SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CONESTOGA
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(Name of Registrant as Specