 11/01/15 100 104
----------
3,746
----------
INDUSTRIAL -- 2.0%
Arco Chemical
10.250%, 11/01/10 210 280
Coca Cola
6.000%, 07/15/03 1,000 991
Dayton Hudson
8.500%, 12/01/22 500 542
ITT
7.375%, 11/15/15 360 356
Laidlaw
8.750%, 04/15/25 75 90
MacMillan Bloedel
7.700%, 02/15/26 215 222
----------
2,481
----------
UTILITIES -- 0.4%
Bellsouth
7.000%, 02/01/05 500 523
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $8,164) 8,400
----------
REPURCHASE AGREEMENTS -- 6.2%
Aubrey Lanston
6.50%, dated 12/31/97,
matures 01/02/98,
repurchase price $3,957,429
(collateralized by various
U.S. Treasury Notes, ranging
in par value $1,920,000-
$2,025,000, 5.625%-8.200,
07/15/98-12/31/99; market
value $4,035,120) 3,956 3,956
Hong Kong Shainghai Bank
6.40%, dated 12/31/97,
matures 01/02/98,
repurchase price $1,977,703
(collateralized by U.S. Treasury
Note, par value $1,915,000,
6.625%, 07/31/01;
market value $2,016,540) 1,977 1,977
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $ 1,977,681
(collateralized by U.S. Treasury
Note, par value $2,030,000,
5.50%, 12/31/00; market
value $2,022,480) 1,977 1,977
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $7,910) 7,910
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
[SQUARE BULLET] COREFUND EQUITY FUNDS
- --------------------------------------------------------------------------------
BALANCED FUND (CONCLUDED)
- ---------------------------------------------------------
DESCRIPTION VALUE (000)
- ---------------------------------------------------------
TOTAL INVESTMENTS -- 100.9%
(Cost $106,009) $128,596
----------
OTHER ASSETS AND LIABILITIES,
NET-- (0.9%) (1,189)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 8,920,348 outstanding shares 96,944
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 406,668 outstanding shares 4,763
Portfolio Shares -- Class B ($0.001 par
value -- 100 million authorized) based
on 42,424 outstanding shares 598
Accumulated Net Realized Gain
on Investments 2,510
Net Unrealized Appreciation
on Investments 22,587
Undistributed Net Investment Income 5
----------
TOTAL NET ASSETS-- 100.0% $127,407
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $13.60
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $13.60
==========
NET ASSET VALUE AND OFFERING
PRICE PER SHARE-- CLASS B $13.51
==========
*NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 37%
U.S. AGENCY BACKED OBLIGATIONS 3%
CASH EQUIVALENTS 7%
CORPORATE OBLIGATIONS 53%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CORPORATE BONDS -- 31.7%
BANKING -- 7.7%
American Express
Centurion Bank (A)
6.019%, 01/21/98 $1,000 $ 1,001
5.999%, 01/23/98 1,000 1,000
Citicorp (A)
6.075%, 02/23/98 500 502
NationsBank
5.375%, 04/15/00 395 389
---------
2,892
---------
FINANCIAL SERVICES -- 20.8%
Associates Corporation
of North America
6.250%, 03/15/99 525 527
Bear Stearns
6.250%, 12/01/00 200 200
Chrysler Financial
6.375%, 01/28/00 510 513
Credit Suisse (A)
5.920%, 01/13/98 1,000 1,000
Fleet Mortgage Group
6.500%, 09/15/99 500 503
General Motors Acceptance (A)
5.906%, 03/09/98 700 699
Lehman Brothers Holdings
6.375%, 06/01/98 500 501
Mellon Financial
7.625%, 11/15/99 255 263
Morgan Stanley Group (A)
5.915%, 02/26/98 1,250 1,250
Morgan Stanley Group
5.625%, 03/01/99 1,000 996
Salomon
6.500%, 03/01/00 750 755
Sears Roebuck Acceptance
6.380%, 02/16/99 650 653
---------
7,860
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
INDUSTRIAL -- 1.9%
Time Warner
7.450%, 02/01/98 $ 735 $ 736
---------
TELEPHONES & TELECOMMUNICATION -- 1.3%
TCI Communications
6.375%, 09/15/99 500 500
---------
TOTAL CORPORATE BONDS
(Cost $11,964) 11,988
---------
U.S. TREASURY OBLIGATIONS -- 33.9%
U.S. Treasury Notes
6.125%, 03/31/98 500 501
5.875%, 04/30/98 2,000 2,003
6.125%, 05/15/98 1,000 1,002
6.000%, 05/31/98 1,000 1,002
6.125%, 08/31/98 1,000 1,003
6.000%, 09/30/98 2,250 2,257
5.875%, 10/31/98 1,000 1,002
5.750%, 12/31/98 1,000 1,002
6.375%, 01/15/99 1,000 1,008
5.875%, 01/31/99 1,000 1,002
6.000%, 08/15/00 1,000 1,007
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $12,760) 12,789
---------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 2.7%
FNMA
5.894%, 10/20/98 500 500
5.870%, 10/25/99 500 500
---------
TOTAL U.S. AGENCY MORTGAGE-
BACKED BONDS
(Cost $999) 1,000
---------
TIME DEPOSIT -- 1.8%
Den Danske Bank
6.500%, 01/02/98 694 694
---------
TOTAL TIME DEPOSIT
(Cost $694) 694
---------
INSURANCE FUNDING AGREEMENT -- 5.3%
Allstate (A)
5.696%, 01/01/98 2,000 2,000
---------
TOTAL INSURANCE FUNDING AGREEMENT
(Cost $2,000) 2,000
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
SHORT TERM INCOME FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 20.5%
Aames Mortgage Trust,
Series 1996-B, Class A1B
7.275%, 05/15/20 $215 $ 217
Banc One Auto Grantor Trust,
Series 1997-B, Class A
6.290%, 07/20/04 750 755
Cit Rv Owner Trust,
Series 1995-B, Class A
6.500%, 04/15/11 216 218
Contimortgage Home Equity Loan
Trust, Series 1996-4, Class A5
6.600%, 10/15/11 210 211
Contimortgage Home Equity Loan
Trust, Series 1997-4, Class A3
6.260%, 07/15/12 500 500
EQCC Home Equity Loan Trust,
Series 1996-2, Class A2
6.700%, 09/15/08 250 252
EQCC Home Equity Loan Trust,
Series 1996-4, Class A3
6.260%, 11/15/06 175 176
EQCC Home Equity Loan Trust,
Series 1997-1, Class A3
6.840%, 09/15/11 750 762
Firstplus Home Loan Equity Trust,
Series 1997-3, Class A3
6.570%, 10/10/10 500 503
Heller Equipment Asset Receivables
Trust, Series 1997-1, Class A2
6.390%, 05/25/05 750 754
Independent National Mortgage,
Series 1996-A, Class A1
6.710%, 09/25/26 315 318
Money Store Home Equity Loan
Trust, Series 1993-B, Class A1
5.400%, 08/15/05 250 250
Navistar Financial Owner Trust,
Series 1996-B, Class A3
6.330%, 04/21/03 310 312
Navistar Financial Owner Trust,
Series 1997-A, Class A2
6.350%, 01/15/00 447 448
Student Loan Marketing Association,
Series 1997-1, Class A1 (A)
5.889%, 01/25/98 671 671
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Union Acceptance,
Series 1996-A, Class A
5.400%, 04/07/03 $451 $ 447
Union Acceptance,
Series 1996-D, Class A2
6.170%, 10/09/02 250 251
Union Acceptance,
Series 1997-A, Class A
6.130%, 07/10/01 281 282
Vanderbilt Mortgage Finance,
Series 1997-B, Class 1A2
6.775%, 01/07/03 430 435
---------
TOTAL MORTGAGE RELATED
(Cost $7,735) 7,762
---------
TOTAL INVESTMENTS -- 95.9%
(Cost $36,152) 36,233
---------
OTHER ASSETS AND LIABILITIES -- 4.1%
Receivable - Investment Securities Sold 1,010
Other Assets and Liabilities 532
---------
TOTAL OTHER ASSETS AND LIABILITIES, NET 1,542
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 3,725,166 outstanding shares 37,207
Portfolio Shares -- Class A ($0.001 par
value -- 1 billion authorized) based
on 57,118 outstanding shares 568
Accumulated Net Realized Loss
on Investments (81)
Net Unrealized Appreciation
on Investments 81
---------
TOTAL NET ASSETS-- 100.0% $37,775
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.99
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.98
=========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE BOND FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 48%
U.S. GOVERNMENT BACKED OBLIGATIONS 2%
U.S. AGENCY BACKED OBLIGATIONS 1%
CASH EQUIVALENTS 3%
CORPORATE OBLIGATIONS 46%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 47.6%
U.S. Treasury Notes
5.125%, 03/02/98 $ 1,500 $ 1,499
6.000%, 05/31/98 12,145 12,169
7.125%, 10/15/98 17,290 17,490
8.875%, 02/15/99 1,755 1,816
6.500%, 04/30/99 15,035 15,198
5.875%, 07/31/99 1,993 1,999
6.000%, 10/15/99 2,200 2,213
5.625%, 10/31/99 4,750 4,745
7.750%, 12/31/99 2,450 2,545
7.750%, 01/31/00 8 8
7.125%, 02/29/00 5,715 5,880
6.750%, 04/30/00 1,630 1,667
8.000%, 05/15/01 5,280 5,639
6.625%, 07/31/01 5,310 5,458
6.125%, 08/15/07 3,852 3,958
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $81,925) 82,284
---------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 3.5%
FHLMC
6.500%, 07/01/04 1,711 1,717
6.750%, 03/15/07 1,755 1,786
FNMA
6.500%, 08/01/10 1,379 1,380
6.500%, 10/01/10 1,096 1,098
---------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $5,918) 5,981
---------
CORPORATE OBLIGATIONS -- 22.4%
BANKING -- 2.7%
Bank One
7.600%, 05/01/07 85 91
Banca Commerciale Italiana
8.250%, 07/15/07 819 905
- ---------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- ---------------------------------------------------------
Bank of Oklahoma
7.125%, 08/15/07 $1,815 $ 1,872
Bch Cayman Islands Limited
7.700%, 07/15/06 1,630 1,728
---------
4,596
---------
FINANCIAL SERVICES -- 11.0%
Associates Corporation
of North America
6.375%, 08/15/98 1,500 1,504
6.750%, 07/15/01 1,990 2,025
Bear Stearns
6.650%, 12/01/04 1,805 1,825
Dean Witter Discover
6.300%, 01/15/06 1,610 1,596
Lehman Brothers
6.710%, 10/12/99 75 76
7.250%, 04/15/03 2,720 2,812
Macsaver Financial
7.600%, 08/01/07 1,289 1,308
Paine Webber Group
6.500%, 11/01/05 1,745 1,719
Salomon
7.200%, 02/01/04 2,810 2,919
Security Pacific
11.500%, 11/15/00 2,050 2,329
Societe Generale
7.400%, 06/01/06 942 991
---------
19,104
---------
INDUSTRIALS -- 6.8%
Barrick Gold
7.500%, 05/01/07 1,780 1,880
CSR America
6.875%, 07/21/05 1,670 1,716
Loews
6.750%, 12/15/06 1,775 1,806
RJR Nabisco
8.750%, 04/15/04 1,710 1,832
Tele-Communications
7.250%, 08/01/05 985 1,012
Time Warner
7.750%, 06/15/05 1,770 1,876
USX
9.625%, 08/15/03 1,490 1,708
---------
11,830
---------
UTILITIES -- 1.9%
Penn Power and Light
7.750%, 05/01/02 1,280 1,347
Tosco
7.625%, 05/15/06 1,790 1,913
---------
3,260
---------
TOTAL CORPORATE OBLIGATIONS
(Cost $37,592) 38,790
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
SHORT-INTERMEDIATE BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
ASSET-BACKED SECURITIES -- 23.0%
Banc One Auto Grantor Trust,
Series 1997-B, Class A
6.290%, 07/20/04 $1,952 $ 1,964
Case Equipment Loan Trust,
Series 1997-5, Class A4
6.410%, 09/15/04 1,857 1,864
Citicorp Mortgage Securities,
Series 1997-1, Class A2
7.250%, 02/25/27 1,775 1,784
Contimortgage Home Equity
Loan Trust, Series 1997-2,
Class A9
7.090%, 04/15/28 3,185 3,254
Contimortgage Home Equity
Loan Trust, Series 1997-4,
Class A3
6.260%, 07/15/12 1,720 1,720
Countrywide Mortgage Broker
Services, Series 1997, Class A1
7.000%, 03/25/27 1,661 1,670
EQCC, Series 1996-4, Class A5
6.710%, 07/15/11 1,945 1,977
Firstplus Home Loan Trust,
Series 1997-3, Class A5
6.860%, 10/10/13 2,535 2,573
General Electric Capital
Mortgage Services,
Series 1997-3, Class A4
7.500%, 04/25/27 1,800 1,820
Heller Equipment Asset
Receivables Trust,
Series 1997-1, Class A2
6.390%, 05/25/05 1,780 1,790
IMC Home Equity Loan Trust,
Series 1997-2, Class A3
6.940%, 11/20/11 1,391 1,408
Metlife Captial Equipment Loan
Trust, Series 1997-A, Class A
6.850%, 05/20/08 1,675 1,712
Money Store Home Equity Loan
Trust, Series 1996-D, Class A9
7.000%, 04/15/28 2,447 2,515
Money Store Home Equity Loan
Trust, Series 1997-D, Class A7
6.485%, 12/15/28 1,500 1,500
Premier Auto Trust,
Series 1997-3, Class A5
6.340%, 01/06/02 2,265 2,271
Residential Asset Securization
Trust, Series 1997, Class A10
7.250%, 05/25/27 1,770 1,787
Sears Credit Account Master
Trust, Series 1995-3, Class A
7.000%, 10/15/04 3,000 3,062
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Standard Credit Card Master
Trust, Series 1995-6, Class A
6.750%, 06/07/00 $2,000 $ 2,007
Union Acceptance,
Series 1996-A, Class A
5.400%, 04/07/03 1,275 1,264
Vanderbilt Mortgage Finance,
Series 1997-C, Class 1A2
6.480%, 09/07/07 1,790 1,796
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $39,391) 39,738
---------
REPURCHASE AGREEMENT -- 2.5%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $4,349,498
(collateralized by U.S. Treasury
Note, par value $4,465,000,
5.50%, 12/31/00; market
value $4,448,480) 4,348 4,348
---------
TOTAL REPURCHASE AGREEMENT
(Cost $4,348) 4,348
---------
TOTAL INVESTMENTS -- 99.0%
(Cost $169,174) 171,141
---------
OTHER ASSETS AND LIABILITIES,
NET-- 1.0% 1,680
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 17,076,303 outstanding shares 169,915
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 284,400 outstanding shares 3,423
Accumulated Net Realized Loss
on Investments (2,490)
Net Unrealized Appreciation
on Investments 1,967
Undistributed Net Investment Income 6
---------
TOTAL NET ASSETS-- 100.0% $172,821
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.95
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.95
=========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 32%
U.S. GOVERNMENT BACKED OBLIGATIONS 66%
CASH EQUIVALENTS 2%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 55.8%
GNMA
8.000%, 09/15/09 $ 552 $ 574
8.000%, 02/15/22 298 309
8.000%, 09/15/22 50 52
8.000%, 10/15/22 226 235
8.000%, 11/15/22 418 434
7.000%, 04/15/23 334 337
7.500%, 08/15/23 1,019 1,045
6.500%, 11/15/23 423 419
7.000%, 01/15/24 799 806
8.000%, 05/15/25 834 866
6.500%, 12/15/25 985 975
7.500%, 02/15/26 433 444
6.500%, 04/15/26 469 464
8.000%, 05/15/26 955 991
8.000%, 06/15/26 669 694
8.000%, 08/15/26 1,978 2,051
8.000%, 09/15/26 1,982 2,056
---------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $12,461) 12,752
---------
U.S. AGENCY MORTGAGE-BACKED BONDS -- 10.2%
FHLMC
6.000%, 05/01/08 304 300
FNMA
7.000%, 10/01/22 644 649
7.000%, 11/01/26 386 389
7.500%, 05/01/27 965 988
---------
TOTAL U.S. AGENCY MORTGAGE-BACKED BONDS
(Cost $2,293) 2,326
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 32.0%
U.S. Treasury Bonds
6.375%, 08/15/27 $2,300 $ 2,427
6.125%, 11/15/27 600 617
U.S. Treasury Notes
6.375%, 05/15/99 970 979
8.000%, 05/15/01 1,200 1,281
6.625%, 07/31/01 600 617
6.250%, 01/31/02 300 305
6.625%, 04/30/02 300 310
6.125%, 08/15/07 750 771
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,076) 7,307
---------
REPURCHASE AGREEMENT -- 1.4%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $332,114
(collateralized by U.S. Treasury
Note, par value $340,000,
5.50%, 12/31/00; market
value $338,742) 332 332
---------
TOTAL REPURCHASE AGREEMENT
(Cost $332) 332
---------
TOTAL INVESTMENTS -- 99.4%
(Cost $22,162) 22,717
---------
OTHER ASSETS AND LIABILITIES,
NET-- 0.6% 142
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 2,097,233 outstanding shares 20,757
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 182,133 outstanding shares 1,844
Accumulated Net Realized Loss
on Investments (297)
Net Unrealized Appreciation
on Investments 555
---------
TOTAL NET ASSETS-- 100.0% $22,859
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.03
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.03
=========
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE CORPORATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE CORPORATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
BOND FUND
[PIE CHART OMITTED]
U.S. TREASURY OBLIGATIONS 27%
U.S. GOVERNMENT BACKED OBLIGATIONS 29%
CASH EQUIVALENTS 3%
CORPORATE OBLIGATIONS 40%
U.S. AGENCY BACKED OBLIGATIONS 1%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 26.4%
U.S. Treasury Bonds
6.500%, 11/15/26 $2,895 $ 3,090
6.375%, 08/15/27 5,511 5,815
6.125%, 11/15/27 3,193 3,282
U.S. Treasury Notes
8.875%, 02/15/99 6,470 6,694
6.500%, 04/30/99 3,305 3,341
5.875%, 07/31/99 1,950 1,956
5.625%, 10/31/99 2,135 2,133
7.750%, 01/31/00 503 523
6.750%, 04/30/00 5,525 5,649
8.000%, 05/15/01 3,795 4,053
6.625%, 07/31/01 2,548 2,619
7.500%, 11/15/01 3,835 4,064
6.250%, 02/28/02 442 450
6.125%, 08/15/07 2,515 2,584
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $45,367) 46,253
---------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS -- 29.2%
FHLMC
6.750%, 03/15/07 2,355 2,396
7.500%, 10/01/10 2,363 2,425
8.000%, 07/01/25 3,145 3,255
FNMA
6.500%, 08/01/10 2,880 2,884
6.500%, 09/01/10 3,225 3,229
7.500%, 06/01/11 2,273 2,333
6.500%, 03/25/19 1,690 1,681
8.500%, 02/01/25 1,271 1,328
7.500%, 08/01/25 2,813 2,879
8.500%, 08/01/26 3,030 3,164
7.000%, 11/01/26 3,862 3,890
7.500%, 05/01/27 4,374 4,476
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
GNMA
7.500%, 12/15/25 $5,170 $ 5,298
6.500%, 04/15/26 5,719 5,661
7.000%, 06/15/26 1,826 1,848
8.000%, 12/15/26 1,881 1,951
7.500%, 06/15/27 2,455 2,516
---------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $50,030) 51,214
---------
ASSET-BACKED SECURITIES -- 13.5%
BankBoston RV Trust,
Series 1997-1, Class A8
6.540%, 02/15/09 1,855 1,877
Carco Auto Loan,
Series 1997-1, Class A
6.689%, 08/15/04 1,510 1,519
Case Equipment Loan Trust,
Series 1997-5, Class A4
6.410%, 09/15/04 1,955 1,962
EQCC, Series 1996-4, Class A5
6.710%, 07/15/11 2,000 2,033
First Plus Home Loan Trust,
Series 1997-2, Class A5
6.820%, 04/10/23 2,200 2,245
First Plus Home Loan Trust,
Series 1997-3, Class A5
6.860%, 10/10/13 2,755 2,796
Green Tree Financial,
Series 1993-3, Class A7
6.400%, 10/15/18 1,785 1,760
Heller Equipment Asset
Receivables Trust,
Series 1997-1, Class A2
6.390%, 05/25/05 1,855 1,865
Metlife Captial Equipment Loan
Trust, Series 1997-A, Class A
6.850%, 05/20/08 1,800 1,840
Money Store Home Equity Loan
Trust, Series 1997-1, Class A3
6.680%, 08/15/12 2,275 2,272
Money Store Home Equity Loan
Trust, Series 1997-D, Class A7
6.485%, 12/15/28 1,735 1,735
Vanderbilt Mortgage Finance,
Series 1997-B, Class 1A4
7.190%, 02/07/14 1,404 1,454
Vanderbilt Mortgage Finance,
Series 1997-C, Class 1A2
6.480%, 09/07/07 400 401
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $23,519) 23,759
---------
NON-AGENCY MORTGAGE-BACKED BONDS -- 4.6%
Citicorp Mortgage Securities,
Series 1997-1, Class A2 CMO
7.250%, 02/25/27 2,060 2,071
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Countrywide Mortgage Broker
Services, Series 1997-A1,
Class A1 CMO
7.000%, 03/25/27 $1,844 $ 1,854
General Electric Capital
Mortgage Services,
Series 1997-3, Class A4 CMO
7.500%, 04/25/27 2,300 2,326
Residential Asset Securization
Trust, Series 1997-A3,
Class A10 CMO
7.250%, 05/25/27 1,835 1,852
---------
TOTAL NON-AGENCY MORTGAGE-BACKED BONDS
(Cost $7,977) 8,103
---------
CORPORATE BONDS -- 22.0%
BANKING -- 4.9%
Banca Commerciale Italiana
8.250%, 07/15/07 973 1,075
Banco Santiago
7.000%, 07/18/07 2,000 1,970
BankBoston
7.000%, 09/15/07 1,740 1,788
First Union Capital I
7.935%, 01/15/27 1,820 1,943
Keycorp
7.500%, 06/15/06 1,805 1,918
---------
8,694
---------
FINANCIAL SERVICES -- 5.8%
Associates Corporation
of North America
6.750%, 07/15/01 700 712
6.500%, 10/15/02 1,810 1,826
CNA Financial
7.250%, 11/15/23 725 742
Fairfax Financial Holdings
8.300%, 04/15/26 1,515 1,693
Lehman Brothers Holdings
7.375%, 05/15/04 1,320 1,371
Loews
6.750%, 12/15/06 1,880 1,913
Santander Finance
6.375%, 02/15/11 1,955 1,906
---------
10,163
---------
INDUSTRIAL -- 11.3%
American Stores
8.000%, 06/01/26 2,110 2,329
Barrick Gold
7.500%, 05/01/07 1,855 1,959
Belo A H
6.875%, 06/01/02 1,202 1,226
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Lasmo USA
6.750%, 12/15/07 $1,200 $ 1,209
Legrand S.A.
8.500%, 02/15/25 2,590 3,121
RJR Nabisco
8.750%, 04/15/04 1,935 2,073
Skandinaviska Enskilda
6.875%, 02/15/09 1,145 1,176
Tele-Communications
7.250%, 08/01/05 1,000 1,028
Time Warner
7.750%, 06/15/05 1,985 2,104
Tosco
7.625%, 05/15/06 2,185 2,335
Weyerhauser
6.950%, 08/01/17 1,244 1,267
---------
19,827
---------
TOTAL CORPORATE BONDS
(Cost $36,955) 38,684
---------
REPURCHASE AGREEMENT -- 3.1%
Morgan Stanley
6.20%, dated 12/31/97,
matures 01/02/98,
repurchase price $5,476,886
(collateralized by U.S. Treasury
Note, par value $5,625,000,
5.50%, 12/31/00; market
value $5,604,188) 5,475 5,475
---------
TOTAL REPURCHASE AGREEMENT
(Cost $5,475) 5,475
---------
TOTAL INVESTMENTS -- 98.8%
(Cost $169,323) 173,488
---------
OTHER ASSETS AND LIABILITIES,
NET-- 1.2% 2,104
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 16,477,588 outstanding shares 169,665
Portfolio Shares -- Class A ($0.001 par
value -- 1 billion authorized) based
on 192,419 outstanding shares 2,020
Accumulated Net Realized Loss
on Investments (258)
Net Unrealized Appreciation
on Investments 4,165
---------
TOTAL NET ASSETS-- 100.0% $175,592
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.53
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.53
=========
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
GLOBAL BOND FUND
[PIE CHART OMITTED]
UNITED STATES 20%
UNITED KINGDOM 9%
SWEDEN 5%
NEW ZEALAND 10%
LUXEMBURG 6%
AUSTRALIA 4%
AUSTRIA 3%
CYPRUS 3%
DENMARK 8%
FRANCE 8%
GERMANY 17%
IRELAND 7%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
FOREIGN BONDS -- 48.8%
AUSTRALIA -- 3.5%
New South Wales Treasury
12.000%, 12/01/01 $ 1,600 $ 1,264
---------
DENMARK -- 7.7%
Kingdom of Denmark
7.000%, 11/10/24 16,850 2,737
---------
FRANCE -- 4.8%
Government of France OAT
6.000%, 10/25/25 10,250 1,726
---------
GERMANY -- 15.5%
Bundesrepublic
6.250%, 01/04/24 9,590 5,553
---------
NEW ZEALAND -- 4.0%
Government of New Zealand
8.000%, 11/15/06 2,320 1,430
---------
SWEDEN -- 4.6%
Government of Sweden
8.000%, 08/15/07 11,500 1,657
---------
UNITED KINGDOM -- 8.7%
Chubu Elecectric Power
6.750%, 08/10/99 950 1,543
Halifax Building
8.375%, 12/15/99 950 1,590
---------
3,133
---------
TOTAL FOREIGN BONDS
(Cost $17,415) 17,500
---------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
COMMERCIAL PAPER -- 26.3%
Bank of Austria
5.340%, 01/12/98 $ 1,000 $ 998
CEDEL Bank
5.720%, 01/16/98 1,000 987
CREGEM North America
5.310%, 01/20/98 1,000 997
DEPFA Bank of Europe
5.740%, 03/05/98 1,500 1,485
EFIC
5.490%, 02/02/98 1,000 995
Helaba Dublin
5.610%, 01/26/98 1,000 996
MTF Securities
5.130%, 01/07/98 1,000 999
New Zealand Dairy
Board Financial
5.700%, 02/26/98 1,000 991
Republic of Cyprus
5.700%, 02/17/98 1,000 993
---------
TOTAL COMMERCIAL PAPER
(Cost $9,441) 9,441
---------
U.S. TREASURY OBLIGATION -- 18.9%
U.S. Treasury Note
4.750%, 09/30/98 6,800 6,758
---------
TOTAL U.S. TREASURY OBLIGATION
(Cost $6,786) 6,758
---------
DEBT OPTIONS -- 0.9%
FRANCE -- 0.1%
Government of France
OAT 6.00% Put,
strike @ 96.93* 10,250,000 3
Government of France
OAT 7.50% Put,
strike @ 113.61* 23,000,000 19
---------
22
---------
GERMANY -- 0.2%
Bundesrepublic 7.375% Put,
strike @ 111.68* 7,300,000 14
Bundesrepublic 6.25% Put,
strike @ 105.00* 6,000,000 71
---------
85
---------
SWEDEN -- 0.1%
Government of Sweden
8.00% Put, strike
@ 113.75* 11,500,000 19
---------
UNITED STATES -- 0.5%
U.S. Treasury Note 6.375%
Call, strike @
101.734375* 5,000,000 192
---------
TOTAL DEBT OPTIONS
(Cost $423) 318
---------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CURRENCY OPTIONS -- 0.0%
GERMANY -- 0.0%
Deutsche Mark Call,
strike @ 1.7037* $7,000,000 $ 12
---------
JAPAN -- 0.0%
Yen Call, strike @ 122.00* 7,000,000 3
---------
TOTAL CURRENCY OPTIONS
(Cost $294) 15
---------
DEMAND DEPOSIT -- 3.1%
Morgan Stanley
4.750%, 01/01/98 1,119 1,119
---------
TOTAL DEMAND DEPOSIT
(Cost $1,119) 1,119
---------
TOTAL INVESTMENTS -- 98.0%
(Cost $35,478) 35,151
---------
OTHER ASSETS AND LIABILITIES,
NET-- 2.0% 720
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 25 million authorized) based
on 3,817,509 outstanding shares 37,800
Portfolio Shares -- Class A ($0.001 par
value -- 25 million authorized) based
on 26,337 outstanding shares 258
Accumulated net realized loss
on investments (2,014)
Net unrealized appreciation on
forward foreign currency contracts,
foreign currency and translation of
other assets and liabilities in
foreign currency 113
Net unrealized depreciation
on investments (327)
Accumulated net investment income 41
---------
TOTAL NET ASSETS-- 100.0% $35,871
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $9.33
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $9.32
=========
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
INTERMEDIATE MUNICIPAL BOND FUND
[PIE CHART OMITTED]
REVENUE BONDS 48%
CASH EQUIVALENT 3%
GENERAL OBLIGATIONS 38%
PRE-REFUNDED SECURITIES 11%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 95.5%
COLORADO -- 1.1%
El Paso County, Colorado GO
5.200%, 12/01/02 $20 $ 21
---------
FLORIDA -- 2.8%
Jacksonville, Florida Electric
Authority Revenue Bond,
Series 3-A
5.200%, 10/01/02 50 52
---------
GEORGIA -- 3.9%
Atlanta, Georgia Water & Sewer
Revenue Bond FGIC
4.500%, 01/01/04 20 20
De Kalb County, Georgia Health
Facilities GO
5.300%, 01/01/03 50 53
---------
73
---------
HAWAII -- 2.8%
Hawaii State GO
5.200%, 06/01/04 50 52
---------
ILLINOIS -- 8.0%
Bloomingdale, Illinois GO
5.450%, 01/01/09 85 89
Illinois State Sales Tax Revenue
Bond, Series S
4.900%, 06/15/07 60 61
---------
150
---------
MARYLAND -- 2.8%
Maryland State Health &
Higher Education Facilities
Authority Revenue Bond,
Johns Hopkins Project
5.125%, 07/01/03 50 52
---------
MASSACHUSETTS -- 2.8%
Massachusetts Bay Transportation
Authority Revenue Bond, Series A
5.300%, 03/01/05 50 53
---------
75
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
INTERMEDIATE MUNICIPAL BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
NEW JERSEY -- 6.5%
Burlington County, New Jersey
Community Bridge Systems
Revenue Bond, Callable
10/01/03 at 101 CG
5.050%, 10/01/04 $ 50 $ 52
Medford Township, New Jersey
Board of Education GO FGIC
5.950%, 02/01/03 65 70
---------
122
---------
PENNSYLVANIA -- 64.8%
Allegheny County, Pennsylvania,
Series C-33, GO
7.450%, 02/15/98 50 50
Governor Mifflin, Pennsylvania
School District GO AMBAC
4.850%, 11/15/01 50 52
Lehigh County, Pennsylvania
GO FGIC
5.125%, 11/15/08 110 114
Luzerne County, Pennsylvania,
Series A, GO, Pre-Refunded
09/15/00 at 100 FGIC
5.850%, 09/15/02 50 52
Pennsylvania State Higher
Education Facilities Authority
Hospital Revenue Bond,
Thomas Jefferson University
Project, Pre-Refunded
01/01/98 at 102
8.000%, 01/01/18 85 87
Pennsylvania State Industrial
Development Authority
Revenue Bond AMBAC
5.000%, 07/01/04 100 104
Pennsylvania State Infrastructure
Authority Revenue Bond for
Pennvest Loan Pool Project MBIA
6.000%, 09/01/03 65 71
Pennsylvania State Turnpike
Commission Revenue Bond,
Series 1, Pre-Refunded
12/01/01 at 102 FGIC
7.150%, 12/01/11 50 56
Pennsylvania State Turnpike
Commission Revenue Bond,
Series F, Pre-Refunded 12/01/99
at 102 AMBAC
7.250%, 12/01/17 50 54
Philadelphia, Pennsylvania Airport
Parking Authority Revenue
Bond AMBAC
5.500%, 09/01/05 80 86
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pittsburgh, Pennsylvania School
District, Series A, GO FGIC
4.850%, 09/01/03 $100 $ 103
Pittsburgh, Pennsylvania Water
and Sewer Authority Revenue
Bond, Series A FGIC
4.800%, 09/01/06 70 72
Reading, Pennsylvania Parking
Authority Revenue Bond MBIA
4.950%, 11/15/02 50 52
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond for Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 50 52
University of Pittsburgh,
Pennsylvania Revenue Bond for
University Capital Projects FGIC
5.050%, 06/01/10 90 93
Wallenpaupack, Pennsylvania Area
School District, Series C, GO,
Callable 09/01/00 at 100 FGIC
6.000%, 09/01/03 50 52
West View, Pennsylvania Municipal
Water Authority Revenue
Bond FGIC
4.800%, 11/15/06 60 62
---------
1,212
---------
TOTAL MUNICIPAL BONDS
(Cost $1,731) 1,787
---------
CASH EQUIVALENT -- 2.8%
SEI Tax Exempt Trust Institutional
Tax Free Portfolio 52 52
---------
TOTAL CASH EQUIVALENT
(Cost $52) 52
---------
TOTAL INVESTMENTS -- 98.3%
(Cost $1,783) 1,839
---------
OTHER ASSETS AND LIABILITIES,
NET-- 1.7% 33
---------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 88,385 outstanding shares 919
Portfolio Shares -- Class A (unlimited
authorization -- no par value) based
on 94,207 outstanding shares 977
Accumulated Net Realized Loss
on Investments (80)
Net Unrealized Appreciation
on Investments 56
---------
TOTAL NET ASSETS-- 100.0% $1,872
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.25
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.25
=========
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
[PIE CHART OMITTED]
TAX ANTICIPATION NOTES 3%
REVENUE BONDS 70%
CASH EQUIVALENT 1%
GENERAL OBLIGATIONS 25%
PRE-REFUNDED SECURITIES 1%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 102.2%
OHIO -- 2.9%
Cleveland, Ohio Bond Anticipation
Notes, Series B
4.500%, 10/01/99 $500 $ 503
---------
PENNSYLVANIA -- 99.3%
Allegheny County, Pennsylvania
GO, Series C-43, Callable
09/15/04 at 100 MBIA
5.875%, 09/15/10 60 64
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Mercy
Hospital of Pittsburgh AMBAC
6.450%, 04/01/01 200 214
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Montefiore
Hospital Association
5.800%, 10/01/03 110 116
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bond for Presbyterian
Health Center, Series B, Callable
11/01/02 at 102 MBIA
6.000%, 11/01/12 25 27
Allegheny County, Pennsylvania
Hospital Development Authority
Revenue Bonds for Allegheny
Health Center - UPMC
Health, Series B
5.000%, 07/01/16 500 489
Allegheny County, Pennsylvania
Redevelopment Authority
Revenue Bond for Home
Improvement Loan Project,
Series A, Callable 02/01/04
at 102 FHA
5.700%, 02/01/07 10 10
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Allegheny County, Pennsylvania
Sanitation Authority Sewer
Revenue Bond, Series B,
Pre-Refunded 06/01/99
at 100 FGIC
7.450%, 12/01/09 $130 $ 136
Berks County, Pennsylvania
Revenue Bond for Reading
Hospital & Medical Center,
Series B, Callable 10/01/04
at 102 MBIA
5.600%, 10/01/06 65 70
Bucks County, Pennsylvania
Community College Authority
Revenue Bond
5.500%, 06/15/14 300 314
Center City District, Pennsylvania
Business Improvement
Assessment Bond, Callable
12/01/07 at 100 AMBAC
5.600%, 12/01/08 60 65
Central Bucks, Pennsylvania
School District GO,
Callable 02/01/01 at 100
6.600%, 02/01/03 175 187
Crawford, Pennsylvania Central
School District GO FGIC
7.000%, 02/15/05 100 116
Dauphin County, Pennsylvania
Dauphin County General
Authority School District
Pooled Financing
Program II AMBAC
4.450%, 09/01/32 500 500
Delaware County, Pennsylvania GO
7.100%, 12/01/98 170 170
5.500%, 10/01/15 75 78
Delaware County, Pennsylvania
Revenue Bond for Villanova
University AMBAC
5.400%, 08/01/08 200 213
Dover Township, Pennsylvania
Sewer Authority Revenue Bond
6.250%, 05/01/12 20 22
Easton, Pennsylvania Area
Sewer Authority Revenue
Bonds, Series A FSA
4.200%, 12/01/01 575 574
5.000%, 12/01/14 500 496
Exeter Township, Pennsylvania
General Obligation Bonds,
Series B FGIC
4.800%, 07/15/09 500 509
Hampden Township, Pennsylvania
Sewer Authority Special
Obligation Bond, Callable
10/01/96 at 100
5.350%, 04/01/03 95 98
Hollidaysburg, Pennsylvania Sewer
Authority Revenue Bonds
5.000%, 12/01/18 1,000 979
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
77
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
PENNSYLVANIA MUNICIPAL BOND FUND (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Keystone Oaks, Pennsylvania
School District GO FGIC
5.000%, 09/01/11 $500 $ 506
Lehigh County, Pennsylvania
General Purpose Authority
Revenue Bonds for Muhlenberg
College Project AMBAC
4.150%, 08/01/02 300 298
Lower Burrell, Pennsylvania City
Municipal Sewer Authority
Revenue Bond AMBAC
5.125%, 02/01/16 250 250
Lower Merion Township,
Pennsylvania GO, Callable
08/01/02 at 100
5.625%, 08/01/05 100 105
Manheim, Pennsylvania Central
School District GO, Callable
05/15/04 at 100 FGIC
6.100%, 05/15/14 100 107
Millcreek Township, Pennsylvania
Sewer Authority Revenue Bond,
Callable 11/01/99 at 100 MBIA
6.000%, 11/01/06 150 155
Montgomery County, Pennsylvania
Higher Education and Health
Authority Revenue Bond for
Abington Memorial Hospital,
Series A AMBAC
5.125%, 06/01/14 250 250
Neshaminy, Pennsylvania
Neshaminy School District
GO FGIC
5.250%, 02/15/07 500 532
North Wales, Pennsylvania Water
Authority Revenue Bond
Pre-Refunded 11/01/04 at 100
6.750%, 11/01/10 100 114
Northampton County,
Pennsylvania Higher Education
Authority Revenue Bond for
Lehigh University, Series A MBIA
5.750%, 11/15/18 150 157
Pennsylvania Housing Finance
Agency Single Family
Mortgage - 55 Revenue Bond
4.700%, 10/01/01 100 102
Pennsylvania State Convention
Center Authority Revenue Bond,
Series A FGIC
6.700%, 09/01/16 75 89
Pennsylvania State GO
5.125%, 09/15/04 450 471
5.000%, 11/15/12 500 506
Pennsylvania State GO, Series 2
6.000%, 07/01/05 25 28
6.250%, 07/01/11 60 69
Pennsylvania State GO,
Third Series
5.000%, 09/01/07 250 259
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State GO,
Third Series, Callable
09/01/03 at 101
5.000%, 09/01/12 $350 $ 352
Pennsylvania State Higher
Education Facilities Authority
Health Services Revenue Bond
for Allegheny/Delaware Valley,
Series A MBIA
5.500%, 11/15/08 400 433
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for
Health Services, Series A,
Callable 01/01/04 at 102
6.000%, 01/01/10 100 109
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for Thomas
Jefferson University, Series A,
Callable 07/01/99 at 102
6.000%, 07/01/19 150 155
Pennsylvania State Higher
Education Facilities Authority
Revenue Bond for University of
Pennsylvania, Series B
5.700%, 01/01/11 150 159
5.850%, 09/01/13 100 106
Pennsylvania State Higher
Educational Facilities Authority
Revenue Bond for
University of Pennsylvania
Project, Series B
5.250%, 01/01/07 500 528
Pennsylvania State Housing
Finance Agency Revenue
Bond, Series C
6.400%, 07/01/12 300 318
Pennsylvania State Industrial
Development Authority
Revenue Bond AMBAC
5.800%, 07/01/09 250 276
6.000%, 07/01/09 305 342
6.000%, 01/01/12 100 108
Pennsylvania State Industrial
Development Authority
Revenue Bond for Economic
Development AMBAC
6.000%, 07/01/08 600 673
Pennsylvania State Industrial
Development Authority Revenue
Bond, State Infrastructure
Investment Authority for
Pennvest Loan Pool MBIA
6.000%, 09/01/04 400 438
Pennsylvania State Turnpike
Commission Revenue
Bond, Series P
5.800%, 12/01/06 75 80
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
[SQUARE BULLET] COREFUND FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State Turnpike
Commission Revenue Bond,
Series O, Callable 12/01/02
at 102 FGIC
5.900%, 12/01/08 $125 $ 135
Pennsylvania State Turnpike
Commission Revenue
Bond, Series P
5.100%, 12/01/99 150 153
Pennsylvania State University
Revenue Bond,
Callable 03/01/04 at 100
6.150%, 03/01/05 185 201
Philadelphia, Pennsylvania Parking
Authority Revenue Bond
5.750%, 09/01/07 400 439
Philadelphia, Pennsylvania
Industrial Authority
Revenue Bond
5.250%, 11/15/09 500 519
Philadelphia, Pennsylvania
Hospitals and Higher Education
Facilities Authority Revenue
Bond for Pennsylvania
Hospital, Series A FGIC
5.250%, 02/15/14 100 101
Pittsburgh, Pennsylvania GO,
Series D, Callable 09/01/02
at 102 AMBAC
6.125%, 09/01/17 25 27
Radnor Township, Pennsylvania
GO, Callable 05/01/06 at 100
5.250%, 11/01/16 200 205
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bond Mercy Health
Project, Series B MBIA
5.000%, 01/01/06 250 259
Scranton-Lackawana, Pennsylvania
Health and Welfare Authority
Revenue Bonds for Community
Medical Center Project
4.500%, 07/01/04 800 805
Scranton-Lackawanna,
Pennsylvania Health and
Welfare Authority Revenue
Bond for University of
Scranton, Series A
6.150%, 03/01/03 150 162
Seneca Valley, Pennsylvania GO
5.850%, 02/15/15 105 111
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
University of Pittsburgh,
Pennsylvania Unrefunded
Balance of Series A Revenue
Bonds MBIA
6.125%, 06/01/21 $ 40 $ 43
West View, Pennsylvania
Municipal Authority Water
Revenue Bonds FGIC
5.150%, 11/15/17 615 621
York, Pennsylvania City School
District GO, Callable
03/01/03 at 100 FGIC
5.600%, 03/01/07 75 79
----------
17,382
----------
TOTAL MUNICIPAL BONDS
(Cost $17,250) 17,885
----------
CASH EQUIVALENT -- 1.2%
SEI Tax Exempt Trust Institutional
Tax Free Portfolio 216 216
----------
TOTAL CASH EQUIVALENT
(Cost $216) 216
----------
TOTAL INVESTMENTS -- 103.4%
(Cost $17,466) 18,101
----------
OTHER ASSETS AND LIABILITIES -- (3.4%)
Liabilities - Investment Securities Purchased (980)
Other Assets and Liabilities 381
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (599)
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized shares)
based on 1,198,485 outstanding shares 12,448
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized shares)
based on 425,928 outstanding shares 4,475
Accumulated Net Realized Loss
on Investments (57)
Net Unrealized Appreciation
on Investments 636
----------
TOTAL NET ASSETS-- 100.0% $17,502
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS Y $10.77
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.78
==========
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FHA -- FEDERAL HOUSING AGENCY
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
NEW JERSEY MUNICIPAL BOND FUND
[PIE CHART OMITTED]
REVENUE BONDS 45%
CASH EQUIVALENTS 3%
GENERAL OBLIGATIONS 52%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 96.1%
NEW JERSEY -- 96.1%
Bayonne, New Jersey GO FGIC
5.900%, 05/01/08 $150 $ 162
Burlington County, New Jersey GO
5.200%, 10/01/05 80 83
Cherry Hill Township,
New Jersey GO
5.900%, 06/01/05 50 54
Flemington-Raritan, New Jersey
Regional School District GO
5.700%, 05/01/06 50 54
Manalapan Township, New Jersey
Fire District Number 1 GO
5.300%, 12/15/99 80 82
Marlboro Township, New Jersey
Board of Education GO FGIC
5.500%, 07/15/09 40 42
Middlesex County New Jersey
Revenue Bond FGIC
5.125%, 12/01/16 70 70
Monmouth County, New Jersey
Improvement Authority
Revenue Bond CG
6.625%, 12/01/05 40 43
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Bridgeton Hospital Association
Project, Series B
6.000%, 07/01/13 50 55
New Jersey Health Care Facilities
Finance Authority Revenue Bond
for Burlington County Memorial
Hospital Project
6.000%, 07/01/12 50 54
New Jersey State Economic
Development Authority Revenue
Bond for Peddie School
Project, Series A
5.400%, 02/01/06 50 53
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
New Jersey State Economic
Development Authority Revenue
Bond for Rutgers State
University-Civic Square AMBAC
6.125%, 07/01/24 $ 55 $ 59
New Jersey State Educational
Facilities Authority Revenue
Bond for Princeton University
Project, Series A
5.500%, 07/01/04 100 108
New Jersey State Educational
Facilities Authority Revenue
Bond for University of Medicine
and Dentistry, Series B AMBAC
5.250%, 12/01/13 60 62
New Jersey State Transportation
Authority Revenue Bond MBIA
5.000%, 06/15/15 100 99
New York & New Jersey States
Port Authority Revenue
Bond, Series 81
5.700%, 08/01/07 50 53
North Bergen Township,
New Jersey GO AMBAC
5.000%, 08/15/09 75 78
North Brunswick Township,
New Jersey Board of
Education GO
6.300%, 02/01/12 150 167
North Brunswick Township,
New Jersey Board of Education
GO FGIC
5.000%, 02/01/12 100 101
North Brunswick Township,
New Jersey GO
6.125%, 05/15/04 24 26
North New Jersey District Water
Supply Revenue Bond MBIA
5.050%, 11/15/11 90 92
Ocean County, New Jersey GO
5.650%, 07/01/03 75 80
Ocean County, New Jersey
Utilities Authority Wastewater
Revenue Bond
5.125%, 01/01/11 75 77
Secaucus, New Jersey Utilities
Authority Sewer Revenue
Bond, Series A
6.100%, 12/01/10 60 67
South Brunswick Township,
New Jersey GO
5.950%, 08/01/14 100 108
South Monmouth, New Jersey
Regional Sewer Authority
Revenue Bond MBIA
5.550%, 01/15/06 50 54
West Windsor Township,
New Jersey Parking Authority
Revenue Bond
6.100%, 12/01/12 50 55
----------
2,038
----------
TOTAL MUNICIPAL BONDS
(Cost $1,934) 2,038
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
80
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
CASH EQUIVALENT -- 2.8%
SEITax Exempt Trust Institutional
Tax Free Portfolio $58 $ 59
--------
TOTAL CASH EQUIVALENT
(Cost $59) 59
--------
TOTAL INVESTMENTS -- 98.9%
(Cost $1,993) 2,097
--------
OTHER ASSETS AND LIABILITIES,
NET-- 1.1% 23
--------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 100 million authorized) based
on 153,520 outstanding shares 1,513
Portfolio Shares -- Class A ($0.001 par
value -- 100 million authorized) based
on 49,310 outstanding shares 507
Accumulated Net Realized Loss
on Investments (4)
Net Unrealized Appreciation
on Investments 104
--------
TOTAL NET ASSETS-- 100.0% $2,120
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $10.46
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS A $10.45
========
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CG -- COUNTY GUARANTY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FSA --FINANCIAL SECURITY ASSURANCE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
TREASURY RESERVE
[PIE CHART OMITTED]
U.S. TREASURY SECURITIES 34%
CASH EQUIVALENTS 66%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 34.4%
U.S. Treasury Bills+
5.700%, 01/08/98 $ 8,500 $ 8,491
5.180%, 01/22/98 39,000 38,884
5.587%, 02/05/98 7,000 6,964
5.650%, 03/05/98 10,000 9,906
5.797%, 04/02/98 10,000 9,861
5.793%, 04/30/98 10,000 9,818
5.580%, 05/28/98 10,000 9,783
5.530%, 06/25/98 10,000 9,744
5.572%, 07/23/98 10,000 9,703
5.544%, 08/20/98 10,000 9,658
U.S. Treasury Notes
5.580%, 01/31/98 10,000 9,995
5.600%, 01/31/98 15,000 15,000
5.690%, 07/31/98 15,000 14,962
5.780%, 08/15/98 10,000 10,005
5.610%, 08/31/98 15,000 15,004
5.630%, 09/30/98 5,000 4,969
5.640%, 09/30/98 10,000 10,026
5.650%, 10/31/98 10,000 10,017
5.730%, 11/15/98 15,000 14,970
5.740%, 11/30/98 15,000 14,985
U.S. Treasury STRIPS
5.710%, 02/15/98 10,000 9,933
5.725%, 05/15/98 14,600 14,305
5.735%, 08/15/98 20,000 19,319
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $286,302) 286,302
--------
REPURCHASE AGREEMENTS -- 65.8%
Aubrey Lanston
5.25%, dated 12/31/97, matures
01/02/98, repurchase price
$37,217,852 (collateralized by
U.S. Treasury Note, par value
$38,190,000 5.625%, 12/31/02;
market value $38,178,543) 37,207 37,207
81
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TREASURY RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Goldman Sachs
6.35%, dated 12/31/97, matures
01/02/98, repurchase price
$19,506,879 (collateralized by
U.S. Treasury Note, par value
$19,120,000, 6.875%,
03/31/00; market
value $19,945,984) $ 19,500 $ 19,500
Hong Kong Shanghai Bank
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$200,071,111 (collateralized
by various U.S. Treasury Notes,
ranging in par value $21,780,000-
50,000,000, 6.375%-7.125%,
04/30/99-04/30/00; total
market value $204,152,180) 200,000 200,000
Merrill Lynch
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$30,010,667 (collateralized by
various U.S. Treasury Notes,
ranging in par value $12,590,000-
$15,810,000, 8.00%,
05/15/01; total market
value $30,697,720) 30,000 30,000
Morgan Stanley
6.20%, dated 12/31/97, matures
01/02/98, repurchase price
$30,010,333 (collateralized by
U.S. Treasury Note, par value
$30,810,000, 5.50%, 12/31/00;
market value $30,696,003) 30,000 30,000
State Street Bank
5.50%, dated 12/31/97, matures
01/02/98, repurchase price
$200,061,111 (collateralized by
various U.S. Treasury Notes,
ranging in par value $13,990,000-
$50,000,000, 6.125%,
03/31/98; total market
value $204,152,580) 200,000 200,000
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Swiss Bank
6.40%, dated 12/31/97, matures
01/02/98, repurchase price
$30,010,667 (collateralized by
various U.S. Treasury Notes,
ranging in par value $12,790,000-
$15,675,000, 7.50%,
05/15/02; total market
value $30,736,507) $30,000 $ 30,000
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $546,707) 546,707
--------
TOTAL INVESTMENTS -- 100.2%
(Cost $833,009) 833,009
--------
OTHER ASSETS AND LIABILITIES,
NET-- (0.2%) (1,740)
--------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1,250 million authorized) based
on 806,957,000 outstanding shares 806,957
Portfolio Shares -- Class C ($0.001 par
value -- 1,250 million authorized) based
on 24,292,618 outstanding shares 24,292
Accumulated Net Realized Gain
on Investments 20
--------
TOTAL NET ASSETS-- 100.0% $831,269
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $1.00
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS C $1.00
========
+ EFFECTIVE YIELD
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
82
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
CASH RESERVE
CASH RESERVE
[PIE CHART OMITTED]
U.S. GOVERNMENT OBLIGATIONS 6%
CASH EQUIVALENTS 14%
CORPORATE OBLIGATIONS 80%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
COMMERCIAL PAPER -- 50.7%
BANKING -- 6.0%
Banc One Funding
5.830%, 01/29/98 $ 9,262 $ 9,220
5.838%, 02/09/98 10,000 9,937
5.840%, 02/13/98 10,000 9,931
NationsBank
5.858%, 01/30/98 10,000 9,953
5.813%, 03/17/98 14,000 13,833
Society Generale
5.900%, 06/16/98 9,000 8,996
--------
61,870
--------
FINANCIAL SERVICES -- 30.7%
Aig Funding
5.806%, 07/31/98 12,100 11,704
Asset Securitization Coop
5.679%, 02/04/98 10,000 9,947
5.800%, 02/12/98 10,000 9,932
5.810%, 02/27/98 10,000 9,909
Caisse de Depots En
Consignations
5.678%, 03/17/98 20,000 19,770
Cafco
6.653%, 01/02/98 20,000 19,996
5.837%, 02/19/98 10,000 9,921
Ciesco
5.809%, 02/17/98 9,500 9,429
5.801%, 03/03/98 19,000 18,816
Credit Agricole USA
5.753%, 01/16/98 10,000 9,976
Eureka Securitization
5.701%, 02/03/98 10,000 9,949
5.854%, 02/25/98 10,000 9,912
5.835%, 03/23/98 15,000 14,806
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Goldman Sachs
5.709%, 05/07/98 $10,000 $ 9,806
Merrill Lynch
5.679%, 01/30/98 10,000 9,955
5.709%, 03/31/98 5,000 4,931
5.803%, 05/13/98 10,000 9,792
5.812%, 05/29/98 10,000 9,768
Morgan Stanley
5.673%, 01/21/98 5,000 4,984
5.679%, 02/04/98 10,000 9,947
Morgan Stanley (A)
5.915%, 01/13/98 15,500 15,500
Met Life Funding
5.757%, 01/13/98 10,000 9,981
5.758%, 01/27/98 10,000 9,959
5.937%, 02/05/98 4,050 4,027
New Center Asset Trust
5.674%, 01/30/98 7,000 6,968
5.784%, 03/09/98 10,000 9,894
5.699%, 03/30/98 14,000 13,810
Norwest Financial
5.661%, 01/20/98 15,250 15,205
Swedish Export Credit
5.818%, 05/07/98 10,000 9,801
--------
318,395
--------
INDUSTRIAL -- 12.4%
BP America
6.402%, 01/02/98 18,000 17,997
Campbell Soup
5.753%, 05/26/98 12,475 12,194
Ford Motor Credit
5.718%, 03/30/98 11,780 11,620
General Electric Capital
5.646%, 02/03/98 5,000 4,975
5.715%, 02/27/98 10,000 9,911
5.736%, 04/23/98 14,950 14,690
Mitsubishi International
5.826%, 01/12/98 13,300 13,277
Pitney Bowes Credit
6.066%, 01/14/98 2,016 2,012
5.656%, 01/20/98 15,000 14,956
Procter & Gamble
5.777%, 04/14/98 16,000 15,740
Southwestern Bell
5.631%, 01/29/98 11,000 10,953
--------
128,325
--------
UTILITIES -- 1.6%
National Rural Utilities
5.617%, 01/09/98 7,100 7,091
5.651%, 01/21/98 10,000 9,969
--------
17,060
--------
TOTAL COMMERCIAL PAPER
(Cost $525,650) 525,650
--------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
83
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
CASH RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.2%
FFCB (A)
5.520%, 01/02/98 $ 5,250 $ 5,248
FHLB (A)
5.899%, 01/07/98 4,200 4,199
FHLB
5.810%, 01/23/98 11,000 11,000
5.805%, 02/13/98 13,400 13,400
5.850%, 03/17/98 5,000 5,000
FNMA (A)
5.894%, 01/06/98 15,000 14,995
SLMA (A)
5.779%, 01/06/98 10,000 10,000
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $63,842) 63,842
--------
CORPORATE OBLIGATIONS -- 11.5%
BANKING -- 0.2%
Morgan Guaranty (A)
6.230%, 01/02/98 2,000 2,000
--------
FINANCIAL SERVICES -- 8.8%
Abbey National Treasury
Services (A)
5.575%, 01/02/98 20,000 19,983
5.650%, 01/02/98 17,000 16,999
Associates Corporation of
North America (A)
6.120%, 01/02/98 15,000 14,998
Credit Suisse First Boston (A)
5.670%, 01/02/98 10,000 10,000
5.921%, 01/13/98 10,000 10,000
Goldman Sachs
6.100%, 04/15/98 6,825 6,826
Paccar Financial (A)
5.841%, 01/20/98 12,000 11,997
--------
90,803
--------
INDUSTRIAL -- 2.5%
Ford Motor Credit
5.700%, 01/02/98 15,000 14,999
6.350%, 02/12/98 1,800 1,801
Exxon Capital
8.000%, 10/02/98 4,249 4,311
Merck
5.250%, 12/22/98 5,000 4,967
--------
26,078
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $118,881) 118,881
--------
TIME DEPOSITS -- 6.8%
Banque Nationale de Paris
6.625%, 01/02/98 30,000 30,000
State Street Bank
5.500%, 01/02/98 40,000 40,000
--------
TOTAL TIME DEPOSITS
(Cost $70,000) 70,000
--------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MASTER NOTE -- 0.9%
Associates Corporation of
North America (A)
5.506%, 01/02/98 $ 8,950 $ 8,950
--------
TOTAL MASTER NOTE
(Cost $8,950) 8,950
--------
CERTIFICATES OF DEPOSIT -- 12.2%
Barclays Bank PLC
5.910%, 03/09/98 14,750 14,749
5.940%, 06/19/98 5,000 4,999
Credit Suisse
6.310%, 04/16/98 10,000 10,000
Deutche Bank
5.840%, 10/14/98 5,000 4,998
5.940%, 10/22/98 9,250 9,247
National Westminster Bank
5.860%, 03/10/98 10,000 9,999
5.940%, 06/26/98 15,000 14,996
5.830%, 10/14/98 5,000 4,999
Societe Generale
6.350%, 04/15/98 10,000 10,001
6.080%, 06/09/98 10,000 9,998
Swiss Bank
5.976%, 03/19/98 7,000 7,000
6.020%, 06/12/98 10,000 10,001
5.825%, 10/02/98 10,000 9,997
5.852%, 11/20/98 5,000 4,999
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $125,983) 125,983
--------
INSURANCE FUNDING AGREEMENTS -- 6.1%
Allstate (A)
5.696%, 01/01/98 18,000 18,000
Combined Insurance of
America (A)
5.959%, 01/01/98 20,000 20,000
Pacific Mutual Insurance (A)
6.076%, 01/01/98 25,000 25,000
--------
TOTAL INSURANCE FUNDING AGREEMENTS
(Cost $63,000) 63,000
--------
ASSET-BACKED SECURITIES -- 4.3%
Asset Backed Securities
Investment Trust, Series
1997-C, Class N (A)
5.961%, 01/15/98 15,000 15,000
Capita Equipment Receivables
Trust, Series 1996-1, Class A2
5.950%, 07/15/98 1,607 1,607
Case Equipment Loan Trust,
Series 1997-B, Class A1
5.612%, 10/13/98 9,544 9,544
Contimortgage Home Equity
Loan Trust, Series
1997-5, Class A1
5.906%, 12/15/98 8,500 8,500
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
84
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Key Auto Finance Trust,
Series 1997-2, Class A1
5.835%, 01/05/99 $10,000 $ 10,000
----------
TOTAL MORTGAGE RELATED
(Cost $44,651) 44,651
----------
BANKERS ACCEPTANCE -- 1.1%
Toronto Dominion Bank
5.735%, 03/23/98 12,000 11,847
----------
TOTAL BANKERS ACCEPTANCE
(Cost $11,847) 11,847
----------
TOTAL INVESTMENTS -- 99.7%
(Cost $1,032,804) 1,032,804
----------
OTHER ASSETS AND LIABILITIES,
NET-- 0.3% 3,356
----------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 1 billion authorized) based
on 956,501,408 outstanding shares 956,732
Portfolio Shares -- Class C ($0.001 par
value -- 1 billion authorized) based
on 79,278,426 outstanding shares 79,484
Portfolio Shares -- Class B ($0.001 par
value -- 1 billion authorized) based
on 80,044 outstanding shares 80
Accumulated Net Realized Loss
on Investments (136)
----------
TOTAL NET ASSETS-- 100.0% $1,036,160
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS C $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS B $1.00
==========
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON
THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
TAX-FREE RESERVE
[PIE CHART OMITTED]
TAX-EXEMPT COMMERCIAL PAPER 21%
TAX ANTICIPATION NOTES 4%
GENERAL OBLIGATIONS 6%
PRE-REFUNDED SECURITIES 2%
REVENUE BONDS 67%
% OF TOTAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
MUNICIPAL BONDS -- 99.1%
ALABAMA -- 0.9%
North Alabama Environmental
Improvement Authority
Reynold Metals Project
(A) (B) (C)
5.000%, 01/02/98 $1,500 $ 1,500
----------
ARIZONA -- 0.9%
Arizona State TRAN (B)
7.400%, 02/09/98 650 661
Flagstaff, Arizona TECP
3.700%, 04/08/98 750 750
----------
1,411
----------
CALIFORNIA -- 1.4%
Los Angeles County
California TRAN
4.500%, 06/30/98 2,000 2,006
Santa Clara, California Electric
Revenue Bond, Series A
(A) (B) (C)
3.400%, 01/07/98 340 340
----------
2,346
----------
COLORADO -- 0.3%
Colorado State TRAN, Series A
4.500%, 06/26/98 500 502
----------
DELAWARE -- 0.8%
Delaware State TECP
3.700%, 04/08/98 750 750
Wilmington, Delaware Franciscan
Health System (A) (B) (C) (D)
5.000%, 01/02/98 300 300
Wilmington, Delaware Hospital
Franciscan Health Systems
Project, Series A
(A) (B) (C) (D)
5.000%, 01/02/98 300 300
----------
1,350
----------
85
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TAX-FREE RESERVE (CONTINUED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
FLORIDA -- 2.5%
Broward County, Florida Housing
Financial Authority Multi-family
Housing Sanctuary Apartments
Project (A) (C)
4.250%, 02/01/09 $ 500 $ 500
Florida Municipal Power TECP
3.650%, 02/11/98 1,700 1,700
Sunshine State Florida TECP
3.750%, 03/27/98 2,000 2,000
----------
4,200
----------
ILLINOIS -- 10.9%
Chicago, Illinois O'Hare
International Airport Revenue
Industrial Lien, Series C (A) (B)
3.650%, 01/07/98 1,500 1,500
Illinois Development Finance
Authority Illinois Power
Company Project, Series B (A)
3.700%, 01/07/98 1,400 1,400
Illinois Development Finance
Authority Revenue Bond
(A) (B) (C)
3.650%, 01/07/98 1,800 1,800
Illinois State Pollution Control
Authority Amoco Oil
Company Project (A) (B)
4.950%, 01/02/98 900 900
Illinois State Sales Tax Revenue
Revenue Bond (B) (D)
8.000%, 06/15/98 3,000 3,115
Illinois State Toll Highway
Authority, Series B
MBIA (A) (B)
3.650%, 01/07/98 4,400 4,400
Schaumburg, Illinois Multi-family
Housing Revenue Bond
(A) (B) (C)
3.950%, 01/02/98 3,500 3,500
St. Charles, Illinois Revenue
Bond (A) (B) (C)
3.750%, 01/07/98 1,300 1,300
----------
17,915
----------
INDIANA -- 4.3%
Chesapeake, Indiana TECP
3.750%, 01/15/98 1,000 1,000
Mt. Vernon, Indiana TECP
3.750%, 04/07/98 1,900 1,900
Gary, Indiana Industrial
Environmental Improvement
Authority U.S. Steel
Corporation Project (A) (B) (C)
4.050%, 01/15/98 1,600 1,600
Hammond, Indiana Pollution
Control Amoco Oil Company
Project (A) (B)
4.950%, 01/02/98 300 300
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Sullivan, Indiana TECP
3.750%, 01/09/98 $1,050 $ 1,050
3.800%, 03/06/98 1,200 1,200
----------
7,050
----------
IOWA -- 0.2%
Des Moines, Iowa Commercial
Development Revenue Bond
Capitol Center III Project
(A) (B)
3.800%, 01/07/98 400 400
----------
KANSAS -- 4.7%
Burlington, Kansas TECP
3.750%, 01/08/98 1,450 1,450
3.700%, 01/16/98 600 600
3.850%, 03/09/98 2,500 2,500
3.850%, 03/10/98 1,200 1,200
3.700%, 04/08/98 600 600
Kansas City, Kansas Highway
Roads Revenue Bonds (B)
9.000%, 07/01/98 1,300 1,333
----------
7,683
----------
KENTUCKY -- 1.8%
Mayfield, Kentucky Multi-City
Lease Revenue Bond Kentucky
League of Cities Funding
Project (A)
3.900%, 01/07/98 2,000 2,000
Pendleton, Kentucky TECP
3.850%, 03/09/98 1,000 1,000
----------
3,000
----------
LOUISIANA -- 3.9%
De Soto Parish, Louisiana
Central Louisiana Electric
Company Pollution Control
Revenue Bond (A) (B)
3.600%, 01/07/98 700 700
Jefferson Parish, Louisiana
Industrial Development Board
George J. Ackel, Sr.
Project (A) (B)
3.850%, 01/07/98 1,850 1,850
Louisiana State Public
Facilities Authority Kenner
Hotel Project (A) (B) (C)
5.100%, 01/02/98 400 400
Saint Charles Parish, Louisiana
Pollution Control Revenue
Shell Oil Company Project,
Series B (A) (B)
4.900%, 01/02/98 1,550 1,550
South Louisiana Port Common
Marine Terminal Revenue
Bond (A) (B) (C)
3.650%, 01/07/98 2,000 2,000
----------
6,500
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
86
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- ---------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- ---------------------------------------------------------
MICHIGAN -- 1.8%
Delta County, Michigan
Environmental Improvement
Authority Revenue Bond,
Mead Escambia Paper,
Series C (A) (B)
5.100%, 01/02/98 $ 700 $ 700
Michigan State Consumers
Power Project (A) (B)
4.950%, 01/02/98 300 300
Michigan State Storage TECP
3.750%, 02/05/98 2,000 2,000
----------
3,000
----------
MINNESOTA -- 1.9%
Minnesota State GO (D)
6.600%, 08/01/98 3,150 3,199
----------
MISSISSIPPI -- 1.8%
Claiborne County,
Mississippi TECP
3.750%, 02/13/98 1,300 1,300
Jackson County, Mississippi
Chevron USA Incorporated
Project (A) (B)
4.950%, 01/02/98 1,600 1,600
----------
2,900
----------
MISSOURI -- 5.0%
Independence, Missouri TECP
3.850%, 01/16/98 1,050 1,050
Missouri State Development
Finance Board Revenue Bond
(A) (B) (C)
4.500%, 01/02/98 2,700 2,700
Missouri State Environmental
Improvement & Energy
Pollution Control Revenue
Bond (A) (B)
3.950%, 01/02/98 1,800 1,800
Missouri State Health and
Educational Facilities
Authority Washington
University, Series A (A) (B)
5.000%, 01/02/98 300 300
Missouri State Health and
Educational Facilities
Authority Washington
University Series A (A) (B) (C)
5.000%, 01/02/98 400 400
Missouri State Health and
Educational Facilities
Authority GO
4.500%, 09/14/98 2,000 2,008
----------
8,258
----------
MONTANA -- 0.7%
Forsyth, Montana Pollution
Control Portland General
Electric Project (A) (B)
3.700%, 01/07/98 200 200
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Forsyth, Montana Pollution
Control Portland General
Electric Project, Series B
(A) (B)
3.750%, 01/07/98 $ 100 $ 100
Forsyth, Montana Pollution
Control Pacificorp Project,
Series 1988 (A) (B) (C)
4.500%, 01/02/98 900 900
----------
1,200
----------
NEVADA -- 1.8%
Clark County, Nevada Industrial
Development Revenue
Series C (A) (B)
3.850%, 01/07/98 2,000 2,000
Las Vegas, Nevada GO,
Series A FGIC
4.750%, 11/01/98 1,000 1,007
----------
3,007
----------
NEW MEXICO -- 0.6%
Albuquerque, New Mexico
Gross Receipts Revenue
Bond (A) (B) (C)
3.700%, 01/07/98 1,000 1,000
----------
NEW YORK -- 2.1%
New York City, New York
GO (A) (B) (C)
4.000%, 01/02/98 1,500 1,500
4.150%, 01/02/98 1,900 1,900
----------
3,400
----------
NORTH CAROLINA -- 2.2%
Lexington, North Carolina
Lexington Memorial
Hospital Project (A) (B)
5.000%, 01/02/98 1,500 1,500
North Carolina Eastern
Municipal Power (B) (D)
8.000%, 01/02/98 1,305 1,331
Wake County, North Carolina
Carolina Power &
Light Company (A) (B)
3.700%, 01/07/98 800 800
----------
3,631
----------
OHIO -- 0.3%
Ohio State Air Quality Revenue
Bond, Series B (A) (B) (C)
4.500%, 01/02/98 300 300
Ohio State Water Development
Authority Environmental
Mead Company, Series B
(A) (B) (C)
5.000%, 01/02/98 200 200
----------
500
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
87
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TAX-FREE RESERVE (CONTINUED)
- ---------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- ---------------------------------------------------------
OREGON -- 0.7%
Port of Portland, Oregon
Pollution Control Revenue
Bond for Reynold Metals
Project (A) (B) (C)
5.000%, 01/02/98 $ 100 $ 100
Port of St. Helens Portland,
Oregon Pollution Control
Revenue Bond (A) (B)
4.950%, 01/02/98 600 600
Umatilla County, Oregon
Franciscan Health System
Revenue Bond, Series A
(A) (B) (C) (D)
5.000%, 01/02/98 300 300
Umatilla County, Oregon
Franciscan Health System
Revenue Bond, Series B
(A) (B) (C) (D)
5.000%, 01/02/98 200 200
----------
1,200
----------
PENNSYLVANIA -- 14.8%
Allegheny County, Pennsylvania
Hospital Development
Presbyterian University
Hospital Project, Series B2
(A) (B) (C)
4.250%, 01/02/98 2,600 2,600
Allegheny County, Pennsylvania
Hospital Development
Presbyterian University
Hospital Project, Series B1
(A) (B) (C)
4.250%, 01/02/98 2,000 2,000
Allegheny County, Pennsylvania
Hospital Development
Presbyterian University
Hospital Project,
Series B3 (A) (B)
4.250%, 01/02/98 1,305 1,305
Beaver County,
Pennsylvania TECP
3.750%, 03/05/98 1,100 1,100
Beaver County, Pennsylvania
Industrial Development
Authority Duquesne Light
Company Project, Series B
(A) (B) (C)
3.650%, 01/07/98 100 100
Lehigh County, Pennsylvania
Industrial Development
Authority Pollution Control
(A) (B)
3.800%, 01/02/98 200 200
Montgomery County,
Pennsylvania TECP
3.850%, 01/22/98 2,600 2,600
3.750%, 02/05/98 1,000 1,000
Montgomery County,
Pennsylvania TECP
3.750%, 02/09/98 2,500 2,500
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Pennsylvania State Higher
Education Authority Carnegie
Mellon University Revenue
Bond, Series D (A) (B)
4.850%, 01/02/98 $ 700 $ 700
Pennsylvania State Higher
Educational Facilities
Authority Hospital Thomas
Jefferson University Project (D)
8.000%, 01/02/98 1,910 1,948
Temple University,
Pennsylvania GO
4.750%, 05/18/98 1,000 1,003
Washington County,
Pennsylvania Lease Revenue
Bond (A) (B) (C)
3.850%, 01/07/98 3,140 3,140
York County, Pennsylvania
Solid Waste and Refuse
Revenue Bonds FGIC
4.750%, 12/01/98 1,500 1,512
York, Pennsylvania General
Authority Revenue
Bond (A) (B)
4.200%, 01/02/98 2,750 2,750
----------
24,458
----------
SOUTH CAROLINA -- 1.1%
Berkley County, South Carolina
Pollution Control Amoco
Chemical Project (A) (B) (C)
4.950%, 01/02/98 900 900
North Charleston, South
Carolina GO (B) (D)
7.500%, 08/01/98 500 520
York County, South Carolina
Pollution Control Revenue
Bond Electric Project,
Series NRU-84N-2 (A) (B)
3.850%, 01/07/98 400 400
----------
1,820
----------
TEXAS -- 14.6%
Camp County, Texas Industrial
Development Corporation
Pollution Control Revenue
Bond Texas Oil and Gas
Project (A) (B)
3.900%, 01/07/98 500 500
Denton County, Texas TAN
5.500%, 09/01/98 930 940
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series A4 (A) (B) (C)
5.000%, 01/02/98 100 100
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series B4 (A) (B) (C)
5.000%, 01/02/98 900 900
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
88
<PAGE>
[SQUARE BULLET] COREFUND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series A3 (A) (B) (C)
5.000%, 01/02/98 $ 400 $ 400
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series B1 (A) (B) (C)
5.000%, 01/02/98 1,500 1,500
Grapevine, Texas Industrial
Development Authority
American Airlines Project,
Series B3 (A) (B) (C)
5.000%, 01/02/98 400 400
Grapevine, Texas Industrial
Development Corporation
American Airlines,
Series A1 (A) (B)
5.000%, 01/02/98 400 400
Grapevine, Texas Industrial
Development Corporation
American Airlines Project,
Series B2 (A) (B)
5.000%, 01/02/98 400 400
Hunt County, Texas Industrial
Development Authority Trico
Industries Incorporated
Project (A) (B)
3.800%, 01/06/98 2,100 2,100
North Central Texas Health
Facilities Development Baylor
Medical Center Project, Series A,
Pre-Refunded @ 102 (D)
7.900%, 05/15/98 500 517
Nueces County, Texas Health
Facilities Authority Driscoll
Childrens Foundation (A) (B)
3.850%, 01/07/98 4,425 4,425
Port Corpus Christi Texas
Industrial Development
Corporation Refunding
Revenue Bonds Series A (A) (B)
3.850%, 01/07/98 2,000 2,000
San Antonio, Texas Electric and
Gas Revenue Bond
Pre-Refunded @ 102 (D)
7.800%, 02/01/98 3,900 3,991
Texas State Higher Education
Authority University and
College Improvement,
Series B FGIC (A) (B)
3.800%, 01/07/98 1,945 1,945
Texas State Southwest Higher
Education Authority Southern
Methodist University
(A) (B) (C)
5.000%, 01/02/98 1,000 1,000
Texas State TRAN, Series A
4.750%, 08/31/98 2,500 2,514
----------
24,032
----------
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
UTAH -- 1.3%
Intermountain Power
Agency TECP
3.750%, 02/17/98 $2,100 $ 2,100
----------
VERMONT -- 0.8%
Vermont State Student Loan
Assistance Corporation Student
Loan Revenue Bond (A) (B)
3.800%, 01/02/98 1,335 1,335
----------
VIRGINIA -- 10.2%
Alexandria, Virginia
Redevelopment & Housing
Authority Revenue Bonds,
Multi-Family First Mortgage,
Goodwin Project, Series B
(A) (B) (C)
5.000%, 01/02/98 3,900 3,900
Pennisula Ports, Virginia TECP
3.750%, 01/12/98 1,500 1,500
Petersburg, Virginia Hospital
Authority Revenue Bonds for
Southside Project (A) (B) (C)
5.000%, 01/02/98 1,800 1,800
Portsmouth, Virginia Housing
Development Authority
Revenue Bond (B) (C)
4.000%, 11/01/27 2,255 2,255
Richmond, Virginia Housing
Authority Old Manchester
Project, Series A (A) (B)
4.000%, 01/07/98 3,250 3,250
Virginia State Housing
Revenue Bonds
3.800%, 06/10/98 3,500 3,500
Waynesboro, Virginia
Residential Care Facilities
Revenue Bond (A) (B) (C)
5.000%, 01/02/98 685 685
----------
16,890
----------
WASHINGTON -- 1.5%
Port Kalama, Washington
Conagra Project (A) (B) (C)
3.700%, 01/02/98 1,900 1,900
Washington State Motor Vehicle
Fuel Tax, Series B
6.000%, 01/01/99 500 510
----------
2,410
----------
WEST VIRGINIA -- 0.1%
Putnam County, West Virginia
Industrial Development
Authority FMC Corporation
Project (A) (B)
3.800%, 01/02/98 200 200
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
89
<PAGE>
STATEMENT
OF
NET ASSETS
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
TAX-FREE RESERVE (CONCLUDED)
- --------------------------------------------------------
DESCRIPTION PAR (000) VALUE (000)
- --------------------------------------------------------
WISCONSIN -- 0.2%
Lac Du Flambeau, Wisconsin
Lake Superior Chippewa
Indians Special Obligation
Simpson Electric Project
(A) (B)
3.700%, 01/07/98 $ 400 $ 400
----------
WYOMING -- 3.0%
Gillette County, Wyoming TECP
3.800%, 01/15/98 1,400 1,400
Lincoln County, Wyoming
Pollution Control Revenue
Bond, Series 1984 B (A) (B)
5.100%, 01/02/98 1,200 1,200
Lincoln County, Wyoming
Pollution Control Exxon
Project (A) (B)
4.950%, 01/02/98 600 600
Lincoln County, Wyoming
Resource Recovery Exxon
Project, Series C (A) (B) (C)
5.100%, 01/02/98 500 500
Platte County, Wyoming
Pollution Control (A) (B)
4.500%, 01/02/98 1,100 1,100
Platte County, Wyoming
Pollution Control Revenue
Bond, Series A (A) (B) (C)
4.500%, 01/02/98 100 100
----------
4,900
----------
TOTAL MUNICIPAL BONDS
(Cost $163,697) 163,697
----------
TOTAL INVESTMENTS -- 99.1%
(Cost $163,697) 163,697
----------
OTHER ASSETS AND LIABILITIES,
NET-- 0.9% 1,521
----------
- --------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------
NET ASSETS:
Portfolio Shares -- Class Y ($0.001 par
value -- 250 million authorized) based
on 152,872,746 outstanding shares $ 152,872
Portfolio Shares -- Class C ($0.001 par
value -- 250 million authorized) based
on 12,374,650 outstanding shares 12,398
Accumulated Net Realized Loss
on Investments (54)
Undistributed Net Investment Income 2
----------
TOTAL NET ASSETS-- 100.0% $165,218
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS Y $1.00
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE-- CLASS C $1.00
==========
(A) VARIABLE RATE SECURITIES--THE RATE REFLECTED ON THE STATEMENT OF THE NET
ASSETS IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSOR OF THE
PUT DEMAND OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK OR FINANCIAL INSTITUTION.
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
GO -- GENERAL OBLIGATION
TECP -- TAX EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
90
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------ -------------- --------------
EQUITY CORE EQUITY GROWTH
INDEX FUND FUND(3) EQUITY FUND
------------ -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 2,223 $ 3,344 $ 561
Interest 22 138 123
Less: Foreign taxes withheld -- -- --
-------- -------- ---------
Total investment income 2,245 3,482 684
-------- -------- ---------
EXPENSES:
Investment advisory fees 533 2,147 632
Less: waiver of investment advisory fees (318) -- --
Administrative fees 333 725 211
Less: waiver of administrative fees (119) (164) (76)
Transfer agent fees & expenses 36 51 13
Custodian fees -- -- --
Professional fees 5 23 3
Registration & filing fees 8 14 4
12b-1 fees--individual shares -- 23 7
Taxes--other than income 3 13 2
Printing fees 25 57 17
Organizational costs -- -- --
Miscellaneous -- 14 6
-------- -------- ---------
Total expenses 506 2,903 819
-------- -------- ---------
NET INVESTMENT INCOME (LOSS) 1,739 579 (135)
-------- -------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 5,184 40,986 11,173
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation) on investments 17,916 20,773 10,360
-------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $24,839 $62,338 $21,398
======== ======== =========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 39.65 $ 20.60 $ 16.33
======== ======== =========
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 39.66 20.61 16.27
-------- -------- ---------
2Offering price $ 41.97 $ 21.81 $ 17.22
======== ======== =========
CLASS B
4Net asset value and offering price $ 39.12 $ 18.31 $ 16.19
======== ======== =========
-------------- -------------- --------------
SPECIAL INTERNATIONAL BALANCED
EQUITY FUND GROWTH FUND FUND
-------------- -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 212 $ 1,039 $ 379
Interest 43 152 1,481
Less: Foreign taxes withheld -- (111) --
-------- ------- ------
Total investment income 255 1,080 1,860
-------- ------- ------
EXPENSES:
Investment advisory fees 607 666 444
Less: waiver of investment advisory fees (263) -- (76)
Administrative fees 101 208 158
Less: waiver of administrative fees (36) (75) (57)
Transfer agent fees & expenses 21 (10) 11
Custodian fees 5 6 --
Professional fees (5) 2 3
Registration & filing fees 9 (7) --
12b-1 fees--individual shares 4 3 7
Taxes--other than income 1 -- 1
Printing fees 11 2 16
Organizational costs -- -- 18
Miscellaneous 1 -- --
-------- ------- ------
Total expenses 456 795 525
-------- ------- ------
NET INVESTMENT INCOME (LOSS) (201) 285 1,335
-------- ------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 7,997 2,385 3,960
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- (411) --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- (12) --
Net change in unrealized appreciation (depreciation) on investments (1,796) (10,180) 3,388
-------- ------- ------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,000 (7,933) $8,683
======== ======= ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.65 $ 13.28 $13.60
======== ======= ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 10.60 13.28 13.60
-------- ------- ------
2Offering price $ 11.22 $ 14.05 $14.39
======== ======= ======
CLASS B
4Net asset value and offering price $ 10.48 $ 13.28 $13.51
======== ======= ======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0
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 5.50%.
3 THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
4 CLASS B HAS A CONTINGENT DEFERRED SALES CHARGE. FOR A DESCRIPTION OF POSSIBLE
REDEMPTION CHARGE, SEE THE NOTES TO THE FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
92 & 93
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------------- -------------- -------------
SHORT TERM SHORT-
INCOME INTERMEDIATE GOVERNMENT
FUND BOND FUND INCOME FUND
-------------- -------------- -------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $1,120 $5,458 $ 758
------ ------ ------
Total Investment income 1,120 5,458 758
------ ------ ------
EXPENSES
Investment advisory fees 139 426 55
Less: waiver of investment advisory fees (92) (170) (2)
Administrative fees 47 213 28
Less:waiver of administrative fees (17) (77) (10)
Transfer agent fees & expenses 6 18 2
Custodian fees 6 -- --
Professional fees -- 4 1
Registration & filing fees (3) 6 1
12b-1 fees--individual shares 1 3 2
Trustee fees 1 2 --
Printing fees 2 11 1
Organizational costs 1 -- 3
Miscellaneous 1 6 1
------ ------ ------
Total expenses 92 442 82
------ ------ ------
NET INVESTMENT INCOME 1,028 5,016 676
------ ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 8 461 88
Option transactions -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation)
on investments 68 1,670 515
------ ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,104 $7,147 $1,279
====== ====== ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.99 $ 9.95 $10.03
====== ====== ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 9.98 9.95 10.03
------ ------ ------
2Offering price $10.32 $10.28 $10.37
====== ====== ======
------------ -------------- ------------
GLOBAL INTERMEDIATE
BOND BOND MUNICIPAL
FUND FUND BOND FUND
------------ -------------- ------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $ 6,153 $1,055 $ 46
------- ------- -------
Total Investment income 6,153 1,055 46
------- ------- -------
EXPENSES
Investment advisory fees 675 108 5
Less: waiver of investment advisory fees (356) (18) (5)
Administrative fees 228 45 2
Less:waiver of administrative fees (82) (16) (1)
Transfer agent fees & expenses 7 (1) --
Custodian fees 11 1 --
Professional fees 8 1 --
Registration & filing fees 18 1 2
12b-1 fees-- individual shares 2 -- 1
Trustee fees -- -- --
Printing fees 10 -- --
Organizational costs -- 2 3
Miscellaneous 5 -- --
------- ------- -------
Total expenses 526 123 7
------- ------- -------
NET INVESTMENT INCOME 5,627 932 39
------- ------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 1,499 (41) 3
Option transactions -- (400) --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- 450 --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- (98) --
Net change in unrealized appreciation (depreciation)
on investments 3,530 (90) 35
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,656 $ 753 $ 77
======= ======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.53 $ 9.33 $10.25
======= ======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.53 9.32 10.25
------- ------- -------
2Offering price $ 11.06 $ 9.78 $10.59
======= ======= =======
-------------- --------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
-------------- --------------
INVESTMENT INCOME
<S> <C> <C>
Interest $ 375 $ 53
------- -------
Total Investment income 375 53
------- -------
EXPENSES
Investment advisory fees 37 5
Less: waiver of investment advisory fees (37) (5)
Administrative fees 19 2
Less:waiver of administrative fees (19) (2)
Transfer agent fees & expenses 1 --
Custodian fees -- --
Professional fees -- --
Registration & filing fees 1 --
12b-1 fees--individual shares 4 1
Trustee fees -- --
Printing fees 1 --
Organizational costs 2 1
Miscellaneous -- --
------- -------
Total expenses 9 2
------- -------
NET INVESTMENT INCOME 366 51
------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 40 (1)
Option transactions -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- --
Net change in unrealized appreciation (depreciation)
on investments 378 57
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 784 $ 107
======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $10.77 $10.46
======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.78 10.45
------- -------
2Offering price $11.32 $10.97
======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
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 3.25% FOR THE SHORT TERM INCOME, SHORT-
INTERMEDIATE BOND, GOVERNMENT INCOME AND INTERMEDIATE MUNICIPAL BOND FUNDS AND
4.75% FOR THE BOND, GLOBAL BOND, PENNSYLVANIA MUNICIPAL BOND AND NEW JERSEY
MUNICIPAL BOND FUNDS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
94 & 95
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------- ------- --------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------- ------- --------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 24,754 $ 27,544 $ 2,735
-------- -------- -------
Total investment income 24,754 27,544 2,735
-------- -------- -------
EXPENSES:
Investment advisory fees 1,113 1,926 185
Less: waiver of investment advisory fees (401) (481) (67)
Administrative fees 1,781 1,204 296
Less: waiver of administrative fees (446) (433) (74)
Transfer agent fees & expenses 71 117 14
Custodian fees 1 1 --
Professional fees 25 10 3
Registration & filing fees 4 60 20
12b-1 fees 23 64 12
Trustee fees 10 11 5
Printing 65 77 5
Miscellaneous 63 32 (1)
-------- -------- -------
Total expenses 2,309 2,588 398
-------- -------- -------
NET INVESTMENT INCOME 22,445 24,956 2,337
-------- -------- -------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain from security
transactions 14 5 --
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 22,459 $ 24,961 $ 2,337
======== ======== =======
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
96
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- -------------------
EQUITY CORE EQUITY
INDEX FUND FUND(2)
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 1,739 $ 3,256 $ 579 $ 2,927
Net realized gain on investments, forward foreign currency contracts and foreign
currency 5,184 3,591 40,986 66,598
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 17,916 55,389 20,773 67,597
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations 24,839 62,236 62,338 137,122
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,685) (3,225) (595) (2,858)
Class A (48) (28) -- (49)
Class B (2) -- -- --
Net realized gains:
Class Y (8,013) (1,484) (69,731) (35,253)
Class A (265) (6) (2,421) (977)
Class B (16) -- (17) --
-------- -------- -------- --------
Total dividends distributed (10,029) (4,743) (72,764) (39,137)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 24,068 -- 48,159 56,759
Reinvestment of cash distributions 8,774 -- 63,917 38,110
Cost of shares redeemed (25,937) -- (59,580) (89,855)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 6,905 -- 52,496 5,014
-------- -------- -------- --------
Class A:
Proceeds from shares issued 4,631 43,492 2,811 3,395
Reinvestment of cash distributions 330 4,960 2,403 1,038
Cost of shares redeemed (655) (30,407) (1,722) (2,376)
-------- -------- -------- --------
Increase in net assets from Class A transactions 4,306 18,045 3,492 2,057
-------- -------- -------- --------
Class B:
Proceeds from shares issued 732 4,101 132 --
Reinvestment of cash distributions 18 34 17 --
Cost of shares redeemed (5) (103) -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 745 4,032 149 --
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,956 22,077 56,137 7,071
-------- -------- -------- --------
Net increase (decrease) in net assets 26,766 79,570 45,711 105,056
-------- -------- -------- --------
NET ASSETS:
Beginning of period 245,920 166,350 531,058 426,002
-------- -------- -------- --------
End of period $272,686 $245,920 $576,769 $531,058
======== ======== ======== ========
------------------- ------------------
GROWTH SPECIAL
EQUITY FUND EQUITY FUND
------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ (135) $ 399 $ (201) $ 121
Net realized gain on investments, forward foreign currency contracts and foreign
currency 11,173 14,635 7,997 7,793
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 10,360 12,411 (1,796) 3,603
-------- -------- ------- -------
Net increase (decrease) in net assets resulting from operations 21,398 27,445 6,000 11,517
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y -- (393) -- (177)
Class A -- (3) -- (2)
Class B -- -- -- --
Net realized gains:
Class Y (11,719) (13,864) (350) (13,011)
Class A (400) (404) (9,099) (307)
Class B (7) -- (15) --
-------- -------- ------- -------
Total dividends distributed (12,126) (14,664) (9,464) (13,497)
-------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 18,945 -- 7,178 --
Reinvestment of cash distributions 10,162 -- 8,424 --
Cost of shares redeemed (23,121) -- (10,285) --
-------- -------- ------- -------
(Decrease) in net assets from Class Y transactions 5,986 -- 5,317 --
-------- -------- ------- -------
Class A:
Proceeds from shares issued 728 38,807 516 13,884
Reinvestment of cash distributions 400 12,752 349 13,074
Cost of shares redeemed (390) (36,303) (179) (16,684)
-------- -------- ------- -------
Increase in net assets from Class A transactions 738 15,256 686 10,274
-------- -------- ------- -------
Class B:
Proceeds from shares issued 102 1,712 124 1,020
Reinvestment of cash distributions 7 410 15 310
Cost of shares redeemed -- (1,001) -- (121)
-------- -------- ------- -------
Increase (decrease) in net assets from Class B transactions 109 1,121 139 1,209
-------- -------- ------- -------
Increase in net assets derived from capital share transactions 6,833 16,377 6,142 11,483
-------- -------- ------- -------
Net increase (decrease) in net assets 16,105 29,158 2,678 9,503
-------- -------- ------- -------
NET ASSETS:
Beginning of period 152,393 123,235 74,327 64,824
-------- -------- ------- -------
End of period $168,498 $152,393 $77,005 $74,327
======== ======== ======= =======
------------------- -------------------
INTERNATIONAL BALANCED
GROWTH FUND FUND
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 285 $ 969 $ 1,335 $ 3,139
Net realized gain on investments, forward foreign currency contracts and foreign
currency 1,974 5,290 3,960 7,717
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies (10,192) 15,689 3,388 6,601
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations (7,933) 21,948 8,683 17,457
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,958) (3,802) (1,280) (3,056)
Class A (22) (53) (48) (92)
Class B -- -- (2) --
Net realized gains:
Class Y (6,263) (8,375) (6,356) (5,885)
Class A (93) (130) (282) (184)
Class B (1) -- (28) --
-------- -------- -------- --------
Total dividends distributed (8,337) (12,360) (7,996) (9,217)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 43,065 34,899 11,645 --
Reinvestment of cash distributions 7,249 11,015 6,080 --
Cost of shares redeemed (38,992) (31,528) (10,793) --
-------- -------- -------- --------
(Decrease) in net assets from Class Y transactions 11,322 14,386 6,932 --
-------- -------- -------- --------
Class A:
Proceeds from shares issued 358 489 1,546 23,565
Reinvestment of cash distributions 11 178 323 8,737
Cost of shares redeemed (238) (506) (519) (29,150)
-------- -------- -------- --------
Increase in net assets from Class A transactions 131 161 1,350 3,152
-------- -------- -------- --------
Class B:
Proceeds from shares issued 14 -- 568 1,285
Reinvestment of cash distributions 1 -- 30 293
Cost of shares redeemed -- -- -- (833)
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 15 -- 598 745
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,468 14,547 8,880 3,897
-------- -------- -------- --------
Net increase (decrease) in net assets (4,802) 24,135 9,567 12,137
-------- -------- -------- --------
NET ASSETS:
Beginning of period 165,548 141,413 117,840 105,703
-------- -------- -------- --------
End of period $160,746 $165,548 $127,407 $117,840
======== ======== ======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL STATEMENTS.
(2) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
98 & 99
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
---------------- ----------------- ----------------
SHORT-
SHORT TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
---------------- ----------------- ----------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,028 $ 1,757 $ 5,016 $ 10,074 $ 676 $ 1,293
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 8 (8) 461 (26) 88 (156)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 68 91 1,670 993 505 434
------- ------- -------- -------- ------- -------
Net increase in net assets resulting from operations 1,104 1,840 7,147 11,041 1,269 1,571
------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,015) (1,748) (4,933) (9,902) (624) (1,204)
Class A (13) (9) (77) (172) (51) (90)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total dividends distributed (1,028) (1,757) (5,010) (10,074) (675) (1,294)
------- ------- -------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 6,147 16,475 20,016 45,113 3,060 8,152
Reinvestment of cash distributions 880 1,808 4,505 9,516 352 612
Cost of shares redeemed (6,908)(11,486) (19,785) (52,263) (1,936) (3,957)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class Y
transactions 119 6,797 4,736 2,366 1,476 4,807
------- ------- -------- -------- ------- -------
Class A:
Proceeds from shares issued 63 483 289 391 308 579
Reinvestment of cash distributions 13 9 59 143 43 85
Cost of shares redeemed -- (1) (305) (865) (229) (311)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class A
transactions 76 491 43 (331) 122 353
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 195 7,288 4,779 2,035 1,598 5,160
------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets 271 7,371 6,916 3,002 2,192 5,437
------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 37,504 30,133 165,905 162,903 20,667 15,230
------- ------- -------- -------- ------- -------
End of period $37,775 $37,504 $172,821 $165,905 $22,859 $20,667
======= ======= ======== ======== ======= =======
----------------- ----------------- ------------------
INTERMEDIATE
BOND GLOBAL MUNICIPAL
FUND BOND FUND BOND FUND
----------------- ----------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 5,627 $ 12,245 $ 931 $ 1,774 $ 39 $ 71
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 1,499 (735) 9 423 3 (6)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 3,530 2,749 (188) (149) 35 25
-------- -------- ------- ------- ------- -------
Net increase in net assets resulting from operations 10,656 14,259 753 2,048 77 90
-------- -------- ------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (5,574) (12,161) (1,509) (2,621) (20) (34)
Class A (53) (84) (10) (13) (19) (37)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Total dividends distributed (5,627) (12,245) (1,519) (2,634) (39) (71)
-------- -------- ------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 11,940 18,942 911 107 34 841
Reinvestment of cash distributions 5,007 12,215 1,285 2,670 7 12
Cost of shares redeemed (30,726) (49,397) (400) (602) (147) (269)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions (13,779) (18,240) 1,796 2,175 (106) 584
-------- -------- ------- ------- ------- -------
Class A:
Proceeds from shares issued 427 579 69 31 66 80
Reinvestment of cash distributions 46 78 10 15 17 37
Cost of shares redeemed (117) (323) (10) (13) (95) (186)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 356 334 69 33 (12) (69)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions (13,423) (17,906) 1,865 2,208 (118) 515
-------- -------- ------- ------- ------- -------
Net increase (decrease) in net assets (8,394) (15,892) 1,099 1,622 (80) 534
-------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of period 183,986 199,878 34,772 33,150 1,952 1,418
-------- -------- ------- ------- ------- -------
End of period $175,592 $183,986 $35,871 $34,772 $ 1,872 $ 1,952
======== ======== ======= ======= ======= =======
------------------ -----------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------------ -----------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 366 $ 583 $ 51 $ 81
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 40 20 (1) (3)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 378 240 57 24
------- ------- ------- -------
Net increase in net assets resulting from operations 784 843 107 102
------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (290) (521) (40) (65)
Class A (76) (62) (11) (16)
Net realized gains:
Class Y -- -- -- (8)
Class A -- -- -- (2)
------- ------- ------- -------
Total dividends distributed (366) (583) (51) (91)
------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 2,871 3,530 172 525
Reinvestment of cash distributions 126 297 14 14
Cost of shares redeemed (586) (2,772) (102) (388)
------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions 2,411 1,055 84 151
------- ------- ------- -------
Class A:
Proceeds from shares issued 2,567 1,341 168 99
Reinvestment of cash distributions 64 56 9 15
Cost of shares redeemed (133) (420) (72) (22)
------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 2,498 977 105 92
------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 4,909 2,032 189 243
------- ------- ------- -------
Net increase (decrease) in net assets 5,327 2,292 245 254
------- ------- ------- -------
NET ASSETS:
Beginning of period 12,175 9,883 1,875 1,621
------- ------- ------- -------
End of period $17,502 $12,175 $ 2,120 $ 1,875
======= ======= ======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
100 & 101
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- ------------------- ------------------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
------------------- ------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 22,445 $ 43,860 $ 24,956 $ 44,127 $ 2,337 $ 3,787
Net realized gain (loss) on securities transactions 14 8 5 1 -- (1)
---------- ---------- ---------- ---------- -------- ---------
Net increase in net assets resulting from operations 22,459 43,868 24,961 44,128 2,337 3,786
---------- ---------- ---------- ---------- -------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (22,007) (43,173) (23,686) (43,042) (2,224) (3,677)
Class C (438) (687) (1,270) (1,085) (135) (86)
---------- ---------- ---------- ---------- -------- ---------
Total dividends distributed (22,445) (43,860) (24,956) (44,127) (2,359) (3,763)
---------- ---------- ---------- ---------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued 1,198,732 2,548,964 1,003,078 2,154,887 170,940 392,069
Reinvestment of cash distributions 1,462 4,246 1,865 3,136 96 229
Cost of shares redeemed (1,228,616) (2,610,396) (961,599) (2,061,985) (137,772) (376,938)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class Y
transactions (28,422) (57,186) 70,344 96,038 33,264 15,360
---------- ---------- ---------- ---------- -------- ---------
Class C
Proceeds from shares issued 34,333 12,429 107,066 44,890 24,342 3,779
Reinvestment of cash distributions 272 264 1,229 1,023 132 79
Cost of shares redeemed (22,458) (19,933) (56,508) (37,956) (15,279) (3,506)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class C
transactions 12,147 (7,240) 51,787 7,957 9,195 352
---------- ---------- ---------- ---------- -------- ---------
Class B
Proceeds from shares issued -- -- 88 -- -- --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed -- -- (8) -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase in net assets from Class B
transactions -- -- 80 -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets derived from
capital share transactions 16,275 (64,426) 122,211 103,995 42,459 15,712
---------- ---------- ---------- ---------- -------- ---------
Net (decrease) increase in net assets 16,261 (64,418) 122,216 103,996 42,437 15,735
---------- ---------- ---------- ---------- -------- ---------
NET ASSETS:
Beginning of period 847,530 911,948 913,944 809,948 122,781 107,046
---------- ---------- ---------- ---------- -------- ---------
End of period $ 831,269 $ 847,530 $1,036,160 $ 913,944 $165,218 $ 122,781
========== ========== ========== ========== ======== =========
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
102
<PAGE>
[This page intentionally left blank.]
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $37.39 $ 0.26 $ 3.50 $(0.26) $(1.24) $39.65 10.12%+ $262,831 0.37%
1997 28.47 0.51 9.16 (0.51) (0.24) 37.39 34.44 241,413 0.37
1996 23.79 0.51 5.47 (0.51) (0.79) 28.47 25.69 166,350 0.35
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,533 0.37
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552 0.35
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551 0.49
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166 0.57
19911 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117 0.97
CLASS A
1997(A) $37.37 $ 0.26 $ 3.51 $(0.24) $(1.24) $39.66 2.74%+ $ 9,113 0.37%
1997(10) 29.62 0.32 8.05 (0.38) (0.24) 37.37 28.58+ 4,507 0.37
CLASS B
1997(A)(12) $39.16 $ 0.16 $ 1.27 $(0.23) $(1.24) $39.12 3.37%+ $ 742 1.37%
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) $21.11 $ -- $ 2.41 $ -- $(2.92) $20.60 11.87%+ $557,593 0.99%
1997 17.26 0.12 5.32 (0.12) (1.47) 21.11 33.10 515,015 0.98
1996 17.07 0.14 1.49 (0.14) (1.30) 17.26 19.24 414,824 0.97
INSTITUTIONAL CLASS*
1995 $15.00 $ 0.19 $ 2.87 $(0.19) $(0.80) $17.07 22.00% $378,352 1.05%
CLASS A*
1997(A) $21.13 $ -- $ 2.40 $ -- $(2.92) $20.61 11.70%+ $ 19,043 1.24%
1997 17.28 0.07 5.32 (0.07) (1.47) 21.13 32.74 16,043 1.23
1996 17.08 0.12 1.49 (0.11) (1.30) 17.28 19.11 11,178 1.22
RETAIL CLASS*
1995 $15.00 $ 0.18 $ 2.87 $(0.17) $(0.80) $17.08 21.94% $ 6,591 1.34%
PRIOR CLASS
1994 $15.39 $ 0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $ 50,128 1.49%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90 45,677 1.20
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27 28,103 0.92
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12,830 0.54
1990(2) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.65
CLASS B
1997(A)(12) $23.05 $(4.44) $ 2.62 $ -- $(2.92) $18.31 (7.39)%+$ 133 1.99%
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y**
1997(A) $15.43 $ 0.01 $ 2.16 $ -- $(1.24) $16.33 14.11%+ $162,698 0.96%
1997 14.19 0.04 2.81 (0.04) (1.57) 15.43 21.67 147,700 0.96
1996 11.18 0.08 3.36 (0.08) (0.35) 14.19 31.36 120,073 0.89
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345 0.76
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877 0.69
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777 0.43
19923 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418 0.14
CLASS A**
1997(A) $15.39 $(0.03) $ 2.15 $ -- $(1.24) $16.27 14.02%+ $ 5,699 1.21%
1997 14.17 0.01 2.79 (0.01) (1.57) 15.39 21.29 4,693 1.21
1996 11.17 0.05 3.35 (0.05) (0.35) 14.17 31.00 3,162 1.14
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043 1.01
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730 0.94
19934 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224 0.80
CLASS B
1997(A)(13) $17.32 $(0.02) $ 0.13 $ -- $(1.24) $16.19 0.85%+ $ 101 1.96%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) 1.30% 0.71% 0.96% 9% $0.0621
1997 1.63 0.71 1.29 11 0.0639
1996 1.94 0.71 1.59 13 0.0641
1995 2.48 0.76 2.09 27 N/A
1994 2.63 0.75 2.23 13 N/A
1993 2.82 0.88 2.43 4 N/A
1992 2.66 1.06 2.17 27 N/A
19911 1.79 1.20 1.56 -- N/A
CLASS A
1997(A) 1.05% 0.71% 0.71% 9% $0.0621
1997(10) 1.51 0.69 1.19 11 0.0639
CLASS B
1997(A)(12) 0.30% 1.71% (0.04)% 9% $0.0621
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) 0.21% 1.05% 0.15% 23% $0.0658
1997 0.63 1.03 0.58 79 0.0624
1996 1.15 1.01 1.11 114 0.0636
INSTITUTIONAL CLASS*
1995 1.44% 1.10% 1.44% 119% N/A
CLASS A*
1997(A) (0.04)% 1.30% (0.10)% 23% $0.0658
1997 0.38 1.28 0.33 79 0.0624
1996 0.89 1.26 0.85 114 0.0636
RETAIL CLASS*
1995 1.23% 1.53% 1.04% 119% N/A
PRIOR CLASS
1994 0.75% 1.51% 0.73% 35% N/A
1993 0.94 1.41 0.73 24 N/A
1992 1.47 1.23 1.17 39 N/A
1991 2.30 1.48 1.36 68 N/A
1990(2) 2.29 1.59 1.35 43 N/A
CLASS B
1997(A)(12) (0.79)% 2.30% (1.10)% 23% $0.0658
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y*
1997(A) (0.15)% 1.05% (0.24)% 41% $0.0602
1997 0.30 1.06 0.20 74 0.0600
1996 0.64 1.05 0.48 81 0.0601
1995 0.84 1.10 0.50 113 N/A
1994 0.48 1.11 0.06 127 N/A
1993 0.85 1.11 0.17 103 N/A
19923 1.38 1.12 0.40 66 N/A
CLASS A*
1997(A) (0.40)% 1.30% (0.49)% 41% $0.0602
1997 0.04 1.31 (0.06) 74 0.0600
1996 0.40 1.30 0.23 81 0.0601
1995 0.59 1.35 0.25 113 N/A
1994 0.23 1.36 (0.19) 127 N/A
19934 0.39 1.48 (0.29) 103 N/A
CLASS B
1997(A)(12) (1.15)% 2.05% (1.24)% 41% $0.0602
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED 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. ADDITIONALLY, ON APRIL 15 & 22, 1996 THE CONESTOGA EQUITY AND SPECIAL EQUITY
FUNDS WERE ACQUIRED BY COREFUNDS, INC.; AT WHICH TIME THE INSTITUTIONAL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED
FOR CLASS Y SHARES AND THE RETAIL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED FOR CLASS A SHARES.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SPECIAL EQUITY FUND, WERE REDESIGNATED CLASS Y AND THE
SERIES B SHARES OF EACH FUND WERE REDESIGNATED CLASS A.
***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.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JUNE 1, 1991. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
104
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------------
SPECIAL EQUITY FUND(9)
- ----------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $11.27 $(0.03) $ 0.90 $ -- $(1.49) $10.65 8.14%+ $74,025 1.07%
1997 11.86 0.02 1.81 (0.03) (2.39) 11.27 17.94 71,980 0.84
1996 11.42 0.07 2.13 (0.07) (1.69) 11.86 22.27 63,680 0.34
INSTITUTIONAL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $57,396 0.32%
CLASS A*
1997(A) $11.25 $(0.03) $ 0.87 $ -- $(1.49) $10.60 7.88%+ $ 2,858 1.32%
1997 11.85 -- 1.81 (0.02) (2.39) 11.25 17.73 2,347 1.14
1996 11.42 0.08 2.11 (0.07) (1.69) 11.85 22.14 1,144 0.37
RETAIL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $ 734 0.27%
PRIOR CLASS
19945 $10.00 $ 0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $10,069 0.15%
CLASS B
1997(A)(12) $12.80 $(0.01) $(0.82) $ -- $(1.49) $10.48 (6.13)+% $ 122 2.07%
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
1997(A) $14.72 $0.01 $(0.73) $(0.17) $(0.55) $13.28 (4.89)%+ $158,408 0.95%
1997 13.97 0.14 1.84 (0.37) (0.86) 14.72 15.43 163,117 1.20
1996 12.29 0.16 1.86 (0.28) (0.06) 13.97 16.72 139,275 1.14
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838 1.05
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911 0.99
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655 0.99
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594 0.96
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582 0.99
19906 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513 1.22
CLASS A**
1997(A) $14.70 $(0.01) $(0.73) $(0.13) $(0.55) $13.28 (4.98)%+ $ 2,324 1.20%
1997 13.96 0.09 1.85 (0.34) (0.86) 14.70 15.09 2,431 1.45
1996 12.27 0.11 1.89 (0.25) (0.06) 13.96 16.54 2,138 1.39
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943 1.30
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019 1.24
19934 10.07 0.05 1.59 -- -- 11.71 16.29+ 344 1.15
CLASS B
1997(A)(15) $13.79 $(0.02) $ 0.22 $(0.16) $(0.55) $13.28 1.46%+ $ 14 2.16%
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997(A) $13.52 $0.15 $ 0.83 $(0.15) $(0.75) $13.60 7.31%+ $121,302 0.82%
1997 12.59 0.36 1.61 (0.36) (0.68) 13.52 16.44 113,642 0.78
1996 11.06 0.33 1.68 (0.33) (0.15) 12.59 18.41 102,515 0.81
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21 61,092 0.73
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429 0.62
19934 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45
CLASS A**
1997(A) $13.52 $0.12 $ 0.84 $(0.13) $(0.75) $13.60 7.19%+ $ 5,532 1.07%
1997 12.59 0.32 1.61 (0.32) (0.68) 13.52 16.15 4,198 1.03
1996 11.06 0.30 1.68 (0.30) (0.15) 12.59 18.13 3,188 1.06
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84 2,344 0.98
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222 0.87
19937 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55
CLASS B
1997(A)(14) $14.39 $0.09 $(0.09) $ 0.13 $(0.75) $13.51 (0.45)%+ $ 573 1.82%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------
SPECIAL EQU
- -----------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) (0.44)% 1.81% (1.18)% 32% $0.0628
1997 0.19 1.82 (0.79) 74 $0.0581
1996 0.94 1.79 (0.51) 72 0.0539
INSTITUTIONAL CLASS*
1995 1.14% 1.97% (0.51)% 129% N/A
CLASS A*
1997(A) (0.69)% 2.06% (1.43)% 32% $0.0628
1997 (0.12) 2.07 (1.05) 74 $0.0581
1996 0.91 1.82 (0.55) 72 0.0539
RETAIL CLASS*
1995 1.29% 2.24% (0.68)% 129% N/A
PRIOR CLASS
19945 1.06% 2.10% (0.89)% 39% N/A
CLASS B
1997(A)(12) (1.44)% 2.81% (2.18)% 32% $0.0628
- ------------------------------
INTERNATIONATIONAL GROWTH FUND
- ------------------------------
CLASS Y**
1997(A) 0.47% 1.04% 0.38% 25% $0.0024
1997 0.82 1.29 0.73 59 0.0080
1996 1.05 1.25 0.94 41 0.0270
1995 0.98 1.19 0.84 59 N/A
1994 0.23 1.18 0.04 67 N/A
1993 1.22 1.28 0.93 59 N/A
1992 1.67 1.40 1.23 87 N/A
1991 1.80 1.56 1.23 49 N/A
19906 2.57 1.99 1.80 20 N/A
CLASS A**
1997(A) 0.23% 1.29% 0.14% 25% $0.0024
1997 0.57 1.54 0.48 59 0.0080
1996 0.80 1.50 0.69 41 0.0270
1995 0.73 1.44 0.59 59 N/A
1994 0.05 1.43 (0.14) 67 N/A
19934 1.51 1.44 1.22 59 N/A
CLASS B
1997(A)(15) (1.15)% 2.23% (1.22%) 25% $0.0024
- -------------
BALANCED FUND
- -------------
CLASS Y**
1997(A) 2.12% 1.03% 1.91% 30% $0.0601
1997 2.79 1.00 2.57 54 0.0600
1996 2.79 1.03 2.57 74 0.0621
1995 3.51 1.07 3.17 46 N/A
1994 3.46 1.08 3.00 56 N/A
19934 3.38 1.39 2.45 21 N/A
CLASS A**
1997(A) 1.87% 1.28% 1.66% 30% $0.0601
1997 2.54 1.25 2.32 54 0.0600
1996 2.53 1.27 2.32 74 0.0621
1995 3.27 1.32 2.93 46 N/A
1994 3.21 1.33 2.75 56 N/A
19937 5.76 1.48 4.83 21 N/A
CLASS B
1997(A)(14) (1.12)% 2.03% 0.91% 30% $0.0601
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
5 COMMENCED OPERATIONS MARCH 15, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 12, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS MARCH 16, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES LOAD. ADDITIONALLY TOTAL RETURN FOR CLASS Y & CLASS A FOR THE CORE
EQUITY & SPECIAL EQUITY FUNDS FOR 1996 ARE FOR AN EIGHT MONTH PERIOD ENDED JUNE 30, 1997.
9 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR 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.
10 COMMENCED OPERATIONS ON OCTOBER 9, 1996. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
11 AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
12 COMMENCED OPERATIONS ON NOVEMBER 7, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
13 COMMENCED OPERATIONS ON NOVEMBER 18, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
14 COMMENCED OPERATIONS ON NOVEMBER 5, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
15 COMMENCED OPERATIONS ON NOVEMBER 24, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
105
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.97 $0.28 $ 0.02 $(0.28) $ -- $ 9.99 3.00%+ $ 37,203 0.49%
1997 9.94 0.53 0.03 (0.53) -- 9.97 5.82 37,011 0.47
1996 10.05 0.36 (0.08) (0.38) (0.01) 9.94 2.78 30,132 0.51
INSTITUTIONAL CLASS*
19951 $10.00 $0.25 $ 0.03 $(0.23) $ -- $10.05 2.57%+ $ 36,059 0.63%
CLASS A*
1997(A) $ 9.96 $0.26 $ 0.02 $(0.26) $ -- $ 9.98 2.87%+ $ 570 0.74%
1997 9.93 0.51 0.03 (0.51) -- 9.96 5.59 493 0.73
1996 10.04 0.35 (0.10) (0.35) (0.01) 9.93 2.55 1 0.76
RETAIL CLASS*
19952 $10.01 $0.23 $0.02 $(0.22) $ -- $10.04 2.87%+ $ 11 0.88%
- -----------------------------
SHORT-INTERMEDIATE BOND FUND
- -----------------------------
CLASS Y**
1997(A) $ 9.83 $0.29 $ 0.12 $(0.29) $ -- $ 9.95 4.25%+ $169,990 0.51%
1997 9.76 0.59 0.07 (0.59) -- 9.83 6.90 163,153 0.49
1996 9.84 0.57 (0.08) (0.57) -- 9.76 5.05 159,841 0.55
1995 9.63 0.53 0.21 (0.53) -- 9.84 8.22 55,128 0.60
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379 0.58
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692 0.42
19923 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11
CLASS A**
1997(A) $ 9.83 $0.28 $ 0.12 $(0.28) $ -- $ 9.95 4.14%+ $ 2,831 0.76%
1997 9.76 0.56 0.07 (0.56) -- 9.83 6.64 2,752 0.74
1996 9.84 0.54 (0.08) (0.54) -- 9.76 4.79 3,062 0.81
1995 9.63 0.54 0.20 (0.53) -- 9.84 7.95 1,961 0.85
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365 0.83
19934 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75
- -----------------------
GOVERNMENT INCOME FUND
- -----------------------
CLASS Y**
1997(A) $ 9.76 $0.31 $ 0.27 $(0.31) $ -- $10.03 6.00%+ $ 21,032 0.73%
1997 9.62 0.62 0.14 (0.62) -- 9.76 8.15 19,007 0.70
1996 9.83 0.61 (0.21) (0.61) -- 9.62 4.09 13,943 0.64
1995 9.52 0.62 0.31 (0.62) -- 9.83 10.26 11,305 0.59
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089 0.50
19935 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44
CLASS A**
1997(A) $ 9.76 $0.30 $ 0.27 $(0.30) $ -- $10.03 5.86%+ $ 1,827 0.98%
1997 9.62 0.60 0.14 (0.60) -- 9.76 7.88 1,660 0.95
1996 9.84 0.58 (0.22) (0.58) -- 9.62 3.73 1,287 0.88
1995 9.51 0.61 0.33 (0.61) -- 9.84 10.23 1,374 0.85
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536 0.75
19938 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63
- ------------
BOND FUND11
- ------------
CLASS Y*
1997(A) $10.24 $0.32 $ 0.29 $(0.32) $ -- $10.53 6.06%+ $173,565 0.57%
1997 10.15 0.64 0.09 (0.64) -- 10.24 7.43 182,364 0.56
1996 10.55 0.43 (0.30) (0.45) (0.08) 10.15 1.23 198,605 0.55
INSTITUTIONAL CLASS*
1995 $ 9.81 $0.61 $ 0.71 $(0.58) $ -- $10.55 13.87% $194,442 0.71%
CLASS A*
1997(A) $10.24 $0.31 $ 0.29 $(0.31) $ -- $10.53 5.93%+ $ 2,027 0.82%
1997 10.15 0.62 0.09 (0.62) -- 10.24 7.15 1,622 0.81
1996 10.56 0.44 (0.33) (0.44) (0.08) 10.15 0.98 1,273 0.80
RETAIL CLASS*
1995 $ 9.81 $0.60 $ 0.72 $(0.57) $ -- $10.56 13.83% $ 1,373 0.97%
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377 1.01%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346 0.88
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180 0.46
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255 0.47
19906 10.00 0.50 (0.04) (0.50) -- 9.96 4.64+ 4,593 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- ------------------------
SHORT TERM INCOME FUND11
- ------------------------
CLASS Y*
<S> <C> <C> <C> <C>
1997(A) 5.48% 1.07% 4.90% 28%
1997 5.37 1.05 4.79 99
1996 5.31 1.03 4.79 102
INSTITUTIONAL CLASS*
19951 5.43% 1.08% 4.98% 40%
CLASS A*
1997(A) 5.23% 1.32% 4.65% 28%
1997 5.18 1.32 4.59 99
1996 5.05 1.25 4.56 102
RETAIL CLASS*
19952 5.05% 1.33% 4.60% 40%
- ----------------------------
SHORT-INTERMEDIATE BOND FUND
- ----------------------------
CLASS Y**
1997(A) 5.37% 0.80% 5.08% 66%
1997 5.98 0.80 5.67 158
1996 5.80 0.81 5.54 257
1995 5.76 0.84 5.52 405
1994 4.30 0.86 4.02 299
1993 4.62 0.86 4.18 188
19923 5.73 0.84 5.00 51
CLASS A**
1997(A) 4.88% 1.05% 4.59% 66%
1997 5.73 1.05 5.42 158
1996 5.51 1.06 5.27 257
1995 5.27 1.09 5.03 405
1994 4.05 1.11 3.77 299
19934 3.78 1.19 3.34 188
- ----------------------
GOVERNMENT INCOME FUND
- ----------------------
CLASS Y**
1997(A) 6.16% 0.83% 6.06% 18%
1997 6.40 0.85 6.25 120
1996 6.17 0.89 5.92 131
1995 6.53 0.98 6.14 368
1994 4.93 1.00 4.43 157
19935 5.41 1.10 4.75 93
CLASS A**
1997(A) 5.91% 1.08% 5.81% 18%
1997 6.15 1.10 6.00 120
1996 5.93 1.14 5.67 131
1995 6.25 1.24 5.86 368
1994 4.68 1.25 4.18 157
19938 5.35 1.29 4.69 93
- -----------
BOND FUND11
- -----------
CLASS Y*
1997(A) 6.11% 1.04% 5.64% 71%
1997 6.29 1.04 5.81 210
1996 6.28 0.97 5.86 190
INSTITUTIONAL CLASS*
1995 6.09% 1.12% 5.68% 352%
CLASS A*
1997(A) 5.86% 1.29% 5.39% 71%
1997 6.05 1.29 5.57 210
1996 6.02 1.22 5.61 190
RETAIL CLASS*
1995 6.02% 1.44% 5.55% 352%
PRIOR CLASS*
1994 5.07% 1.60% 4.48% 232%
1993 5.16 1.49 4.55 158
1992 6.78 1.24 6.01 99
1991 7.71 1.41 6.78 47
19906 7.75 1.62 6.81 23
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
106
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------
GLOBAL BOND FUND
- ----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.54 $0.37 $(0.17) $(0.41) $ -- $ 9.33 2.06%+ $ 35,625 0.68%
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
19947 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73
CLASS A**
1997(A) $ 9.52 $0.29 $(0.10) $(0.39) $ -- $ 9.32 2.05%+ $ 246 0.93%
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
19947 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98
- ---------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.05 $0.21 $ 0.20 $(0.21) $ -- $10.25 4.13%+ $ 906 0.56%
1997 9.92 0.42 0.13 (0.42) -- 10.05 5.62 993 0.55
1996 9.83 0.37 0.09 (0.37) -- 9.92 4.74 403 0.81
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365 0.82
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088 0.63
19938 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58
CLASS A**
1997(A) $10.05 $0.20 $ 0.20 $(0.20) $ -- $10.25 4.00%+ $ 966 0.81%
1997 9.92 0.39 0.13 (0.39) -- 10.05 5.36 959 0.80
1996 9.83 0.35 0.09 (0.35) -- 9.92 4.48 1,015 1.08
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027 1.08
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311 0.88
19938 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.47 $0.27 $ 0.30 $(0.27) $ -- $10.77 5.51%+ $ 12,912 0.08%
1997 10.22 0.54 0.25 (0.54) -- 10.47 7.92 10,171 0.08
1996 10.16 0.55 0.06 (0.55) -- 10.22 6.02 8,864 0.21
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42
CLASS A**
1997(A) $10.47 $0.26 $ 0.31 $(0.26) $ -- $10.78 5.47%+ $ 4,590 0.33%
1997 10.22 0.51 0.25 (0.51) -- 10.47 7.65 2,004 0.33
1996 10.16 0.52 0.06 (0.52) -- 10.22 5.76 994 0.46
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997(A) $10.16 $0.26 $ 0.30 $(0.26) $ -- $10.46 5.55%+ $ 1,605 0.11%
1997 10.08 0.51 0.15 (0.51) (0.07) 10.16 6.70 1,477 0.21
1996 10.12 0.51 0.02 (0.51) (0.06) 10.08 5.28 1,317 0.37
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42
19949 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432 0.43
CLASS A**
1997(A) $10.15 $0.25 $ 0.30 $(0.25) $ -- $10.45 5.42%+ $ 51 0.36%
1997 10.07 0.48 0.15 (0.48) (0.07) 10.15 6.44 398 0.45
1996 10.12 0.48 0.01 (0.48) (0.06) 10.07 4.93 304 0.60
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- -----------
GLOBAL BOND
- -----------
CLASS Y**
<S> <C> <C> <C> <C>
1997(A) 5.16% 0.87% 4.97% 7%
1997 5.14 1.03 4.96 90
1996 5.81 0.95 5.57 67
1995 6.84 1.03 6.45 133
19947 5.04 1.12 4.65 161
CLASS A**
1997(A) 4.91% 1.12% 4.72% 7%
1997 4.89 1.28 4.71 90
1996 5.56 1.20 5.32 67
1995 6.59 1.28 6.20 133
19947 4.79 1.37 4.40 161
- --------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.07% 1.07% 3.56% 8%
1997 4.20 1.02 3.73 22
1996 3.73 1.31 3.23 10
1995 3.91 1.26 3.47 9
1994 3.91 1.17 3.37 43
19938 2.74 1.45 1.87 10
CLASS A**
1997(A) 3.87% 1.32% 3.36% 8%
1997 3.92 1.23 3.49 22
1996 3.47 1.61 2.94 10
1995 3.65 1.52 3.21 9
1994 3.66 1.42 3.12 43
19938 2.51 1.68 1.64 10
- --------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.99% 0.82% 4.25% 17%
1997 5.23 0.83 4.48 39
1996 5.25 0.96 4.50 92
1995 5.26 1.14 4.51 18
19949 5.09 1.17 4.34 3
CLASS A**
1997(A) 4.74% 1.07% 4.00% 17%
1997 4.99 1.08 4.24 39
1996 4.93 1.21 4.18 92
1995 4.95 1.39 4.20 18
19949 4.84 1.42 4.09 3
- ------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- ------------------------------
CLASS Y**
1997(A) 4.96% 0.86% 4.21% 4%
1997 5.02 0.96 4.27 19
1996 4.93 1.12 4.18 21
1995 5.21 1.17 4.46 32
19949 5.07 1.35 4.15 13
CLASS A**
1997(A) 4.71% 1.11% 3.96% 4%
1997 4.81 1.20 4.06 19
1996 4.65 1.35 3.90 21
1995 4.97 1.44 4.21 32
19949 4.82 1.60 3.90 13
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED 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.
ADDITIONALLY, ON APRIL 22, 1996 THE CONESTOGA SHORT-TERM INCOME AND BOND
FUNDS WERE ACQUIRED BY COREFUNDS, INC. AT WHICH TIME THE INSTITUTIONAL CLASS
OF SHARES OF THESE FUNDS WERE REDESIGNATED CLASS Y AND THE RETAIL CLASS OF
SHARES OF THESE FUNDS WERE REDESIGNATED CLASS A.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SHORT TERM
INCOME AND BOND FUNDS, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF
EACH FUND, EXCLUDING THE SHORT TERM INCOME AND BOND FUNDS, WERE REDESIGNATED
CLASS A.
***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.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS MAY 15, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
2 COMMENCED OPERATIONS MAY 17, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS APRIL 1, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS DECEMBER 15, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 COMMENCED OPERATIONS MAY 3, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
9 COMMENCED OPERATIONS MAY 16, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
10 TOTAL RETURN DOES NOT REFLECT THE SALES LOAD CHARGED ON THE CLASS A SHARES. ADDITIONALLY, TOTAL RETURN FOR CLASS Y &
CLASS A FOR THE SHORT TERM INCOME AND BOND FUNDS FOR 1996 ARE FOR THE EIGHT
MONTH PERIOD ENDED DECEMBER 31, 1996.
11 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
107
<PAGE>
FINANCIAL
HIGHLIGHTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO RATIO OF NET
NET RATIO OF EXPENSES INCOME
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- --------------- ------------ -------- --------- ----------- ---------- ----------- ------------
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $1.00 $0.03 $(0.03) $1.00 2.57%+ $806,855 0.51% 5.05% 0.70% 4.86%
1997 1.00 0.05 (0.05) 1.00 4.97 835,384 0.51 4.86 0.71 4.66
1996 1.00 0.05 (0.05) 1.00 5.20 892,562 0.50 5.02 0.77 4.75
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91 0.85 4.54
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87 0.86 2.49
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89 0.85 2.50
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58 0.82 4.14
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80 0.82 6.35
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03 0.84 7.56
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.44%+ $ 24,414 0.76% 4.80% 0.95% 4.61%
1997 1.00 0.05 (0.05) 1.00 4.71 12,146 0.76 4.61 0.96 4.41
1996 1.00 0.05 (0.05) 1.00 4.94 19,386 0.75 4.81 1.03 4.53
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81 1.10 4.44
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62 1.11 2.24
19931 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- -------------
CASH RESERVE
- -------------
CLASS Y*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.65%+ $956,368 0.52% 5.20% 0.72% 5.00%
1997 1.00 0.05 (0.05) 1.00 5.09 886,251 0.50 4.99 0.70 4.79
1996 1.00 0.05 (0.05) 1.00 5.26 790,211 0.50 5.09 0.78 4.81
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04 0.85 4.67
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95 0.85 2.57
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97 0.85 2.58
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68 0.82 4.24
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94 0.82 6.49
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28 0.80 7.82
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62 0.90 8.05
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54 1.14 5.96
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.52%+ $ 79,712 0.77% 4.95% 0.97% 4.75%
1997 1.00 0.05 (0.05) 1.00 4.83 27,693 0.75 4.74 0.95 4.54
1996 1.00 0.05 (0.05) 1.00 5.00 19,736 0.75 4.86 1.03 4.58
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86 1.10 4.49
1994 1.00 0.03 (0.03) 1.00 2.74 11,451 0.72 2.70 1.10 2.32
19931 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
CLASS B
1997(A)(4) $1.00 $ -- $ -- $1.00 0.50%+ $ 80 1.52% 4.20% 1.72% 4.00%
- ----------------
TAX-FREE RESERVE
- ----------------
CLASS Y*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.63%+ $ 152,822 0.52% 3.17% 0.71% 2.98%
1997 1.00 0.03 (0.03) 1.00 3.08 119,579 0.50 3.07 0.70 2.87
1996 1.00 0.03 (0.03) 1.00 3.20 104,196 0.48 3.14 0.76 2.86
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09 0.85 2.72
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00 0.87 1.62
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20 0.89 1.82
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39 0.88 2.88
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
CLASS C*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.49%+ $ 12,396 0.77% 2.92% 0.96% 2.73%
1997 1.00 0.03 (0.03) 1.00 2.83 3,202 0.75 2.82 0.95 2.62
1996 1.00 0.03 (0.03) 1.00 2.95 2,850 0.73 2.94 1.02 2.65
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80 1.10 2.43
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75 1.12 1.37
19931 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON APRIL 22, 1996, SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B
SHARES WERE REDESIGNATED CLASS C. + RETURNS ARE FOR THE PERIOD INDICATED AND
HAVE NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JANUARY 4, 1993. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS NOVEMBER 21, 1988. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS APRIL 16, 1991. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS NOVEMBER 18, 1997. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
108
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
1. ORGANIZATION
The CoreFund Equity Index Fund, Core Equity Fund, Growth Equity Fund, Special
Equity Fund, International Growth Fund, Balanced Fund (the Equity Funds), 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 (the Fixed Income Funds), Treasury
Reserve, Cash Reserve, and Tax-Free Reserve (the Money Market Funds) are
portfolios offered by CoreFunds, Inc. (The Company), an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Company is presently authorized to offers 20 separate portfolios (the Funds):
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
The financial statements of the Elite Cash Reserve, Elite Treasury Reserve
and Elite Tax-Free Reserve are not presented herein.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Funds' prospectus
provides a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities of the Equity and Fixed Income
Funds 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.
Investment securities of the Money Market Funds are stated at amortized
cost, which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
The books and records of the International Growth Fund and Global Bond
Fund are maintained in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on the following 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 International Growth Fund does not isolate the portion of gains or
losses on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Global Bond Fund 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.
109
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of unrealized and realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund and
Global Bond Fund enter into forward foreign currency contracts as hedges against
either specific transactions or portfolio positions. The aggregate principal
amounts of the contracts are not recorded since the funds intend to settle the
contracts prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The funds realize gains or losses at the time forward
contracts are 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. Dividend income is recorded on ex-dividend
date.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Portfolio may be delayed or limited.
EXPENSES--Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Company are
pro-rated to the Funds 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 Equity Index Fund, Core Equity Fund,
Growth Equity Fund, Special Equity Fund, Balanced Fund and Global Bond Fund
declare and pay dividends on a quarterly basis. The International Growth Fund
declares and pays dividends periodically. Such dividends are reinvested in
additional shares unless otherwise requested. The Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve and Tax-Free Reserve distributions from net
investment income are declared on a daily basis and are payable on the first
business day of the following month. Any net realized capital gains on sales of
securities for a Fund 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 International Growth Fund and Global Bond Fund as of
December 31, 1997, $(411,000) and $450,000 was reclassified from accumulated net
realized gain (loss)on investments to accumulated net investment income,
respectively.
FEDERAL INCOME TAXES--It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income tax is required.
OTHER--Organizational costs incurred with the start up of the Balanced
Fund, Government Income Fund, Short Term Income Fund, Intermediate Municipal
Bond Fund, Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund are being amortized on a straight line basis over a maximum
period of sixty months. If any or all of the shares representing initial capital
of each fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
110
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
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 each Fund. For its services CSIA receives a fee based on the annual
average daily net assets of each Fund as shown in the following table:
<TABLE>
<CAPTION>
ADVISER INVESTMENT ADVISORY ADVISER INVESTMENT ADVISORY
FUND FEE AGREEMENT DATE FUND FEE AGREEMENT DATE
- -------------------- ------- ------------------- -------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index 0.40% March 25, 1991 Short Term Income 0.74% April 12, 1996
Core Equity 0.74 April 12, 1996 Short-Intermediate Bond 0.50 March 25, 1991
Growth Equity 0.75 March 25, 1991 Government Income 0.50 March 25, 1991
Special Equity 1.50 April 12, 1996 Bond 0.74 April 12, 1996
International Growth 0.80 December 5, 1989 Global Bond 0.60 March 25, 1991
Balanced 0.70 March 25, 1991 Intermediate Municipal
Bond 0.50 March 25, 1991
Treasury Reserve 0.40 April 12, 1996 Pennsylvania Municipal
Cash Reserve 0.40 April 12, 1996 Bond 0.50 May 15, 1994
Tax-Free Reserve 0.40 April 12, 1996 New Jersey Municipal
Bond 0.50 May 15, 1994
</TABLE>
Advisory fees are computed daily and paid monthly for all Funds.
Additionally, for the period ended December 31, 1997, CSIA has voluntarily
waived a portion of their fees in order to assist the Funds in maintaining
competitive expense ratios.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, in
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
Sub-Advisory services are provided to the CoreStates Advisers for the
International Growth Fund by Martin Currie, Inc. and Aberdeen Managers (The
"Sub-Advisers"). Sub-Advisory services are provided for the Global Bond Fund 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 Fund'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 Funds. SFR voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
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 Funds' Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the Funds.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Funds' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the "Plan") for those Funds
offering Class A, C and B shares. The Plan provides for the payment by the
Company to the Distributor of up to 0.25% of the daily net assets of each Class
A and C Portfolio and 1.00% of the daily net assets of each Class B Portfolio.
The Company has also adopted a Shareholder Servicing Plan for those Funds
offering Class B shares. The Shareholder Servicing Plan provides for the payment
by the Company to the Distributor of up to 25% of the daily net assets of each
Class B Portfolio to which the Plan is applicable. 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 Funds paid approximately $850,104 to affiliated brokers for
commissions earned on the sales of the shares of the Funds for the six month
period ended December 31, 1997.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Funds.
111
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
A contingent Deferred Sales Charge (CDSC) is imposed on redemptions made in
the Class B shares. The CDSC varies depending on the number of years from the
time of payment for the purchase of Class B shares until the redemption of such
shares.
Contingent Deferred Sales
Year Charges as a Percentage
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
5. INVESTMENT TRANSACTIONS
During the six month period ended December 31, 1997, purchases of
securities and proceeds from sales of securities, other than temporary
investments in short-term securities, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
-------------------------------- -------------------------------
PURCHASES SALES
-------------------------------- -------------------------------
U.S. U.S.
PORTFOLIO INVESTMENT TRANSACTIONS (000) GOVERNMENT OTHER TOTAL GOVERNMENT OTHER TOTAL
---------- ----- ------- ---------- ------- --------
<S> <C> <C> <C> <C>
Equity Index Fund -- 26,703 26,703 -- 22,386 22,386
Core Equity Fund -- 132 132 -- 151,787 151,787
Growth Equity Fund -- 66,463 66,463 -- 71,272 71,272
Special Equity Fund -- 24,748 24,748 -- 30,293 30,293
International Growth Fund -- 38,930 38,930 -- 39,848 39,848
Balanced Fund -- 36,206 36,206 -- 34,822 34,822
Short Term Income Fund 2,753 5,191 7,944 4,333 5,139 9,472
Short-Intermediate Bond Fund 65,819 39,422 105,241 69,963 33,236 103,199
Government Income Fund 5,451 -- 5,451 3,814 -- 3,814
Bond Fund 81,637 39,056 120,693 105,566 65,138 170,704
Global Bond Fund -- 41,416 41,416 -- 4,688 4,688
Intermediate Municipal Fund -- 139 139 -- 232 232
Pennsylvania Municipal Bond Fund -- 7,890 7,890 -- 2,405 2,405
New Jersey Municipal Bond Fund -- 353 353 -- 76 76
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Certain net capital losses incurred subsequent to October 31, 1996 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1998. The Funds had capital loss carryforwards at December 31,
1997, as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/97 2002 2003 2004 2005
------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Short Term Income Fund $ 88,520 $ -- $ -- $ -- $ 88,520
Short-Intermediate Bond Fund 2,907,103 -- 1,483,436 217,497 1,206,170
Government Income Fund 319,174 -- 222,660 4,127 92,387
Bond Fund 1,702,115 -- -- -- 1,702,115
Global Bond Fund 1,573,551 -- 844,493 -- 729,058
Intermediate Term Municipal Bond Fund 79,158 -- 41,918 34,827 2,413
Pennsylvania Municipal Bond Fund 96,691 73,679 95 8,784 14,133
Treasury Reserve 9,082 -- -- -- 9,082
Cash Reserve 167,012 134,628 23,362 9,022 --
Tax-Free Reserve 54,381 5,273 44,981 4,127 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
At December 31, 1997 the total cost of securities and the net realized
gains or losses on securities sold for Federal income tax purposes was not
materially different from amounts reported for financial purposes. The aggregate
gross unrealized gain or loss on securities at December 31, 1997 for each fund
within the CoreFunds is as follows:
112
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN (LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ --------
<S> <C> <C> <C>
Equity Index Fund $119,666 $ (3,247) $116,419
Core Equity Fund 149,108 (16,936) 132,172
Growth Equity Fund 57,102 (1,766) 55,336
Special Equity Fund 15,922 (11,198) 4,724
International Growth Fund 29,294 (10,958) 18,336
Balanced Fund 23,572 (985) 22,587
Short Term Income Fund 89 (8) 81
Short-Intermediate Bond Fund 1,991 (24) 1,967
Government Income Fund 570 (15) 555
Bond Fund 4,190 (25) 4,165
Global Bond Fund 554 (881) (327)
Intermediate Municipal Bond Fund 56 -- 56
Pennsylvania Municipal Bond Fund 640 (4) 636
New Jersey Municipal Bond Fund 104 -- 104
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS
The International Growth Fund and Global Bond Fund enter into forward
foreign currency contracts as hedges against portfolio positions. Such
contracts, which protect the value of a Fund's investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at a
future date. Also, although such contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such foreign
currency increase. The following forward foreign currency contracts were
outstanding at December 31, 1997:
- -------------------------------------------------------------------------------
GLOBAL BOND FUND:
Foreign Currency Sales:
Contracts to In Exchange Unrealized
Deliver/Receive For Appreciation
--------------- ----------- ------------
3/23/98 DM 10,750,000 $6,101,645 $ 96,870
3/23/98 DK 19,000,000 2,829,149 44,204
3/12/98 FF 10,500,000 1,761,036 8,991
3/12/98 GP 1,950,000 3,197,318 34,913
3/23/98 SK 13,600,000 1,763,451 46,185
---------
Net Unrealized Appreciation $ 231,163
=========
- --------------------------------------------------------------------------------
CURRENCY LEGEND
- ---------------
DM German Marks
DK Danish Kroner
FF French Francs
GP British Pounds
SK Swedish Krona
113
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
7. CONCENTRATION OF CREDIT RISK
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in debt instruments of
municipal issuers. Although these Funds maintain a diversified portfolio, with
the exception of the Pennsylvania Municipal Bond Fund and the New Jersey
Municipal Bond Fund, the issuers ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities that
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At December 31, 1997, the percentage of
portfolio investments by each revenue source was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL
BOND BOND BOND TAX-FREE
FUND FUND FUND RESERVE
------------ ------------ ---------- --------
REVENUE BONDS:
<S> <C> <C> <C> <C>
Education Bonds 17% 18% 15% 7%
Health Care Bonds 3 13 5 10
Transportation Bonds 12 5 7 7
Utility Bonds 14 16 17 4
Housing Bonds -- 2 -- 10
Pollution Control Bonds -- -- -- 10
Industrial Development Bonds 6 16 -- 8
Public Facility Bonds -- 1 2 3
Other 12 2 7 10
GENERAL OBLIGATIONS 36 24 47 6
TAX EXEMPT COMMERCIAL PAPER -- -- -- 21
TAX AND REVENUE ANTICIPATION NOTES -- -- -- 3
TAX ANTICIPATION NOTES -- 3 -- 1
----- ----- ----- ----
100% 100% 100% 100%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount on an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by the issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At December 31, 1997, the percentage of securities with credit
enhancements are as follows:
- ----------------------------------------------------------------------------
------- ---------
LETTERS
OF BOND
CREDIT INSURANCE
------- ---------
Intermediate Municipal Bond Fund -- 64.9%
Pennsylvania Municipal Bond Fund -- 62.1
New Jersey Municipal Bond Fund -- 38.4
Tax-Free Reserve 53.3% 27.6
- ----------------------------------------------------------------------------
114
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
8. SHARE TRANSACTIONS (000):
The following are the share transactions for the six month period ended December
31, 1997.
<TABLE>
<CAPTION>
------ ------- ------ ------- ------------- -------- -------- ------- --------
EQUITY CORE GROWTH SPECIAL INTERNATIONAL
INDEX EQUITY EQUITY EQUITY GROWTH BALANCED TREASURY CASH TAX-FREE
FUND FUND(1) FUND FUND FUND FUND RESERVE RESERVE RESERVE
------ ------- ------ ------- ------------- -------- -------- ------- --------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 613 2,134 1,130 590 3,024 830 1,198,732 1,030,078 170,940
Shares issued in lieu
of cash distributions 223 3,181 639 816 543 449 1,462 1,865 96
Shares redeemed (664) (2,642) (1,381) (841) (2,727) (766) (1,228,616) (961,599) (137,772)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 172 2,673 388 565 840 513 (28,422) 70,344 33,264
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS A/C
Shares issued 117 123 43 42 18 108 34,333 107,066 24,342
Shares issued in lieu
of cash distributions 8 120 25 34 9 24 272 1,229 132
Shares redeemed 16 (78) (23) (15) (17) (35) (22,458) (56,508) (15,279)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 109 165 45 61 10 97 12,147 51,787 9,195
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS B
Shares issued 19 6 6 10 1 40 -- 88 --
Shares issued in lieu
of cash distributions -- 1 -- 2 -- 2 -- -- --
Shares redeemed -- -- -- -- -- -- -- (8) --
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 19 7 6 12 1 42 -- 80 --
==== ====== ====== ==== ====== ==== ========== ========= ========
TOTAL SHARE ACTIVITY
FOR PERIOD 300 2,845 439 638 851 652 (16,275) 122,211 42,459
==== ====== ====== ==== ====== ==== ========== ========= ========
<FN>
(1) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
<TABLE>
<CAPTION>
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
SHORT TERM SHORT- GOVERNMENT GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
INCOME INTERMEDIATE INCOME BOND BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND FUND FUND FUND BOND FUND BOND FUND BOND FUND
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 616 2,018 309 1,147 95 3 270 17
Shares issued in lieu
of cash distributions 88 454 35 479 137 -- 12 1
Shares repurchased (692) (1,998) (195) (2,950) (42) (14) (55) (10)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 12 474 149 (1,324) 190 (11) 227 8
==== ====== ==== ====== === === === ===
CLASS A
Shares issued 7 29 31 42 7 6 241 16
Shares issued in lieu
of cash distributions 1 6 4 4 1 2 6 1
Shares repurchased -- (31) (23) (12) (1) (9) (12) (7)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 8 4 12 34 7 (1) 235 10
==== ====== ==== ====== === === === ===
TOTAL SHARE ACTIVITY
FOR PERIOD 20 478 161 (1,290) 197 (12) 462 18
==== ====== ==== ====== === === === ===
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
115
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONCLUDED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
9. SHAREHOLDER VOTING RIGHTS
There was a special meeting scheduled for December 15, 1997 at which the
shareholders of the International Growth Fund voted on to approve the selection
of Aberdeen Managers as a sub-adviser for a portion of the assets of the
International Growth Fund. The results are as follows:
Shares Voted % of Voted % of Total
----------- ---------- ----------
FOR 8,203,048.00 98.77% 70.55%
AGAINST 11,795.00 0.14% 0.10%
ABSTAIN 89,958.00 1.08% 0.77%
10. PROPOSED REORGANIZATION
On November 18, 1997, CoreStates Financial Corp. and First Union
Corporation jointly announced that they had signed a definitive agreement for
the merger of CoreStates Bank, N.A. and First Union Bank. The Advisor is
currently a wholly-owned subsidiary of CoreStates Bank, N.A. Subject to certain
conditions, it is anticipated that the transaction will close at the end of
April, 1998. Thereafter, the Advisor will be an indirect wholly-owned subsidiary
of First Union Bank. A special meeting of shareholders will be called to
consider certain proposed fund reorganizations.
116
<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 FUNDS ARE NOT
DEPOSITS OR OBLIGATIONS 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. INVESTMENTS IN SHARES OF A MUTUAL FUND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. CORESTATES BANK, N.A.
SERVES AS CUSTODIAN FOR THE FUNDS. SEI FINANCIAL DISTRIBUTION CO. SERVES AS
DISTRIBUTOR AND IS NOT AFFILIATED WITH CORESTATES BANK, N.A.
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------ -------------- --------------
EQUITY CORE EQUITY GROWTH
INDEX FUND FUND(3) EQUITY FUND
------------ -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 2,223 $ 3,344 $ 561
Interest 22 138 123
Less: Foreign taxes withheld -- -- --
-------- -------- ---------
Total investment income 2,245 3,482 684
-------- -------- ---------
EXPENSES:
Investment advisory fees 533 2,147 632
Less: waiver of investment advisory fees (318) -- --
Administrative fees 333 725 211
Less: waiver of administrative fees (119) (164) (76)
Transfer agent fees & expenses 36 51 13
Custodian fees -- -- --
Professional fees 5 23 3
Registration & filing fees 8 14 4
12b-1 fees--individual shares -- 23 7
Taxes--other than income 3 13 2
Printing fees 25 57 17
Organizational costs -- -- --
Miscellaneous -- 14 6
-------- -------- ---------
Total expenses 506 2,903 819
-------- -------- ---------
NET INVESTMENT INCOME (LOSS) 1,739 579 (135)
-------- -------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 5,184 40,986 11,173
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation) on investments 17,916 20,773 10,360
-------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $24,839 $62,338 $21,398
======== ======== =========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 39.65 $ 20.60 $ 16.33
======== ======== =========
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 39.66 20.61 16.27
-------- -------- ---------
2Offering price $ 41.97 $ 21.81 $ 17.22
======== ======== =========
CLASS B
4Net asset value and offering price $ 39.12 $ 18.31 $ 16.19
======== ======== =========
-------------- -------------- --------------
SPECIAL INTERNATIONAL BALANCED
EQUITY FUND GROWTH FUND FUND
-------------- -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 212 $ 1,039 $ 379
Interest 43 152 1,481
Less: Foreign taxes withheld -- (111) --
-------- ------- ------
Total investment income 255 1,080 1,860
-------- ------- ------
EXPENSES:
Investment advisory fees 607 666 444
Less: waiver of investment advisory fees (263) -- (76)
Administrative fees 101 208 158
Less: waiver of administrative fees (36) (75) (57)
Transfer agent fees & expenses 21 (10) 11
Custodian fees 5 6 --
Professional fees (5) 2 3
Registration & filing fees 9 (7) --
12b-1 fees--individual shares 4 3 7
Taxes--other than income 1 -- 1
Printing fees 11 2 16
Organizational costs -- -- 18
Miscellaneous 1 -- --
-------- ------- ------
Total expenses 456 795 525
-------- ------- ------
NET INVESTMENT INCOME (LOSS) (201) 285 1,335
-------- ------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain from security transactions 7,997 2,385 3,960
Net realized (loss) on forward foreign currency contracts and
foreign currency transactions -- (411) --
Net unrealized depreciation on forward foreign currency contracts and
translation of assets and liabilities in foreign currencies -- (12) --
Net change in unrealized appreciation (depreciation) on investments (1,796) (10,180) 3,388
-------- ------- ------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,000 (7,933) $8,683
======== ======= ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - DECEMBER 31, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.65 $ 13.28 $13.60
======== ======= ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 5.50% 10.60 13.28 13.60
-------- ------- ------
2Offering price $ 11.22 $ 14.05 $14.39
======== ======= ======
CLASS B
4Net asset value and offering price $ 10.48 $ 13.28 $13.51
======== ======= ======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0
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 5.50%.
3 THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
4 CLASS B HAS A CONTINGENT DEFERRED SALES CHARGE. FOR A DESCRIPTION OF POSSIBLE
REDEMPTION CHARGE, SEE THE NOTES TO THE FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
92 & 93
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------------- -------------- -------------
SHORT TERM SHORT-
INCOME INTERMEDIATE GOVERNMENT
FUND BOND FUND INCOME FUND
-------------- -------------- -------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $1,120 $5,458 $ 758
------ ------ ------
Total Investment income 1,120 5,458 758
------ ------ ------
EXPENSES
Investment advisory fees 139 426 55
Less: waiver of investment advisory fees (92) (170) (2)
Administrative fees 47 213 28
Less:waiver of administrative fees (17) (77) (10)
Transfer agent fees & expenses 6 18 2
Custodian fees 6 -- --
Professional fees -- 4 1
Registration & filing fees (3) 6 1
12b-1 fees--individual shares 1 3 2
Trustee fees 1 2 --
Printing fees 2 11 1
Organizational costs 1 -- 3
Miscellaneous 1 6 1
------ ------ ------
Total expenses 92 442 82
------ ------ ------
NET INVESTMENT INCOME 1,028 5,016 676
------ ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 8 461 88
Option transactions -- -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- -- --
Net change in unrealized appreciation (depreciation)
on investments 68 1,670 515
------ ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,104 $7,147 $1,279
====== ====== ======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 9.99 $ 9.95 $10.03
====== ====== ======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 9.98 9.95 10.03
------ ------ ------
2Offering price $10.32 $10.28 $10.37
====== ====== ======
------------ -------------- ------------
GLOBAL INTERMEDIATE
BOND BOND MUNICIPAL
FUND FUND BOND FUND
------------ -------------- ------------
INVESTMENT INCOME
<S> <C> <C> <C>
Interest $ 6,153 $1,055 $ 46
------- ------- -------
Total Investment income 6,153 1,055 46
------- ------- -------
EXPENSES
Investment advisory fees 675 108 5
Less: waiver of investment advisory fees (356) (18) (5)
Administrative fees 228 45 2
Less:waiver of administrative fees (82) (16) (1)
Transfer agent fees & expenses 7 (1) --
Custodian fees 11 1 --
Professional fees 8 1 --
Registration & filing fees 18 1 2
12b-1 fees-- individual shares 2 -- 1
Trustee fees -- -- --
Printing fees 10 -- --
Organizational costs -- 2 3
Miscellaneous 5 -- --
------- ------- -------
Total expenses 526 123 7
------- ------- -------
NET INVESTMENT INCOME 5,627 932 39
------- ------- -------
NETREALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 1,499 (41) 3
Option transactions -- (400) --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- 450 --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- (98) --
Net change in unrealized appreciation (depreciation)
on investments 3,530 (90) 35
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,656 $ 753 $ 77
======= ======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $ 10.53 $ 9.33 $10.25
======= ======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.53 9.32 10.25
------- ------- -------
2Offering price $ 11.06 $ 9.78 $10.59
======= ======= =======
-------------- --------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
-------------- --------------
INVESTMENT INCOME
<S> <C> <C>
Interest $ 375 $ 53
------- -------
Total Investment income 375 53
------- -------
EXPENSES
Investment advisory fees 37 5
Less: waiver of investment advisory fees (37) (5)
Administrative fees 19 2
Less:waiver of administrative fees (19) (2)
Transfer agent fees & expenses 1 --
Custodian fees -- --
Professional fees -- --
Registration & filing fees 1 --
12b-1 fees--individual shares 4 1
Trustee fees -- --
Printing fees 1 --
Organizational costs 2 1
Miscellaneous -- --
------- -------
Total expenses 9 2
------- -------
NET INVESTMENT INCOME 366 51
------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Security transactions 40 (1)
Option transactions -- --
Net realized gain on forward foreign currency contracts and
foreign currency transactions -- --
Net unrealized depreciation on forward foreign currency
contracts and translation of other assets and liabilities
in foreign currencies -- --
Net change in unrealized appreciation (depreciation)
on investments 378 57
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 784 $ 107
======= =======
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - JUNE 30, 1997:
CLASS Y
1Net asset value, offer and redemption price $10.77 $10.46
======= =======
CLASS A
1Net asset value, redemption price
Maximum sales charge of 3.25% or 4.75% 10.78 10.45
------- -------
2Offering price $11.32 $10.97
======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
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 3.25% FOR THE SHORT TERM INCOME, SHORT-
INTERMEDIATE BOND, GOVERNMENT INCOME AND INTERMEDIATE MUNICIPAL BOND FUNDS AND
4.75% FOR THE BOND, GLOBAL BOND, PENNSYLVANIA MUNICIPAL BOND AND NEW JERSEY
MUNICIPAL BOND FUNDS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
94 & 95
<PAGE>
STATEMENT
OF
OPERATIONS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
-------- ------- --------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
-------- ------- --------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest $ 24,754 $ 27,544 $ 2,735
-------- -------- -------
Total investment income 24,754 27,544 2,735
-------- -------- -------
EXPENSES:
Investment advisory fees 1,113 1,926 185
Less: waiver of investment advisory fees (401) (481) (67)
Administrative fees 1,781 1,204 296
Less: waiver of administrative fees (446) (433) (74)
Transfer agent fees & expenses 71 117 14
Custodian fees 1 1 --
Professional fees 25 10 3
Registration & filing fees 4 60 20
12b-1 fees 23 64 12
Trustee fees 10 11 5
Printing 65 77 5
Miscellaneous 63 32 (1)
-------- -------- -------
Total expenses 2,309 2,588 398
-------- -------- -------
NET INVESTMENT INCOME 22,445 24,956 2,337
-------- -------- -------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain from security
transactions 14 5 --
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 22,459 $ 24,961 $ 2,337
======== ======== =======
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
96
<PAGE>
[This page intentionally left blank.]
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- -------------------
EQUITY CORE EQUITY
INDEX FUND FUND(2)
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 1,739 $ 3,256 $ 579 $ 2,927
Net realized gain on investments, forward foreign currency contracts and foreign
currency 5,184 3,591 40,986 66,598
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 17,916 55,389 20,773 67,597
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations 24,839 62,236 62,338 137,122
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,685) (3,225) (595) (2,858)
Class A (48) (28) -- (49)
Class B (2) -- -- --
Net realized gains:
Class Y (8,013) (1,484) (69,731) (35,253)
Class A (265) (6) (2,421) (977)
Class B (16) -- (17) --
-------- -------- -------- --------
Total dividends distributed (10,029) (4,743) (72,764) (39,137)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 24,068 -- 48,159 56,759
Reinvestment of cash distributions 8,774 -- 63,917 38,110
Cost of shares redeemed (25,937) -- (59,580) (89,855)
-------- -------- -------- --------
Increase in net assets from Class Y transactions 6,905 -- 52,496 5,014
-------- -------- -------- --------
Class A:
Proceeds from shares issued 4,631 43,492 2,811 3,395
Reinvestment of cash distributions 330 4,960 2,403 1,038
Cost of shares redeemed (655) (30,407) (1,722) (2,376)
-------- -------- -------- --------
Increase in net assets from Class A transactions 4,306 18,045 3,492 2,057
-------- -------- -------- --------
Class B:
Proceeds from shares issued 732 4,101 132 --
Reinvestment of cash distributions 18 34 17 --
Cost of shares redeemed (5) (103) -- --
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 745 4,032 149 --
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,956 22,077 56,137 7,071
-------- -------- -------- --------
Net increase (decrease) in net assets 26,766 79,570 45,711 105,056
-------- -------- -------- --------
NET ASSETS:
Beginning of period 245,920 166,350 531,058 426,002
-------- -------- -------- --------
End of period $272,686 $245,920 $576,769 $531,058
======== ======== ======== ========
------------------- ------------------
GROWTH SPECIAL
EQUITY FUND EQUITY FUND
------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ (135) $ 399 $ (201) $ 121
Net realized gain on investments, forward foreign currency contracts and foreign
currency 11,173 14,635 7,997 7,793
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies 10,360 12,411 (1,796) 3,603
-------- -------- ------- -------
Net increase (decrease) in net assets resulting from operations 21,398 27,445 6,000 11,517
-------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y -- (393) -- (177)
Class A -- (3) -- (2)
Class B -- -- -- --
Net realized gains:
Class Y (11,719) (13,864) (350) (13,011)
Class A (400) (404) (9,099) (307)
Class B (7) -- (15) --
-------- -------- ------- -------
Total dividends distributed (12,126) (14,664) (9,464) (13,497)
-------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 18,945 -- 7,178 --
Reinvestment of cash distributions 10,162 -- 8,424 --
Cost of shares redeemed (23,121) -- (10,285) --
-------- -------- ------- -------
(Decrease) in net assets from Class Y transactions 5,986 -- 5,317 --
-------- -------- ------- -------
Class A:
Proceeds from shares issued 728 38,807 516 13,884
Reinvestment of cash distributions 400 12,752 349 13,074
Cost of shares redeemed (390) (36,303) (179) (16,684)
-------- -------- ------- -------
Increase in net assets from Class A transactions 738 15,256 686 10,274
-------- -------- ------- -------
Class B:
Proceeds from shares issued 102 1,712 124 1,020
Reinvestment of cash distributions 7 410 15 310
Cost of shares redeemed -- (1,001) -- (121)
-------- -------- ------- -------
Increase (decrease) in net assets from Class B transactions 109 1,121 139 1,209
-------- -------- ------- -------
Increase in net assets derived from capital share transactions 6,833 16,377 6,142 11,483
-------- -------- ------- -------
Net increase (decrease) in net assets 16,105 29,158 2,678 9,503
-------- -------- ------- -------
NET ASSETS:
Beginning of period 152,393 123,235 74,327 64,824
-------- -------- ------- -------
End of period $168,498 $152,393 $77,005 $74,327
======== ======== ======= =======
------------------- -------------------
INTERNATIONAL BALANCED
GROWTH FUND FUND
------------------- -------------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 285 $ 969 $ 1,335 $ 3,139
Net realized gain on investments, forward foreign currency contracts and foreign
currency 1,974 5,290 3,960 7,717
Net unrealized appreciation on investments, forward foreign currency contracts
and translation of assets and liabilites in foreign currencies (10,192) 15,689 3,388 6,601
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations (7,933) 21,948 8,683 17,457
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,958) (3,802) (1,280) (3,056)
Class A (22) (53) (48) (92)
Class B -- -- (2) --
Net realized gains:
Class Y (6,263) (8,375) (6,356) (5,885)
Class A (93) (130) (282) (184)
Class B (1) -- (28) --
-------- -------- -------- --------
Total dividends distributed (8,337) (12,360) (7,996) (9,217)
-------- -------- -------- --------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 43,065 34,899 11,645 --
Reinvestment of cash distributions 7,249 11,015 6,080 --
Cost of shares redeemed (38,992) (31,528) (10,793) --
-------- -------- -------- --------
(Decrease) in net assets from Class Y transactions 11,322 14,386 6,932 --
-------- -------- -------- --------
Class A:
Proceeds from shares issued 358 489 1,546 23,565
Reinvestment of cash distributions 11 178 323 8,737
Cost of shares redeemed (238) (506) (519) (29,150)
-------- -------- -------- --------
Increase in net assets from Class A transactions 131 161 1,350 3,152
-------- -------- -------- --------
Class B:
Proceeds from shares issued 14 -- 568 1,285
Reinvestment of cash distributions 1 -- 30 293
Cost of shares redeemed -- -- -- (833)
-------- -------- -------- --------
Increase (decrease) in net assets from Class B transactions 15 -- 598 745
-------- -------- -------- --------
Increase in net assets derived from capital share transactions 11,468 14,547 8,880 3,897
-------- -------- -------- --------
Net increase (decrease) in net assets (4,802) 24,135 9,567 12,137
-------- -------- -------- --------
NET ASSETS:
Beginning of period 165,548 141,413 117,840 105,703
-------- -------- -------- --------
End of period $160,746 $165,548 $127,407 $117,840
======== ======== ======== ========
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE FINANCIAL STATEMENTS.
(2) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
98 & 99
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
---------------- ----------------- ----------------
SHORT-
SHORT TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
---------------- ----------------- ----------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 1,028 $ 1,757 $ 5,016 $ 10,074 $ 676 $ 1,293
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 8 (8) 461 (26) 88 (156)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 68 91 1,670 993 505 434
------- ------- -------- -------- ------- -------
Net increase in net assets resulting from operations 1,104 1,840 7,147 11,041 1,269 1,571
------- ------- -------- -------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (1,015) (1,748) (4,933) (9,902) (624) (1,204)
Class A (13) (9) (77) (172) (51) (90)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total dividends distributed (1,028) (1,757) (5,010) (10,074) (675) (1,294)
------- ------- -------- -------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 6,147 16,475 20,016 45,113 3,060 8,152
Reinvestment of cash distributions 880 1,808 4,505 9,516 352 612
Cost of shares redeemed (6,908)(11,486) (19,785) (52,263) (1,936) (3,957)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class Y
transactions 119 6,797 4,736 2,366 1,476 4,807
------- ------- -------- -------- ------- -------
Class A:
Proceeds from shares issued 63 483 289 391 308 579
Reinvestment of cash distributions 13 9 59 143 43 85
Cost of shares redeemed -- (1) (305) (865) (229) (311)
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets from Class A
transactions 76 491 43 (331) 122 353
------- ------- -------- -------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 195 7,288 4,779 2,035 1,598 5,160
------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets 271 7,371 6,916 3,002 2,192 5,437
------- ------- -------- -------- ------- -------
NET ASSETS:
Beginning of period 37,504 30,133 165,905 162,903 20,667 15,230
------- ------- -------- -------- ------- -------
End of period $37,775 $37,504 $172,821 $165,905 $22,859 $20,667
======= ======= ======== ======== ======= =======
----------------- ----------------- ------------------
INTERMEDIATE
BOND GLOBAL MUNICIPAL
FUND BOND FUND BOND FUND
----------------- ----------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 5,627 $ 12,245 $ 931 $ 1,774 $ 39 $ 71
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 1,499 (735) 9 423 3 (6)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 3,530 2,749 (188) (149) 35 25
-------- -------- ------- ------- ------- -------
Net increase in net assets resulting from operations 10,656 14,259 753 2,048 77 90
-------- -------- ------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (5,574) (12,161) (1,509) (2,621) (20) (34)
Class A (53) (84) (10) (13) (19) (37)
Net realized gains:
Class Y -- -- -- -- -- --
Class A -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Total dividends distributed (5,627) (12,245) (1,519) (2,634) (39) (71)
-------- -------- ------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 11,940 18,942 911 107 34 841
Reinvestment of cash distributions 5,007 12,215 1,285 2,670 7 12
Cost of shares redeemed (30,726) (49,397) (400) (602) (147) (269)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions (13,779) (18,240) 1,796 2,175 (106) 584
-------- -------- ------- ------- ------- -------
Class A:
Proceeds from shares issued 427 579 69 31 66 80
Reinvestment of cash distributions 46 78 10 15 17 37
Cost of shares redeemed (117) (323) (10) (13) (95) (186)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 356 334 69 33 (12) (69)
-------- -------- ------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions (13,423) (17,906) 1,865 2,208 (118) 515
-------- -------- ------- ------- ------- -------
Net increase (decrease) in net assets (8,394) (15,892) 1,099 1,622 (80) 534
-------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of period 183,986 199,878 34,772 33,150 1,952 1,418
-------- -------- ------- ------- ------- -------
End of period $175,592 $183,986 $35,871 $34,772 $ 1,872 $ 1,952
======== ======== ======= ======= ======= =======
------------------ -----------------
PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL
BOND FUND BOND FUND
------------------ -----------------
7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 366 $ 583 $ 51 $ 81
Net realized gain (loss) on investments, forward foreign
currency contracts and foreign currency 40 20 (1) (3)
Net unrealized appreciation (depreciation) on investments,
forward foreign currency contracts and translation of
assets and liabilites in foreign currencies 378 240 57 24
------- ------- ------- -------
Net increase in net assets resulting from operations 784 843 107 102
------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (290) (521) (40) (65)
Class A (76) (62) (11) (16)
Net realized gains:
Class Y -- -- -- (8)
Class A -- -- -- (2)
------- ------- ------- -------
Total dividends distributed (366) (583) (51) (91)
------- ------- ------- -------
CAPITAL TRANSACTIONS (1):
Class Y:
Proceeds from shares issued 2,871 3,530 172 525
Reinvestment of cash distributions 126 297 14 14
Cost of shares redeemed (586) (2,772) (102) (388)
------- ------- ------- -------
Increase (decrease) in net assets from Class Y transactions 2,411 1,055 84 151
------- ------- ------- -------
Class A:
Proceeds from shares issued 2,567 1,341 168 99
Reinvestment of cash distributions 64 56 9 15
Cost of shares redeemed (133) (420) (72) (22)
------- ------- ------- -------
Increase (decrease) in net assets from Class A transactions 2,498 977 105 92
------- ------- ------- -------
Increase (decrease) in net assets derived from capital
share transactions 4,909 2,032 189 243
------- ------- ------- -------
Net increase (decrease) in net assets 5,327 2,292 245 254
------- ------- ------- -------
NET ASSETS:
Beginning of period 12,175 9,883 1,875 1,621
------- ------- ------- -------
End of period $17,502 $12,175 $ 2,120 $ 1,875
======= ======= ======= =======
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) FOR CAPITAL SHARE TRANSACTIONS PLEASE SEE FOOTNOTE 8 IN THE NOTES TO THE
FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
100 & 101
<PAGE>
STATEMENT
OF CHANGES
IN NET ASSETS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
(000)
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
------------------- ------------------- ------------------
TREASURY CASH TAX-FREE
RESERVE RESERVE RESERVE
------------------- ------------------- ------------------
7/1/97 7/1/96 7/1/97 7/1/96 7/1/97 7/1/96
TO TO TO TO TO TO
12/31/97 6/30/97 12/31/97 6/30/97 12/31/97 6/30/97
-------- ------- -------- ------- -------- -------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 22,445 $ 43,860 $ 24,956 $ 44,127 $ 2,337 $ 3,787
Net realized gain (loss) on securities transactions 14 8 5 1 -- (1)
---------- ---------- ---------- ---------- -------- ---------
Net increase in net assets resulting from operations 22,459 43,868 24,961 44,128 2,337 3,786
---------- ---------- ---------- ---------- -------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income:
Class Y (22,007) (43,173) (23,686) (43,042) (2,224) (3,677)
Class C (438) (687) (1,270) (1,085) (135) (86)
---------- ---------- ---------- ---------- -------- ---------
Total dividends distributed (22,445) (43,860) (24,956) (44,127) (2,359) (3,763)
---------- ---------- ---------- ---------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued 1,198,732 2,548,964 1,003,078 2,154,887 170,940 392,069
Reinvestment of cash distributions 1,462 4,246 1,865 3,136 96 229
Cost of shares redeemed (1,228,616) (2,610,396) (961,599) (2,061,985) (137,772) (376,938)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class Y
transactions (28,422) (57,186) 70,344 96,038 33,264 15,360
---------- ---------- ---------- ---------- -------- ---------
Class C
Proceeds from shares issued 34,333 12,429 107,066 44,890 24,342 3,779
Reinvestment of cash distributions 272 264 1,229 1,023 132 79
Cost of shares redeemed (22,458) (19,933) (56,508) (37,956) (15,279) (3,506)
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets from Class C
transactions 12,147 (7,240) 51,787 7,957 9,195 352
---------- ---------- ---------- ---------- -------- ---------
Class B
Proceeds from shares issued -- -- 88 -- -- --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed -- -- (8) -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase in net assets from Class B
transactions -- -- 80 -- -- --
---------- ---------- ---------- ---------- -------- ---------
Increase (decrease) in net assets derived from
capital share transactions 16,275 (64,426) 122,211 103,995 42,459 15,712
---------- ---------- ---------- ---------- -------- ---------
Net (decrease) increase in net assets 16,261 (64,418) 122,216 103,996 42,437 15,735
---------- ---------- ---------- ---------- -------- ---------
NET ASSETS:
Beginning of period 847,530 911,948 913,944 809,948 122,781 107,046
---------- ---------- ---------- ---------- -------- ---------
End of period $ 831,269 $ 847,530 $1,036,160 $ 913,944 $165,218 $ 122,781
========== ========== ========== ========== ======== =========
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
102
<PAGE>
[This page intentionally left blank.]
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND EQUITY FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $37.39 $ 0.26 $ 3.50 $(0.26) $(1.24) $39.65 10.12%+ $262,831 0.37%
1997 28.47 0.51 9.16 (0.51) (0.24) 37.39 34.44 241,413 0.37
1996 23.79 0.51 5.47 (0.51) (0.79) 28.47 25.69 166,350 0.35
1995 20.54 0.52 4.24 (0.52) (0.99) 23.79 24.45 112,533 0.37
1994 20.97 0.55 (0.43) (0.55) -- 20.54 0.55 72,552 0.35
1993 19.22 0.52 1.84 (0.52) (0.09) 20.97 12.39 50,551 0.49
1992 18.46 0.52 1.80 (0.48) (1.08) 19.22 12.59 20,166 0.57
19911 19.48 0.03 (0.94) (0.02) (0.09) 18.46 (4.64)+ 12,117 0.97
CLASS A
1997(A) $37.37 $ 0.26 $ 3.51 $(0.24) $(1.24) $39.66 2.74%+ $ 9,113 0.37%
1997(10) 29.62 0.32 8.05 (0.38) (0.24) 37.37 28.58+ 4,507 0.37
CLASS B
1997(A)(12) $39.16 $ 0.16 $ 1.27 $(0.23) $(1.24) $39.12 3.37%+ $ 742 1.37%
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) $21.11 $ -- $ 2.41 $ -- $(2.92) $20.60 11.87%+ $557,593 0.99%
1997 17.26 0.12 5.32 (0.12) (1.47) 21.11 33.10 515,015 0.98
1996 17.07 0.14 1.49 (0.14) (1.30) 17.26 19.24 414,824 0.97
INSTITUTIONAL CLASS*
1995 $15.00 $ 0.19 $ 2.87 $(0.19) $(0.80) $17.07 22.00% $378,352 1.05%
CLASS A*
1997(A) $21.13 $ -- $ 2.40 $ -- $(2.92) $20.61 11.70%+ $ 19,043 1.24%
1997 17.28 0.07 5.32 (0.07) (1.47) 21.13 32.74 16,043 1.23
1996 17.08 0.12 1.49 (0.11) (1.30) 17.28 19.11 11,178 1.22
RETAIL CLASS*
1995 $15.00 $ 0.18 $ 2.87 $(0.17) $(0.80) $17.08 21.94% $ 6,591 1.34%
PRIOR CLASS
1994 $15.39 $ 0.11 $ 0.22 $(0.11) $(0.61) $15.00 2.21% $ 50,128 1.49%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90 45,677 1.20
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27 28,103 0.92
1991 8.95 0.26 4.13 (0.26) -- 13.08 49.37 12,830 0.54
1990(2) 10.00 0.14 (1.05) (0.14) -- 8.95 (9.22) 5,982 0.65
CLASS B
1997(A)(12) $23.05 $(4.44) $ 2.62 $ -- $(2.92) $18.31 (7.39)%+$ 133 1.99%
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y**
1997(A) $15.43 $ 0.01 $ 2.16 $ -- $(1.24) $16.33 14.11%+ $162,698 0.96%
1997 14.19 0.04 2.81 (0.04) (1.57) 15.43 21.67 147,700 0.96
1996 11.18 0.08 3.36 (0.08) (0.35) 14.19 31.36 120,073 0.89
1995 9.11 0.08 2.07 (0.08) -- 11.18 23.71 91,345 0.76
1994 9.95 0.05 (0.84) (0.05) -- 9.11 (8.01) 64,877 0.69
1993 8.74 0.08 1.21 (0.08) -- 9.95 14.76 63,777 0.43
19923 10.00 0.05 (1.26) (0.05) -- 8.74 (12.05)+ 33,418 0.14
CLASS A**
1997(A) $15.39 $(0.03) $ 2.15 $ -- $(1.24) $16.27 14.02%+ $ 5,699 1.21%
1997 14.17 0.01 2.79 (0.01) (1.57) 15.39 21.29 4,693 1.21
1996 11.17 0.05 3.35 (0.05) (0.35) 14.17 31.00 3,162 1.14
1995 9.10 0.06 2.07 (0.06) -- 11.17 23.44 2,043 1.01
1994 9.95 0.04 (0.85) (0.04) -- 9.10 (8.13) 1,730 0.94
19934 9.80 0.03 0.15 (0.03) -- 9.95 1.80+ 5,224 0.80
CLASS B
1997(A)(13) $17.32 $(0.02) $ 0.13 $ -- $(1.24) $16.19 0.85%+ $ 101 1.96%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------------
EQUITY INDEX FUND
- -----------------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) 1.30% 0.71% 0.96% 9% $0.0621
1997 1.63 0.71 1.29 11 0.0639
1996 1.94 0.71 1.59 13 0.0641
1995 2.48 0.76 2.09 27 N/A
1994 2.63 0.75 2.23 13 N/A
1993 2.82 0.88 2.43 4 N/A
1992 2.66 1.06 2.17 27 N/A
19911 1.79 1.20 1.56 -- N/A
CLASS A
1997(A) 1.05% 0.71% 0.71% 9% $0.0621
1997(10) 1.51 0.69 1.19 11 0.0639
CLASS B
1997(A)(12) 0.30% 1.71% (0.04)% 9% $0.0621
- -------------------
CORE EQUITY FUND(9)
- -------------------
CLASS Y*
1997(A) 0.21% 1.05% 0.15% 23% $0.0658
1997 0.63 1.03 0.58 79 0.0624
1996 1.15 1.01 1.11 114 0.0636
INSTITUTIONAL CLASS*
1995 1.44% 1.10% 1.44% 119% N/A
CLASS A*
1997(A) (0.04)% 1.30% (0.10)% 23% $0.0658
1997 0.38 1.28 0.33 79 0.0624
1996 0.89 1.26 0.85 114 0.0636
RETAIL CLASS*
1995 1.23% 1.53% 1.04% 119% N/A
PRIOR CLASS
1994 0.75% 1.51% 0.73% 35% N/A
1993 0.94 1.41 0.73 24 N/A
1992 1.47 1.23 1.17 39 N/A
1991 2.30 1.48 1.36 68 N/A
1990(2) 2.29 1.59 1.35 43 N/A
CLASS B
1997(A)(12) (0.79)% 2.30% (1.10)% 23% $0.0658
- ------------------
GROWTH EQUITY FUND
- ------------------
CLASS Y*
1997(A) (0.15)% 1.05% (0.24)% 41% $0.0602
1997 0.30 1.06 0.20 74 0.0600
1996 0.64 1.05 0.48 81 0.0601
1995 0.84 1.10 0.50 113 N/A
1994 0.48 1.11 0.06 127 N/A
1993 0.85 1.11 0.17 103 N/A
19923 1.38 1.12 0.40 66 N/A
CLASS A*
1997(A) (0.40)% 1.30% (0.49)% 41% $0.0602
1997 0.04 1.31 (0.06) 74 0.0600
1996 0.40 1.30 0.23 81 0.0601
1995 0.59 1.35 0.25 113 N/A
1994 0.23 1.36 (0.19) 127 N/A
19934 0.39 1.48 (0.29) 103 N/A
CLASS B
1997(A)(12) (1.15)% 2.05% (1.24)% 41% $0.0602
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED 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. ADDITIONALLY, ON APRIL 15 & 22, 1996 THE CONESTOGA EQUITY AND SPECIAL EQUITY
FUNDS WERE ACQUIRED BY COREFUNDS, INC.; AT WHICH TIME THE INSTITUTIONAL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED
FOR CLASS Y SHARES AND THE RETAIL CLASS OF SHARES OF THESE FUNDS WERE EXCHANGED FOR CLASS A SHARES.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SPECIAL EQUITY FUND, WERE REDESIGNATED CLASS Y AND THE
SERIES B SHARES OF EACH FUND WERE REDESIGNATED CLASS A.
***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.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JUNE 1, 1991. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
104
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE INVESTMENT UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN8 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------------
SPECIAL EQUITY FUND(9)
- ----------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $11.27 $(0.03) $ 0.90 $ -- $(1.49) $10.65 8.14%+ $74,025 1.07%
1997 11.86 0.02 1.81 (0.03) (2.39) 11.27 17.94 71,980 0.84
1996 11.42 0.07 2.13 (0.07) (1.69) 11.86 22.27 63,680 0.34
INSTITUTIONAL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $57,396 0.32%
CLASS A*
1997(A) $11.25 $(0.03) $ 0.87 $ -- $(1.49) $10.60 7.88%+ $ 2,858 1.32%
1997 11.85 -- 1.81 (0.02) (2.39) 11.25 17.73 2,347 1.14
1996 11.42 0.08 2.11 (0.07) (1.69) 11.85 22.14 1,144 0.37
RETAIL CLASS*
1995 $ 9.37 $ 0.12 $ 2.12 $(0.12) $(0.07) $11.42 24.44% $ 734 0.27%
PRIOR CLASS
19945 $10.00 $ 0.06 $(0.63) $(0.06) $ -- $ 9.37 (5.72)% $10,069 0.15%
CLASS B
1997(A)(12) $12.80 $(0.01) $(0.82) $ -- $(1.49) $10.48 (6.13)+% $ 122 2.07%
- --------------------------
INTERNATIONAL GROWTH FUND
- --------------------------
CLASS Y**
1997(A) $14.72 $0.01 $(0.73) $(0.17) $(0.55) $13.28 (4.89)%+ $158,408 0.95%
1997 13.97 0.14 1.84 (0.37) (0.86) 14.72 15.43 163,117 1.20
1996 12.29 0.16 1.86 (0.28) (0.06) 13.97 16.72 139,275 1.14
1995 13.18 0.12 (0.17) (0.04) (0.80) 12.29 (0.21) 110,838 1.05
1994 11.71 0.12 1.78 (0.12) (0.31) 13.18 16.28 108,911 0.99
1993 10.52 0.10 1.16 (0.07) -- 11.71 12.06 61,655 0.99
1992 10.10 0.17 0.31 -- (0.06) 10.52 4.90 42,594 0.96
1991 10.75 0.19 (0.44) (0.27) (0.13) 10.10 (2.71) 20,582 0.99
19906 10.00 0.11 0.86 (0.09) (0.13) 10.75 9.74+ 13,513 1.22
CLASS A**
1997(A) $14.70 $(0.01) $(0.73) $(0.13) $(0.55) $13.28 (4.98)%+ $ 2,324 1.20%
1997 13.96 0.09 1.85 (0.34) (0.86) 14.70 15.09 2,431 1.45
1996 12.27 0.11 1.89 (0.25) (0.06) 13.96 16.54 2,138 1.39
1995 13.17 0.09 (0.17) (0.02) (0.80) 12.27 (0.48) 1,943 1.30
1994 11.71 0.06 1.82 (0.11) (0.31) 13.17 16.08 2,019 1.24
19934 10.07 0.05 1.59 -- -- 11.71 16.29+ 344 1.15
CLASS B
1997(A)(15) $13.79 $(0.02) $ 0.22 $(0.16) $(0.55) $13.28 1.46%+ $ 14 2.16%
- --------------
BALANCED FUND
- --------------
CLASS Y**
1997(A) $13.52 $0.15 $ 0.83 $(0.15) $(0.75) $13.60 7.31%+ $121,302 0.82%
1997 12.59 0.36 1.61 (0.36) (0.68) 13.52 16.44 113,642 0.78
1996 11.06 0.33 1.68 (0.33) (0.15) 12.59 18.41 102,515 0.81
1995 9.88 0.35 1.21 (0.35) (0.03) 11.06 16.21 61,092 0.73
1994 10.39 0.35 (0.51) (0.35) -- 9.88 (1.62) 42,429 0.62
19934 10.00 0.16 0.39 (0.16) -- 10.39 5.52+ 29,434 0.45
CLASS A**
1997(A) $13.52 $0.12 $ 0.84 $(0.13) $(0.75) $13.60 7.19%+ $ 5,532 1.07%
1997 12.59 0.32 1.61 (0.32) (0.68) 13.52 16.15 4,198 1.03
1996 11.06 0.30 1.68 (0.30) (0.15) 12.59 18.13 3,188 1.06
1995 9.89 0.34 1.19 (0.33) (0.03) 11.06 15.84 2,344 0.98
1994 10.38 0.31 (0.49) (0.31) -- 9.89 (1.86) 2,222 0.87
19937 10.00 0.16 0.38 (0.16) -- 10.38 2.50+ 701 0.55
CLASS B
1997(A)(14) $14.39 $0.09 $(0.09) $ 0.13 $(0.75) $13.51 (0.45)%+ $ 573 1.82%
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO AVG.
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMM.
NET ASSETS WAIVERS) WAIVERS) RATE*** RATE11
---------- ----------- ------------ --------- ------
- -----------
SPECIAL EQU
- -----------
CLASS Y*
<S> <C> <C> <C> <C> <C>
1997(A) (0.44)% 1.81% (1.18)% 32% $0.0628
1997 0.19 1.82 (0.79) 74 $0.0581
1996 0.94 1.79 (0.51) 72 0.0539
INSTITUTIONAL CLASS*
1995 1.14% 1.97% (0.51)% 129% N/A
CLASS A*
1997(A) (0.69)% 2.06% (1.43)% 32% $0.0628
1997 (0.12) 2.07 (1.05) 74 $0.0581
1996 0.91 1.82 (0.55) 72 0.0539
RETAIL CLASS*
1995 1.29% 2.24% (0.68)% 129% N/A
PRIOR CLASS
19945 1.06% 2.10% (0.89)% 39% N/A
CLASS B
1997(A)(12) (1.44)% 2.81% (2.18)% 32% $0.0628
- ------------------------------
INTERNATIONATIONAL GROWTH FUND
- ------------------------------
CLASS Y**
1997(A) 0.47% 1.04% 0.38% 25% $0.0024
1997 0.82 1.29 0.73 59 0.0080
1996 1.05 1.25 0.94 41 0.0270
1995 0.98 1.19 0.84 59 N/A
1994 0.23 1.18 0.04 67 N/A
1993 1.22 1.28 0.93 59 N/A
1992 1.67 1.40 1.23 87 N/A
1991 1.80 1.56 1.23 49 N/A
19906 2.57 1.99 1.80 20 N/A
CLASS A**
1997(A) 0.23% 1.29% 0.14% 25% $0.0024
1997 0.57 1.54 0.48 59 0.0080
1996 0.80 1.50 0.69 41 0.0270
1995 0.73 1.44 0.59 59 N/A
1994 0.05 1.43 (0.14) 67 N/A
19934 1.51 1.44 1.22 59 N/A
CLASS B
1997(A)(15) (1.15)% 2.23% (1.22%) 25% $0.0024
- -------------
BALANCED FUND
- -------------
CLASS Y**
1997(A) 2.12% 1.03% 1.91% 30% $0.0601
1997 2.79 1.00 2.57 54 0.0600
1996 2.79 1.03 2.57 74 0.0621
1995 3.51 1.07 3.17 46 N/A
1994 3.46 1.08 3.00 56 N/A
19934 3.38 1.39 2.45 21 N/A
CLASS A**
1997(A) 1.87% 1.28% 1.66% 30% $0.0601
1997 2.54 1.25 2.32 54 0.0600
1996 2.53 1.27 2.32 74 0.0621
1995 3.27 1.32 2.93 46 N/A
1994 3.21 1.33 2.75 56 N/A
19937 5.76 1.48 4.83 21 N/A
CLASS B
1997(A)(14) (1.12)% 2.03% 0.91% 30% $0.0601
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
5 COMMENCED OPERATIONS MARCH 15, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 12, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS MARCH 16, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES LOAD. ADDITIONALLY TOTAL RETURN FOR CLASS Y & CLASS A FOR THE CORE
EQUITY & SPECIAL EQUITY FUNDS FOR 1996 ARE FOR AN EIGHT MONTH PERIOD ENDED JUNE 30, 1997.
9 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR 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.
10 COMMENCED OPERATIONS ON OCTOBER 9, 1996. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
11 AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS BEGINNING AFTER SEPTEMBER 1, 1995.
12 COMMENCED OPERATIONS ON NOVEMBER 7, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
13 COMMENCED OPERATIONS ON NOVEMBER 18, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
14 COMMENCED OPERATIONS ON NOVEMBER 5, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
15 COMMENCED OPERATIONS ON NOVEMBER 24, 1997. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
105
<PAGE>
FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
COREFUND FIXED INCOME FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET
ASSET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- -------------------------
SHORT TERM INCOME FUND11
- -------------------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.97 $0.28 $ 0.02 $(0.28) $ -- $ 9.99 3.00%+ $ 37,203 0.49%
1997 9.94 0.53 0.03 (0.53) -- 9.97 5.82 37,011 0.47
1996 10.05 0.36 (0.08) (0.38) (0.01) 9.94 2.78 30,132 0.51
INSTITUTIONAL CLASS*
19951 $10.00 $0.25 $ 0.03 $(0.23) $ -- $10.05 2.57%+ $ 36,059 0.63%
CLASS A*
1997(A) $ 9.96 $0.26 $ 0.02 $(0.26) $ -- $ 9.98 2.87%+ $ 570 0.74%
1997 9.93 0.51 0.03 (0.51) -- 9.96 5.59 493 0.73
1996 10.04 0.35 (0.10) (0.35) (0.01) 9.93 2.55 1 0.76
RETAIL CLASS*
19952 $10.01 $0.23 $0.02 $(0.22) $ -- $10.04 2.87%+ $ 11 0.88%
- -----------------------------
SHORT-INTERMEDIATE BOND FUND
- -----------------------------
CLASS Y**
1997(A) $ 9.83 $0.29 $ 0.12 $(0.29) $ -- $ 9.95 4.25%+ $169,990 0.51%
1997 9.76 0.59 0.07 (0.59) -- 9.83 6.90 163,153 0.49
1996 9.84 0.57 (0.08) (0.57) -- 9.76 5.05 159,841 0.55
1995 9.63 0.53 0.21 (0.53) -- 9.84 8.22 55,128 0.60
1994 10.18 0.43 (0.53) (0.43) (0.02) 9.63 (0.32) 48,379 0.58
1993 10.01 0.47 0.31 (0.47) (0.14) 10.18 7.90 44,692 0.42
19923 10.00 0.23 0.01 (0.23) -- 10.01 2.49+ 22,623 0.11
CLASS A**
1997(A) $ 9.83 $0.28 $ 0.12 $(0.28) $ -- $ 9.95 4.14%+ $ 2,831 0.76%
1997 9.76 0.56 0.07 (0.56) -- 9.83 6.64 2,752 0.74
1996 9.84 0.54 (0.08) (0.54) -- 9.76 4.79 3,062 0.81
1995 9.63 0.54 0.20 (0.53) -- 9.84 7.95 1,961 0.85
1994 10.18 0.41 (0.53) (0.41) (0.02) 9.63 (0.56) 9,365 0.83
19934 10.01 0.20 0.17 (0.20) -- 10.18 3.95+ 5,752 0.75
- -----------------------
GOVERNMENT INCOME FUND
- -----------------------
CLASS Y**
1997(A) $ 9.76 $0.31 $ 0.27 $(0.31) $ -- $10.03 6.00%+ $ 21,032 0.73%
1997 9.62 0.62 0.14 (0.62) -- 9.76 8.15 19,007 0.70
1996 9.83 0.61 (0.21) (0.61) -- 9.62 4.09 13,943 0.64
1995 9.52 0.62 0.31 (0.62) -- 9.83 10.26 11,305 0.59
1994 10.18 0.50 (0.62) (0.50) (0.04) 9.52 (1.34) 9,089 0.50
19935 10.00 0.13 0.18 (0.13) -- 10.18 3.12+ 6,323 0.44
CLASS A**
1997(A) $ 9.76 $0.30 $ 0.27 $(0.30) $ -- $10.03 5.86%+ $ 1,827 0.98%
1997 9.62 0.60 0.14 (0.60) -- 9.76 7.88 1,660 0.95
1996 9.84 0.58 (0.22) (0.58) -- 9.62 3.73 1,287 0.88
1995 9.51 0.61 0.33 (0.61) -- 9.84 10.23 1,374 0.85
1994 10.17 0.47 (0.62) (0.47) (0.04) 9.51 (1.57) 1,536 0.75
19938 10.00 0.07 0.17 (0.07) -- 10.17 1.71+ 201 0.63
- ------------
BOND FUND11
- ------------
CLASS Y*
1997(A) $10.24 $0.32 $ 0.29 $(0.32) $ -- $10.53 6.06%+ $173,565 0.57%
1997 10.15 0.64 0.09 (0.64) -- 10.24 7.43 182,364 0.56
1996 10.55 0.43 (0.30) (0.45) (0.08) 10.15 1.23 198,605 0.55
INSTITUTIONAL CLASS*
1995 $ 9.81 $0.61 $ 0.71 $(0.58) $ -- $10.55 13.87% $194,442 0.71%
CLASS A*
1997(A) $10.24 $0.31 $ 0.29 $(0.31) $ -- $10.53 5.93%+ $ 2,027 0.82%
1997 10.15 0.62 0.09 (0.62) -- 10.24 7.15 1,622 0.81
1996 10.56 0.44 (0.33) (0.44) (0.08) 10.15 0.98 1,273 0.80
RETAIL CLASS*
1995 $ 9.81 $0.60 $ 0.72 $(0.57) $ -- $10.56 13.83% $ 1,373 0.97%
PRIOR CLASS
1994 $11.18 $0.53 $(1.04) $(0.52) $(0.34) $ 9.81 (4.75)% $ 23,377 1.01%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63 27,346 0.88
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82 15,180 0.46
1991 9.96 0.78 0.69 (0.78) -- 10.65 15.16 7,255 0.47
19906 10.00 0.50 (0.04) (0.50) -- 9.96 4.64+ 4,593 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME (LOSS)
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- ------------------------
SHORT TERM INCOME FUND11
- ------------------------
CLASS Y*
<S> <C> <C> <C> <C>
1997(A) 5.48% 1.07% 4.90% 28%
1997 5.37 1.05 4.79 99
1996 5.31 1.03 4.79 102
INSTITUTIONAL CLASS*
19951 5.43% 1.08% 4.98% 40%
CLASS A*
1997(A) 5.23% 1.32% 4.65% 28%
1997 5.18 1.32 4.59 99
1996 5.05 1.25 4.56 102
RETAIL CLASS*
19952 5.05% 1.33% 4.60% 40%
- ----------------------------
SHORT-INTERMEDIATE BOND FUND
- ----------------------------
CLASS Y**
1997(A) 5.37% 0.80% 5.08% 66%
1997 5.98 0.80 5.67 158
1996 5.80 0.81 5.54 257
1995 5.76 0.84 5.52 405
1994 4.30 0.86 4.02 299
1993 4.62 0.86 4.18 188
19923 5.73 0.84 5.00 51
CLASS A**
1997(A) 4.88% 1.05% 4.59% 66%
1997 5.73 1.05 5.42 158
1996 5.51 1.06 5.27 257
1995 5.27 1.09 5.03 405
1994 4.05 1.11 3.77 299
19934 3.78 1.19 3.34 188
- ----------------------
GOVERNMENT INCOME FUND
- ----------------------
CLASS Y**
1997(A) 6.16% 0.83% 6.06% 18%
1997 6.40 0.85 6.25 120
1996 6.17 0.89 5.92 131
1995 6.53 0.98 6.14 368
1994 4.93 1.00 4.43 157
19935 5.41 1.10 4.75 93
CLASS A**
1997(A) 5.91% 1.08% 5.81% 18%
1997 6.15 1.10 6.00 120
1996 5.93 1.14 5.67 131
1995 6.25 1.24 5.86 368
1994 4.68 1.25 4.18 157
19938 5.35 1.29 4.69 93
- -----------
BOND FUND11
- -----------
CLASS Y*
1997(A) 6.11% 1.04% 5.64% 71%
1997 6.29 1.04 5.81 210
1996 6.28 0.97 5.86 190
INSTITUTIONAL CLASS*
1995 6.09% 1.12% 5.68% 352%
CLASS A*
1997(A) 5.86% 1.29% 5.39% 71%
1997 6.05 1.29 5.57 210
1996 6.02 1.22 5.61 190
RETAIL CLASS*
1995 6.02% 1.44% 5.55% 352%
PRIOR CLASS*
1994 5.07% 1.60% 4.48% 232%
1993 5.16 1.49 4.55 158
1992 6.78 1.24 6.01 99
1991 7.71 1.41 6.78 47
19906 7.75 1.62 6.81 23
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
106
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET
NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS NET ASSETS RATIO
VALUE NET UNREALIZED FROM NET FROM ASSET VALUE END OF EXPENSES
BEGINNING INVESTMENT GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN10 (000) NET ASSETS
--------- ---------- ---------------- ------------- ------------- ----------- ------- --------- -----------
- ----------------
GLOBAL BOND FUND
- ----------------
CLASS Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $ 9.54 $0.37 $(0.17) $(0.41) $ -- $ 9.33 2.06%+ $ 35,625 0.68%
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
19947 10.00 0.25 (1.15) (0.04) -- 9.06 (9.00)+ 24,957 0.73
CLASS A**
1997(A) $ 9.52 $0.29 $(0.10) $(0.39) $ -- $ 9.32 2.05%+ $ 246 0.93%
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
19947 10.00 0.19 (1.11) (0.04) -- 9.04 (9.22)+ 167 0.98
- ---------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.05 $0.21 $ 0.20 $(0.21) $ -- $10.25 4.13%+ $ 906 0.56%
1997 9.92 0.42 0.13 (0.42) -- 10.05 5.62 993 0.55
1996 9.83 0.37 0.09 (0.37) -- 9.92 4.74 403 0.81
1995 9.68 0.38 0.15 (0.38) -- 9.83 5.58 365 0.82
1994 10.09 0.39 (0.41) (0.39) -- 9.68 (0.27) 1,088 0.63
19938 10.00 0.04 0.09 (0.04) -- 10.09 1.33+ 2,009 0.58
CLASS A**
1997(A) $10.05 $0.20 $ 0.20 $(0.20) $ -- $10.25 4.00%+ $ 966 0.81%
1997 9.92 0.39 0.13 (0.39) -- 10.05 5.36 959 0.80
1996 9.83 0.35 0.09 (0.35) -- 9.92 4.48 1,015 1.08
1995 9.67 0.35 0.16 (0.35) -- 9.83 5.42 1,027 1.08
1994 10.08 0.37 (0.41) (0.37) -- 9.67 (0.52) 1,311 0.88
19938 10.00 0.03 0.08 (0.03) -- 10.08 1.19+ 166 0.81
- ---------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- ---------------------------------
CLASS Y**
1997(A) $10.47 $0.27 $ 0.30 $(0.27) $ -- $10.77 5.51%+ $ 12,912 0.08%
1997 10.22 0.54 0.25 (0.54) -- 10.47 7.92 10,171 0.08
1996 10.16 0.55 0.06 (0.55) -- 10.22 6.02 8,864 0.21
1995 9.95 0.51 0.21 (0.51) -- 10.16 7.50 2,272 0.39
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.14+ 434 0.42
CLASS A**
1997(A) $10.47 $0.26 $ 0.31 $(0.26) $ -- $10.78 5.47%+ $ 4,590 0.33%
1997 10.22 0.51 0.25 (0.51) -- 10.47 7.65 2,004 0.33
1996 10.16 0.52 0.06 (0.52) -- 10.22 5.76 994 0.46
1995 9.95 0.49 0.21 (0.49) -- 10.16 7.25 317 0.64
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.09+ 163 0.67
- -------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- -------------------------------
CLASS Y**
1997(A) $10.16 $0.26 $ 0.30 $(0.26) $ -- $10.46 5.55%+ $ 1,605 0.11%
1997 10.08 0.51 0.15 (0.51) (0.07) 10.16 6.70 1,477 0.21
1996 10.12 0.51 0.02 (0.51) (0.06) 10.08 5.28 1,317 0.37
1995 9.94 0.52 0.18 (0.52) -- 10.12 7.25 1,550 0.42
19949 10.00 0.06 (0.06) (0.06) -- 9.94 0.01+ 1,432 0.43
CLASS A**
1997(A) $10.15 $0.25 $ 0.30 $(0.25) $ -- $10.45 5.42%+ $ 51 0.36%
1997 10.07 0.48 0.15 (0.48) (0.07) 10.15 6.44 398 0.45
1996 10.12 0.48 0.01 (0.48) (0.06) 10.07 4.93 304 0.60
1995 9.95 0.49 0.17 (0.49) -- 10.12 6.84 24 0.68
19949 10.00 0.06 (0.05) (0.06) -- 9.95 0.08+ 2 0.68
RATIO RATIO OF NET
RATIO OF EXPENSES INCOME
OF NET TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE***
---------- ----------- ------------ ---------
- -----------
GLOBAL BOND
- -----------
CLASS Y**
<S> <C> <C> <C> <C>
1997(A) 5.16% 0.87% 4.97% 7%
1997 5.14 1.03 4.96 90
1996 5.81 0.95 5.57 67
1995 6.84 1.03 6.45 133
19947 5.04 1.12 4.65 161
CLASS A**
1997(A) 4.91% 1.12% 4.72% 7%
1997 4.89 1.28 4.71 90
1996 5.56 1.20 5.32 67
1995 6.59 1.28 6.20 133
19947 4.79 1.37 4.40 161
- --------------------------------
INTERMEDIATE MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.07% 1.07% 3.56% 8%
1997 4.20 1.02 3.73 22
1996 3.73 1.31 3.23 10
1995 3.91 1.26 3.47 9
1994 3.91 1.17 3.37 43
19938 2.74 1.45 1.87 10
CLASS A**
1997(A) 3.87% 1.32% 3.36% 8%
1997 3.92 1.23 3.49 22
1996 3.47 1.61 2.94 10
1995 3.65 1.52 3.21 9
1994 3.66 1.42 3.12 43
19938 2.51 1.68 1.64 10
- --------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
- --------------------------------
CLASS Y**
1997(A) 4.99% 0.82% 4.25% 17%
1997 5.23 0.83 4.48 39
1996 5.25 0.96 4.50 92
1995 5.26 1.14 4.51 18
19949 5.09 1.17 4.34 3
CLASS A**
1997(A) 4.74% 1.07% 4.00% 17%
1997 4.99 1.08 4.24 39
1996 4.93 1.21 4.18 92
1995 4.95 1.39 4.20 18
19949 4.84 1.42 4.09 3
- ------------------------------
NEW JERSEY MUNICIPAL BOND FUND
- ------------------------------
CLASS Y**
1997(A) 4.96% 0.86% 4.21% 4%
1997 5.02 0.96 4.27 19
1996 4.93 1.12 4.18 21
1995 5.21 1.17 4.46 32
19949 5.07 1.35 4.15 13
CLASS A**
1997(A) 4.71% 1.11% 3.96% 4%
1997 4.81 1.20 4.06 19
1996 4.65 1.35 3.90 21
1995 4.97 1.44 4.21 32
19949 4.82 1.60 3.90 13
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON FEBRUARY 21, 1995, THE SHARES OF THE FUNDS WERE REDESIGNED 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.
ADDITIONALLY, ON APRIL 22, 1996 THE CONESTOGA SHORT-TERM INCOME AND BOND
FUNDS WERE ACQUIRED BY COREFUNDS, INC. AT WHICH TIME THE INSTITUTIONAL CLASS
OF SHARES OF THESE FUNDS WERE REDESIGNATED CLASS Y AND THE RETAIL CLASS OF
SHARES OF THESE FUNDS WERE REDESIGNATED CLASS A.
** ON APRIL 22, 1996 THE SERIES A SHARES OF EACH FUND, EXCLUDING THE SHORT TERM
INCOME AND BOND FUNDS, WERE REDESIGNATED CLASS Y AND THE SERIES B SHARES OF
EACH FUND, EXCLUDING THE SHORT TERM INCOME AND BOND FUNDS, WERE REDESIGNATED
CLASS A.
***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.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS MAY 15, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
2 COMMENCED OPERATIONS MAY 17, 1995. UNLESS OTHERWISE NOTED, ALL RATIOS FOR
THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS FEBRUARY 3, 1992. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS JANUARY 4, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
5 COMMENCED OPERATIONS APRIL 1, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
6 COMMENCED OPERATIONS FEBRUARY 28, 1990. UNLESS OTHERWISE NOTED, ALL RATIOS
FOR THE PERIOD HAVE BEEN ANNUALIZED.
7 COMMENCED OPERATIONS DECEMBER 15, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
8 COMMENCED OPERATIONS MAY 3, 1993. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
9 COMMENCED OPERATIONS MAY 16, 1994. UNLESS OTHERWISE NOTED, ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
10 TOTAL RETURN DOES NOT REFLECT THE SALES LOAD CHARGED ON THE CLASS A SHARES. ADDITIONALLY, TOTAL RETURN FOR CLASS Y &
CLASS A FOR THE SHORT TERM INCOME AND BOND FUNDS FOR 1996 ARE FOR THE EIGHT
MONTH PERIOD ENDED DECEMBER 31, 1996.
11 THE PER SHARE AMOUNT FOR THESE FUNDS FOR THE YEAR 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
107
<PAGE>
FINANCIAL
HIGHLIGHTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
COREFUND MONEY MARKET FUNDS
AS OF
DECEMBER 31, 1997
(UNAUDITED)
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
RATIO RATIO OF NET
NET RATIO OF EXPENSES INCOME
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- --------------- ------------ -------- --------- ----------- ---------- ----------- ------------
- ----------------
TREASURY RESERVE
- ----------------
CLASS Y*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(A) $1.00 $0.03 $(0.03) $1.00 2.57%+ $806,855 0.51% 5.05% 0.70% 4.86%
1997 1.00 0.05 (0.05) 1.00 4.97 835,384 0.51 4.86 0.71 4.66
1996 1.00 0.05 (0.05) 1.00 5.20 892,562 0.50 5.02 0.77 4.75
1995 1.00 0.05 (0.05) 1.00 4.98 479,206 0.48 4.91 0.85 4.54
1994 1.00 0.03 (0.03) 1.00 2.91 484,974 0.48 2.87 0.86 2.49
1993 1.00 0.03 (0.03) 1.00 2.96 446,788 0.46 2.89 0.85 2.50
1992 1.00 0.05 (0.05) 1.00 4.73 444,388 0.38 4.58 0.82 4.14
1991 1.00 0.07 (0.07) 1.00 7.11 427,439 0.37 6.80 0.82 6.35
1990 1.00 0.08 (0.08) 1.00 8.38 270,524 0.37 8.03 0.84 7.56
19892 1.00 0.06 (0.06) 1.00 4.66+ 220,479 0.20 9.26 0.84 8.62
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.44%+ $ 24,414 0.76% 4.80% 0.95% 4.61%
1997 1.00 0.05 (0.05) 1.00 4.71 12,146 0.76 4.61 0.96 4.41
1996 1.00 0.05 (0.05) 1.00 4.94 19,386 0.75 4.81 1.03 4.53
1995 1.00 0.05 (0.05) 1.00 4.72 21,612 0.73 4.81 1.10 4.44
1994 1.00 0.03 (0.03) 1.00 2.65 7,573 0.73 2.62 1.11 2.24
19931 1.00 0.01 (0.01) 1.00 1.21+ 7,672 0.75 2.46 1.14 2.07
- -------------
CASH RESERVE
- -------------
CLASS Y*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.65%+ $956,368 0.52% 5.20% 0.72% 5.00%
1997 1.00 0.05 (0.05) 1.00 5.09 886,251 0.50 4.99 0.70 4.79
1996 1.00 0.05 (0.05) 1.00 5.26 790,211 0.50 5.09 0.78 4.81
1995 1.00 0.05 (0.05) 1.00 5.15 510,341 0.48 5.04 0.85 4.67
1994 1.00 0.03 (0.03) 1.00 3.00 505,273 0.47 2.95 0.85 2.57
1993 1.00 0.03 (0.03) 1.00 2.99 460,832 0.46 2.97 0.85 2.58
1992 1.00 0.05 (0.05) 1.00 4.83 568,672 0.38 4.68 0.82 4.24
1991 1.00 0.07 (0.07) 1.00 7.28 473,187 0.37 6.94 0.82 6.49
1990 1.00 0.08 (0.08) 1.00 8.65 316,290 0.34 8.28 0.80 7.82
1989 1.00 0.09 (0.09) 1.00 8.87 186,151 0.37 8.62 0.90 8.05
1988 1.00 0.07 (0.07) 1.00 6.70 82,399 0.55 6.54 1.14 5.96
CLASS C*
1997(A) $1.00 $0.03 $(0.03) $1.00 2.52%+ $ 79,712 0.77% 4.95% 0.97% 4.75%
1997 1.00 0.05 (0.05) 1.00 4.83 27,693 0.75 4.74 0.95 4.54
1996 1.00 0.05 (0.05) 1.00 5.00 19,736 0.75 4.86 1.03 4.58
1995 1.00 0.05 (0.05) 1.00 4.89 17,583 0.73 4.86 1.10 4.49
1994 1.00 0.03 (0.03) 1.00 2.74 11,451 0.72 2.70 1.10 2.32
19931 1.00 0.01 (0.01) 1.00 1.23+ 15,330 0.76 2.52 1.15 2.13
CLASS B
1997(A)(4) $1.00 $ -- $ -- $1.00 0.50%+ $ 80 1.52% 4.20% 1.72% 4.00%
- ----------------
TAX-FREE RESERVE
- ----------------
CLASS Y*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.63%+ $ 152,822 0.52% 3.17% 0.71% 2.98%
1997 1.00 0.03 (0.03) 1.00 3.08 119,579 0.50 3.07 0.70 2.87
1996 1.00 0.03 (0.03) 1.00 3.20 104,196 0.48 3.14 0.76 2.86
1995 1.00 0.03 (0.03) 1.00 3.12 62,756 0.48 3.09 0.85 2.72
1994 1.00 0.02 (0.02) 1.00 2.03 79,384 0.49 2.00 0.87 1.62
1993 1.00 0.02 (0.02) 1.00 2.23 72,255 0.51 2.20 0.89 1.82
1992 1.00 0.03 (0.03) 1.00 3.56 80,147 0.37 3.39 0.88 2.88
19913 1.00 0.01 (0.01) 1.00 1.07+ 42,573 0.06 4.20 0.81 3.45
CLASS C*
1997(A) $1.00 $0.02 $(0.02) $1.00 1.49%+ $ 12,396 0.77% 2.92% 0.96% 2.73%
1997 1.00 0.03 (0.03) 1.00 2.83 3,202 0.75 2.82 0.95 2.62
1996 1.00 0.03 (0.03) 1.00 2.95 2,850 0.73 2.94 1.02 2.65
1995 1.00 0.03 (0.03) 1.00 2.86 1,524 0.73 2.80 1.10 2.43
1994 1.00 0.02 (0.02) 1.00 1.78 2,708 0.74 1.75 1.12 1.37
19931 1.00 0.01 (0.01) 1.00 0.85+ 1,795 0.76 1.71 1.14 1.33
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
* ON APRIL 22, 1996, SERIES A SHARES WERE REDESIGNATED CLASS Y AND SERIES B
SHARES WERE REDESIGNATED CLASS C. + RETURNS ARE FOR THE PERIOD INDICATED AND
HAVE NOT BEEN ANNUALIZED.
(A)RATIOS FOR THIS SIX-MONTH PERIOD ENDED DECEMBER 31, 1997, HAVE BEEN ANNUALIZED.
1 COMMENCED OPERATIONS JANUARY 4, 1993. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS NOVEMBER 21, 1988. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
3 COMMENCED OPERATIONS APRIL 16, 1991. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
4 COMMENCED OPERATIONS NOVEMBER 18, 1997. RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
108
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS [SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
AS OF
DECEMBER 31, 1997
(UNAUDITED)
1. ORGANIZATION
The CoreFund Equity Index Fund, Core Equity Fund, Growth Equity Fund, Special
Equity Fund, International Growth Fund, Balanced Fund (the Equity Funds), 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 (the Fixed Income Funds), Treasury
Reserve, Cash Reserve, and Tax-Free Reserve (the Money Market Funds) are
portfolios offered by CoreFunds, Inc. (The Company), an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Company is presently authorized to offers 20 separate portfolios (the Funds):
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
The financial statements of the Elite Cash Reserve, Elite Treasury Reserve
and Elite Tax-Free Reserve are not presented herein.
The assets of each Portfolio are segregated, and a Shareholder's interest
is limited to the Portfolio in which shares are held. The Funds' prospectus
provides a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities of the Equity and Fixed Income
Funds 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.
Investment securities of the Money Market Funds are stated at amortized
cost, which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income.
The books and records of the International Growth Fund and Global Bond
Fund are maintained in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on the following 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 International Growth Fund does not isolate the portion of gains or
losses on investments in equity securities that is due to changes in the foreign
exchange rates from that which is due to changes in market prices of equity
securities.
The Global Bond Fund 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.
109
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
The International Growth Fund and Global Bond Fund report certain foreign
currency related transactions as components of unrealized and realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--The International Growth Fund and
Global Bond Fund enter into forward foreign currency contracts as hedges against
either specific transactions or portfolio positions. The aggregate principal
amounts of the contracts are not recorded since the funds intend to settle the
contracts prior to delivery. All commitments are "marked-to-market" daily at the
applicable foreign exchange rate and any resulting unrealized gains or losses
are recorded currently. The funds realize gains or losses at the time forward
contracts are 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. Dividend income is recorded on ex-dividend
date.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by each Portfolio's custodian bank until maturity of the
repurchase agreements. Provisions of the agreements and procedures adopted by
the adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of collateral by
the Portfolio may be delayed or limited.
EXPENSES--Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Company are
pro-rated to the Funds 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 Equity Index Fund, Core Equity Fund,
Growth Equity Fund, Special Equity Fund, Balanced Fund and Global Bond Fund
declare and pay dividends on a quarterly basis. The International Growth Fund
declares and pays dividends periodically. Such dividends are reinvested in
additional shares unless otherwise requested. The Short Term Income Fund,
Short-Intermediate Bond Fund, Government Income Fund, Bond Fund, Intermediate
Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New Jersey Municipal Bond
Fund, Treasury Reserve, Cash Reserve and Tax-Free Reserve distributions from net
investment income are declared on a daily basis and are payable on the first
business day of the following month. Any net realized capital gains on sales of
securities for a Fund 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 International Growth Fund and Global Bond Fund as of
December 31, 1997, $(411,000) and $450,000 was reclassified from accumulated net
realized gain (loss)on investments to accumulated net investment income,
respectively.
FEDERAL INCOME TAXES--It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income tax is required.
OTHER--Organizational costs incurred with the start up of the Balanced
Fund, Government Income Fund, Short Term Income Fund, Intermediate Municipal
Bond Fund, Global Bond Fund, Pennsylvania Municipal Bond Fund and New Jersey
Municipal Bond Fund are being amortized on a straight line basis over a maximum
period of sixty months. If any or all of the shares representing initial capital
of each fund are redeemed by any holder thereof prior to the end of the
amortization period, the proceeds will be reduced by the unamortized
organizational cost balance in the same proportion as the number of shares
redeemed bears to the initial shares outstanding immediately preceding the
redemption.
110
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
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 each Fund. For its services CSIA receives a fee based on the annual
average daily net assets of each Fund as shown in the following table:
<TABLE>
<CAPTION>
ADVISER INVESTMENT ADVISORY ADVISER INVESTMENT ADVISORY
FUND FEE AGREEMENT DATE FUND FEE AGREEMENT DATE
- -------------------- ------- ------------------- -------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Index 0.40% March 25, 1991 Short Term Income 0.74% April 12, 1996
Core Equity 0.74 April 12, 1996 Short-Intermediate Bond 0.50 March 25, 1991
Growth Equity 0.75 March 25, 1991 Government Income 0.50 March 25, 1991
Special Equity 1.50 April 12, 1996 Bond 0.74 April 12, 1996
International Growth 0.80 December 5, 1989 Global Bond 0.60 March 25, 1991
Balanced 0.70 March 25, 1991 Intermediate Municipal
Bond 0.50 March 25, 1991
Treasury Reserve 0.40 April 12, 1996 Pennsylvania Municipal
Cash Reserve 0.40 April 12, 1996 Bond 0.50 May 15, 1994
Tax-Free Reserve 0.40 April 12, 1996 New Jersey Municipal
Bond 0.50 May 15, 1994
</TABLE>
Advisory fees are computed daily and paid monthly for all Funds.
Additionally, for the period ended December 31, 1997, CSIA has voluntarily
waived a portion of their fees in order to assist the Funds in maintaining
competitive expense ratios.
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' securities and performs other related services. CoreStates Bank may, in
its discretion and at its own expense, open and maintain a sub-custody account
or employ a sub-custodian on behalf of the Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
Sub-Advisory services are provided to the CoreStates Advisers for the
International Growth Fund by Martin Currie, Inc. and Aberdeen Managers (The
"Sub-Advisers"). Sub-Advisory services are provided for the Global Bond Fund 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 Fund'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 Funds. SFR voluntarily waives a portion of
their fees in order to assist the Funds in maintaining competitive expense
ratios.
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 Funds' Transfer Agent. As such, BFDS provides
transfer agency, dividend disbursing and shareholder servicing for the Funds.
On November 2, 1992, SEI Financial Services ("SFS"), a wholly owned
subsidiary of SEI, became the Funds' exclusive Distributor pursuant to a
distribution agreement dated October 30, 1992.
The Company has adopted a Distribution Plan (the "Plan") for those Funds
offering Class A, C and B shares. The Plan provides for the payment by the
Company to the Distributor of up to 0.25% of the daily net assets of each Class
A and C Portfolio and 1.00% of the daily net assets of each Class B Portfolio.
The Company has also adopted a Shareholder Servicing Plan for those Funds
offering Class B shares. The Shareholder Servicing Plan provides for the payment
by the Company to the Distributor of up to 25% of the daily net assets of each
Class B Portfolio to which the Plan is applicable. 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 Funds paid approximately $850,104 to affiliated brokers for
commissions earned on the sales of the shares of the Funds for the six month
period ended December 31, 1997.
Certain officers of the Company are also officers of the Administrator.
Such officers are paid no fees by the Funds.
111
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
A contingent Deferred Sales Charge (CDSC) is imposed on redemptions made in
the Class B shares. The CDSC varies depending on the number of years from the
time of payment for the purchase of Class B shares until the redemption of such
shares.
Contingent Deferred Sales
Year Charges as a Percentage
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
5. INVESTMENT TRANSACTIONS
During the six month period ended December 31, 1997, purchases of
securities and proceeds from sales of securities, other than temporary
investments in short-term securities, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
-------------------------------- -------------------------------
PURCHASES SALES
-------------------------------- -------------------------------
U.S. U.S.
PORTFOLIO INVESTMENT TRANSACTIONS (000) GOVERNMENT OTHER TOTAL GOVERNMENT OTHER TOTAL
---------- ----- ------- ---------- ------- --------
<S> <C> <C> <C> <C>
Equity Index Fund -- 26,703 26,703 -- 22,386 22,386
Core Equity Fund -- 132 132 -- 151,787 151,787
Growth Equity Fund -- 66,463 66,463 -- 71,272 71,272
Special Equity Fund -- 24,748 24,748 -- 30,293 30,293
International Growth Fund -- 38,930 38,930 -- 39,848 39,848
Balanced Fund -- 36,206 36,206 -- 34,822 34,822
Short Term Income Fund 2,753 5,191 7,944 4,333 5,139 9,472
Short-Intermediate Bond Fund 65,819 39,422 105,241 69,963 33,236 103,199
Government Income Fund 5,451 -- 5,451 3,814 -- 3,814
Bond Fund 81,637 39,056 120,693 105,566 65,138 170,704
Global Bond Fund -- 41,416 41,416 -- 4,688 4,688
Intermediate Municipal Fund -- 139 139 -- 232 232
Pennsylvania Municipal Bond Fund -- 7,890 7,890 -- 2,405 2,405
New Jersey Municipal Bond Fund -- 353 353 -- 76 76
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Certain net capital losses incurred subsequent to October 31, 1996 have
been deferred for tax purposes and will be recognized during the fiscal year
ended June 30, 1998. The Funds had capital loss carryforwards at December 31,
1997, as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES
6/30/97 2002 2003 2004 2005
------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Short Term Income Fund $ 88,520 $ -- $ -- $ -- $ 88,520
Short-Intermediate Bond Fund 2,907,103 -- 1,483,436 217,497 1,206,170
Government Income Fund 319,174 -- 222,660 4,127 92,387
Bond Fund 1,702,115 -- -- -- 1,702,115
Global Bond Fund 1,573,551 -- 844,493 -- 729,058
Intermediate Term Municipal Bond Fund 79,158 -- 41,918 34,827 2,413
Pennsylvania Municipal Bond Fund 96,691 73,679 95 8,784 14,133
Treasury Reserve 9,082 -- -- -- 9,082
Cash Reserve 167,012 134,628 23,362 9,022 --
Tax-Free Reserve 54,381 5,273 44,981 4,127 --
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
At December 31, 1997 the total cost of securities and the net realized
gains or losses on securities sold for Federal income tax purposes was not
materially different from amounts reported for financial purposes. The aggregate
gross unrealized gain or loss on securities at December 31, 1997 for each fund
within the CoreFunds is as follows:
112
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------
AGGREGATE AGGREGATE
GROSS GROSS
AGGREGATE GROSS UNREALIZED GAIN (LOSS) (000) APPRECIATION DEPRECIATION NET
------------ ------------ --------
<S> <C> <C> <C>
Equity Index Fund $119,666 $ (3,247) $116,419
Core Equity Fund 149,108 (16,936) 132,172
Growth Equity Fund 57,102 (1,766) 55,336
Special Equity Fund 15,922 (11,198) 4,724
International Growth Fund 29,294 (10,958) 18,336
Balanced Fund 23,572 (985) 22,587
Short Term Income Fund 89 (8) 81
Short-Intermediate Bond Fund 1,991 (24) 1,967
Government Income Fund 570 (15) 555
Bond Fund 4,190 (25) 4,165
Global Bond Fund 554 (881) (327)
Intermediate Municipal Bond Fund 56 -- 56
Pennsylvania Municipal Bond Fund 640 (4) 636
New Jersey Municipal Bond Fund 104 -- 104
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
6. FORWARD FOREIGN CURRENCY CONTRACTS
The International Growth Fund and Global Bond Fund enter into forward
foreign currency contracts as hedges against portfolio positions. Such
contracts, which protect the value of a Fund's investment securities against a
decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at a
future date. Also, although such contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such foreign
currency increase. The following forward foreign currency contracts were
outstanding at December 31, 1997:
- -------------------------------------------------------------------------------
GLOBAL BOND FUND:
Foreign Currency Sales:
Contracts to In Exchange Unrealized
Deliver/Receive For Appreciation
--------------- ----------- ------------
3/23/98 DM 10,750,000 $6,101,645 $ 96,870
3/23/98 DK 19,000,000 2,829,149 44,204
3/12/98 FF 10,500,000 1,761,036 8,991
3/12/98 GP 1,950,000 3,197,318 34,913
3/23/98 SK 13,600,000 1,763,451 46,185
---------
Net Unrealized Appreciation $ 231,163
=========
- --------------------------------------------------------------------------------
CURRENCY LEGEND
- ---------------
DM German Marks
DK Danish Kroner
FF French Francs
GP British Pounds
SK Swedish Krona
113
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONTINUED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
7. CONCENTRATION OF CREDIT RISK
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in debt instruments of
municipal issuers. Although these Funds maintain a diversified portfolio, with
the exception of the Pennsylvania Municipal Bond Fund and the New Jersey
Municipal Bond Fund, the issuers ability to meet their obligations may be
affected by economic developments in a specific state or region.
The Intermediate Municipal Bond Fund, Pennsylvania Municipal Bond Fund, New
Jersey Municipal Bond Fund, and Tax-Free Reserve invest in securities that
include revenue bonds, tax exempt commercial paper, tax and revenue anticipation
notes, and general obligation bonds. At December 31, 1997, the percentage of
portfolio investments by each revenue source was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
------------ ------------ --------- --------
INTERMEDIATE PENNSYLVANIA NEW JERSEY
MUNICIPAL MUNICIPAL MUNICIPAL
BOND BOND BOND TAX-FREE
FUND FUND FUND RESERVE
------------ ------------ ---------- --------
REVENUE BONDS:
<S> <C> <C> <C> <C>
Education Bonds 17% 18% 15% 7%
Health Care Bonds 3 13 5 10
Transportation Bonds 12 5 7 7
Utility Bonds 14 16 17 4
Housing Bonds -- 2 -- 10
Pollution Control Bonds -- -- -- 10
Industrial Development Bonds 6 16 -- 8
Public Facility Bonds -- 1 2 3
Other 12 2 7 10
GENERAL OBLIGATIONS 36 24 47 6
TAX EXEMPT COMMERCIAL PAPER -- -- -- 21
TAX AND REVENUE ANTICIPATION NOTES -- -- -- 3
TAX ANTICIPATION NOTES -- 3 -- 1
----- ----- ----- ----
100% 100% 100% 100%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Many municipalities insure their obligations with insurance underwritten by
insurance companies which undertake to pay a holder, when due, the interest and
principal amount on an obligation if the issuer defaults on its obligation.
Although bond insurance reduces the risk of loss due to default by the issuer,
there is no assurance that the insurance company will meet its obligations.
Also, some of the securities have credit enhancements (letters of credit or
guarantees issued by third party domestic or foreign banks or other
institutions). At December 31, 1997, the percentage of securities with credit
enhancements are as follows:
- ----------------------------------------------------------------------------
------- ---------
LETTERS
OF BOND
CREDIT INSURANCE
------- ---------
Intermediate Municipal Bond Fund -- 64.9%
Pennsylvania Municipal Bond Fund -- 62.1
New Jersey Municipal Bond Fund -- 38.4
Tax-Free Reserve 53.3% 27.6
- ----------------------------------------------------------------------------
114
<PAGE>
[SQUARE BULLET] COREFUND
- --------------------------------------------------------------------------------
8. SHARE TRANSACTIONS (000):
The following are the share transactions for the six month period ended December
31, 1997.
<TABLE>
<CAPTION>
------ ------- ------ ------- ------------- -------- -------- ------- --------
EQUITY CORE GROWTH SPECIAL INTERNATIONAL
INDEX EQUITY EQUITY EQUITY GROWTH BALANCED TREASURY CASH TAX-FREE
FUND FUND(1) FUND FUND FUND FUND RESERVE RESERVE RESERVE
------ ------- ------ ------- ------------- -------- -------- ------- --------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 613 2,134 1,130 590 3,024 830 1,198,732 1,030,078 170,940
Shares issued in lieu
of cash distributions 223 3,181 639 816 543 449 1,462 1,865 96
Shares redeemed (664) (2,642) (1,381) (841) (2,727) (766) (1,228,616) (961,599) (137,772)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 172 2,673 388 565 840 513 (28,422) 70,344 33,264
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS A/C
Shares issued 117 123 43 42 18 108 34,333 107,066 24,342
Shares issued in lieu
of cash distributions 8 120 25 34 9 24 272 1,229 132
Shares redeemed 16 (78) (23) (15) (17) (35) (22,458) (56,508) (15,279)
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 109 165 45 61 10 97 12,147 51,787 9,195
==== ====== ====== ==== ====== ==== ========== ========= ========
CLASS B
Shares issued 19 6 6 10 1 40 -- 88 --
Shares issued in lieu
of cash distributions -- 1 -- 2 -- 2 -- -- --
Shares redeemed -- -- -- -- -- -- -- (8) --
---- ------ ------ ---- ------ ---- ---------- --------- --------
Net increase 19 7 6 12 1 42 -- 80 --
==== ====== ====== ==== ====== ==== ========== ========= ========
TOTAL SHARE ACTIVITY
FOR PERIOD 300 2,845 439 638 851 652 (16,275) 122,211 42,459
==== ====== ====== ==== ====== ==== ========== ========= ========
<FN>
(1) THIS FUND WAS FORMERLY KNOWN AS THE EQUITY FUND.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
<TABLE>
<CAPTION>
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
SHORT TERM SHORT- GOVERNMENT GLOBAL INTERMEDIATE PENNSYLVANIA NEW JERSEY
INCOME INTERMEDIATE INCOME BOND BOND MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND FUND FUND FUND BOND FUND BOND FUND BOND FUND
---------- ------------ ---------- ------ ------ ------------ ------------ ----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued 616 2,018 309 1,147 95 3 270 17
Shares issued in lieu
of cash distributions 88 454 35 479 137 -- 12 1
Shares repurchased (692) (1,998) (195) (2,950) (42) (14) (55) (10)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 12 474 149 (1,324) 190 (11) 227 8
==== ====== ==== ====== === === === ===
CLASS A
Shares issued 7 29 31 42 7 6 241 16
Shares issued in lieu
of cash distributions 1 6 4 4 1 2 6 1
Shares repurchased -- (31) (23) (12) (1) (9) (12) (7)
---- ------ ---- ------ --- --- --- ---
Net increase (decrease) 8 4 12 34 7 (1) 235 10
==== ====== ==== ====== === === === ===
TOTAL SHARE ACTIVITY
FOR PERIOD 20 478 161 (1,290) 197 (12) 462 18
==== ====== ==== ====== === === === ===
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
115
<PAGE>
NOTES TO
FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
(CONCLUDED)
AS OF
DECEMBER 31, 1997
(UNAUDITED)
9. SHAREHOLDER VOTING RIGHTS
There was a special meeting scheduled for December 15, 1997 at which the
shareholders of the International Growth Fund voted on to approve the selection
of Aberdeen Managers as a sub-adviser for a portion of the assets of the
International Growth Fund. The results are as follows:
Shares Voted % of Voted % of Total
----------- ---------- ----------
FOR 8,203,048.00 98.77% 70.55%
AGAINST 11,795.00 0.14% 0.10%
ABSTAIN 89,958.00 1.08% 0.77%
10. PROPOSED REORGANIZATION
On November 18, 1997, CoreStates Financial Corp. and First Union
Corporation jointly announced that they had signed a definitive agreement for
the merger of CoreStates Bank, N.A. and First Union Bank. The Advisor is
currently a wholly-owned subsidiary of CoreStates Bank, N.A. Subject to certain
conditions, it is anticipated that the transaction will close at the end of
April, 1998. Thereafter, the Advisor will be an indirect wholly-owned subsidiary
of First Union Bank. A special meeting of shareholders will be called to
consider certain proposed fund reorganizations.
116
<PAGE>
CoreFunds,Inc.
--------------
ELITE TREASURY RESERVE
ELITE CASH RESERVE
ELITE TAX-FREE RESERVE
SEMI-ANNUAL REPORT
December 31, 1997
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 33.7%
U.S. Treasury Bills+
5.180%, 01/22/98 .......................................................... $ 6,000 $ 5,982
5.650%, 03/05/98 .......................................................... 500 495
5.797%, 04/02/98 .......................................................... 500 493
5.793%, 04/30/98 .......................................................... 500 491
5.580%, 05/28/98 .......................................................... 500 489
5.530%, 06/25/98 .......................................................... 500 487
5.540%, 08/20/98 .......................................................... 2,000 1,932
U.S. Treasury Notes
5.600%, 01/31/98 .......................................................... 900 900
5.690%, 07/31/98 .......................................................... 500 499
5.780%, 08/15/98 .......................................................... 500 500
5.610%, 08/31/98 .......................................................... 500 502
5.640%, 09/30/98 .......................................................... 500 501
5.650%, 10/31/98 .......................................................... 500 501
5.730%, 11/15/98 .......................................................... 2,000 1,996
5.740%, 11/30/98 .......................................................... 3,000 2,997
U.S. Treasury STRIPS
5.730%, 05/15/98 .......................................................... 400 392
5.740%, 08/15/98 .......................................................... 500 483
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $19,640) ............................................................... 19,640
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 66.6%
Aubrey Lanston 5.25%, dated 12/31/97, matures 01/02/98, repurchase price
$2,778,810 (collateralized by U.S. Treasury Note, par value $2,850,000,
5.625%, 12/31/02; market value $2,849,145) ................................... 2,778 2,778
Goldman Sachs 6.35%, dated 12/31/97, matures 01/02/98,
repurchase price $2,000,706 (collateralized by U.S. Treasury
Note, par value $1,960,000, 6.875%, 03/31/00;
market value $2,044,672) ..................................................... 2,000 2,000
Hong Kong Shanghai Bank 6.40%, dated 12/31/97, matures 01/02/98, repurchase
price $13,304,729 (collateralized by U.S. Treasury Note, par value
$13,155,000, 6.75%, 04/30/00; market value $13,619,372) ...................... 13,300 13,300
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TREASURY RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merrill Lynch 6.40%, dated 12/31/97, matures 01/02/98, repurchase price
$2,500,889 (collateralized by U.S. Treasury Note, par value $2,365,000,
8.00%, 05/15/01; market value $2,556,092) .................................... $ 2,500 $ 2,500
Morgan Stanley 6.20%, dated 12/31/97, matures 01/02/98,
repurchase price $2,500,861 (collateralized by various U.S.
Treasury Notes, ranging in par value $295,000-$2,275,000,
5.50%, 12/31/00; total market value $2,560,491) .............................. 2,500 2,500
State Street Bank 5.50%, dated 12/31/97, matures 01/02/98,
repurchase price $13,204,033 (collateralized by U.S. Treasury
Note, par value $13,250,000, 6.125%, 03/31/98;
market value $13,475,250) .................................................... 13,200 13,200
Swiss Bank 6.40%, dated 12/31/97, matures 01/02/98,
repurchase price $2,500,889 (collateralized by U.S. Treasury
Note, par value $2,370,000, 7.50%, 05/15/02;
market value $2,559,126) ..................................................... 2,500 2,500
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $38,778) ............................................................... 38,778
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.3%
(Cost $58,418) .................................................................. 58,418
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - (0.3%) ......................................... (151)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Shares ($0.001 par value -- 250 million authorized shares)
based on 53,853,436 outstanding shares .......................................... 53,854
Portfolio Shares ($0.001 par value -- 250 million authorized shares)
based on 4,413,400 outstanding shares ........................................... 4,413
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% .......................................................... $58,267
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS Y .......................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS C .......................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ YIELD TO MATURITY
STRIPS -- SEPARATELY TRADED REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 58.1%
BANKING - 3.3%
NationsBank
5.858%, 01/30/98 ........................................................... $5,000 $ 4,977
5.813%, 03/17/98 ........................................................... 5,000 4,940
----------
Total Banking 9,917
----------
FINANCIAL SERVICES - 40.3%
Abbey National Treasury Services
5.712%, 04/27/98 ........................................................... 3,000 2,946
American Express
6.653%, 01/02/98 ........................................................... 5,000 4,999
5.581%, 01/09/98 ........................................................... 2,000 1,998
Asset Securitization Coop
5.770%, 02/26/98 ........................................................... 5,000 4,956
Cafco
6.653%, 01/02/98 ........................................................... 5,000 4,999
5.689%, 01/27/98 ........................................................... 5,000 4,980
Caisse de Depots En Consignations
5.678%, 03/17/98 ........................................................... 5,000 4,943
Cit Group Holdings
5.841%, 01/28/98 ........................................................... 5,000 4,978
Credit Suisse Commercial Paper
5.710%, 03/12/98 ........................................................... 5,000 4,945
Eureka Securitization
5.666%, 01/23/98 ........................................................... 3,000 2,990
5.695%, 02/02/98 ........................................................... 5,000 4,975
Ford Motor Credit
5.639%, 01/05/98 ........................................................... 3,000 2,998
5.788%, 02/05/98 ........................................................... 3,000 2,983
5.688%, 02/06/98 ........................................................... 2,000 1,989
5.774%, 03/06/98 ........................................................... 3,000 2,970
Goldman Sachs
5.560%, 05/07/98 ........................................................... 5,000 4,901
Merrill Lynch
5.679%, 01/16/98 ........................................................... 3,000 2,993
5.696%, 02/20/98 ........................................................... 3,900 3,870
5.700%, 03/30/98 ........................................................... 150 148
5.825%, 04/30/98 ........................................................... 3,000 2,944
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Morgan Stanley
5.673%, 01/21/98 ........................................................... $3,000 $ 2,991
5.680%, 02/04/98 ........................................................... 3,000 2,984
Morgan Stanley (A)
5.910%, 01/13/98 ........................................................... 5,000 5,000
National Australia Bank
5.764%, 02/13/98 ........................................................... 5,000 4,966
New Center Asset Trust
5.674%, 01/30/98 ........................................................... 3,000 2,987
5.490%, 04/03/98 ........................................................... 6,900 6,803
Prudential Funding
5.856%, 01/08/98 ........................................................... 5,000 4,994
5.839%, 01/12/98 ........................................................... 5,000 4,991
Swedish Export Credit
5.810%, 04/09/98 ........................................................... 5,000 4,922
---------
Total Financial Services 114,143
---------
INDUSTRIAL - 13.7%
Bell Atlantic Network
5.835%, 01/07/98 ........................................................... 5,000 4,995
BP America
6.402%, 01/02/98 ........................................................... 5,000 4,999
Campbell Soup
5.684%, 03/04/98 ........................................................... 3,600 3,566
Coca Cola
5.603%, 01/22/98 ........................................................... 5,000 4,984
Dupont
5.599%, 01/29/98 ........................................................... 5,000 4,978
General Electric
5.685%, 02/25/98 ........................................................... 3,000 2,974
5.736%, 04/23/98 ........................................................... 3,000 2,948
5.881%, 07/09/98 ........................................................... 5,000 4,851
Mitsubishi International
5.681%, 02/04/98 ........................................................... 3,000 2,984
---------
Total Industrial 39,278
---------
UTILITIES - 0.8%
National Rural Utilities
5.644%, 01/20/98 ........................................................... 3,000 2,991
TOTAL COMMERCIAL PAPER
(Cost $164,330) ............................................................... 164,330
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.7%
FHLB
5.810%, 01/23/98 ........................................................... $5,000 $ 5,000
FNMA (A)
5.894%, 01/06/98 ........................................................... 5,000 4,998
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,998) ................................................................. 9,998
- ---------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 4.8%
Asset-Backed Securities Investment Trust,
Series 1997-C, Class N (A)
5.961%, 01/15/98 ........................................................... 5,000 5,000
Case Equipment Loan Trust, Series 1997-B, Class A1
5.612%, 10/13/98 ........................................................... 3,181 3,181
Key Auto Finance Trust, Series 1997-2, Class A1
5.835%, 01/05/99 ........................................................... 5,000 5,000
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $13,181) ................................................................ 13,181
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 7.7%
BANKING - 1.8%
J.P. Morgan (A)
5.875%, 01/02/98 ........................................................... 5,000 5,002
----------
FINANCIAL SERVICES - 4.8%
Abbey National Treasury Services (A)
5.650%, 01/02/98 ........................................................... 5,000 4,999
Credit Suisse First Boston (A)
5.670%, 01/02/98 ........................................................... 5,000 5,000
Paccar Financial
5.770%, 09/15/98 ........................................................... 3,500 3,497
----------
Total Financial Services 13,496
----------
INDUSTRIAL - 1.0%
Pitney Bowes Credit
6.305%, 09/23/98 ........................................................... 2,900 2,909
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $21,407) ................................................................ 21,407
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MASTER NOTE - 2.5%
Associates Corporation of North America
5.497%, 01/02/98 ........................................................... $6,816 $ 6,817
----------
TOTAL MASTER NOTE
(Cost $6,817) ................................................................. 6,817
- ---------------------------------------------------------------------------------------------------------------------------
TIME DEPOSITS - 12.6%
Banque Nationale de Paris
6.625%, 01/02/98 ........................................................... 7,000 7,000
Bayerische Vereinsbank
6.500%, 01/02/98 ........................................................... 7,000 7,000
Den Danske Bank
6.500%, 01/02/98 ........................................................... 7,000 7,000
Republic National Bank of New York
6.500%, 01/02/98 ........................................................... 7,000 7,000
State Street Bank
5.500%, 01/02/98 ........................................................... 7,000 7,000
----------
TOTAL TIME DEPOSITS
(Cost $35,000) ................................................................ 35,000
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE FUNDING AGREEMENT - 1.9%
Allstate (A)
5.696%, 01/01/98 ........................................................... 5,000 5,000
----------
TOTAL INSURANCE FUNDING AGREEMENT
(Cost $5,000) ................................................................. 5,000
- ---------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 8.6%
National Westminster Bank
5.940%, 06/26/98 ........................................................... 5,000 4,999
Societe Generale
6.080%, 06/09/98 ........................................................... 5,000 4,999
5.765%, 10/09/98 ........................................................... 3,000 2,998
Swiss Bank
6.020%, 06/12/98 ........................................................... 5,000 5,001
5.825%, 10/02/98 ........................................................... 3,000 2,999
5.852%, 11/20/98 ........................................................... 3,000 2,999
----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $23,995) ................................................................ 23,995
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE CASH RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS - 100.0%
(Cost $279,728) .................................................................. $279,728 $281,727
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.0% ............................................ (35)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares ($0.001 par value -- 750 million authorized)
based on 279,350,241 outstanding shares .......................................... 279,351
Portfolio Shares ($0.001 par value -- 750 million authorized)
based on 345,347 outstanding shares .............................................. 345
Accumulated net realized loss on investments ........................................ (3)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ........................................................... $279,693
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS Y ............................ $1.00
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS C ............................ $1.00
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SLMA -- STUDENT LOAN MARKETING ASSOCIATION
</FN>
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS - 99.7%
ALABAMA - 2.8%
Alabama State Public School and College Revenue Bond (C)
5.500%, 10/01/98 ........................................................... $1,000 $ 1,012
Montgomery, Alabama TECP
3.700%, 02/26/98 ........................................................... 2,000 2,000
North Alabama Environmental Improvement Authority Revenue
Bond for Reynold Metals Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... 2,500 2,500
---------
Total Alabama 5,512
---------
ALASKA - 0.4%
Valdez, Alaska TECP
3.800%, 03/10/98 ........................................................... 800 800
---------
ARIZONA - 2.5%
Arizona Agriculture Improvement and Power District Electric
Revenue Bond for Salt River Project, Series E
Pre-Refunded @ 100 (C) (D)
8.250%, 01/02/98 ........................................................... 2,710 2,710
Arizona State, Maricopa County Regional Area
Road Funding TRAN (B)
7.400%, 07/01/98 ........................................................... 2,100 2,136
---------
Total Arizona 4,846
---------
CALIFORNIA - 3.7%
Los Angeles County, California TRAN
4.500%, 06/30/98 ........................................................... 2,000 2,006
Los Angeles County, California TRAN, Series A
4.500%, 06/30/98 ........................................................... 3,000 3,009
Sonoma County, California TRAN
4.500%, 01/29/98 ........................................................... 2,200 2,202
---------
Total California 7,217
---------
COLORADO - 0.7%
Moffat County, Colorado Pollution Control
Revenue Bond (A) (B) (C)
4.150%, 07/01/98 ........................................................... 1,400 1,400
---------
DELAWARE - 0.5%
Wilmington, Delaware Hospital for Franciscan Health System
Hospital Project, Series A Pre-Refunded @ 100 (A) (B) (C) (D)
5.000%, 02/02/98 ........................................................... 1,000 1,000
---------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA - 3.3%
Broward County, Florida Housing Finance Authority Multi-Family
Housing Revenue Landings Inverray Apartments
Project (A) (B) (C)
4.250%, 01/02/98 ........................................................... $ 600 $ 600
Broward County, Florida Housing Financial Authority
Multi-Family Housing Revenue Bond Sanctuary
Apartments Project (A) (C)
4.250%, 01/02/98 ........................................................... 1,500 1,500
Florida Municipal Power TECP
3.650%, 02/11/98 ........................................................... 2,510 2,510
Sunshine State, Florida TECP
3.750%, 03/27/98 ........................................................... 2,000 2,000
----------
Total Florida 6,610
----------
GEORGIA - 1.4%
Georgia Municipal Electric Authority Revenue Bond,
Series B Pre-Refunded @ 102 (A) (B) (D)
8.000%, 01/02/98 ........................................................... 1,000 1,020
Hapeville, Georgia Industrial Development Authority
Revenue Bond for Hapeville Hotel Project (A) (B) (C)
5.100%, 01/02/98 ........................................................... 300 300
Georgia State, Municipal Electric Authority
Revenue Bond (A) (B) (C)
3.850%, 01/02/98 ........................................................... 1,405 1,405
----------
Total Georgia 2,725
----------
ILLINOIS - 1.2%
Chicago, Illinois O'Hare Airport Revenue Bond (A) (B) (C)
3.700%, 01/02/98 ........................................................... 300 300
Illinois Development Financial Authority Pollution Control
Revenue Bond for Amoco Oil Company Project (A) (B)
4.950%, 01/02/98 ........................................................... 600 600
Illinois State Toll Highway Authority Revenue Bond,
Series B (A) (B)
3.650%, 01/02/98 ........................................................... 1,400 1,400
----------
Total Illinois 2,300
----------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDIANA - 4.8%
Gary, Indiana Environmental Improvement Revenue Bond for
U.S. Steel Project (A) (B) (C)
4.050%, 01/15/98 ........................................................... $ 700 $ 700
Hammond, Indiana Pollution Control Revenue Bond for Amoco
Oil Company Project (A) (B) (C)
4.950%, 01/02/98 ........................................................... 1,835 1,835
Sullivan Hoosiers, Indiana L1 TECP
3.750%, 02/25/98 ........................................................... 1,000 1,000
Sullivan Hoosiers, Indiana L2 TECP
3.750%, 01/09/98 ........................................................... 1,450 1,450
3.750%, 03/27/98 ........................................................... 1,100 1,100
Sullivan Hoosiers, Indiana L3 TECP
3.700%, 04/09/98 ........................................................... 2,000 2,000
Sullivan Hoosiers, Indiana L5 TECP
3.700%, 02/27/98 ........................................................... 1,000 1,000
3.750%, 03/27/98 ........................................................... 1,000 1,000
3.700%, 04/09/98 ........................................................... 1,700 1,700
Sullivan Hoosiers, Indiana L6 TECP
3.700%, 02/27/98 ........................................................... 1,100 1,100
3.750%, 07/07/98 ........................................................... 2,000 2,000
---------
Total Indiana 14,885
---------
KANSAS - 2.0%
Burlington, Kansas TECP
3.700%, 01/13/98 ........................................................... 1,800 1,800
Johnson County, Kansas School District No. 512
Shawnee Mission GO
5.850%, 10/01/98 ........................................................... 2,000 2,029
Kansas City, Kansas Industrial Development Revenue Bond for
PQ Corporation Project (A) (B) (C)
5.200%, 01/02/98 ........................................................... 100 100
---------
Total Kansas 3,929
---------
KENTUCKY - 4.0%
Mason County, Kentucky Pollution Control Revenue Bond (B) (C)
3.950%, 01/07/98 ........................................................... 6,000 6,000
Pendleton, Kentucky TECP
3.850%, 03/09/98 ........................................................... 2,000 2,000
---------
Total Kentucky 8,000
---------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LOUISIANA - 3.0%
Jefferson Parish, Louisiana Industrial Revenue Bond for
George J. Ackel, Sr. Project (A) (B) (C)
3.850%, 01/07/98 ........................................................... $1,900 $ 1,900
Lake Charles, Louisiana District Port Facility Revenue Bond
for Conoco Project (A) (B)
5.000%, 01/02/98 ........................................................... 2,100 2,100
Louisiana State Public Facilities Authority Revenue Bond
for Kenner Hotel Project (A) (B) (C)
5.100%, 01/07/98 ........................................................... 600 600
Parish of Saint Charles, Louisiana Pollution Control Revenue
Bond for Shell Oil Company Project, Ser B (A) (B)
4.900%, 01/02/98 ........................................................... 1,400 1,400
---------
Total Louisiana 6,000
---------
MASSACHUSETTS - 0.5%
Massachussetts State Health and Educational Facilities Lahey
Clinic Project, Series A1 Pre-Refunded @ 102 (C) (D)
7.625%, 07/01/98 ........................................................... 950 986
---------
MICHIGAN - 4.6%
Cornell Township, Michigan Economic Development
Corporation Revenue Bond for Environmental
Improvement (A) (B) (C)
5.000%, 11/01/16 ........................................................... 200 200
Delta County, Michigan Environmental Improvement Revenue
Bond for Mead Escambia Paper Project, Series C (A) (B) (C)
5.100%, 12/01/23 ........................................................... 600 600
Michigan State GO
4.500%, 09/30/98 ........................................................... 3,000 3,016
Michigan State Strategic Fund Pollution Control Revenue
Bond for Consumer Power Project (A) (B) (C)
4.950%, 01/02/98 ........................................................... 300 300
Michigan Storage TECP
3.750%, 02/05/98 ........................................................... 5,000 5,000
---------
Total Michigan 9,116
---------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MINNESOTA - 1.0%
Minnesota State, GO Pre-Refunded @ 100
6.600%, 08/01/98 ........................................................... $2,000 $ 2,031
---------
MISSISSIPPI - 3.7%
Claiborne County, Mississippi TECP
3.750%, 02/13/98 ........................................................... 2,350 2,350
Claiborne County, Mississippi G2 TECP
3.750%, 03/06/98 ........................................................... 1,400 1,400
Claiborne County, Mississippi TECP
3.750%, 02/13/98 ........................................................... 3,500 3,500
---------
Total Mississippi 7,250
---------
MISSOURI - 3.5%
Independence, Missouri TECP
3.800%, 01/09/98 ........................................................... 2,900 2,900
University of Missouri Capital Project Notes, Series FY
4.250%, 06/30/98 ........................................................... 4,000 4,008
---------
Total Missouri 6,908
---------
MONTANA - 1.9%
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project (A) (B) (C)
3.700%, 01/02/98 ........................................................... 1,000 1,000
Forsyth, Montana Pollution Control Revenue Bond for Portland
General Electric Project, Series A (A) (B) (C)
3.650%, 01/02/98 ........................................................... 2,000 2,000
Forsyth, Montana Polution Control Revenue Bond Pacificorp
Project, Series 1988 (A) (B) (C)
4.500%, 01/02/98 ........................................................... 800 800
---------
Total Montana 3,800
---------
NEVADA - 1.0%
Clark County, Nevada Industrial Development Revenue
Bond, Series C (A) (B)
3.850%, 01/07/98 ........................................................... 2,000 2,000
---------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW HAMPSHIRE - 0.3%
New Hampshire State Industrial Development Revenue Bond
for Oerlikon-Burlhe Project (A) (B) (C)
3.800%, 01/02/98 ........................................................... $ 600 $ 600
----------
NEW MEXICO - 1.1%
Albuquerque, New Mexico GO, Ser A & B
4.600%, 07/01/98 ........................................................... 2,150 2,159
----------
NEW YORK - 3.6%
New York City, New York GO (A) (B) (C)
4.150%, 01/02/98 ........................................................... 300 300
New York Muni Waters TECP
3.800%, 02/05/98 ........................................................... 5,000 5,000
New York State Energy Research and Development Authority
Pollution Control Revenue for Niagara Mohawk Power
Project, Series A (A) (B) (C)
4.500%, 01/02/98 ........................................................... 600 600
New York State Urban Development Corporate Revenue Bond
for Correctional Facilities Project, Series C
Pre-Refunded @102 (C) (D)
7.625%, 01/01/98 ........................................................... 1,175 1,199
----------
Total New York 7,099
----------
NORTH CAROLINA - 4.3%
Lexington, North Carolina Medical Care Community
Hospital Revenue Bond for Memorial Hospital
Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... 1,000 1,000
North Carolina Medcare Givens Revenue Bond (A) (B) (C)
5.000%, 01/02/98 ........................................................... 3,000 3,000
North Carolina Medical Care Community Hospital Revenue
Pooled Finance Project, Series A (A) (B) (C)
5.000%, 01/02/98 ........................................................... 4,470 4,470
----------
Total North Carolina 8,470
----------
OHIO - 1.6%
Evandale, Ohio Industrial Development Authority Revenue
Bond (A) (B) (C)
3.700%, 01/02/98 ........................................................... 1,600 1,600
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
PAR VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ohio State Air Quality Revenue Bond (A) (B) (C)
5.000%, 01/07/98 ........................................................... $ 600 $ 600
Ohio State Air Quality Revenue Bond, Series B (A) (B) (C)
4.500%, 01/02/98 ........................................................... 1,000 1,000
----------
Total Ohio 3,200
----------
OREGON - 2.6%
Port of Portland, Oregon Pollution Control Revenue Bond for
Reynold Metals Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... 2,700 2,700
Port of St. Helens, Oregon Pollution Control Revenue
Bond (A) (B) (C)
4.950%, 01/02/98 ........................................................... 1,400 1,400
Umatilla County, Oregon Franciscan Health System Revenue
Bond, Series A Pre-Refunded @ 100 (A) (B) (C) (D)
5.000%, 02/02/98 ........................................................... 1,100 1,100
----------
Total Oregon 5,200
----------
PENNSYLVANIA - 13.8%
Allegheny County, Pennsylvania Hospital Development Revenue
Bond for Presbyterian University Hospital Project,
Ser B3 (A) (B) (C)
4.250%, 01/02/98 ........................................................... 900 900
Allegheny County, Pennsylvania Revenue Bond for Presbyterian
University Hospital (A) (B) (C)
4.250%, 01/02/98 ........................................................... 805 805
4.250%, 01/07/98 ........................................................... 1,700 1,700
Beaver County, Pennsylvania TECP
3.750%, 03/05/98 ........................................................... 1,700 1,700
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series A (A) (B) (C)
3.650%, 01/02/98 ........................................................... 1,000 1,000
Beaver County, Pennsylvania Industrial Development Authority
Revenue Bond for Duquesne Light Company Project,
Series B (A) (B) (C)
3.650%, 01/02/98 ........................................................... 1,100 1,100
Curwensville, Pennsylvania School District TRAN
4.160%, 06/30/98 ........................................................... 840 841
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Valley Regional Finance Authority Local Government
Revenue Bond, Series B (A) (B) (C)
3.650%, 01/02/98 ........................................................... $3,000 $ 3,000
Langhorne, Pennsylvania Saint Mary Hospital Authority
Revenue Bond for Franciscan Health Systems Project,
Series C Pre-Refunded @ 100 (A) (B) (C) (D)
5.000%, 02/02/98 ........................................................... 1,000 1,000
Lehigh County, Pennsylvania Industrial Development Authority
Revenue Bond for Allegheny Electric Project,
Series A (A) (B) (C)
3.800%, 12/01/15 ........................................................... 500 500
Montgomery County, Pennsylvania TECP
3.750%, 02/10/98 ........................................................... 2,500 2,500
Pennsylvania State Higher Education Facilities Authority
Revenue Bond for Carnegie Mellon University
Project, Series B (A) (B)
4.850%, 01/02/98 ........................................................... 800 800
Temple University, Pennsylvania Commonwealth
System of Higher Education
4.750%, 05/18/98 ........................................................... 1,000 1,003
Upper Darby, Pennsylvania School District GO
4.170%, 06/30/98 ........................................................... 500 501
Upper Darby, Pennsylvania School District TRAN
4.170%, 06/30/98 ........................................................... 1,756 1,757
Washington County, Pennsylvania Industrial Development
Authority Revenue Bond for Wetterau Finance
Company Project (A) (B) (C)
4.250%, 01/02/98 ........................................................... 2,500 2,500
Washington County, Pennsylvania Lease Revenue
Bond (A) (B) (C)
3.850%, 11/01/05 ........................................................... 3,415 3,415
York, Pennsylvania General Authority Pooled Revenue
Bond (A) (B) (C)
4.200%, 01/02/98 ........................................................... 2,350 2,350
---------
Total Pennsylvania 27,372
---------
SOUTH CAROLINA - 1.0%
Berkeley County, South Carolina Pollution Control Revenue
Bond for Amoco Chemical Project (A) (B)
4.950%, 01/02/98 ........................................................... 1,900 1,900
---------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TENNESSEE - 0.0%
Sullivan County, Tennessee Industrial Development Authority
Pollution Control Revenue Bond for Mead
Project (A) (B) (C)
5.000%, 01/02/98 ........................................................... $ 100 $ 100
----------
TEXAS - 5.6%
Grapevine, Texas Industrial Development Authority Revenue
Bond for American Airlines Project, Series B3 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 1,600 1,600
Grapevine, Texas Industrial Development Authority Revenue
Bond for American Airlines Project, Series B4 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 800 800
Grapevine, Texas Industrial Development Authority
Revenue Bond for American Airlines Project,
Series A3 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 700 700
Grapevine, Texas Industrial Development Corporation
American Airlines, Series A1 (A) (B) (C)
5.000%, 01/02/98 ........................................................... 400 400
North Central, Texas Health Facility Development Corporation
Revenue Bond (A) (B) (C)
5.000%, 01/02/98 ........................................................... 195 195
Nueces County, Texas Health Facilities Authority Revenue
Bond for Driscoll Children's Foundation Project (A) (B) (C)
3.850%, 01/02/98 ........................................................... 600 600
Port Corpus Christi, Texas Industrial Development Corporation
Revenue Bond, Series A (A) (B) (C)
3.850%, 01/02/98 ........................................................... 2,000 2,000
Tarrant County, Texas Housing Finance Authority Revenue
Bond for Windcastle Project (A) (B) (C)
3.850%, 01/02/98 ........................................................... 1,034 1,034
Texas Small Business Industrial Development Revenue Bond
3.700%, 01/07/98 ........................................................... 1,300 1,300
Texas State, Series A TRAN (A) (B) (C)
4.750%, 08/31/98 ........................................................... 2,500 2,514
----------
Total Texas 11,143
----------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTAH - 3.6%
Intermountain Power Agency Utah Power Supply Revenue
Bond, Series F (A) (B) (C)
3.750%, 07/01/15 ........................................................... $3,000 $ 3,000
Intermountain Power Agency Utah TECP
3.750%, 01/12/98 ........................................................... 3,000 3,000
Utah State Brd Regents Revenue Bond (A) (B) (C)
4.750%, 08/01/98 ........................................................... 1,155 1,161
---------
Total Utah 7,161
---------
VERMONT - 0.6%
Vermont State Student Loan Revenue Bond, Student Loan
Assistance Corporation Project (A) (B) (C)
3.800%, 01/02/98 ........................................................... 1,240 1,240
---------
VIRGINIA - 7.1%
Alexandria, Redevelopment & Housing Authority Goodwin
Project Revenue Bond, Ser B (A) (B) (C)
5.000%, 10/01/06 ........................................................... 2,100 2,100
Petersburg, Virginia Hospital Authority Southside
Revenue Project (A)
5.000%, 01/02/98 ........................................................... 1,800 1,800
Portsmouth, Virginia Housing Development Revenue
Bond (A) (B) (C)
4.000%, 11/01/27 ........................................................... 2,000 2,000
Virginia State Peninsula Port Authority Revenue Bond for
Dominion Terminal Project, Series 1987C (A) (B) (C)
5.000%, 01/02/98 ........................................................... 725 725
Virigina State Housing Revenue Bond
3.800%, 06/10/98 ........................................................... 3,000 3,000
Waynesboro, Viriginia Residential Care Facilities
Revenue Bond (A) (B) (C)
5.000%, 01/02/98 ........................................................... 4,330 4,330
---------
Total Virginia 13,955
---------
WEST VIRGINIA - 0.7%
Putnam County, West Virginia Industrial Development
Authority Revenue Bond for FMC Corporation
Project (A) (B) (C)
3.800%, 01/02/98 ........................................................... 1,300 1,300
---------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
FACE
AMOUNT VALUE
ELITE TAX-FREE RESERVE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
WISCONSIN - 0.5%
Wisconsin Health and Educational Facilities Wheaton
Franciscan Services Revenue Bond
Pre-Refunded @ 102 (C) (D)
8.200%, 08/15/98 ........................................................... $1,000 $ 1,046
---------
WYOMING - 6.8%
Converse County, Wyoming TECP
3.750%, 02/02/98 ........................................................... 2,800 2,800
Gillette County, Wyoming TECP
3.700%, 01/07/98 ........................................................... 1,200 1,200
3.800%, 01/14/98 ........................................................... 3,000 3,000
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project, Series D (A) (B)
5.100%, 01/07/98 ........................................................... 1,200 1,200
Lincoln County, Wyoming Pollution Control Revenue Bond,
Series 1984 B (A)
5.100%, 01/02/98 ........................................................... 600 600
Lincoln County, Wyoming Resource Recovery Revenue Bond
for Exxon Project, Series C (A) (B)
5.100%, 01/02/98 ........................................................... 600 600
Lincoln County, Wyoming Pollution Control Revenue Bond
for Exxon Project (A) (B)
4.950%, 01/02/98 ........................................................... 1,900 1,900
Platte County, Wyoming Pollution Control Revenue Bond,
Series A (A) (B) (C)
4.500%, 01/02/98 ........................................................... 600 600
Platte County, Wyoming Pollution Control Revenue Bond,
Series B (A) (B) (C)
4.500%, 01/02/98 ........................................................... 1,600 1,600
---------
Total Wyoming 13,500
---------
TOTAL MUNICIPAL BONDS
(Cost $202,760) ............................................................... 202,760
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.7%
(Cost $202,760) .................................................................. 202,760
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET - 0.3% ............................................ 499
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
MARKET
VALUE
ELITE TAX-FREE RESERVE (000)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio Shares ($0.001 par value -- 250 million authorized)
based on 202,261,424 outstanding shares .......................................... $202,261
Portfolio Shares ($0.001 par value -- 250 million authorized)
based on 1,028,846 outstanding shares ............................................ 1,029
Accumulated Net Realized Loss on Investments ........................................ (31)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% ........................................................... $203,259
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS Y ........................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -- CLASS C ........................... $1.00
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
GO -- GENERAL OBLIGATION
RAN -- REVENUE ANTICIPATION NOTE
TECP -- TAX-EXEMPT COMMERCIAL PAPER
TRAN -- TAX AND REVENUE ANTICIPATION NOTES
(A) VARIABLE RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 1997.
(B) PUT OR DEMAND FEATURES EXIST REQUIRING THE ISSUER TO REPURCHASE THE
INSTRUMENT PRIOR TO MATURITY. THE MATURITY DATE SHOWN IS THE LESSER OF THE
PUT DEMAND DATE OR MATURITY DATE.
(C) SECURITIES ARE HELD IN CONNECTION WITH A LETTER OF CREDIT ISSUED BY A MAJOR
COMMERCIAL BANK.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
This page left intentionally blank.
20
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (000) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
For the six month period ended December 31, 1997 (Unaudited)
ELITE ELITE ELITE
TREASURY CASH TAX
RESERVE RESERVE FREE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ................................................ $831 $7,064 $3,408
---- ------ ------
EXPENSES:
Investment advisory fees ................................... 30 248 184
Less investment advisory fees waived ....................... (18) (149) (111)
Administrative fees ........................................ 37 310 230
Less administrative fees waived ............................ (27) (224) (166)
Transfer agent fees & expenses ............................. 3 6 11
Professional fees .......................................... (1) (1) 4
Registration & filing fees ................................. -- 21 4
Printing ................................................... -- 15 10
Miscellaneous .............................................. -- 16 --
---- ------ ------
Total expenses ................................................... 24 242 166
---- ------ ------
NET INVESTMENT INCOME ............................................ 807 6,822 3,242
NET REALIZED LOSS ON INVESTMENTS:
Net realized loss from securities sold ..................... -- -- (1)
---- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $807 $6,822 $3,241
==== ====== ======
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (000) COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
For the six month period ended December 31, 1997 (Unaudited) and the year ended June 30, 1996
ELITE
TREASURY
RESERVE*
- ---------------------------------------------------------------------------------------------------------------------
07/01/97 07/01/96
TO 12/31/97 TO 06/30/97
----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income ................................................. $ 807 $ 1,347
Net realized loss on securities ....................................... -- --
-------- --------
Net increase in net assets resulting from operations ........................ 807 1,347
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class Y ........................................................... (799) (13,478)
Class C ........................................................... (8) --
-------- --------
Total dividends distributed ........................................... (807) (13,478)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued ....................................... 97,965 40,896
Cost of shares redeemed ........................................... (65,778) (43,727)
-------- --------
Increase (Decrease) in net assets
from Class C transactions .............................. 32,187 (2,831)
-------- --------
Class C
Proceeds from shares issued ....................................... 4,498 --
Cost of shares redeemed ........................................... (85) --
-------- --------
Increase in net assets from Class C transactions ............. 4,413 --
-------- --------
Increase (Decrease) in net assets from capital transactions ................. 36,600 (2,831)
======== ========
NET ASSETS:
Beginning of period ................................................... 21,667 24,498
-------- --------
End of period ......................................................... $ 58,267 $ 21,667
======== ========
SHARES ISSUED AND REDEEMED:
Class Y
Shares issued ..................................................... 97,965 40,896
Shares redeemed ................................................... (65,778) (43,727)
-------- --------
Net increase (decrease) ...................................... 32,187 (2,831)
-------- --------
Class C
Shares issued ..................................................... 4,498 --
Shares redeemed ................................................... (85) --
-------- --------
Net increase (decrease) ...................................... 4,413 --
-------- --------
Total share activity for period ............................................. 36,600 (2,831)
-------- --------
OUTSTANDING SHARES:
Beginning of period ................................................... 21,667 24,498
-------- --------
End of period ......................................................... 58,267 21,667
======== ========
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ELITE
CASH
RESERVE**
- -----------------------------------------------------------------------------------------------------------------------
07/01/97 07/01/96
TO 12/31/97 TO 06/30/97
----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income ................................................. $ 6,822 $ 18,767
Net realized loss on securities ....................................... -- (3)
---------- ------------
Net increase in net assets resulting from operations ........................ 6,822 18,764
---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class Y ........................................................... (6,821) (18,767)
Class C ........................................................... (1) --
---------- ------------
Total dividends distributed ........................................... (6,822) (18,767)
---------- ------------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued ....................................... 457,011 825,899
Cost of shares redeemed ........................................... (384,653) (1,003,355)
---------- ------------
Increase (Decrease) in net assets
from Class C transactions .............................. 72,358 (177,456)
---------- ------------
Class C
Proceeds from shares issued ....................................... 345 --
Cost of shares redeemed ........................................... -- --
---------- ------------
Increase in net assets from Class C transactions ............. 345 --
---------- ------------
Increase (Decrease) in net assets from capital transactions ................. 72,703 (177,456)
========== ============
NET ASSETS:
Beginning of period ................................................... 206,990 384,446
---------- ------------
End of period ......................................................... $ 279,693 $ 206,990
========== ============
SHARES ISSUED AND REDEEMED:
Class Y
Shares issued ..................................................... 457,014 825,899
Shares redeemed ................................................... (384,653) (1,003,355)
---------- ------------
Net increase (decrease) ...................................... 72,361 (177,456)
---------- ------------
Class C
Shares issued ..................................................... 345 --
Shares redeemed ................................................... -- --
---------- ------------
Net increase (decrease) ...................................... 345 --
---------- ------------
Total share activity for period ............................................. 72,706 (177,456)
---------- ------------
OUTSTANDING SHARES:
Beginning of period ................................................... 206,990 384,446
---------- ------------
End of period ......................................................... 279,696 206,990
========== ============
</TABLE>
<TABLE>
<CAPTION>
ELITE
TAX-FREE
RESERVE***
- -------------------------------------------------------------------------------------------------------------------
07/01/96 07/01/96
TO 06/30/97 TO 06/30/97
----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net investment income ................................................. $ 3,242 $ 3,774
Net realized loss on securities ....................................... (1) --
----------- ----------
Net increase in net assets resulting from operations ........................ 3,241 3,774
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class Y ........................................................... (3,241) (3,774)
Class C ........................................................... (1) --
----------- ----------
Total dividends distributed ........................................... (3,242) (3,774)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Class Y
Proceeds from shares issued ....................................... 248,501 226,783
Cost of shares redeemed ........................................... (193,581) (165,949)
----------- ----------
Increase (Decrease) in net assets
from Class C transactions .............................. 54,920 60,834
----------- ----------
Class C
Proceeds from shares issued ....................................... 1,029 --
Cost of shares redeemed ........................................... -- --
----------- ----------
Increase in net assets from Class C transactions ............. 1,029 --
----------- ----------
Increase (Decrease) in net assets from capital transactions ................. 55,948 60,834
=========== ==========
NET ASSETS:
Beginning of period ................................................... 147,311 86,477
----------- ----------
End of period ......................................................... $ 203,259 $147,311
=========== ==========
SHARES ISSUED AND REDEEMED:
Class Y
Shares issued ..................................................... 248,501 226,783
Shares redeemed ................................................... (193,581) (165,949)
----------- ----------
Net increase (decrease) ...................................... 54,920 60,834
----------- ----------
Class C
Shares issued ..................................................... 1,029 --
Shares redeemed ................................................... -- --
----------- ----------
Net increase (decrease) ...................................... 1,029 --
----------- ----------
Total share activity for period ............................................. 55,949 60,834
----------- ----------
OUTSTANDING SHARES:
Beginning of period ................................................... 147,341 86,507
----------- ----------
End of period ......................................................... 203,290 147,341
=========== ==========
<FN>
* THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
** THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY CASH RESERVE.
*** THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
</FN>
</TABLE>
See accompanying notes to financial statements.
22 & 23
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
ELITE TREASURY RESERVE+
- ---------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO
NET NET RATIO OF EXPENSES
ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ------------- ------------ ------ --------- ----------- ---------- -----------
CLASS Y
For the six month
period ended
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997** $1.00 0.05 (0.05) $1.00 2.76%* $53,854 0.16% 5.46% 0.46%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.54% $24,498 0.19% 5.39% 0.80%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.24% $18,396 0.23% 5.09% 0.87%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.10% $20,363 0.28% 3.03% 0.91%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.17% $27,614 0.18% 3.19% 0.85%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 2.00%* $49,328 0.05% 3.95% 0.80%
CLASS C
For the six month
period ended
December 31, 1997**(2) $1.00 0.01 (0.01) $1.00 0.20%* $4,413 0.41% 5.21% 0.71%
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS
(EXCLUDING
WAIVERS)
----------
CLASS Y
For the six month
period ended
<S> <C>
December 31, 1997** 5.16%
For the year ended
June 30, 1996 4.78%
For the year ended
June 30, 1995 4.45%
For the year ended
June 30, 1994 2.40%
For the year ended
June 30, 1993 2.52%
For the period ended
June 30, 1992 (1) 3.20%
CLASS C
For the six month
period ended
December 31, 1997**(2) 4.91%
<FN>
- ----------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997 HAVE BEEN ANNUALIZED.
(1) THE ELITE TREASURY RESERVE CLASS Y COMMENCED OPERATIONS ON DECEMBER 10, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) THE ELITE TREASURY RESERVE CLASS C COMMENCED OPERATIONS ON DECEMBER 18, 1997.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TREASURY RESERVE.
</FN>
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
ELITE CASH RESERVE+
- ---------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO
NET NET RATIO OF EXPENSES
ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ------------- ------------ ------ --------- ----------- ---------- -----------
CLASS Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the six month
period ended
December 31, 1997** $1.00 0.05 (0.05) $1.00 2.81%* $279,348 0.20% 5.50% 0.50%
For the year ended
June 30, 1997 $1.00 0.05 (0.05) $1.00 5.43% $206,987 0.17% 5.28% 0.50%
For the year ended
June 30, 1996 $1.00 0.05 (0.05) $1.00 5.62% $384,446 0.15% 5.46% 0.76%
For the year ended
June 30, 1995 $1.00 0.05 (0.05) $1.00 5.46% $406,597 0.17% 5.35% 0.81%
For the year ended
June 30, 1994 $1.00 0.03 (0.03) $1.00 3.31% $382,814 0.16% 3.24% 0.84%
For the year ended
June 30, 1993 $1.00 0.03 (0.03) $1.00 3.29% $424,363 0.17% 3.25% 0.81%
For the year ended
June 30, 1992 $1.00 0.05 (0.05) $1.00 5.04% $416,945 0.18% 4.96% 0.83%
For the year ended
June 30, 1991 $1.00 0.07 (0.07) $1.00 7.49% $453,947 0.15% 7.05% 0.80%
For the period ended
June 30, 1990 (1) $1.00 0.08 (0.08) $1.00 8.03%* $232,091 0.13% 8.42% 0.83%
CLASS C
For the six month
period ended
December 31, 1997**(2) $1.00 0.01 (0.01) $1.00 0.21%* $345 0.45% 5.35% 0.75%
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS
(EXCLUDING
WAIVERS)
----------
CLASS Y
For the six month
period ended
<S> <C>
December 31, 1997** 5.20%
For the year ended
June 30, 1997 4.94%
For the year ended
June 30, 1996 4.85%
For the year ended
June 30, 1995 4.71%
For the year ended
June 30, 1994 2.56%
For the year ended
June 30, 1993 2.61%
For the year ended
June 30, 1992 4.31%
For the year ended
June 30, 1991 6.40%
For the period ended
June 30, 1990 (1) 7.72%
CLASS C
For the six month
period ended
December 31, 1997**(2) 5.05%
<FN>
- ------------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997 HAVE BEEN ANNUALIZED.
(1) THE ELITE CASH RESERVE CLASS Y COMMENCED OPERATIONS ON DECEMBER 10, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) THE ELITE CASH RESERVE CLASS C COMMENCED OPERATIONS ON DECEMBER 18, 1997.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY CASH RESERVE
</FN>
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS COREFUND ELITE MONEY MARKET FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
ELITE TAX-FREE RESERVE+
- ---------------------------------------------------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
RATIO
NET NET RATIO OF EXPENSES
ASSET DISTRIBUTIONS NET ASSETS RATIO OF NET TO AVERAGE
VALUE NET FROM NET ASSET VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
--------- ---------- ------------- ------------ ------ --------- ----------- ---------- -----------
CLASS Y
For the six month
period ended
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997** $1.00 0.03 (0.03) $1.00 1.78%* $202,230 0.18% 3.52% 0.48%
For the year ended
June 30, 1997 $1.00 0.03 (0.03) $1.00 3.42%$ 147,311 0.17% 3.39% 0.50%
For the year ended
June 30, 1996 $1.00 0.03 (0.03) $1.00 3.51%$ 86,477 0.16% 3.44% 0.76%
For the year ended
June 30, 1995 $1.00 0.03 (0.03) $1.00 3.41%$ 72,593 0.19% 3.37% 0.83%
For the year ended
June 30, 1994 $1.00 0.02 (0.02) $1.00 2.32%$ 78,219 0.17% 2.29% 0.82%
For the year ended
June 30, 1993 $1.00 0.02 (0.02) $1.00 2.48%$ 48,424 0.19% 2.45% 0.83%
For the period ended
June 30, 1992 (1) $1.00 0.02 (0.02) $1.00 1.50%* $ 66,158 0.17% 3.00% 0.89%
For the six month
period ended
December 31, 1997** $1.00 0.03 (0.03) $1.00 1.78%* $202,230 0.18% 3.52% 0.48%
CLASS C
For the six month
period ended
December 31, 1997**(2) $1.00 0.01 (0.01) $1.00 0.13%* $1,029 0.43% 3.27% 0.73%
RATIO OF
NET INCOME
TO AVERAGE
NET ASSETS
(EXCLUDING
WAIVERS)
----------
CLASS Y
For the six month
period ended
<S> <C>
December 31, 1997** 3.22%
For the year ended
June 30, 1997 3.06%
For the year ended
June 30, 1996 2.84%
For the year ended
June 30, 1995 2.73%
For the year ended
June 30, 1994 1.64%
For the year ended
June 30, 1993 1.81%
For the period ended
June 30, 1992 (1) 2.28%
For the six month
period ended
December 31, 1997** 3.22%
CLASS C
For the six month
period ended
December 31, 1997**(2) 2.97%
<FN>
- --------------------
* RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
** RATIOS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997 HAVE BEEN ANNUALIZED.
(1) THE ELITE TAX-FREE RESERVE CLASS Y COMMENCED OPERATIONS ON NOVEMBER 19, 1991.
RATIOS FOR THIS PERIOD HAVE BEEN ANNUALIZED.
(2) THE ELITE TAX-FREE RESERVE CLASS C COMMENCED OPERATIONS ON DECEMBER 18, 1997.
+ THIS FUND WAS FORMERLY KNOWN AS THE FIDUCIARY TAX-FREE RESERVE.
</FN>
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
1. ORGANIZATION
The CoreFund Elite Treasury Reserve is a Fund offered by CoreFunds, Inc.
(the "Company"), an open-end investment company registered under the Investment
Company Act of 1940, as amended.
The Company is presently authorized to offer shares in the following Funds (the
"Funds"):
EQUITY FUNDS: MONEY MARKET FUNDS:
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 FUNDS:
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
The financial statements included herein present only those of the Elite
Treasury Reserve. The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Fund's prospectus provides
a description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Elite Treasury Reserve.
SECURITY VALUATION -- Investment securities of the Elite Treasury Reserve are
stated at amortized cost which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs 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 the purchase discounts and premiums during the respective
holding period. Interest income is recorded on the accrual basis.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by each Fund's custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
the Adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines or if the
counterparty enters into insolvency proceedings, realization of the collateral
by the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to the Fund are charged directly
to that Fund. Other operating expenses of the Company are prorated to the Fund
on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared on a daily basis and are payable on the first business day of the
following month. Any net realized capital gains on sales of securities for a
Fund are distributed to its shareholders at least annually.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
3. INVESTMENT ADVISORY AND CUSTODIAL SERVICES
Pursuant to an investment advisory agreement dated April 12, 1996, investment
advisory services are provided to the Company by CoreStates Investment Advisers,
Inc. ("CoreStates Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A.
("CoreStates Bank"), itself a wholly-owned subsidiary of CoreStates Financial
Corp. Under the terms of such agreement, CoreStates Advisers is entitled to
receive an annual fee of 0.20% on the average net assets of the Elite Treasury
Reserve, Elite Cash Reserve and Elite Tax-Free Reserve. Advisory fees are
computed daily and paid monthly for all Funds. Additionally, for the six month
period ended December 31, 1997, CSIA has voluntarily waived a portion of their
fees in order to assist the Funds in maintaining competitive expense ratios.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
CoreStates Bank serves as Custodian to the Company. Under the Custodian
Agreement, CoreStates Bank holds each Fund's securities and cash items, makes
receipts and disbursements of money on behalf of each Fund, collects and
receives all income and other payments and distributions on account of the
Funds' 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 Funds investing exclusively in the
United States and may, with the Funds' Board approval and at the expense of the
Funds, employ sub-custodians on behalf of the Funds who invest in foreign
countries provided that CoreStates Bank shall remain liable for the performance
of all of its duties under the Custodian Agreement.
4. ADMINISTRATIVE, DISTRIBUTION, AND TRANSFER AGENT SERVICES
Pursuant to an administration agreement dated October 30, 1992, as amended June
1, 1995, SEI Fund Resource ("SFR"), a wholly-owned subsidiary of SEI
Corporation, acts as the Funds's Administrator. Under the terms of such
agreement, SFR is entitled to receive an annual fee of 0.25% on the average
daily net assets of the Elite Treasury Reserve, Elite Cash Reserve and Elite
Tax-Free Reserve. Such a fee is computed daily and paid monthly for all Funds.
Additionally, for the six month period ended December 31, 1997, SFR has
voluntarily waived a portion of their fees in order to assist the Fund in
maintaining a competitive expense ratio.
Effective for the period July 1, 1995 to November 16, 1995, SEI Investments
Management Corporation acted as the Transfer Agent of the Fund. Pursuant to a
transfer agency agreement dated November 16, 1995, Boston Financial Data
Services ("BFDS") a subsidiary of State Street Bank and Trust Company acts as
the Fund's Transfer Agent. As such, BFDS provides transfer agency, dividend
disbursing, and shareholder servicing for the Fund.
On November 2, 1992, SEI Investments Distribution Co., also a wholly-owned
subsidiary of SEI Corporation, became the Fund's exclusive Distributor pursuant
to a distribution agreement dated October 30, 1992.
Certain officers of the Company are also officers of the Administrator. Such
officers are not paid fees by the Fund.
The Fund has paid legal fees to a law firm in which the secretary of the Company
is a partner.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
5. INVESTMENT COMPOSITION
The Fund invests in securities which include revenue and general obligation
instruments.
At December 31, 1997, the revenue sources by purpose were as follows:
% OF PORTFOLIO
INVESTMENTS
--------------
REVENUE INSTRUMENTS
Education Bonds ..................................... 5%
Hospital & Health Care Bonds ........................ 12
Housing Bonds ....................................... 5
Industrial Development Bonds ........................ 8
Other Bonds ......................................... 5
Pollution Control Bonds ............................. 16
Transportation Bonds ................................ 4
Utility Bonds ....................................... 3
TAX EXEMPT COMMERCIAL PAPER .................................. 29
GENERAL OBLIGATIONS .......................................... 7
TAX & REVENUE ANTICIPATION NOTES ............................. 6
-----
100%
=====
In addition, certain investments are covered by insurance issued by several
private issuers who guarantee the payment of interest and principal at final
maturity in the event of default. Such insurance, however, does not guarantee
the market value of the securities or the value of the Fund's shares.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) COREFUND ELITE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
December 31, 1997 (Unaudited)
6. PROPOSED REORGANIZATION
On November 18, 1997, CoreStates Financial Corp. and First Union
Corporation jointly announced that they had signed a definitive agreement for
the merger of CoreStates Bank, N.A. and First Union Bank. The Advisor is
currently a wholly-owned subsidiary of CoreStates Bank, N.A. Subject to certain
conditions, it is anticipated that the transaction will close at the end of
April, 1998. Thereafter, the Advisor will be an indirect wholly-owned subsidiary
of First Union Bank. A special meeting of shareholders will be called to
consider certain proposed fund reorganizations.
31
<PAGE>
NOTES
- --------------------------------------------------------------------------------
32
<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-059-02
<PAGE>
<PAGE>
Evergreen Money Market Fund
Pro Forma Combining Financial Statements (unaudited)
Statement of Assets and Liabilities
January 31, 1998 (000's omitted)
<TABLE>
<CAPTION>
Evergreen
Money CoreFund
Market Cash Pro Forma
Fund Reserve Adjustments Combined
-----------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments at value (identified cost $4,608,562) $3,555,072 $1,053,490 0 $4,608,562
Cash 219 487 0 706
Interest receivable 25,275 8,124 0 33,399
Receivable for Fund shares sold 11,136 0 0 11,136
Prepaid expenses and other assets 313 176 0 489
-----------------------------------------------------
Total assets 3,592,015 1,062,277 0 4,654,292
Liabilities:
Payable for investments purchased 25,012 0 0 25,012
Dividends payable 11,163 4,728 0 15,891
Payable for Fund shares redeemed 6,586 0 0 6,586
Due to related parties 1,394 0 0 1,394
Distribution fee payable 729 0 0 729
Accrued Trustees' fees and expenses 74 0 0 74
Accrued expenses and other liabilities 375 504 0 879
-----------------------------------------------------
Total liabilities 45,333 5,232 0 50,565
-----------------------------------------------------
Net assets $3,546,682 $1,057,045 0 $4,603,727
-----------------------------------------------------
Net assets are comprised of:
Paid-in capital $3,547,313 $1,057,177 0 $4,604,490
Accumulated net realized loss on investments (631) (132) 0 (763)
-----------------------------------------------------
Net assets $3,546,682 $1,057,045 0 $4,603,727
-----------------------------------------------------
Class A shares
Net assets $2,909,593 - $2,909,593
Shares of beneficial interest outstanding 2,909,731 - 2,909,731
Net asset value $1.00 - $1.00
Class B shares
Net assets $25,053 $81 $25,134
Shares of beneficial interest outstanding 25,056 81 25,137
Net asset value $1.00 $1.00 $1.00
Class C shares
Net assets $2,029 $82,955 $84,984
Shares of beneficial interest outstanding 2,031 82,958 84,989
Net asset value $1.00 $1.00 $1.00
Class Y shares
Net assets $610,007 $974,009 $1,584,016
Shares of beneficial interest outstanding 610,567 974,138 1,584,705
Net asset value $1.00 $1.00 $1.00
</TABLE>
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Money Market Fund
PROFORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
SCHEDULE OF INVESTMENTS - JANUARY 31, 1998 (000'S OMITTED)
<TABLE>
<CAPTION>
EVERGREEN MONEY COREFUND
MARKET FUND CASH RESERVE
--------------- -----------------
MATURITY PRINCIPAL MARKET PRINCIPAL MARKET PRINCIPAL MARKET
ASSET NAME DATE COUPON AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BANKERS' ACCEPTANCES - 1.5%
Fuji Bank Limited (New York) 2/2/98 5.62% $ 10,000 $9,998 $10,000 $9,998
Industrial Bank Of Japan Limited 4/17/98 5.68 28,650 28,311 28,650 28,311
Sanwa Bank Limited 2/17/98 6.00 19,700 19,647 19,700 19,647
Toronto Dominion Bank 3/23/98 5.73 ---------- $12,000 $ 11,906 12,000 11,906
------------ -----------
TOTAL BANKERS' ACCEPTANCES
(cost $69,862) 57,956 11,906 69,862
---------- ------------ -----------
CERTIFICATES OF DEPOSIT - 15.0%
Bank Of Nova Scotia 8/5/98 5.81 50,000 49,993 50,000 49,993
Bank Of Tokyo Mitsubishi 2/5/98 6.18 50,000 50,003 50,000 50,003
Bank Of Tokyo Mitsubishi 5/18/98 6.02 50,000 50,001 50,000 50,001
Banque National de Paris (New York) 11/12/98 5.90 50,000 50,000 50,000 50,000
Barclay's Bank 6/19/98 5.94 5,000 4,999 5,000 4,999
Barclay's Bank 3/9/98 5.91 14,750 14,750 14,750 14,750
Bayerische Vereinsbank AG (New York) 5/11/98 6.15 25,000 25,000 25,000 25,000
Bayerische Vereinsbank AG (New York) 10/5/98 5.92 25,000 25,000 25,000 25,000
Credit Suisse First Boston, Incorporated 4/16/98 6.31 10,000 10,000 10,000 10,000
Credit Suisse First Boston, 12/14/98 5.70 50,000 50,000 50,000 50,000
Incorporated, FRN
Deutsche Bank 10/22/98 5.94 9,250 9,247 9,250 9,247
Deutsche Bank 3/17/98 5.91 5,000 5,000 5,000 5,000
Deutsche Bank 10/14/98 5.84 5,000 4,998 5,000 4,998
National Bank Of Canada (New York) 6/26/98 6.00 50,000 50,000 50,000 50,000
National Bank Of Canada (New York) 9/14/98 5.93 50,000 49,985 50,000 49,985
National Westminster Bank 6/26/98 5.94 15,000 14,997 15,000 14,997
National Westminster Bank 3/10/98 5.86 10,000 9,999 10,000 9,999
National Westminster Bank, PLC 10/14/98 5.83 5,000 4,999 5,000 4,999
Norinchukin Bank (New York) 3/4/98 5.82 25,000 25,000 25,000 25,000
Rabobank Nederland N.V. 3/24/98 5.99 1,000 1,000 1,000 1,000
Societe Generale 6/9/98 6.08 10,000 9,998 10,000 9,998
Societe Generale (New York) 9/15/98 5.97 25,000 25,015 25,000 25,015
Societe Generale (New York) 2/23/98 5.66 25,000 25,000 25,000 25,000
Standard Chartered Bank 10/19/98 5.95 50,000 49,997 50,000 49,997
Svenska Handlesbanken, Incorporated 8/13/98 5.96 50,000 49,990 50,000 49,990
Swiss Bank 6/12/98 6.02 10,000 10,001 10,000 10,001
Swiss Bank 11/20/98 5.85 5,000 4,999 5,000 4,999
Swiss Bank 10/2/98 5.83 10,000 9,997 10,000 9,997
--------- ------------ -----------
TOTAL CERTIFICATES OF DEPOSITS
(cost $689,968) 580,984 108,984 689,968
--------- ------------ -----------
CORPORATE NOTES - 18.6%
Abbey National Treasury Services, MTN 4/7/98 6.19 25,000 24,997 25,000 24,997
Abbey National Treasury Services, MTN 1/29/99 5.72 25,000 25,000 25,000 25,000
Abbey National Treasury Services, MTN 4/15/98 5.65 17,000 16,999 17,000 16,999
Abbey National Treasury Services, MTN 2/25/98 5.57 20,000 19,998 20,000 19,998
Associates Corporation of North America 3/2/98 5.68 15,000 14,999 15,000 14,999
Associates Corporation of North America 2/2/98 5.50 11,097 11,097 11,097 11,097
Bank of America 4/23/98 5.50 15,000 15,000 15,000 15,000
Bank of Montreal 2/2/98 5.59 2,000 2,000 2,000 2,000
BankBoston 8/7/98 5.90 25,000 25,000 25,000 25,000
BankBoston Medium Senior Notes 4/21/98 5.74 25,000 25,000 25,000 25,000
Beneficial Corporation, MTN 5/28/98 6.09 15,000 15,016 15,000 15,016
Bravo Trust Series, (a) 10/15/98 5.65 70,000 70,000 70,000 70,000
Credit Suisse First Boston, Incorporated 7/22/98 5.67 10,000 10,000 10,000 10,000
Credit Suisse First Boston, Incorporated 3/13/98 5.54 10,000 10,000 10,000 10,000
Dean Witter Discover & Co. 2/12/98 5.69 13,000 13,001 13,000 13,001
Den Danske Bank 2/2/98 5.63 32,000 31,999 32,000 31,999
Deutsche Bank 4/15/98 5.50 15,000 15,000 15,000 15,000
Exxon Capital Corporation 10/2/98 8.00 4,249 4,304 4,249 4,304
Ford Motor Credit Corporation 2/12/98 6.35 1,800 1,800 1,800 1,800
Ford Motor Credit Corporation 12/23/98 5.70 15,000 14,999 15,000 14,999
General Electric Capital Corporation 2/3/98 5.47 5,000 5,000 5,000 5,000
Gesmundo & Associates, Incorporated, 5.60 4,500 4,500 4,500 4,500
(LOC: First of America Bank N.A.), VRDN
Goldman Sachs Group 4/15/98 6.10 6,825 6,826 6,825 6,826
Heller Financial, Incorporated 3/15/98 9.38 20,000 20,069 20,000 20,069
Houlihan Brothers, (LOC: First of 5.60 8,300 8,300 8,300 8,300
America Bank N.A.), VRDN
KBL Capital Fund, Incorporated, (LOC: 5.60 5,000 5,000 5,000 5,000
First of America Bank N.A.), VRDN
LAM Funding LLC, (LOC: First of 5.60 13,260 13,260 13,260 13,260
America Bank N.A.), VRDN
Lehman Brothers Holdings, Incorporated 9/25/98 6.84 10,000 10,047 10,000 10,047
Lehman Brothers Holdings, Incorporated 8/10/98 5.97 5,000 5,007 5,000 5,007
Lehman Brothers Holdings, Incorporated 11/15/98 5.75 1,819 1,814 1,819 1,814
Lehman Brothers Holdings, Incorporated 1/13/99 5.74 30,000 30,000 30,000 30,000
Lehman Brothers Holdings, Incorporated 1/13/99 5.65 40,000 40,000 40,000 40,000
Lehman Brothers Holdings, Incorporated 5/16/98 0.00 19,464 19,136 19,464 19,136
(effective yield 5.84%)
Manitoba Province (Canada) 9/15/98 9.50 14,000 14,291 14,000 14,291
Merck & Company, MTN 12/22/98 5.25 5,000 4,970 5,000 4,970
Morgan Guaranty Trust Co. (New York) 8/31/98 5.93 75,000 75,008 75,000 75,008
Morgan Guaranty Trust Co. (New York) 8/21/98 5.79 2,000 2,000 2,000 2,000
Morgan Stanley Dean Witter 6/16/98 5.91 50,000 50,000 50,000 50,000
Discover & Co. FRN
Morgan Stanley Dean Witter 1/15/99 5.83 15,000 15,000 15,000 15,000
Discover & Co. FRN
New Center Asset Trust 3/9/98 5.78 10,000 9,943 10,000 9,943
Northern Trust Co. Bank MTN 6/17/98 5.96 5,000 5,000 5,000 5,000
Paccar Financial 6/18/98 5.50 12,000 11,997 12,000 11,997
PHH Corporation MTN 2/25/98 5.69 25,000 24,998 25,000 24,998
Salomon, Incorporated MTN 5/11/98 7.76 26,000 26,150 26,000 26,150
Salomon, Incorporated 2/13/98 6.16 15,000 15,036 15,000 15,036
Sigma Finance Corporation MTN 9/16/98 6.00 50,000 50,000 50,000 50,000
</TABLE>
<PAGE>
Evergreen Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Schedule of Investments - January 31, 1998 (000's omitted)
<TABLE>
<CAPTION>
Evergreen Money Market Fund
---------------------------
Asset Name Maturity Date Coupon Principal Amount Market Value
- ---------------------------------------------------------- ------------- ------ ----------------------------------
<S> <C> <C> <C> <C>
Societe Generale (New York) 4/15/98 6.35
Swiss Bank 3/19/98 5.98 -------------
TOTAL CORPORATE NOTES (cost $856,562) 615,630
-------------
COMMERCIAL PAPER - 52.6%
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 1.4%
Daimler-Benz North America Corporation 4/1/98 5.55 29,450 29,182
Ford Motor Credit Corporation 3/30/98 5.72
Hertz Corporation 2/6/98 5.58 25,000 24,981
-------------
54,163
-------------
BANKS - 3.5%
Banc One Funding 2/13/98 5.84
Banc One Funding 2/9/98 5.84
Bankers Trust Co. 5/28/98 6.15 25,000 24,999
BCI Funding Corporation 2/11/98 5.71 25,000 24,960
Nations Bank Corporation 3/17/98 5.81
Nations Bank Corporation 2/10/98 5.52 30,000 29,959
Nations Bank Corporation 5/18/98 5.50
Societe Generale 6/16/98 5.90
Sumitomo Bank Capital Markets, Incorporated 2/4/98 5.82 25,000 24,988
-------------
104,906
-------------
BROKERS - 2.1%
Goldman Sachs Group 5/7/98 5.71
Goldman Sachs Group 2/2/98 5.60 49,455 49,447
Merrill Lynch 5/29/98 5.81
Merrill Lynch 5/13/98 5.80
Merrill Lynch 3/31/98 5.71
Morgan Stanley 2/4/98 5.68
Morgan Stanley 3/9/98 5.51
-------------
49,447
-------------
BUSINESS EQUIPMENT & SERVICES - 0.4%
JLUS Funding Corporation, (LOC: Norinchukin Bank) 2/12/98 6.03 18,500 18,466
-------------
DIVERSIFIED COMPANIES - 0.2%
Finova Capital Corporation 2/2/98 5.70 10,000 9,998
-------------
FINANCE - 38.0%
AIG Funding 7/31/98 5.81
AIG Funding 2/2/98 5.62
Amsterdam Funding Corporation 2/9/98 5.78 19,000 18,976
Anchor Funding Corporation 2/11/98 5.65 47,460 47,386
Apex Funding Corporation, (LOC: Bank of Tokyo-Mitsubishi Ltd.) 4/6/98 5.72 50,000 49,492
Asset Securitization Coop Corporation 2/27/98 5.81
Asset Securitization Coop Corporation 2/12/98 5.80
Asset Securitization Coop Corporation 2/4/98 5.68
Asset Securitization Coop Corporation 5/8/98 5.53
Atlas Funding Corporation, (LOC: Dai-Ichi Kangyo Bank Ltd.) 2/11/98 5.90 26,275 26,232
Atlas Funding Corporation, (LOC: Dai-Ichi Kangyo Bank Ltd.) 2/17/98 5.86 30,000 29,922
Atlas Funding Corporation, (LOC: Dai-Ichi Kangyo Bank Ltd.) 2/18/98 5.80 45,000 44,877
Banner Receivables Corporation, (LOC: Republic Bank) 2/5/98 5.70 19,040 19,028
Banner Receivables Corporation, (LOC: Republic Bank) 2/11/98 5.58 30,000 29,954
Broadway Capital Corporation 2/2/98 6.35 9,200 9,198
Broadway Capital Corporation 2/20/98 5.52 25,000 24,927
Budget Funding Corporation 2/24/98 5.50 50,000 49,824
Cafco 2/19/98 5.84
Cafco 3/25/98 5.54
Cafco 3/2/98 5.47
Caisse De Deposits en Consignations 3/17/98 5.68
CDC 2/27/98 5.50
Ciesco 2/17/98 5.81
Ciesco 3/3/98 5.80
Clipper Receivables Corporation 2/18/98 5.49 50,000 49,870
Eureka Securitization 2/25/98 5.85
Eureka Securitization 3/23/98 5.83
Eureka Securitization 2/3/98 5.70
FP Funding Corporation, (LOC:The Bank of Tokyo-Misubishi Ltd.) 2/6/98 5.80 38,418 38,387
Gotham Funding Corporation, (LOC: Republic Bank) 2/4/98 5.77 35,619 35,602
Gotham Funding Corporation, (LOC: Republic Bank) 2/3/98 5.77 20,064 20,058
Gotham Funding Corporation, (LOC: Republic Bank) 2/5/98 5.65 35,000 34,978
Gotham Funding Corporation, (LOC: Republic Bank) 2/18/98 5.60 20,819 20,764
Gotham Funding Corporation, (LOC: Republic Bank) 2/19/98 5.58 35,000 34,902
GTE Funding, Incorporated 2/11/98 5.75 49,640 49,561
GTE Funding, Incorporated 2/3/98 5.55 25,000 24,992
Lexington Parker Capital Corporation 2/6/98 5.48 20,100 20,085
Madison Funding, Incorporated 2/19/98 5.55 35,450 35,352
Met Life Funding 2/5/98 5.94
Mont Blanc Capital Corporation 3/5/98 5.51 50,000 49,755
Monte Rosa Capital Corporation 3/5/98 5.48 25,682 25,557
New Center Asset Trust 3/30/98 5.70
Old Line Funding Corporation, (LOC: Dai-Ichi Kangyo Bank, Ltd.) 2/17/98 5.52 22,289 22,234
Old Line Funding Corporation, (LOC: Dai-Ichi Kangyo Bank, Ltd.) 2/23/98 5.50 25,121 25,037
</TABLE>
<TABLE>
<CAPTION>
CoreFund Cash Reserve Pro Forma Combined
--------------------- ------------------
Asset Name Principal Amount Market Value Principal Amount Market Value
- ---------------------------------------------------------- ---------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Societe Generale (New York) 10,000 10,001 10,000 10,001
Swiss Bank 7,000 7,000 7,000 7,000
---------- ----------
TOTAL CORPORATE NOTES (cost $856,562) 240,932 856,562
---------- ----------
COMMERCIAL PAPER - 52.6%
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 1.4%
Daimler-Benz North America Corporation 29,450 29,182
Ford Motor Credit Corporation 11,780 11,677 11,780 11,677
Hertz Corporation 25,000 24,981
---------- ----------
11,677 65,840
---------- ----------
BANKS - 3.5%
Banc One Funding 10,000 9,981 10,000 9,981
Banc One Funding 10,000 9,987 10,000 9,987
Bankers Trust Co. 25,000 24,999
BCI Funding Corporation 25,000 24,960
Nations Bank Corporation 14,000 13,902 14,000 13,902
Nations Bank Corporation 30,000 29,959
Nations Bank Corporation 12,000 11,809 12,000 11,809
Societe Generale 9,000 8,997 9,000 8,997
Sumitomo Bank Capital Markets, Incorporated 25,000 24,988
---------- ----------
54,676 159,582
---------- ----------
BROKERS - 2.1%
Goldman Sachs Group 10,000 9,854 10,000 9,854
Goldman Sachs Group 49,455 49,447
Merrill Lynch 10,000 9,816 10,000 9,816
Merrill Lynch 10,000 9,841 10,000 9,841
Merrill Lynch 5,000 4,955 5,000 4,955
Morgan Stanley 10,000 9,995 10,000 9,995
Morgan Stanley 5,000 4,973 5,000 4,973
---------- ----------
49,434 98,881
---------- ----------
BUSINESS EQUIPMENT & SERVICES - 0.4%
JLUS Funding Corporation, (LOC: Norinchukin Bank) 18,500 18,466
----------
DIVERSIFIED COMPANIES - 0.2%
Finova Capital Corporation 10,000 9,998
----------
FINANCE - 38.0%
AIG Funding 12,100 11,762 12,100 11,762
AIG Funding 20,000 19,997 20,000 19,997
Amsterdam Funding Corporation 19,000 18,976
Anchor Funding Corporation 47,460 47,386
Apex Funding Corporation, (LOC: Bank of Tokyo-Mitsubishi Ltd.) 50,000 49,492
Asset Securitization Coop Corporation 10,000 9,959 10,000 9,959
Asset Securitization Coop Corporation 10,000 9,982 10,000 9,982
Asset Securitization Coop Corporation 10,000 9,995 10,000 9,995
Asset Securitization Coop Corporation 10,000 9,855 10,000 9,855
Atlas Funding Corporation, (LOC: Dai-Ichi Kangyo Bank Ltd.) 26,275 26,232
Atlas Funding Corporation, (LOC: Dai-Ichi Kangyo Bank Ltd.) 30,000 29,922
Atlas Funding Corporation, (LOC: Dai-Ichi Kangyo Bank Ltd.) 45,000 44,877
Banner Receivables Corporation, (LOC: Republic Bank) 19,040 19,028
Banner Receivables Corporation, (LOC: Republic Bank) 30,000 29,954
Broadway Capital Corporation 9,200 9,198
Broadway Capital Corporation 25,000 24,927
Budget Funding Corporation 50,000 49,824
Cafco 10,000 9,971 10,000 9,971
Cafco 10,000 9,921 10,000 9,921
Cafco 10,000 9,956 10,000 9,956
Caisse De Deposits en Consignations 20,000 19,865 20,000 19,865
CDC 10,000 9,960 10,000 9,960
Ciesco 9,500 9,476 9,500 9,476
Ciesco 19,000 18,909 19,000 18,909
Clipper Receivables Corporation 50,000 49,870
Eureka Securitization 10,000 9,961 10,000 9,961
Eureka Securitization 15,000 14,880 15,000 14,880
Eureka Securitization 10,000 9,997 10,000 9,997
FP Funding Corporation, (LOC:The Bank of Tokyo-Misubishi Ltd.) 38,418 38,387
Gotham Funding Corporation, (LOC: Republic Bank) 35,619 35,602
Gotham Funding Corporation, (LOC: Republic Bank) 20,064 20,058
Gotham Funding Corporation, (LOC: Republic Bank) 35,000 34,978
Gotham Funding Corporation, (LOC: Republic Bank) 20,819 20,764
Gotham Funding Corporation, (LOC: Republic Bank) 35,000 34,902
GTE Funding, Incorporated 49,640 49,561
GTE Funding, Incorporated 25,000 24,992
Lexington Parker Capital Corporation 20,100 20,085
Madison Funding, Incorporated 35,450 35,352
Met Life Funding 4,050 4,047 4,050 4,047
Mont Blanc Capital Corporation 50,000 49,755
Monte Rosa Capital Corporation 25,682 25,557
New Center Asset Trust 14,000 13,877 14,000 13,877
Old Line Funding Corporation, (LOC: Dai-Ichi Kangyo Bank, Ltd.) 22,289 22,234
Old Line Funding Corporation, (LOC: Dai-Ichi Kangyo Bank, Ltd.) 25,121 25,037
</TABLE>
<PAGE>
Evergreen Money Market Fund
Proforma Combining Financial Statements (Unaudited)
Schedule of Investments - January 31, 1998 (000's omitted)
<TABLE>
<CAPTION>
Evergreen Money CoreFund Pro Forma
Market Fund Cash Reserve Combined
------------------- ------------------ -------------------
Principal Market Principal Market Principal Market
Asset Name Maturity Date Coupon Amount Value Amount Value Amount Value
- -------------------------- ---------------------------- ----------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Orix America, Incorporated,
(LOC: Norinchukin Bank) 10/23/98 5.83 50,000 50,000 50,000 50,000
Sanwa Business Credit
Corporation, (LOC:
Fuji Bank Ltd.) 2/3/98 5.65 30,000 29,991 30,000 29,991
Sanwa Business Credit
Corporation, (LOC:
Fuji Bank Ltd.) 2/17/98 5.60 35,000 34,913 35,000 34,913
Seven Hills Funding
Corporation 2/2/98 5.75 50,000 49,992 50,000 49,992
Seven Hills Funding
Corporation 2/2/98 5.67 100,000 99,984 100,000 99,984
Strategic Asset Funding
Corporation (Series
A, Years 1 & 2) 2/9/98 5.80 30,717 30,677 30,717 30,677
Swedish Export Credit
Corporation 5/7/98 5.82 10,000 9,850 10,000 9,850
Tri-Lateral Capital
(USA), Incorporated,
(LOC: Industrial Bank of
Japan Ltd.) 2/20/98 6.00 50,000 49,842 50,000 49,842
Tri-Lateral Capital
(USA), Incorporated,
(LOC: Industrial Bank of
Japan Ltd.) 2/2/98 5.70 50,000 49,992 50,000 49,992
Tri-Lateral
Capital (USA), Incorporated,
(LOC: Industrial Bank of
Japan Ltd.) 2/5/98 5.55 50,000 49,969 50,000 49,969
WCP Funding,
Incorporated 3/17/98 5.47 35,000 34,766 35,000 34,766
Windmill Funding
Corporation 2/23/98 5.50 23,572 23,493 23,572 23,495
Wood Street Funding
Corporation, (LOC:
Royal Bank of Canada) 2/12/98 5.50 25,081 25,039 25,081 25,039
Wood Street Funding
Corporation, (LOC:
Royal Bank of Canada) 2/3/98 5.50 35,138 35,127 35,138 35,127
Working Capital Management
Co. L.P 2/2/98 5.85 75,000 74,989 75,000 74,989
Working Capital
Management Co. L.P.,
(LOC: Industrial Bank of
Japan Ltd.) 2/13/98 5.65 42,230 42,150 42,230 42,1500
---------- -------- ---------
1,517,874 222,220 1,740,094
---------- -------- ---------
INDUSTRIAL SPECIALTY
PRODUCTS & SERVICES - 4.0%
BP America 2/2/98 5.60 15,000 14,998 15,000 14,998
BP America 3/19/98 5.49 15,000 14,896 15,000 14,896
Campbell Soup 5/26/98 5.75 12,475 12,254 12,475 12,254
Campbell Soup 10/5/98 5.63 18,550 17,866 18,550 17,866
Coca Cola 4/15/98 5.45 18,400 18,200 18,400 18,200
General Electric
Capital Corporation 4/23/98 5.74 14,950 14,762 14,950 14,762
General Electric
Capital Corporation 2/27/98 5.71 10,000 9,960 10,000 9,960
General Electric
Capital Corporation 2/3/98 5.65 5,000 4,998 5,000 4,998
Proctor and Gamble 4/14/98 5.78 16,000 15,819 16,000 15,819
Siemens 2/5/98 5.61 5,132 5,129 5,132 5,129
Siemens 3/23/98 5.56 10,500 10,420 10,500 10,420
Thames Asset Global
Securitization 4/20/98 5.48 46,821 46,265 46,821 46,265
-------- -------- ---------
46,265 139,302 185,567
-------- -------- ---------
INSURANCE - 1.2%
ING America Insurance HL 3/4/98 5.73 25,500 25,374 25,500 25,374
Safeco Credit Company,
Incorporated 2/9/98 5.70 30,000 29,962 30,000 29,962
-------- ---------
55,336 55,336
TELECOMMUNICATIONS -------- ---------
SERVICES & EQUIPMENT - 0.9%
Ameritech 3/10/98 5.56 11,350 11,286 11,350 11,286
GTE Corporate 2/9/98 5.55 30,600 30,562 30,600 30,562
-------- -------- ---------
30,562 11,286 41,848
-------- -------- ---------
UTILITIES - 0.2%
National Ruaral Utilities 5/15/98 5.61 9,875 9,720 9,875 9,720
Corporation
OTHER - 0.7%
Fingerhut Owner Trust 2/20/98 5.48 32,500 32,406 32,500 32,406
---------- ---------
TOTAL COMMERCIAL PAPER ---------- --------
(cost $2,417,738) 1,919,423 498,315 2,417,738
---------- -------- ---------
ASSET BACKED - 1.5%
Capital Equipment
Receivable Trust 7/15/98 5.95 1,231 1,231 1,231 1,231
Case Equipment
Loan Trust 10/13/98 5.61 6,183 6,183 6,183 6,183
Contimortgage Home
Equity Loan Trust 12/15/98 5.91 7,781 7,781 7,781 7,781
Asset Backed Securities
Investment Trust, VRDN 2/17/98 5.59 22,500 22,500 22,500 22,500
Key Auto Finance
Trust 1/5/99 5.84 8,529 8,529 8,529 8,529
Standard Credit
Card Master Trust I 2/19/98 5.50 25,000 24,931 25,000 24,931
---------- -------- ---------
TOTAL ASSET BACKED (cost $71,155) 24,931 46,224 71,155
---------- -------- ---------
FUNDING AGREEMENTS - 3.5%
Allstate Insurance Company 2/1/98 5.70 18,000 18,000 18,000 18,000
Combined Insurance Company
of America 2/1/98 5.99 20,000 20,000 20,000 20,000
General American, Cash
Manager Plus 2/1/98 6.14 100,000 100,000 100,000 100,000
Pacific Mutual Insurance 2/1/98 5.75 25,000 25,000 25,000 25,000
---------- -------- ---------
TOTAL FUNDING AGREEMENTS 100,000 63,000 163,000
(cost $163,000) ---------- -------- ---------
GOVERNMENT AGENCY NOTES &
BONDS - 4.0%
Federal Farm Credit Bank 8/11/98 5.52 5,250 5,248 5,250 5,248
Federal Home Loan Bank 12/30/98 6.00 30,000 30,000 30,000 30,000
Federal Home Loan Bank 2/26/98 5.88 5,000 5,000 5,000 5,000
Federal Home Loan Bank 3/17/98 5.85 5,000 5,000 5,000 5,000
Federal Home Loan Bank 2/13/98 5.81 13,400 13,400 13,400 13,400
Federal Home Loan Bank 10/23/98 5.68 4,200 4,199 4,200 4,199
Federal Home Loan Bank 1/29/99 5.61 15,000 15,000 15,000 15,000
Federal National Mortgage
Assn. MTN 6/19/98 5.68 10,000 10,003 10,000 10,003
Federal National Mortgage
Assn. MTN 10/20/98 5.67 5,000 4,998 5,000 4,998
Federal National Mortgage
Assn. MTN 2/4/98 5.60 75,000 74,980 75,000 74,980
Federal National Mortgage
Assn. MTN 2/13/98 5.44 5,000 5,000 5,000 5,000
Student Loan Mortgage
Association 4/16/98 5.56 10,000 10,000 10,000 10,000
TOTAL GOVERNMENT AGENCY ---------- -------- ---------
NOTES & BONDS (cost $182,828) 114,980 67,848 182,828
---------- -------- ---------
TAXABLE MUNICIPALS - 2.0%
Brittany Acres, VRDN 6.22 5,900 5,900 5,900 5,900
</TABLE>
<PAGE>
Evergreen Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Schedule of Investments - January 31, 1998 (000's ommitted)
<TABLE>
<CAPTION>
EVERGREEN MONEY MARKET FUND CORE FUND CASH RESERVE PRO FORMA COMBINED
--------------------------- ---------------------- ------------------
MATURITY PRINCIPAL MARKET PRINCIPAL MARKET PRINCIPAL MARKET
ASSET NAME DATE COUPON AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
- -------------------------- -------- ------ --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Macon Trust Pooled
Variable Certificates,
VRDN, (a) 5.96 84,500 84,500 84,500 84,500
---------- ---------
TOTAL TAXABLE
MUNICIPALS (cost
$90,400) 90,400 90,400
---------- ---------
REPURCHASE AGREEMENTS -
1.4%
Dresdner Bank AG, 5.57%
dated 1/30/98, due 2/2/98
maturity value
$49,556,103 (b) 49,533 49,533 49,533 49,533
Treasury
Repurchase Agreement (c) 2/2/98 5.50 16,281 16,281 16,281 16,281
--------- --------- ---------
TOTAL REPURCHASE
AGREEMENTS (cost
$65,814) 49,533 16,281 65,814
--------- --------- ---------
SHARES SHARES
------ ------
MUTUAL FUND SHARES - 0.0%
(COST $1,235)
Federated Prime Value
Obligation Fund 1,235 1,235 1,235 1,235
-------- --------
TOTAL INVESTMENTS (COST
$4,608,562) - 100.1% 3,555,072 1,053,490 4,608,562
OTHER ASSETS AND
LIABILITIES - NET -
(0.1%) (8,390) 3,555 (4,835)
-------- -------- --------
NET ASSETS
- 100.0% 3,546,682 1,057,045 4,603,727
---------- ---------- ----------
</TABLE>
Summay of Abbreviations:
FRN Floating Rate Note
LOC Letter of Credit
MTN Medium Term Note
VRDN Variable Rate Demand Note
Variable Rate Demand Notes are payable on demand on no more than seven
calendar days notice given by the Fund to the issuer or other parties not
affiliated with the issuer. Interest rates are determined and reset by
the issuer daily, weekly, or monthly depending upon the terms of the
security. Interest rates presented for these securities are those in
effect at January 31, 1998.
(a) Securities may be sold to "qualified institutional buyers" under rule
144A or securities offered pursuant to section 4(2) of the Securities Act
of 1933, as amended. These Securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(b) Collaterized by $42,125,000 U.S. Treasury Notes, 6.125%, due 3/31/98, and
$7,105,000 U.S. Treasury Notes, 7.50%, due 10/31/99; total value
including accrued interest $50,525,658.
(c) Collaterized by $15,890,000 U.S. Treasury Note, 6.25%, due 8/31/00; total
value including accrued interest $16,288,489.
See Notes to Proforma Combining Financial Statements
<PAGE>
Evergreen Money Market Fund
Pro Forma Combining Financial Statements (unaudited)
Statement of Operations
Year Ended August 31, 1997 (000's omitted)
<TABLE>
<CAPTION>
Evergreen
Money CoreFund
Market Cash Pro Forma
Fund Reserve Adjustments Combined
------------------------------ ----------
<S> <C> <C> <C> <C>
Interest income $159,154 $50,104 $0 $209,258
Expenses:
Management fee 13,092 3,613 540 (a) 17,245
Distribution Plan expenses 6,360 63 0 6,423
Transfer agent fee 923 160 (106)(b) 977
Administrative service fees 0 2,258 (2,258)(d) 0
Miscellaneous 1,205 326 (65)(c) 1,466
-------------------------- --------
Total expenses 21,580 6,420 (1,889) 26,111
Less: Fee waivers and reimbursements (1,482) (1,746) 1,611 (a) (1,617)
-------------------------- --------
Net expenses 20,098 4,674 (278) 24,494
-------------------------- --------
Net investment income 139,056 45,430 278 184,764
Net realized gain (loss) on investments (85) 1 0 (84)
-------------------------- --------
Net increase in net assets resulting from operations $138,971 $45,431 $278 $184,680
-------------------------- --------
</TABLE>
(a) Reflects an increase (decrease) based on the surviving fund's fee schedule
and pro forma combined assets.
(b) Reflects adjustment due to overaccrual of target fund; combined fund
expense based on total accounts.
(c) Net adjustments reflects savings as a result of the merger.
(d) Administrative service fee of surviving fund is not paid by the Fund as an
expense.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Money Market Fund
Pro Forma Combining Financial Statements (unaudited)
Statement of Operations
Five Months Ended January 31, 1998* (000's omitted)
<TABLE>
<CAPTION>
Evergreen
Money CoreFund
Market Cash Pro Forma
Fund Reserve Adjustments Combined
----------------------------------------- ---------
<S> <C> <C> <C> <C>
Interest income $85,036 $23,742 $ 0 $108,778
Expenses:
Management fee 6,801 1,656 207 (a) 8,664
Distribution Plan expenses 3,698 67 3,765
Transfer agent fee 758 96 (42)(b) 812
Administrative service fees 0 1,035 (1,035)(d) 0
Miscellaneous 1,080 167 38 (c) 1,285
------------------------------------- --------
Total expenses 12,337 3,021 (832) 14,526
Less: Fee waivers and reimbursements 0 (786) 786 (a) 0
------------------------------------- --------
Net expenses 12,337 2,235 (46) 14,526
------------------------------------- --------
Net investment income 72,699 21,507 46 94,252
Net realized gain on investments 5 9 0 14
------------------------------------- --------
Net increase in net assets resulting from operations $72,704 $21,516 $ 46 $ 94,266
------------------------------------- --------
</TABLE>
(a) Reflects an increase (decrease) based on the surviving fund's fee schedule
and pro forma combined assets.
(b) Reflects adjustment due to overaccrual of target fund; combined fund
expense based on total accounts.
(c) Net adjustments reflects increase due to increased asset base.
(d) Administrative service fee of surviving fund is not paid by the Fund as an
expense.
* The Fund changed its fiscal year end from August 31 to January 31
effective January 31, 1998.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Money Market Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
January 31, 1998
1. Basis of Combination - The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Schedule of Investments, and the
related Pro Forma Combining Statement of Operations ("Pro Forma
Statements") reflect the accounts of Evergreen Money Market Fund and
CoreFund Cash Reserve at January 31, 1998, for the period then ended and
for the year ended August 31, 1997.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
CoreFund Cash Reserve. The Reorganization provides for the acquisition of
all assets and assumption of identified liabilities of CoreFund Cash
Reserve by Evergreen Money Market Fund, in exchange for Class B, Class C
and Class Y shares of Evergreen Money Market Fund. Thereafter, there will
be a distribution of Class B, Class C and Class Y shares of Evergreen Money
Market Fund to the respective shareholders of CoreFund Cash Reserve in
liquidation and subsequent termination thereof. As a result of the
Reorganization, the shareholders of CoreFund Cash Reserve will become the
owners of that number of full and fractional Class B, Class C and Class Y
shares of Evergreen Money Market Fund having an aggregate net asset value
equal to the aggregate net asset value of their shares of CoreFund Cash
Reserve as of the close of business immediately prior to the date that
CoreFund Cash Reserve assets are exchanged for Class B, Class C and Class Y
shares of Evergreen Money Market Fund.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at
the beginning of the period presented.
The information contained herein is based on the experience of each Fund
for the five month period ended January 31, 1998 and the year ended August
31, 1997 and is designed to permit shareholders of the consolidating mutual
funds to evaluate the financial effect of the proposed Reorganization. The
expenses of CoreFund Cash Reserve in connection with the Reorganization
(including the cost of any proxy soliciting agents) will be borne by First
Union National Bank of North Carolina. It is not anticipated that the
securities of the combined portfolio will be sold in significant amounts in
order to comply with the policies and investment practices of Evergreen
Money Market Fund.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the
Statement of Additional Information.
2. Shares of Beneficial Interest - The Pro Forma net asset values per share
assume the issuance of Class B, Class C and Class Y shares of Evergreen
Money Market Fund which would have been issued at January 31, 1998 in
connection with the proposed Reorganization. Shareholders of CoreFund Cash
Reserve would receive Class B, Class C and Class Y shares of Evergreen
Money Market Fund based on conversion ratios determined on January 31,
1998. The conversion ratios are calculated by dividing the net asset value
per share of Class B, Class C and Class Y of CoreFund Cash Reserve by the
net asset value per share of the respective class of Evergreen Money Market
Fund.
3. Pro Forma Operations - The Pro Forma Combining Statement of Operations
assumes similar rates of gross investment income for the investments of
each Fund. Accordingly, the combined gross investment income is equal to
the sum of each Fund's gross investment income. Pro Forma operating
expenses include the actual expenses of the Funds adjusted to reflect the
expected expenses of the combined entity. The investment advisory and
distribution fees have been charged to the combined Fund based on the fee
schedule in effect for Evergreen Money Market Fund at the combined level of
average net assets for the year ended January 31, 1998.
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Portfolio of Investments (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Coupon Maturity
Asset Name Insurer Rate % Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds - 99.4%
Alaska - 1.8%
Alaska State Dept. Admin. COP LIQ: Cr. Suisse & Ins. by Capital Mkt. Assurance AK 3.75 VRDN
City of Valdez, AK AK 3.60 5/20/98
Valdez, Alaska AK 3.65 VRDN
Alabama - 5.1%
Alabama IDA-IDRB LOC: Southtrust Bank of Alabama, N.A. AL 3.85 VRDN
Alabama IDA-IDRB LOC: Columbus Bank & Trust Co. AL 3.85 VRDN
Commercial Devevelopment Authority of the City of
Birmingham RB LOC: Amsouth Bank, N.A. AL 3.85 VRDN
Florence, Alabama IDRB LOC: Southtrust Bank of Alabama AL 3.88 VRDN
Guntersville, Alabama IDB-IDRB LOC: National Bank of Canada AL 3.88 VRDN
IDB of Mobile County RB LOC: Columbus Bank & Trust Co. AL 3.85 VRDN
Jefferson County, Alabama Sewer Revenue LIQ: Chase Manhattan Bank & Ins. by FGIC AL 3.75 VRDN
Mobile, Alabama IDB Gtd. by International Paper Co. AL 4.00 11/16/98
Mobile, Alabama PCRB Gtd. by International Paper Co. AL 3.85 4/15/98
North Alabama AL 3.70 VRDN
Phenix City, Alabama Environmental IDRB LOC: Sumitomo Bank AL 4.00 VRDN
Arkansas - 0.3%
Magnolia, Arkansas IDR LOC: Credit Comml de France AR 4.10 2/5/98
Arizona - 0.2%
Arizona St TRAN AZ 7.40 7/1/98
Maricopa County IDA LOC: Wachovia Bank of Georgia AZ 3.95 VRDN
Maricopa, AZ. AZ 3.65 VRDN
California - 7.8%
California State RAN LOC: Bank of New York CA 4.00 VRDN
City of Paramount MHRB LOC: Heller Financial Inc. CA 4.05 VRDN
Glenn County IDA-RB LOC: Sanwa Bank, Ltd. CA 4.40 VRDN
Los Angeles County, CA CA 4.50 6/30/98
Los Angeles, California MHRB LOC: Fuji Bank Ltd. CA 4.20 VRDN
Los Angeles, California Municipal Improvement Corp. COP CA 4.50 VRDN
Ontario, California IDA-RB LOC: Tokai Bank, Ltd. CA 4.50 VRDN
Orange County, California Apartment Development ARB LOC: Tokai Bank Ltd. CA 4.35 VRDN
Pitney Bowes Credit Corp. Leasetops Trusts LOC: ABN-Amro Bank, N.V. CA 3.70 VRDN
Pitney Bowes Credit Corp. Leasetops Trusts LOC: Landesbank Hessen & Gtd. by Pitney Bowes CA 3.70 VRDN
Sacramento County, California MHRB LOC: Dai-Ichi Kangyo Bank CA 4.15 VRDN
San Diego, California Public Facilities Financing LIQ: Merrill Lynch & Ins. by FGIC CA 3.55 VRDN
Santa Clara, CA CA 3.20 VRDN
Colorado - 1.1%
Adams County IDRB LOC: LaSalle National Bank CO 3.95 VRDN
Colorado Housing Finance Auth. RB MERLOTS LOC: CoreStates Bank, N.A. CO 4.10 2/1/98
Colorado State TRAN CO 4.50 6/26/98
Dove Valley Metropolitan District Arapahoe County GO LOC: Dai-Ichi Kangyo Bank, Ltd. CO 4.25 11/1/98
Parkview Metropolitan District Arapahoe County GO LOC: Colorado National Bank CO 3.75 VRDN
Delaware - 0.6%
Delaware EDA-IDRB LOC: Bank of America, IL DE 3.90 VRDN
Delaware Housing Authority RB MERLOTS LIQ: CoreStates Bank & Ins. by FGIC DE 4.15 VRDN
Delaware State Econ DE 3.70 4/8/98
New Castle County EDRB LOC: Bankers Trust Co., NY DE 3.60 VRDN
Wilmington, DE DE 3.70 VRDN
District of Columbia - 0.8%
District of Columbia GO RB LIQ: Merrill Lynch & Ins. by FGIC DC 3.80 VRDN
District of Columbia GO, Series A Ins. by AMBAC DC 7.25 6/1/98
District of Columbia HFA SFHRB COLL: GNMA DC 4.05 9/1/98
Florida - 2.0%
Broward County, FL FL 3.55 VRDN
Florida Muni Power FL 3.65 2/11/98
Orange County Florida Health Facilities Authority MSTR LIQ: Credit Suisse First Boston & Ins. by AMBAC FL 3.75 VRDN
Orange County HFA MHRB LOC: Fleet Bank, N.A. FL 4.00 10/1/98
Palm Beach County School Board LIQ: Norwest Bank, MN & Ins. by AMBAC FL 3.70 VRDN
Palm Beach Housing Project RB LOC: Union Bank of California, N.A. FL 4.25 VRDN
Sunshine State, FL FL 3.75 3/27/98
<CAPTION>
Evergreen Municipal CoreFund Tax Free
Money Market Reserve Proforma Combined
--------------------- ------------------- ---------------------
Principal Market Principal Market Principal Market
Asset Name Amount Value Amount Value Adjustments Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Municipal Bonds - 99.4%
Alaska - 1.8%
Alaska State Dept. Admin. COP $18,820 $18,820 $18,820 $18,820
City of Valdez, AK $2,000 $2,000 2,000 2,000
Valdez, Alaska 1,700 1,700 1,700 1,700
Alabama - 5.1%
Alabama IDA-IDRB 2,150 2,150 2,150 2,150
Alabama IDA-IDRB 3,470 3,470 3,470 3,470
Commercial Devevelopment Authority of the City of
Birmingham RB 1,660 1,660 1,660 1,660
Florence, Alabama IDRB 1,500 1,500 1,500 1,500
Guntersville, Alabama IDB-IDRB 1,400 1,400 1,400 1,400
IDB of Mobile County RB 2,955 2,955 2,955 2,955
Jefferson County, Alabama Sewer Revenue 14,000 14,000 14,000 14,000
Mobile, Alabama IDB 9,060 9,060 9,060 9,060
Mobile, Alabama PCRB 18,790 18,790 18,790 18,790
North Alabama 2,900 2,900 2,900 2,900
Phoenix City, Alabama Environmental IDRB 5,200 5,200 5,200 5,200
Arkansas - 0.3%
Magnolia, Arkansas IDR 3,655 3,655 3,655 3,655
Arizona - 0.2%
Arizona St TRAN 650 659 650 659
Maricopa County IDA 200 200 200 200
Maricopa, AZ. 2,100 2,100 2,100 2,100
California - 7.8%
California State RAN 6,600 6,600 6,600 6,600
City of Paramount MHRB 4,250 4,250 4,250 4,250
Glenn County IDA-RB 1,900 1,900 1,900 1,900
Los Angeles County, CA 2,000 2,005 2,000 2,005
Los Angeles, California MHRB 5,000 5,000 5,000 5,000
Los Angeles, California Municipal Improvement Corp. COP 6,440 6,461 6,440 6,461
Ontario, California IDA-RB 1,100 1,100 1,100 1,100
Orange County, California Apartment Development ARB 17,200 17,200 17,200 17,200
Pitney Bowes Credit Corp. Leasetops Trusts 24,425 24,425 24,425 24,425
Pitney Bowes Credit Corp. Leasetops Trusts 12,930 12,930 12,930 12,930
Sacramento County, California MHRB 4,400 4,400 4,400 4,400
San Diego, California Public Facilities Financing 9,300 9,300 9,300 9,300
Santa Clara, CA 340 340 340 340
Colorado - 1.1%
Adams County IDRB 2,500 2,500 2,500 2,500
Colorado Housing Finance Auth. RB MERLOTS 4,760 4,760 4,760 4,760
Colorado State TRAN 500 501 500 501
Dove Valley Metropolitan District Arapahoe County GO 2,900 2,900 2,900 2,900
Parkview Metropolitan District Arapahoe County GO 2,680 2,680 2,680 2,680
Delaware - 0.6%
Delaware EDA-IDRB 3,000 3,000 3,000 3,000
Delaware Housing Authority RB MERLOTS 380 380 380 380
Delaware State Econ 750 750 750 750
New Castle County EDRB 2,480 2,480 2,480 2,480
Wilmington, DE 300 300 300 300
District of Columbia - 0.8%
District of Columbia GO RB 5,120 5,120 5,120 5,120
District of Columbia GO, Series A 500 505 500 505
District of Columbia HFA SFHRB 4,500 4,500 4,500 4,500
Florida - 2.0%
Broward County, FL 500 500 500 500
Florida Muni Power 1,700 1,700 1,700 1,700
Orange County Florida Health Facilities Authority MSTR 6,835 6,835 6,835 6,835
Orange County HFA MHRB 2,800 2,800 2,800 2,800
Palm Beach County School Board 5,875 5,875 5,875 5,875
Palm Beach Housing Project RB 955 955 955 955
Sunshine State, FL 2,000 2,000 2,000 2,000
</TABLE>
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Portfolio of Investments (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Coupon Maturity
Asset Name Insurer Rate % Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tampa Florida Capital Improvement Program RB LOC: Merrill Lynch FL 3.75 VRDN
Georgia - 3.3%
Albany Dougherty County Hospital RB Gtd. By Merck & Co. GA 3.95 VRDN
Albany Dougherty Payroll Ser. 1982A Gtd. By Merck & Co. GA 3.70 VRDN
Cherokee County, Georgia EDA IDR LOC: Industrial Bank of Japan GA 4.00 VRDN
Columbus Housing Authority MHRB RRB LOC: Columbus Bank & Trust Co. GA 3.90 VRDN
De Kalb County, Georgia MHRB LOC: Merrill Lynch GA 3.75 VRDN
Georgia Municipal Electric Authority Power Revenue MSTR LIQ: Credit Suisse First Boston & Ins. by MBIA GA 3.75 VRDN
Meag Power One SR A GA 3.60 4/1/98
Polk County Development Authority RB LOC: Indl. Bank of Japan, Ltd. GA 3.95 VRDN
Illinois - 15.4%
ABN Amro Chicago Corporation Leasetop COP LOC: LaSalle National Bank IL 3.70 VRDN
Arlington Heights, Illinois MHRB RRB LOC: Heller Financial, Inc. IL 4.30 VRDN
Chicago IDR, Federal Marine Terminal Project LOC: Canadian Imperial Bank of Commerce IL 3.95 VRDN
Chicago, IL O'Hare IL 3.55 VRDN
Chicago, Illinois Sales Tax Revenue LIQ: Chase Manhattan Bank & Ins. by FGIC IL 3.75 VRDN
City of Aurora MHRB LOC: Sumitomo Bank, Ltd. IL 4.25 VRDN
City of Chicago GO LIQ: Credit Suisse First Boston & Ins. by AMBAC IL 3.75 VRDN
City of Peoria IDR LOC: Sanwa Bank, Ltd. IL 4.15 VRDN
City of Peoria Solid Waste Disposal RB LOC: Sanwa Bank, Ltd. IL 4.15 VRDN
City of West Chicago IDRB LOC: Bank of Tokyo-Mitsubishi, Ltd. IL 3.98 VRDN
Illinois Dev Fin IL 3.50 VRDN
Illinois Development Finance Authority EDRB LOC: Indl. Bank of Japan, Ltd. IL 4.20 VRDN
Illinois Development Finance Limited Obligation Revenue LOC: First Bank of America, Illinois IL 3.70 VRDN
Illinois Fin Authority IL 3.55 VRDN
Illinois Poll. Cont. IL 3.65 VRDN
Illinois Sales Tax IL 5.00 6/15/98
Illinois St IL 3.50 VRDN
Illinois St Sales IL 8.00 VRDN
Oakbrook Terrace, Illinois MHRB LOC: Trinity Funding Corp. and Ins. by FGIC IL 4.95 11/3/98
Saint Charles, IL IL 3.60 VRDN
Skokie, Illinois EDR LOC: LaSalle National Bank IL 3.83 VRDN
Vill Schaumburg IL 3.50 VRDN
Village of Hazel Crest Retirement Center RB LOC: Sumitomo Bank Ltd. IL 4.35 VRDN
Village of Vernon Hills MHRB RRB LIQ: Fuji Bank, Ltd. & Ins. by FSA IL 4.35 VRDN
Indiana - 1.6%
Avilla, Indiana EDRB LOC: Fort Wayne National Bank IN 4.35 VRDN
City of Fort Wayne PCRB Gtd. by General Motors Corporation IN 3.90 VRDN
City of Mount Vernon IN 3.75 4/7/98
City of South Bend MHRB LOC: FHLB of Indianapolis IN 3.80 VRDN
Decatur Industrial EDA-RB LOC: CoreStates Bank N.A. IN 4.20 VRDN
Gary, Indiana IN 3.70 VRDN
Hammond, IN IN 3.65 VRDN
Muncie, Indiana Delaware County COP Ins. by AMBAC IN 8.10 VRDN
Sullivan Hoosiers IN 3.75 4/9/98
Sullivan Hoosiers IN 3.80 3/6/98
Sullivan Hoosiers IN 3.65 5/22/98
Iowa - 1.0%
Algona, Iowa IDR LOC: Sumitomo Bank Ltd. IA 4.00 VRDN
City of Council Bluffs RB Catholic Healthcare Corp. LOC: Fuji Bank, Ltd. IA 3.90 VRDN
City of Council Bluffs RB Catholic Healthcare Corp. IA 3.90 4/1/98
Des Moines, IA IA 3.50 VRDN
Kansas - 1.0%
Burlington, KS KS 3.85 3/10/98
Burlington, KS KS 3.85 3/9/98
Burlington, KS KS 3.70 4/8/98
Burlington, KS KS 3.55 5/22/98
Burlington, KS TECP KS 3.85 3/9/98
City of Praire Village MHRB Gtd. by Principal Mutual Life Ins. Co. KS 4.15 VRDN
Johnson County, KS KS 10.50 12/1/98
Kansas State Highway KS 9.00 7/1/98
Salina, Kansas RB, Salina Central Mall Limited LOC: Boatmen's Bank of St. Louis KS 3.70 VRDN
Kentucky - 2.1%
<CAPTION>
Evergreen Municipal CoreFund Tax Free
Money Market Reserve Proforma Combined
----------------------- -------------------- -----------------------
Principal Market Principal Market Principal Market
Asset Name Amount Value Amount Value Adjustments Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tampa Florida Capital Improvement Program RB 3,900 3,900 3,900 3,900
Georgia - 3.3%
Albany Dougherty County Hospital RB 1,000 1,000 1,000 1,000
Albany Dougherty Payroll Ser. 1982A 5,000 5,000 5,000 5,000
Cherokee County, Georgia EDA IDR 1,000 1,000 1,000 1,000
Columbus Housing Authority MHRB RRB 2,200 2,200 2,200 2,200
De Kalb County, Georgia MHRB 10,980 10,980 10,980 10,980
Georgia Municipal Electric Authority Power Revenue MSTR 13,040 13,040 13,040 13,040
Meag Power One SR A 2,000 2,000 2,000 2,000
Polk County Development Authority RB 6,000 6,000 6,000 6,000
Illinois - 15.4%
ABN Amro Chicago Corporation Leasetop COP 13,311 13,311 13,311 13,311
Arlington Heights, Illinois MHRB RRB 2,820 2,820 2,820 2,820
Chicago IDR, Federal Marine Terminal Project 1,700 1,700 1,700 1,700
Chicago, IL O'Hare 1,500 1,500 1,500 1,500
Chicago, Illinois Sales Tax Revenue 25,000 25,000 25,000 25,000
City of Aurora MHRB 9,595 9,595 9,595 9,595
City of Chicago GO 2,900 2,900 2,900 2,900
City of Peoria IDR 1,000 1,000 1,000 1,000
City of Peoria Solid Waste Disposal RB 6,500 6,500 6,500 6,500
City of West Chicago IDRB 5,900 5,900 5,900 5,900
Illinois Dev Fin 1,800 1,800 1,800 1,800
Illinois Development Finance Authority EDRB 3,500 3,500 3,500 3,500
Illinois Development Finance Limited Obligation Revenue 3,500 3,500 3,500 3,500
Illinois Fin Authority 1,400 1,400 1,400 1,400
Illinois Poll. Cont. 900 900 900 900
Illinois Sales Tax 500 502 500 502
Illinois St 4,400 4,400 4,400 4,400
Illinois St Sales 3,000 3,104 3,000 3,104
Oakbrook Terrace, Illinois MHRB 64,000 64,000 64,000 64,000
Saint Charles, IL 1,300 1,300 1,300 1,300
Skokie, Illinois EDR 1,850 1,850 1,850 1,850
Vill Schaumburg 3,500 3,500 3,500 3,500
Village of Hazel Crest Retirement Center RB 16,640 16,640 16,640 16,640
Village of Vernon Hills MHRB RRB 15,210 15,210 15,210 15,210
Indiana - 1.6%
Avilla, Indiana EDRB 6,500 6,500 6,500 6,500
City of Fort Wayne PCRB 2,180 2,180 2,180 2,180
City of Mount Vernon 1,900 1,900 1,900 1,900
City of South Bend MHRB 2,000 2,000 2,000 2,000
Decatur Industrial EDA-RB 775 775 775 775
Gary, Indiana 1,600 1,600 1,600 1,600
Hammond, IN 300 300 300 300
Muncie, Indiana Delaware County COP 1,000 1,000 1,000 1,000
Sullivan Hoosiers 1,050 1,050 1,050 1,050
Sullivan Hoosiers 1,200 1,200 1,200 1,200
Sullivan Hoosiers 1,450 1,450 1,450 1,450
Iowa - 1.0%
Algona, Iowa IDR 2,800 2,800 2,800 2,800
City of Council Bluffs RB Catholic Healthcare Corp. 6,810 6,810 6,810 6,810
City of Council Bluffs RB Catholic Healthcare Corp. 2,170 2,170 2,170 2,170
Des Moines, IA 400 400 400 400
Kansas - 1.0%
Burlington, KS 1,200 1,200 1,200 1,200
Burlington, KS 1,000 1,000 1,000 1,000
Burlington, KS 600 600 600 600
Burlington, KS 600 600 600 600
Burlington, KS TECP 1,500 1,500 1,500 1,500
City of Praire Village MHRB 1,800 1,800 1,800 1,800
Johnson County, KS 2,000 2,109 2,000 2,109
Kansas State Highway 1,300 1,327 1,300 1,327
Salina, Kansas RB, Salina Central Mall Limited 2,305 2,305 2,305 2,305
Kentucky - 2.1%
</TABLE>
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Portfolio of Investments (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Coupon Maturity
Asset Name Insurer Rate % Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
County of Ohio PCRB LOC: Chemical Bank KY 4.20 VRDN
Mason County, KY KY 3.55 VRDN
Mayfield, KY KY 3.60 VRDN
Pendleton Co, KY KY 3.85 3/9/98
Louisiana - 1.9%
Bastrop, Louisiana IDB-PCRB Gtd. by International Paper LA 3.85 VRDN
De Soto Parish, LA LA 3.50 VRDN
IDB of the Parish of Bossier, Inc. LOC: Canadian Imperial Bank of Commerce LA 4.05 12/1/98
Jeff. Parish, LA LA 3.55 VRDN
Louisiana PFA LA 3.65 VRDN
Natchitoches Parish Louisiana MHRB LOC: Bank of Tokyo-Mitsubishi LA 4.00 VRDN
Saint Charles, LA LA 3.60 VRDN
South LA LA 3.55 VRDN
Maine - 0.3%
Jay Maine Solid Waste Disposal Revenue Gtd. by International Paper ME 4.20 6/1/98
Maryland - 0.7%
Howard County, Maryland MHRB, Broken Land Parkway Proj. LOC: Merrill Lynch MD 3.75 VRDN
Massachusetts - 0.2%
Massachusetts Industrial Finance Authority LOC: First National BankBoston MA 4.50 VRDN
Massachusetts Industrial Finance Authority LOC: First National BankBoston MA 4.25 9/1/98
Massachusetts Industrial Finance Authority IDRB LOC: Citibank, N.A. MA 4.25 VRDN
Massachusetts Industrial Finance Authority IDRB LOC: First National BankBoston MA 4.25 VRDN
Michigan - 1.1%
Delta, Michigan MI 3.65 VRDN
Michigan State Jobs Development Authority PCRB LOC: Sumitomo Bank MI 4.08 VRDN
Michigan Storage MI 3.75 2/5/98
Michigan Strat MI 3.65 VRDN
Sault Ste. Marie Tribe Building Authority RB LOC: First of America Bank, N.A. MI 4.33 6/1/98
Minnesota - 3.5%
City of Robbinsdale IDRB LOC: Banque Paribas MN 3.75 VRDN
Dakota & Washington Counties Hsg. & Redev. Auth., ARB LOC: CoreStates Bank, N.A. MN 4.15 3/1/98
Minneapolis GO (Sports Arena) LIQ: Norwest Bank, MN MN 3.70 VRDN
Minneapolis/ Saint Paul Hsg. Fin. Brd. SFHRB COLL: GNMA MN 4.00 2/1/98
Minnesota State MN 6.60 8/1/98
Richfield Independent School Dist. #280 LIQ: First Bank, N.A. & Ins. by FGIC MN 3.70 VRDN
Southern Minnesota Muni. Pwr. Agy. Supply System LIQ: Norwest Bank, MN & Ins. by FGIC MN 3.70 VRDN
Spring Lake Park I.S.D. No. 16 LIQ: Norwest Bank, MN & Ins. by MBIA MN 3.70 VRDN
St Louis Park Healthcare Facility RB Floating
Trust Certificates LIQ: Norwest Bank, MN. & Ins. by AMBAC MN 3.70 2/6/98
Missouri - 0.9%
Independence Development Flagstaff MO 3.70 4/8/98
Independence, MO MO 3.40 3/20/98
Missouri St Health MO 4.50 9/14/98
Missouri State MO 3.90 VRDN
Missouri State Development Finance Board IDRB LOC: Societe Generale MO 3.90 VRDN
Missouri State Env PCR MO 3.95 VRDN
Mississippi - 0.2%
Claiborne County MS 3.75 2/13/98
Claiborne, MS TECP MS 3.75 2/13/98
Jackson County, MISS MS 3.65 VRDN
Montana - 0.2%
Butte Silver Bow City & County LOC: Bank of America, N.T. & S.A. MT 3.80 VRDN
Forsyth Mont PCRB MT 3.45 VRDN
Forsyth, MT MT 3.55 VRDN
Forsyth, MT MT 3.90 VRDN
New Jersey - 0.4%
Essex County, New Jersey BAN NJ 4.25 8/7/98
New Mexico - 0.5%
Alburqueque, NM MN 3.55 VRDN
<CAPTION>
Evergreen Municipal CoreFund Tax Free
Money Market Reserve Proforma Combined
------------------- ----------------- ------------------
Principal Market Principal Market Principal Market
Asset Name Amount Value Amount Value Adjustments Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
County of Ohio PCRB 20,300 20,300 20,300 20,300
Mason County, KY 2,600 2,600 2,600 2,600
Mayfield, KY 2,000 2,000 2,000 2,000
Pendleton Co, KY 1,000 1,000 1,000 1,000
Louisiana - 1.9%
Bastrop, Louisiana IDB-PCRB 3,400 3,400 3,400 3,400
De Soto Parish, LA 700 700 700 700
IDB of the Parish of Bossier, Inc. 3,060 3,060 3,060 3,060
Jeff. Parish, LA 1,850 1,850 1,850 1,850
Louisiana PFA 400 400 400 400
Natchitoches Parish Louisiana MHRB 10,000 10,000 10,000 10,000
Saint Charles, LA 1,550 1,550 1,550 1,550
South LA 2,000 2,000 2,000 2,000
Maine - 0.3%
Jay Maine Solid Waste Disposal Revenue 3,685 3,685 3,685 3,685
Maryland - 0.7%
Howard County, Maryland MHRB, Broken Land Parkway Proj. 8,271 8,271 8,271 8,271
Massachusetts - 0.2%
Massachusetts Industrial Finance Authority 400 400 400 400
Massachusetts Industrial Finance Authority 590 590 590 590
Massachusetts Industrial Finance Authority IDRB 700 700 700 700
Massachusetts Industrial Finance Authority IDRB 415 415 415 415
Michigan - 1.1%
Delta, Michigan 700 700 700 700
Michigan State Jobs Development Authority PCRB 6,000 6,000 6,000 6,000
Michigan Storage 2,000 2,000 2,000 2,000
Michigan Strat 1,000 1,000 1,000 1,000
Sault Ste. Marie Tribe Building Authority RB 3,985 3,985 3,985 3,985
Minnesota - 3.5%
City of Robbinsdale IDRB 2,800 2,800 2,800 2,800
Dakota & Washington Counties Hsg. & Redev. Auth., ARB 4,420 4,420 4,420 4,420
Minneapolis GO (Sports Arena) 4,220 4,220 4,220 4,220
Minneapolis/ Saint Paul Hsg. Fin. Brd. SFHRB 765 765 765 765
Minnesota State 3,150 3,192 3,150 3,192
Richfield Independent School Dist. #280 1,510 1,510 1,510 1,510
Southern Minnesota Muni. Pwr. Agy. Supply System 750 750 750 750
Spring Lake Park I.S.D. No. 16 1,000 1,000 1,000 1,000
St Louis Park Healthcare Facility RB Floating
Trust Certificates 24,200 24,200 24,200 24,200
Missouri - 0.9%
Independence Development Flagstaff 750 750 750 750
Independence, MO 1,050 1,050 1,050 1,050
Missouri St Health 2,000 2,007 2,000 2,007
Missouri State 1,400 1,400 1,400 1,400
Missouri State Development Finance Board IDRB 4,240 4,240 4,240 4,240
Missouri State Env PCR 1,800 1,800 1,800 1,800
Mississippi - 0.2%
Claiborne County 300 300 300 300
Claiborne, MS TECP 1,000 1,000 1,000 1,000
Jackson County, MISS 1,600 1,600 1,600 1,600
Montana - 0.2%
Butte Silver Bow City & County 660 660 660 660
Forsyth Mont PCRB 100 100 100 100
Forsyth, MT 200 200 200 200
Forsyth, MT 900 900 900 900
New Jersey - 0.4%
Essex County, New Jersey BAN 5,000 5,008 5,000 5,008
New Mexico - 0.5%
Alburqueque, NM 1,000 1,000 1,000 1,000
</TABLE>
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Portfolio of Investments (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Coupon Maturity
Asset Name Insurer Rate % Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
County of Sandoval MHRB Ins. by FGIC NM 4.65 3/2/98
Nevada - 0.1%
Las Vegas, NV NV 4.75 11/1/98
New York - 9.4%
Battery Park City Hsg. Authority RB LOC: Sumitomo Bank Ltd. NY 4.55 VRDN
Battery Park City Hsg. Authority RB LOC: Sumitomo Bank Ltd. NY 4.55 VRDN
New York City NY 3.70 VRDN
New York City NY 4.00 VRDN
New York City, NY 4.00 VRDN
New York State Medical Care Facilities Finance Agency RB LIQ: Credit Suisse First Boston & Ins. by FHA NY 3.95 VRDN
New York State Thruway Auth. Local Highway and Bridge
Service Contract LOC: Merrill Lynch NY 3.75 VRDN
New York State Thruway Authority RB LOC: Societe Generale NY 4.00 VRDN
New York, New York GO LOC: Merrill Lynch NY 3.75 VRDN
New York, New York GO LOC: Merrill Lynch NY 3.80 VRDN
New York, New York GO RAN LOC: Bank of New York NY 3.80 VRDN
Onondaga County Solid Waste Disposal LOC: Bear Stearns Capital Markets NY 4.10 11/1/98
North Carolina - 3.5%
Cabarrus County Indl. Fac. PCRB LOC: Indl. Bank of Japan, Ltd., NY NC 4.15 VRDN
Halifax County, NC IIndustrial Facilities LOC: Credit Suisse First Boston NC 3.80 VRDN
North Carolina Medical Care Community Hospital NC 3.70 VRDN
Wake County, NC NC 3.55 VRDN
Wake County, NC Industrial Facilities PCRB LOC: Sumitomo Bank NC 4.05 VRDN
Ohio - 0.3%
Ohio Hsg. Fin. Agy. MHRB LIQ: Fuji Bank, Ltd. & Ins. by FSA OH 4.35 VRDN
Ohio State OH 3.90 VRDN
Ohio Water Authority OH 3.65 VRDN
Oregon - 0.5%
Oregon EDRB Series CLVI OR 3.95 VRDN
Oregon State EDRB LOC: Deutsche Genosn-schaftshank OR 3.85 VRDN
Port Portland, OR OR 3.70 VRDN
Port St. Helens, OR OR 3.65 VRDN
Umatilla County, OR OR 3.70 VRDN
Pennsylvania - 3.5%
Allegheny Co, PA PA 3.50 VRDN
Allegheny Co, PA PA 3.50 VRDN
Beaver County, PA PA 3.75 3/5/98
Beaver County, PA PA 3.50 VRDN
Beaver County, PA PA 3.70 6/9/98
Chartiers Valley, Pennsylvania Industrial & Commercial
Development Authority LOC: CoreStates Bank, N.A. PA 4.00 VRDN
City of Philadelphia Water & Waste Water RB LIQ: Bear Stearns & Ins. by FGIC PA 4.15 VRDN
Elk County IDA-IDRB LOC: Fleet Bank, N.A. PA 4.25 VRDN
Lawrence County, Pennsylvania IDA-PCRB Gtd. by Merck & Co. PA 3.95 VRDN
Lehigh, PA PA 3.85 VRDN
Mont. County, PA PA 3.75 2/5/98
Montgomery Co PA PA 3.75 2/9/98
Montgomery County PA 3.50 5/19/98
Montgomery County, PA PA 3.50 2/5/98
Penn State PA 3.60 VRDN
Temple University PA 4.75 5/18/98
Washington County, PA PA 3.55 VRDN
Westmoreland Cnty. IDA-IDRB LOC: Bank of Nova Scotia PA 4.18 VRDN
York PA Solid Waste PA 4.75 12/1/98
York, PA PA 3.55 VRDN
South Carolina - 2.5%
Berkley, SC SC 3.65 VRDN
Georgetown County PCRB Gtd by International Paper SC 4.00 9/1/98
Lexington Combined Water and Sewer Systems RB LIQ: Merrill Lynch & Ins. by Asset Guaranty Corp. SC 3.75 VRDN
North Charleston SC 7.50 9/1/98
Rapid City, SC EDRB LOC: Citibank N.A. SD 3.88 VRDN
South Carolina Jobs EDA-EDRB LOC: Nations Bank N.A. SC 4.00 VRDN
South Carolina Jobs EDA-EDRB LOC: Credit Coml. de France SC 4.00 VRDN
<CAPTION>
Evergreen Municipal CoreFund Tax Free
Money Market Reserve Proforma Combined
--------------------- -------------------- --------------------
Principal Market Principal Market Principal Market
Asset Name Amount Value Amount Value Adjustments Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
County of Sandoval MHRB 4,855 4,855 4,855 4,855
Nevada - 0.1%
Las Vegas, NV 1,000 1,007 1,000 1,007
New York - 9.2%
Battery Park City Hsg. Authority RB 8,560 8,560 8,560 8,560
Battery Park City Hsg. Authority RB 7,765 7,765 7,765 7,765
New York City 1,500 1,500 1,500 1,500
New York City 1,100 1,100 1,100 1,100
New York City, 800 800 800 800
New York State Medical Care Facilities Finance Agency RB 4,000 4,000 4,000 4,000
New York State Thruway Auth. Local Highway and Bridge
Service Contract 6,500 6,500 6,500 6,500
New York State Thruway Authority RB 10,400 10,400 10,400 10,400
New York, New York GO 32,600 32,600 32,600 32,600
New York, New York GO 3,395 3,395 3,395 3,395
New York, New York GO RAN 10,200 10,200 10,200 10,200
Onondaga County Solid Waste Disposal 25,000 25,000 25,000 25,000
North Carolina - 3.5%
Cabarrus County Indl. Fac. PCRB 4,000 4,000 4,000 4,000
Halifax County, NC IIndustrial Facilities 2,600 2,600 2,600 2,600
North Carolina Medical Care Community Hospital 1,600 1,600 1,600 1,600
Wake County, NC 1,800 1,800 1,800 1,800
Wake County, NC Industrial Facilities PCRB 33,250 33,250 33,250 33,250
Ohio - 0.3%
Ohio Hsg. Fin. Agy. MHRB 3,000 3,000 3,000 3,000
Ohio State 300 300 300 300
Ohio Water Authority 200 200 200 200
Oregon - 0.5%
Oregon EDRB Series CLVI 2,960 2,960 2,960 2,960
Oregon State EDRB 1,200 1,200 1,200 1,200
Port Portland, OR 400 400 400 400
Port St. Helens, OR 600 600 600 600
Umatilla County, OR 500 500 500 500
Pennsylvania - 3.5%
Allegheny Co, PA 4,700 4,700 4,700 4,700
Allegheny Co, PA 1,305 1,305 1,305 1,305
Beaver County, PA 1,100 1,100 1,100 1,100
Beaver County, PA 100 100 100 100
Beaver County, PA 2,000 2,000 2,000 2,000
Chartiers Valley, Pennsylvania Industrial & Commercial
Development Authority 2,300 2,300 2,300 2,300
City of Philadelphia Water & Waste Water RB 10,000 10,000 10,000 10,000
Elk County IDA-IDRB 500 500 500 500
Lawrence County, Pennsylvania IDA-PCRB 650 650 650 650
Lehigh, PA 200 200 200 200
Mont. County, PA 1,000 1,000 1,000 1,000
Montgomery Co PA 2,500 2,500 2,500 2,500
Montgomery County 2,600 2,600 2,600 2,600
Montgomery County, PA 1,800 1,800 1,800 1,800
Penn State 700 700 700 700
Temple University 1,000 1,002 1,000 1,002
Washington County, PA 3,140 3,140 3,140 3,140
Westmoreland Cnty. IDA-IDRB 3,065 3,065 3,065 3,065
York PA Solid Waste 1,500 1,511 1,500 1,511
York, PA 2,750 2,750 2,750 2,750
South Carolina - 2.5%
Berkley, SC 1,300 1,300 1,300 1,300
Georgetown County PCRB 16,030 16,030 16,030 16,030
Lexington Combined Water and Sewer Systems RB 8,770 8,770 8,770 8,770
North Charleston 500 519 500 519
Rapid City, SC EDRB 5,175 5,175 5,175 5,175
South Carolina Jobs EDA-EDRB 750 750 750 750
South Carolina Jobs EDA-EDRB 550 550 550 550
</TABLE>
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Portfolio of Investments (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Coupon Maturity
Asset Name Insurer Rate % Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South Carolina Jobs EDA-EDRB LOC: Heller Financial Inc. SC 4.33 VRDN
York County, SC SC 3.55 VRDN
Tennessee - 4.4%
Bristol, TN IDB LOC: First American National Bank TN 3.90 VRDN
IDB of the City Chattanooga RRB LOC: Heller Financial Inc. TN 4.30 VRDN
Jackson, TN Health and Educational Housing Facility LOC: First American National Bank TN 3.75 VRDN
Maryville, TN IDB Education RB LOC: First American National Bank TN 3.75 VRDN
Metro Govt. of Nashville and Davidson Counties IDB LOC: First Bank, N.A. TN 3.95 VRDN
Metro Govt. of Nashville and Davidson Counties IDB LOC: Sumitomo Bank Ltd. TN 4.65 VRDN
Metro Govt. of Nashville and Davidson Counties IDB MHRB LOC: Sumitomo Bank Ltd. TN 4.65 VRDN
Morristown, TN IDB-IDRB LOC: ABN Amro Bank TN 3.83 VRDN
Shelby County, TN Health Educational and Housing Facility
Board MHRB LOC: Boatmen's Bank TN 4.10 VRDN
Smyrna Housing Assn. MHRB LOC: Sumitomo Bank Ltd. TN 4.65 VRDN
Wilson County, TN IDB-IDRB LOC: First American National Bank TN 3.90 VRDN
Texas - 4.9%
Camp County Tax IDA TX 3.60 VRDN
Denton County, TX TRAN TX 5.50 9/1/98
Grapevine, TX 3.70 VRDN
Houston, TX Water and Sewer Systems RB MSTR LIQ: Chase Manhattan Bank & Ins. by FGIC TX 3.75 VRDN
Hunt Co., TX TX 3.60 VRDN
NCNB Pooled Tax-Exempt Trust COP LOC: NationsBank of Texas TX 4.25 VRDN
North Central TX Health TX 7.90 VRDN
Nueces County, TX TX 3.55 VRDN
Port Corpus Christi TX 3.55 VRDN
San Antonio, TX (Preref) TX 7.80 VRDN
Southwest Higher Education TX 3.65 VRDN
Tarrant County Housing Finance Corp. MHRB RRB Surety Bond: Continental Casualty Corp. TX 4.10 VRDN
Texas Higher Education TX 3.50 VRDN
Texas State Public Finance Authority Building RB LIQ: Cititbank, N.A. & Ins. by AMBAC TX 3.68 VRDN
Texas State Trans TX 4.75 8/31/98
Utah- 3.9%
Intermountain Power Agency UT 3.75 2/17/98
Intermountain Power Agency UT 3.75 2/17/98
Summitt County IDRB LOC: West One Bank, Idaho UT 3.95 VRDN
Tooele County Hazardous Waste Treatment RB Gtd. by Union Pacific Corp. UT 4.25 2/24/98
Tooele County Hazardous Waste Treatment RB Gtd. by Union Pacific Corp. UT 4.25 2/26/98
Tooele County Hazardous Waste Treatment RB Gtd. by Union Pacific Corp. UT 4.25 4/28/98
Tooele County Hazardous Waste Treatment RB Gtd. by Union Pacific Corp. UT 4.30 2/23/98
Virginia - 2.0%
Chesapeake Industrial Development VA 3.50 4/6/98
Henrico County IDA RB LOC: Tokai Bank, Ltd. VA 4.20 VRDN
Peninsula Port, VA VA 3.65 VRDN
Penn Ports, VA VA 3.50 2/9/98
Portsmouth VA Dev VA 3.55 VRDN
Richmond, VA VA 3.55 VRDN
Richmond, VA Housing Authority MHRB LOC: Merrill Lynch VA 3.75 VRDN
Rockingham County IDA-PCRB VA 3.70 VRDN
Virginia State HSG VA 3.80 6/10/98
Waynesboro, VA VA 3.70 VRDN
Vermont - 0.1%
Vermont Student Loan VM 3.85 VRDN
Washington - 1.3%
Klickitat County Public Corp. RB LOC: U.S. Bank of Washington, N.A. WA 3.85 VRDN
Pierce County Economic Development Corp. LOC: U.S. Bank of Washington, N.A. WA 3.85 VRDN
Pilchuck Public Development Corp. IDRB LOC: U.S. Bank of Washington, N.A. WA 3.70 VRDN
Port Alama, WA WA 3.40 VRDN
Washington State Community Economic Revitalization Bonds LOC: Industrial Bank of Japan WA 3.95 VRDN
Washington State Go WA 6.00 1/1/99
Washington State Public Power Supply, Ser. 1998A WA 4.50 7/1/98
Washington U Ser A and B WA 3.65 VRDN
<CAPTION>
Evergreen Municipal CoreFund Tax Free
Money Market Reserve Proforma Combined
--------------------- ------------------ --------------------
Principal Market Principal Market Principal Market
Asset Name Amount Value Amount Value Adjustments Amount Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
South Carolina Jobs EDA-EDRB 2,700 2,700 2,700 2,700
York County, SC 400 400 400 400
Tennessee - 4.4%
Bristol, TN IDB 2,500 2,500 2,500 2,500
IDB of the City Chattanooga RRB 3,200 3,200 3,200 3,200
Jackson, TN Health and Educational Housing Facility 4,400 4,400 4,400 4,400
Maryville, TN IDB Education RB 5,000 5,000 5,000 5,000
Metro Govt. of Nashville and Davidson Counties IDB 700 700 700 700
Metro Govt. of Nashville and Davidson Counties IDB 8,995 8,995 8,995 8,995
Metro Govt. of Nashville and Davidson Counties IDB MHRB 6,710 6,710 6,710 6,710
Morristown, TN IDB-IDRB 5,000 5,000 5,000 5,000
Shelby County, TN Health Educational and Housing Facility
Board MHRB 700 700 700 700
Smyrna Housing Assn. MHRB 9,285 9,285 9,285 9,285
Wilson County, TN IDB-IDRB 8,000 8,000 8,000 8,000
Texas - 4.9%
Camp County Tax IDA 500 500 500 500
Denton County, TX TRAN 930 938 930 938
Grapevine, TX 3,500 3,500 3,500 3,500
Houston, TX Water and Sewer Systems RB MSTR 12,500 12,500 12,500 12,500
Hunt Co., TX 2,100 2,100 2,100 2,100
NCNB Pooled Tax-Exempt Trust COP 6,805 6,805 6,805 6,805
North Central TX Health 500 515 500 515
Nueces County, TX 4,425 4,425 4,425 4,425
Port Corpus Christi 2,000 2,000 2,000 2,000
San Antonio, TX (Preref) 3,900 3,978 3,900 3,978
Southwest Higher Education 1,200 1,200 1,200 1,200
Tarrant County Housing Finance Corp. MHRB RRB 4,380 4,380 4,380 4,380
Texas Higher Education 1,945 1,945 1,945 1,945
Texas State Public Finance Authority Building RB 11,130 11,130 11,130 11,130
Texas State Trans 4,500 4,526 4,500 4,526
Utah- 3.9%
Intermountain Power Agency 1,000 1,000 1,000 1,000
Intermountain Power Agency 1,100 1,100 1,100 1,100
Summitt County IDRB 2,600 2,600 2,600 2,600
Tooele County Hazardous Waste Treatment RB 17,500 17,500 17,500 17,500
Tooele County Hazardous Waste Treatment RB 10,000 10,000 10,000 10,000
Tooele County Hazardous Waste Treatment RB 10,000 10,000 10,000 10,000
Tooele County Hazardous Waste Treatment RB 6,290 6,290 6,290 6,290
Virginia - 2.0%
Chesapeake Industrial Development 1,000 1,000 1,000 1,000
Henrico County IDA RB 2,500 2,500 2,500 2,500
Peninsula Port, VA 800 800 800 800
Penn Ports, VA 1,500 1,500 1,500 1,500
Portsmouth VA Dev 2,555 2,555 2,555 2,555
Richmond, VA 3,250 3,250 3,250 3,250
Richmond, VA Housing Authority MHRB 7,700 7,700 7,700 7,700
Rockingham County IDA-PCRB 1,000 1,000 1,000 1,000
Virginia State HSG 3,500 3,500 3,500 3,500
Waynesboro, VA 685 685 685 685
Vermont - 0.1%
Vermont Student Loan 1,235 1,235 1,235 1,235
Washington - 1.3%
Klickitat County Public Corp. RB 2,200 2,200 2,200 2,200
Pierce County Economic Development Corp. 2,000 2,000 2,000 2,000
Pilchuck Public Development Corp. IDRB 3,502 3,502 3,502 3,502
Port Alama, WA 1,800 1,800 1,800 1,800
Washington State Community Economic Revitalization Bonds 2,015 2,015 2,015 2,015
Washington State Go 500 510 500 510
Washington State Public Power Supply, Ser. 1998A 3,230 3,236 3,230 3,236
Washington U Ser A and B 700 700 700 700
</TABLE>
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Portfolio of Investments (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Coupon Maturity
Asset Name Insurer Rate % Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
West Virginia - 0.0%
Putnam County, WVA Indl WV 3.85 VRDN
Wisconsin - 0.1%
Lac Du Flambeau, WI WI 3.50 VRDN
Wisconsin Health WI 3.55 VRDN
Wyoming - 0.4%
Gillete Co, WY WY 3.45 4/15/98
Lincoln County, WY WY 3.65 VRDN
Lincoln County, WY WY 3.65 VRDN
PL. County, WY WY 3.90 VRDN
Platte County, WY WY 3.90 VRDN
Other - 8.5%
Captial Investors Tax Exempt Fund L.P. LOC: Swiss Bank Corp. OT 4.20 2/4/98
Koch Financial Corp. OT 4.10 5/6/98
Puttable Floating Option Tax Exempt Receipts LIQ: Bay Hypotheken & Ins. by AMBAC OT 3.80 VRDN
Puttable Floating Option Tax Exempt Receipts Ins. by MBIA & FHA OT 4.10 VRDN
Puttable Floating Option Tax Exempt Receipts LOC: Credit Suisse OT 4.08 VRDN
Puttable Floating Option Tax Exempt Receipts Ins. by FHA OT 4.00 VRDN
Puttable Floating Option Tax Exempt Receipts Ins. by MBIA OT 3.90 VRDN
Puttable Floating Tax Exempt Receipts NY 4.00 8/13/98
- ------------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds - (cost $1,052,543, $174,992,
and $1,227,535, respectively)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments - (cost 1,227,535) (99.4%)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities - Net (0.6%)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - (100%)
====================================================================================================================================
<CAPTION>
Evergreen Municipal CoreFund Tax Free
Money Market Reserve Proforma Combined
--------------------- ------------------ ---------------------
Principal Market Principal Market Principal Market
Asset Name Amount Value Amount Value Adjustments Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
West Virginia - 0.0%
Putnam County, WVA Indl 200 200 200 200
Wisconsin - 0.1%
Lac Du Flambeau, WI 400 400 400 400
Wisconsin Health 600 600 600 600
Wyoming - 0.4%
Gillete Co, WY 1,400 1,400 1,400 1,400
Lincoln County, WY 1,700 1,700 1,700 1,700
Lincoln County, WY 600 600 600 600
PL. County, WY 100 100 100 100
Platte County, WY 1,100 1,100 1,100 1,100
Other - 8.5%
Captial Investors Tax Exempt Fund L.P. 5,900 5,900 5,900 5,900
Koch Financial Corp. 914 914 914 914
Puttable Floating Option Tax Exempt Receipts 2,265 2,265 2,265 2,265
Puttable Floating Option Tax Exempt Receipts 4,455 4,455 4,455 4,455
Puttable Floating Option Tax Exempt Receipts 18,850 18,850 18,850 18,850
Puttable Floating Option Tax Exempt Receipts 9,600 9,600 9,600 9,600
Puttable Floating Option Tax Exempt Receipts 56,200 56,200 56,200 56,200
Puttable Floating Tax Exempt Receipts 6,755 6,755 6,755 6,755
- ------------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds - (cost $1,052,543, $174,992, 1,052,543 174,992 0 1,227,535
and $1,227,535, respectively)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments - (cost 1,227,535) (99.4%) 1,052,543 174,992 0 1,227,535
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities - Net (0.6%) 5,269 2,635 7,904
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - (100%) $1,057,812 $177,627 0 $1,235,439
====================================================================================================================================
</TABLE>
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
ARB Adjustable Rate Bonds
BAN Bond Anticipation Note
COLL Collateral
COP Certificates of Participation
EDA Economic Development Authority
EDRB Economic Development Revenue Bond
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Authority
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Inc.
GNMA Government National Mortgage Association
GO General Obligations
HFA Housing Finance Authority
IDB Industrial Development Board
IDRB Industrial Development Revenue Bond
LIQ Liquidity Provider
LOC Letter of credit
MBIA Municipal Bond Investors Assurance Corp.
MERLOTS Municipal Exempt Receipts Liquidity Option Tenders
MHRB Multifamily Housing Revenue Bond
MSTR Municipal Securities Trust receipt
PCRB Pollution Control Revenue Bond
RAN Revenue Anticipated Bond
RB Revenue Bonds
RRB Refunding Revenue Bonds
SFHRB Single Family Housing Revenue Bond
TECP Tax Exempt Commercial Paper
TRAN Tax and Revenue Anticipated Note
VRDN Variable Rate Demand Notes are payable on demand on no more than seven
calendar days notice given by the Fund to the issuer or other parties
not affiliated with the issuer. Interest rates are determined and reset
by the issuer daily, weekly or monthly depending upon the terms of the
security. Interest rates presented for these securities are those in
effect at January 31, 1998.
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Statement of Assets and Liabilities (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
Evergreen CoreFund
Municipal Money Tax - Free Pro Forma
Market Reserve Adjustments Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments at amortized cost $1,052,543 $174,992 $1,227,535
Cash 27 1,924 1,951
Interest receivable 7,528 1,223 8,751
Receivable for Fund shares sold 360 0 360
Prepaid expenses and other assets 69 38 107
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 1,060,527 178,177 1,238,704
Liabilities:
Payable for Fund shares repurchased 379 0 379
Due to related parties 435 0 435
Dividends Payable 1,606 457 2,063
Accrued expenses and other liabilities 295 93 388
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 2,715 550 3,265
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets $1,057,812 $177,627 $1,235,439
===================================================================================================================================
Net assets consist of:
Paid-in capital 1,058,040 $177,697 1,235,737
Undistributed net investment income 0 8 8
Accumulated net realized loss on investments (228) (78) (306)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets $1,057,812 $177,627 $1,235,439
===================================================================================================================================
Class A/Class C
Net Assets $671,755 $15,827 $687,582
Shares of Beneficial Interest Outstanding 671,854 15,830 687,684
Net Asset Value $1.00 $1.00 $1.00
Class Y
Net Assets $386,057 $161,800 $547,857
Shares of Beneficial Interest Outstanding 386,147 161,867 548,014
Net Asset Value $1.00 $1.00 $1.00
</TABLE>
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited) Statement of Operations
(000's omitted) For the five month period ended January 31, 1998*
<TABLE>
<CAPTION>
Evergreen CoreFund
Municipal Money Tax - Free Pro Forma
Market Fund Reserve Fund Adjustments Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income $17,539 $2,427 $0 $19,966
Expenses:
Management fee 2,156 261 34 (a) 2,451
Distribution Plan expenses 834 12 0 846
Transfer agent fee 114 13 (5)(b) 122
Custodian fee 115 0 17 (a) 132
Printing 31 4 (3)(b) 32
Registration fees 21 15 (15)(a) 21
Professional fees 39 (2) 5 (c) 42
Directors' fees and expenses 10 4 (2)(a) 12
Administrative service fees 0 163 (163)(d) 0
Miscellaneous 24 5 (2)(a) 27
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 3,344 475 (134) 3,685
Less: Fee waivers and/or reimbursements 0 (124) 124 (a) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,344 351 10 3,685
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 14,195 2,076 (10) 16,281
Net realized gain (loss) on investments 33 (24) 0 9
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations $14,228 $2,052 ($10) $16,290
====================================================================================================================================
</TABLE>
(a) Reflects an increase (decrease) based on surviving fund's fee schedule and
pro forma combined assets.
(b) Reflects an increase (decrease) based on combined number of shareholder
accounts and surviving fund's fee schedule.
(c) Reflects an increase due to surviving fund's contractual rates.
(d) Not applicable to surviving fund.
* The Fund changed its fiscal year end from August 31 to January 31,
effective January 31, 1998.
See Notes to Pro Forma Combining Financial Statements
<PAGE>
Evergreen Municipal Money Market Fund
Pro Forma Combining Financial Statements (Unaudited)
Statement of Operations (000's omitted)
Year ended August 31,1997
<TABLE>
<CAPTION>
Evergreen CoreFund
Muni Money Tax - Free Pro Forma
Market Fund Reserve Fund Adjustments Combined
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income $45,163 $4,542 $0 $49,705
Expenses:
Management fee 5,696 504 63 (a) 6,263
Distribution Plan expenses 1,989 10 0 1,999
Transfer agent fee 213 21 (13)(b) 221
Custodian fee 238 0 26 (a) 264
Printing 34 10 (9)(b) 35
Registration fees 16 17 (17)(a) 16
Professional fees 37 (1) 2 (c) 38
Directors' fees and expenses 26 6 (3)(a) 29
Administrative service fees 0 313 (313)(d) 0
Taxes 0 4 (4)(d) 0
Miscellaneous 74 13 (5)(a) 82
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 8,323 897 (273) 8,947
Less: Fee waivers and/or reimbursements (184) (244) 213 (a) (215)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 8,139 653 (60) 8,732
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 37,024 3,889 60 40,973
Net realized gain (loss) on investments (3) (1) 0 (4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations
assets resulting from operations $37,021 $3,888 $60 $40,969
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects an increase (decrease) based on surviving fund's fee schedule and
pro forma combined assets.
(b) Reflects an increase (decrease) based on combined number of shareholder
accounts and surviving fund's fee schedule.
(c) Reflects an increase due to surviving fund's contractual rates.
(d) Not applicable to surviving fund.
See Notes to Pro Forma Combining Financial Statements.
<PAGE>
Evergreen Municipal Money Market Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
January 31, 1998
1. Basis of Combination-The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Portfolio of Investments, and the
related Pro Forma Combining Statements of Operations ("Pro Forma
Statements") reflect the accounts of Evergreen Municipal Money Market Fund
("Evergreen Municipal Money Market") and CoreFund Tax-Free Reserve Fund
("CoreFund Tax-Free Reserve") at January 31, 1998, for the period then ended
and for the year ended August 31, 1997.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders
ofCoreFund Tax-Free Reserve. The Reorganization provides for the acquisition
of all assets and assumed liabilities of CoreFund Tax-Free Reserve by
Evergreen Municipal Money Market, in exchange for Class A and Class Y shares
of Evergreen Municipal Money Market. Thereafter, there will be a
distribution of Class A and Class Y shares of Evergreen Municipal Money
Market to the respective shareholders of CoreFund Tax-Free Reserve Class C
and Class Y, respectively, in liquidation and subsequent termination
thereof. As a result of the Reorganization, the shareholders of CoreFund
Tax-Free Reserve will become the owners of that number of full and
fractional Class A and Class Y shares of Evergreen Municipal Money Market
having an aggregate net asset value equal to the aggregate net asset value
of their shares of CoreFund Tax-Free Reserve as of the close of business
immediately prior to the date that CoreFund Tax-Free Reserve Class C and
Class Y shares are exchanged for Class A and Class Y shares, respectively,
of Evergreen Municipal Money Market.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at
the beginning of each period presented.
The information contained herein is based on the experience of each Fund for
the five month period ended January 31, 1998 and the year ended August 31,
1997 and is designed to permit shareholders of the consolidating mutual
funds to evaluate the financial effect of the proposed Reorganization. The
expenses of CoreFund Tax-Free Reserve in connection with the Reorganization
(including the cost of any proxy soliciting agents) will be borne by First
Union National Bank of North Carolina. It is not anticipated that the
securities of the combined portfolio will be sold in significant amounts in
order to comply with the policies and investment practices of Evergreen.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the Statement
of Additional Information.
2. Shares of Beneficial Interest-The Pro Forma net asset values per share
assume the issuance of Class A and Class Y shares of Evergreen Municipal
Money Market which would have been issued at January 31, 1998 in connection
with the proposed Reorganization. Shareholders of CoreFund Tax-Free Reserve
Class C and Class Y shares would become owners of that number of full and
fractional Class A and Class Y shares, respectively, of Evergreen Municipal
Money Market based on conversion ratios determined on January 31, 1998. The
conversion ratios are calculated by dividing the net asset value per share
of CoreFund Tax-Free Reserve Class C and Class Y shares by the net asset
value per share of Class A and Class Y, respectively, of Evergreen Municipal
Money Market.
3. Pro Forma Operations-Each of the Pro Forma Combining Statements of
Operations assumes similar rates of gross investment income for the
investments of each Fund. Accordingly, the combined gross investment income
is equal to the sum of each Fund's gross investment income. Pro Forma
operating expenses include the actual expenses of the Funds adjusted to
reflect the expected expenses of the combined entity. The investment
advisory and distribution fees have been charged to the combined Fund based
on the fee schedule in effect for Evergreen Municipal Money Market at the
combined level of average net assets for the five month period ended January
31, 1998 and the year ended August 31, 1997.
<PAGE>
Evergreen Treasury Money Market Fund
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
PORTFOLIO OF INVESTMENTS (000's omitted)
January 31, 1998
<TABLE>
<CAPTION>
EVERGREEN TREASURY COREFUND PRO FORMA
MONEY MARKET TREASURY RESERVE COMBINED
----------------------- --------------------- --------------------------
MARKET MARKET MARKET
PRINCIPAL VALUE PRINCIPAL VALUE ADJ. PRINCIPAL VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES TREASURY BILLS* - 1.9%
4.25%, 2/5/98 $7,000 $6,996 $7,000 $6,996
5.25%, 3/5/98 10,000 9,952 10,000 9,952
5.47%, 4/2/98 10,000 9,908 10,000 9,908
5.51%, 4/30/98 10,000 9,866 10,000 9,866
5.35%, 5/28/98 10,000 9,829 10,000 9,829
5.34%, 6/25/98 10,000 9,789 10,000 9,789
5.38%, 7/23/98 10,000 9,748 10,000 9,748
5.47%, 8/20/98 10,000 9,704 10,000 9,704
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES TREASURY BILLS (Cost - $75,792) 75,792 77,000 75,792
- ---------------------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY NOTES* - 17.4%
6.13%, 3/31/98 $75,000 $75,039 75,000 75,039
5.88%, 4/30/98 50,000 49,998 50,000 49,998
6.25%, 6/30/98 135,000 135,271 135,000 135,271
5.25%, 7/31/98 15,000 14,968 15,000 14,968
5.875%, 8/15/98 10,000 10,004 10,000 10,004
4.75% - 6.13%, 8/31/98 110,000 109,806 110,000 109,806
4.75% - 6.125%, 8/31/98 15,000 15,004 15,000 15,004
6.00%, 9/30/98 50,000 50,075 50,000 50,075
4.75% - 6.00%, 9/30/98 15,000 14,995 15,000 14,995
5.88%, 10/31/98 50,000 50,058 50,000 50,058
5.875%, 10/31/98 10,000 10,015 10,000 10,015
5.50%, 11/15/98 15,000 14,973 15,000 14,973
5.625%, 11/30/98 15,000 14,986 15,000 14,986
5.13% - 5.75%, 12/31/98 125,000 124,615 125,000 124,615
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES TREASURY NOTES (Cost - $689,807) 594,862 94,945 689,807
- ---------------------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY STRIPS* - 1.1%
5.21%, 2/15/98 10,000 9,979 10,000 9,979
5.53%, 5/15/98 14,600 14,373 14,600 14,373
5.59%, 8/15/98 20,000 19,413 20,000 19,413
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES TREASURY STRIPS (Cost - $43,765) 43,765 43,765
- ---------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS** - 78.8%
Aubrey G. Lanston, 5.58%, dated 1/26/98,
due 2/2/98 (1) 140,000 140,000 140,000 140,000
Aubrey G. Lanston, 5.58%, dated 1/30/98,
due 2/2/98 (2) 136,000 136,000 136,000 136,000
Barclays Bank, PLC, 5.57%, dated 1/26/98,
due 2/2/98 (3) 140,000 140,000 140,000 140,000
Credit Suisse First Boston, Corp., 5.58%,
dated 1/26/98, due 2/2/98 (4) 140,000 140,000 140,000 140,000
Dean Witter Reynolds, Inc., 5.58%, dated 1/26/98,
due 2/2/98 (5) 140,000 140,000 140,000 140,000
Deutsche Bank GC, 5.58%, dated 1/26/98,
due 2/2/98 (6) 140,000 140,000 140,000 140,000
Donalson Lufkin & Jenrette Securities Corp.,
5.58%, dated 1/30/98, due 2/2/98 (7) 140,000 140,000 140,000 140,000
Dresdner Bank AG, 5.57%, dated 1/26/98,
due 2/2/98 (8) 284,000 284,000 284,000 284,000
Goldman Sachs & Co., 5.59%, dated 1/30/98,
due 2/2/98 (9) 140,000 140,000 140,000 140,000
Goldman Sachs & Co., 5.55%, dated 1/30/98,
due 2/2/98 (10) 110,000 110,000 110,000 110,000
HSBC Securities, Inc., 5.57%, dated 1/26/98,
due 2/2/98 (11) 140,000 140,000 140,000 140,000
HSBC Securities, Inc., 5.55%, dated 1/30/98,
due 2/2/98 (12) 30,000 30,000 30,000 30,000
Lehman Brothers, Inc., 5.55%, dated 1/30/98,
due 2/2/98 (13) 200,000 200,000 200,000 200,000
Merrill Lynch, Pierce, Fenner & Smith, Inc.,
5.57%, dated 1/30/98, due 2/2/98 (14) 140,000 140,000 140,000 140,000
Morgan Guaranty Trust Co. of New York, 5.58%, dated
1/30/98, due 2/2/98 (15) 140,000 140,000 140,000 140,000
Morgan Guaranty Trust Co. of New York, 5.55%, dated
1/30/98, due 2/2/98 (16) 29,631 29,631 29,631 29,631
NationsBank, Charlotte, NC, 5.57%, dated 1/30/98,
due 2/2/98 (17) 50,000 50,000 50,000 50,000
Republic Bank, New York, 5.55%, dated 1/30/98,
due 2/2/98 (18) 44,631 44,631 44,631 44,631
Smith Barney Shearson, Inc., 5.62%, dated 1/26/98,
due 2/2/98 (19) 210,000 210,000 210,000 210,000
State Street Bank & Trust Co., 5.55%, dated 1/30/98,
5.54%, dated 1/30/98, due 2/2/98 (20) 140,000 140,000 140,000 140,000
State Street Bank & Trust Co., 5.54%, dated 1/30/98,
due 2/2/98 (21) 29,631 29,631 29,631 29,631
Swiss Bank, 5.52%, dated 1/30/98, due 2/2/98 (22) 23,150 23,150 23,150 23,150
Swiss Bank, 5.57%, dated 1/30/98, due 2/2/98 (23) 134,631 134,631 134,631 134,631
Union Bank of Switzerland, Inc., 5.60%, dated 1/30/98,
due 2/2/98 (24) 300,000 300,000 300,000 300,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (Cost - $3,121,674) 2,584,000 537,674 3,121,674
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MUTUAL FUND SHARES - (Cost - $11,475) 0.3% SHARES SHARES
---------- ------------
<S> <C> <C> <C> <C> <C>
Fidelity U.S. Treasury, Inc. Portfolio 11,475 11,475 11,475 11,475
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - (Cost - $3,942,513) 99.5% 3,190,337 752,176 3,942,513
OTHER ASSETS AND LIABILITIES - 0.5% (2,432) 24,083 21,651
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS (100.0%) $3,187,905 $776,259 $3,964,164
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Rates listed are effective yields.
** Collateralized by:
(1) $139,434 U.S. Treasury Notes, 4.75% to 9.125%, 1/31/98
to 8/15/07; value including accrued interest---
$142,803.
(2) $91,380 U.S. Treasury STRIPS, 7/2/98; value including
accrued interest ---$87,703, $48,100 U.S. Treasury
Notes, 5.75%, 9/30/99; value including accrued interest ---
$48,360.
(3) $141,326 U.S. Treasury Notes, 4.75% to 8.25%, 7/15/98
to 10/31/98; value including accrued interest---
$142,800.
(4) $129,001 U.S. Treasury Notes, 5.875% to 7.875%, 8/15/98
to 2/15/05; value including accrued interest---
$144,153.
(5) $365,408 U.S. Treasury STRIPS, 2/15/98 to 2/15/27;
value including accrued interest---$139,763 and
$4,592 GNMA 5.50% to 10.50%, 10/15/08 to 8/20/27; value
including accrued interest---$3,060.
(6) $137,256 U.S. Treasury Notes, 5.75% to 6.75%, 8/15/03
to 4/30/00; value including accrued interest---
$142,801.
(7) $343,786 U.S. Treasury STRIPS, 8/15/06 to 2/15/25;
value including accrued interest ---$116,391,
$1,297 U.S. Treasury Notes, 7.50%, 10/31/99; value
including accrued interest ---$1,366 and $17,989
U.S. Treasury Bonds, 8.75% to 11.625%, 11/15/02 to 5/15/20;
value including accrued interest ---$25,044.
(8) $279,905 U.S. Treasury Notes, 5.875% to 9.25%, 6/30/98
to 6/30/01; value including accrued interest---
$289,689.
(9) $141,466 U.S. Treasury Notes, 5.625%, 12/31/99; value
including accrued interest --- $142,800.
<PAGE>
(10) $83,520 U.S. Treasury Notes, 11.125% to 15.75%,
11/15/01 to 8/15/03; value including accrued interest ---
$110,051.
(11) $93,838 U.S. Treasury STRIPS, 8/15/20; value including
accrued interest ---$24,481, $45,259 U.S. Treasury
Notes, 5.875%, 8/31/99; value including accrued interest
---$46,686 and $43,870 U.S. Treasury Bonds, 11.25%,
2/15/15; value including accrued interest ---$71,636.
(12) $28,530 U.S. Treasury Notes, 8.00%, 8/15/99; value
including accrued interest ---$30,014.
(13) $54,455 U.S. Treasury STRIPS, 2/15/19; value including
accrued interest ---$15,567, $94,057 U.S. Treasury
Notes, 5.75% to 8.125%, 2/15/98 to 10/31/02; value
including accrued interest---$97,347 and $76,205
U.S. Treasury Bonds, 7.50%, 11/15/16; value including
accrued interest ---$91,003.
(14) $109,464 U.S. Treasury Bonds, 6.75% to 8.875, 8/15/17
to 8/15/26; value including accrued interest ---
$142,804.
(15) $81,813 U.S. Treasury Notes, 6.00% to 7.00%, 5/31/98 to
4/15/99; value including accrued interest ---$83,903
and $50,465 U.S. Treasury Bonds, 7.25%, 5/15/16; value
including accrued interest ---$58,897.
(16) $27,950 U.S. Treasury Notes, 5.625% to 8.50%, 11/15/98
to 2/15/00; value including accrued interest---$29,645.
(17) $50,000 U.S. Treasury Notes, 6.00%, 7/31/02; value
including accrued interest ---$50,008.
(18) $44,725 U.S. Treasury Notes, 5.75% to 8.50%, 12/31/98
to 11/15/00; value including accrued interest---
$44,652.
(19) $296,894 GNMA, 6.00% to 8.00%, 3/15/21 to 10/15/27;
value including accrued interest ---$214,200.
(20) $140,000 U.S. Treasury Notes, 8.00%, 8/15/99; value
including accrued interest ---$142,803.
(21) $30,000 U.S. Treasury Notes, 5.75%, 12/31/98; value
including accrued interest ---$29,645.
(22) $22,595 U.S. Treasury Notes, 6.25%, 8/31/00; value
including accrued interest ---$23,161.
(23) $2,675 U.S. Treasury Notes, 11.875%, 11/15/03; value
including accrued interest ---$3,507.
(24) $289,018 U.S. Treasury Notes, 5.875% to 11.75%, 9/30/98
to 11/15/14; value including accrued interest ---
$305,603 and $800 U.S. Treasury STRIPS, 11/15/14;
value including accrued interest---$402.
SUMMARY OF ABBREVIATIONS:
GNMA Government National Mortgage Association
STRIPS Separately Traded Registered Interest and
Principal Securities
See Notes to Pro Forma Combining Financial Statements.
EVERGREEN TREASURY MONEY MARKET FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES (000'S)
JANUARY 31, 1998
<TABLE>
<CAPTION>
Evergreen Treasury CoreFund Pro Forma
Money Market Treasury Reserve Adj. Combined
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities $606,337 $214,502 $820,839
Investments in repurchase ageements 2,584,000 537,674 3,121,674
- ------------------------------------------------------------------------------------------------------------------------------
Investments at amortized cost 3,190,337 752,176 3,942,513
Cash 0 26,066 26,066
Interest receivable 9,537 1,561 11,098
Receivable for Fund shares sold 1,222 0 1,222
Prepaid expenses and other assets 75 144 219
-------------------------------------------------------------------------
Total Assets 3,201,171 779,947 3,981,118
LIABILITIES:
Dividends payable 11,179 3,442 14,621
Payable for Fund shares redeemed 93 0 93
Due to related parties 1,012 0 1,012
Distribution fee payable 655 0 655
Accrued Trustees' fees and expenses 144 0 144
Accrued expenses and other liabilities 183 246 429
-------------------------------------------------------------------------
Total Liabilities 13,266 3,688 16,954
NET ASSETS $3,187,905 $776,259 $3,964,164
=========================================================================
NET ASSETS ARE COMPRISED OF:
Paid-in capital 3,187,814 776,238 3,964,052
Undistributed net investment income 91 0 91
Accumulated net realized gain on investments 0 21 21
-------------------------------------------------------------------------
Net Assets $3,187,905 $776,259 $3,964,164
=========================================================================
CLASS A SHARES (CLASS C IN COREFUND)
Net Assets $2,616,380 $21,996 $2,638,376
Shares of Beneficial Interest Outstanding 2,616,320 21,994 2,638,314
Net Asset Value $1.00 $1.00 $1.00
CLASS Y SHARES
Net Assets $571,525 $754,263 $1,325,788
Shares of Beneficial Interest Outstanding 571,511 754,248 1,325,759
Net Asset Value $1.00 $1.00 $1.00
</TABLE>
See Notes to Pro Forma Combining Financial Statements
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS (000'S)
FIVE MONTHS ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
Evergreen Treasury CoreFund Pro Forma
Money Market Treasury Reserve Adj. Combined
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $71,377 $20,209 $0 $91,586
EXPENSES:
Advisory fee 4,447 1,453 (182)a 5,718
Distribution fee 3,142 22 0 3,164
Administrative services fees 427 908 (786)a 549
Custodian fee 299 1 76 a 376
Transfer agent fee 84 98 (65)b 117
Trustees' fees and expenses 26 9 (1)a 34
Other 155 83 (39)a 199
Fee waivers and/or expense reimbursement 0 (690) (690) 0
--------------------------------------------------------------------------
Total Expenses 8,580 1,884 (307) 10,157
Less: Indirectly paid expenses (26) 0 0 (26)
--------------------------------------------------------------------------
Net expenses 8,554 1,884 (307) 10,131
--------------------------------------------------------------------------
NET INVESTMENT INCOME 62,823 18,325 307 81,455
NET REALIZED GAIN ON INVESTMENTS 41 6 0 47
--------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $62,864 $18,331 $307 $81,502
==========================================================================
</TABLE>
a - Reflects an increase (decrease) based on surviving Fund's fee schedule
and pro forma combined assets.
b - Reflects a decrease due to surviving Fund's contractual rates.
See Notes to Pro Forma Combining Financial Statements
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS (000'S)
YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
Evergreen Treasury CoreFund Pro Forma
Money Market Treasury Reserve Adj. Combined
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $168,501 $48,274 $0 $216,775
EXPENSES:
Advisory fee 10,831 3,567 (446)a 13,952
Distribution fee 7,263 36 0 7,299
Administrative services fees 1,242 2224 (1,866)a 1,600
Custodian fee 581 0 164 a 745
Transfer agent fee 184 190 (176)b 198
Trustees' fees and expenses 66 23 (4)a 85
Other 232 294 (250)a 276
Fee waivers and/or expense reimbursement (132) (1,726) 1,726 (132)
--------------------------------------------------------------
Total Expenses 20,267 4,608 (852) 24,023
Less: Indirectly paid expenses (10) 0 0 (10)
--------------------------------------------------------------
Net expenses 20,257 4,608 (852) 24,013
--------------------------------------------------------------
NET INVESTMENT INCOME 148,244 43,666 852 192,762
NET REALIZED GAIN ON INVESTMENTS 0 9 0 9
-------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $148,244 $43,675 $852 $192,771
=============================================================
</TABLE>
a - Reflects an increase (decrease) based on surviving Fund's fee schedule and
pro forma combined assets.
b - Reflects a decrease due to surviving Fund's contractual rates.
See Notes to Pro Forma Combining Financial Statements
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 1998
1. Basis of Combination The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Schedule of Investments, and the
related Pro Forma Combining Statements of Operations ("Pro Forma
Statements") reflect the accounts of Evergreen Treasury Money Market Fund
("Evergreen Treasury Money Market") and CoreFund Treasury Reserve Fund
("CoreFund Treasury Reserve") at January 31, 1998, for the five-month period
then ended and for the year ended August 31, 1997.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
CoreFund Treasury Reserve. The Reorganization provides for the acquisition
of all assets and assumption of identified liabilities of CoreFund Treasury
Reserve by Evergreen Treasury Money Market, in exchange for Class A and
Class Y shares of Evergreen Treasury Money Market. Thereafter, there will be
a distribution of Class A and Class Y shares of Evergreen Treasury Money
Market to the respective shareholders of CoreFund Treasury Reserve Class C
and Class Y in liquidation and subsequent termination thereof. As a result
of the Reorganization, the shareholders of CoreFund Treasury Reserve Class C
and Class Y will become the owners of that number of full and fractional
Class A and Class Y shares, respectively, of Evergreen Treasury Money Market
having an aggregate net asset value equal to the aggregate net asset value
of their shares of CoreFund Treasury Reserve as of the close of business
immediately prior to the date that CoreFund Treasury Reserve assets are
exchanged for Class A and Class Y shares of Evergreen Treasury Money Market.
Under the Reorganization, the Pro Forma Statements reflect the expenses of
each Fund in carrying out its obligations as though the merger occurred at
the beginning of the periods presented.
The information contained herein is based on the experience of each Fund for
the five months ended January 31, 1998 and the year ended August 31, 1997
and is designed to permit shareholders of the consolidating mutual funds to
evaluate the financial effect of the proposed Reorganization. The expenses
of CoreFund Treasury Reserve in connection with the Reorganization
(including the cost of any proxy soliciting agents) will be borne by First
Union National Bank of North Carolina. It is not anticipated that the
securities of the combined portfolio will be sold in significant amounts in
order to comply with the policies and investment practices of Evergreen
Treasury Money Market.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the Statement
of Additional Information.
2. Shares of Beneficial Interest The Pro Forma net asset values per share
assume the issuance of Class A and Class Y shares of Evergreen Treasury
Money Market which would have been issued at January 31, 1998 in connection
with the proposed Reorganization. Shareholders of CoreFund Treasury Reserve
Class C and Class Y would receive Class A and Class Y shares, respectively,
of Evergreen Treasury Money Market based on assumed conversion ratios
determined on January 31, 1998. The conversion ratios are calculated by
dividing the net asset value of CoreFund Treasury Reserve Class C and Class
Y by the net asset value per share of Class A and Class Y, respectively, of
Evergreen Treasury Money Market.
3. Pro Forma Operations The Pro Forma Combining Statements of Operations assume
similar rates of gross investment income for the investments of each Fund.
Accordingly, the combined gross investment income is equal to the sum of
each Fund's gross investment income. Pro Forma operating expenses include
the actual expenses of the Funds adjusted to reflect the expected expenses
of the combined entity. The investment advisory and distribution fees have
been charged to the combined Fund based on the fee schedule in effect for
Evergreen Treasury Money Market at the combined level of average net assets
for the five months ended January 31, 1998 and the year ended August 31,
1997.
<PAGE>
4. Expense Offset Arrangement
The Evergreen Treasury Money Market has entered into an expense offset
arrangement with its custodian. The assets deposited with the custodian
under this expense offset arrangement could have been invested in income-
producing assets.
<PAGE>
4. Expense Offset Arrangement
The Evergreen Treasury Money Market has entered into an expense offset
arrangement with its custodian. The assets deposited with the custodian
under this expense offset arrangement could have been invested in income-
producing assets.
EVERGREEN MONEY MARKET TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to "Liability
and Indemnification of Trustees" under the caption "Comparative Information on
Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust. Incorporated by reference to Evergreen Money Market
Trust's Registration Statement on Form N-1A filed on December 12, 1997 -
Registration No. 333-42181 ("Form N-1A Registration Statement")
2. Bylaws. Incorporated by reference to the Form N-1A Registration Statement.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Declaration of Evergreen Money Market Trust Articles II., III.6(c), IV.(3),
IV.(8), V., VI., VII., and VIII and ByLaws Articles II., III. and VIII.
6(a). Form of Investment Advisory Agreement between Evergreen
Asset Management Corp. and Evergreen Money Market Trust.
Incorporated by reference to the Form N-1A Registration
Statement.
6(b). Form of Investment Advisory Agreement between First Union National Bank
and Evergreen Money Market Trust. Incorporated by reference to the Form N-1A
Registration Statement.
6(c). Form of Interim Investment Advisory Agreement. Exhibit
B to Prospectus contained in Part A of this Registration
Statement.
6(d). Sub-Advisory Agreement between Evergreen Asset
Management Corp. and Liber & Company. *
-94-
<PAGE>
7(a). Form of Distribution Agreement between Evergreen Distributor, Inc. and
Evergreen Money Market Trust. Incorporated by reference to the Form N-1A
Registration Statement.
7(b). Form of Dealer Agreement for Class A, Class B and Class C shares used by
Evergreen Distributor, Inc. Incorporated by reference to the Form N-1A
Registration Statement.
8. Form of Deferred Compensation Plan. Incorporated by reference to the Form
N-1A Registration Statement.
9. Form of Custody Agreement between State Street Bank and Trust Company and
Evergreen Money Market Trust. Incorporated by reference to Form N-1A
Registration Statement.
10. Form of Rule 12b-1 Distribution Plan. Incorporated by reference to the Form
N-1A Registration Statement.
11. Opinion and consent of Sullivan & Worcester LLP. *
12. Tax opinion and consent of Sullivan & Worcester LLP. *
13. Not applicable.
14(a). Consent of KPMG Peat Marwick LLP.*
14(b). Consent of Price Waterhouse LLP.*
14(c). Consent of Ernst & Young LLP. *
15. Not applicable.
16. Powers of Attorney. *
17. Form of Proxy Card. *
* Previously filed.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus that is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
-95-
<PAGE>
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) Not Applicable.
-96-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Post- Effective
Amendment No. 1 to the Registration Statement has been signed on behalf of the
Registrant, in the City of Columbus and State of Ohio, on the 2nd day of June,
1998.
EVERGREEN MONEY MARKET TRUST
By: /s/ William J. Tomko
-----------------------
Name: William J. Tomko
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Post-Effective Amendment No. 1 to the Registration Statement in the
capacities indicated on the 2nd day of June, 1998.
Signatures Title
- ---------- -----
/s/William J. Tomko President and
- ------------------- Treasurer
William J. Tomko
/s/Laurence B. Ashkin* Trustee
- ---------------------
Laurence B. Ashkin
/s/Charles A. Austin III* Trustee
- -------------------------
Charles A. Austin III
/s/K. Dun Gifford* Trustee
- -----------------
K. Dun Gifford
/s/James S. Howell* Trustee
- ------------------
James S. Howell
/s/Leroy Keith, Jr.* Trustee
- -------------------
Leroy Keith, Jr.
-97-
<PAGE>
/s/Gerald M. McDonnell* Trustee
- ----------------------
Gerald M. McDonnell
/s/Thomas L. McVerry* Trustee
- --------------------
Thomas L. McVerry
/s/William Walt Pettit* Trustee
- ---------------------
William Walt Pettit
/s/David M. Richardson* Trustee
- ----------------------
David M. Richardson
/s/Russell A. Salton III* Trustee
- -------------------------
Russell A. Salton III
/s/Michael S. Scofield* Trustee
- ----------------------
Michael S. Scofield
/s/Richard J. Shima* Trustee
- -------------------
Richard J. Shima
* By: /s/William J. Tomko
-------------------
Attorney-in-Fact
William J. Tomko, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and included as Exhibit 16 to this
Registration Statement.
-98-
<PAGE>
INDEX TO EXHIBITS
N-14
EXHIBIT NO.
6(d) Sub-Advisory Agreement*
11 Opinion and Consent of Sullivan & Worcester LLP*
12(a) Tax Opinion and Consent of Sullivan & Worcester LLP*
12(b) Tax Opinion and Consent of Sullivan & Worcester LLP*
12(c) Tax Opinon and Consent of Sullivan & Worcester LLP*
14(a) Consent of KPMG Peat Marwick LLP*
14(b) Consent of Price Waterhouse LLP*
14(c) Consent of Ernst & Young LLP*
16 Powers of Attorney*
17 Form of Proxy*
- --------------------
* Previously filed.
-99-
<PAGE>
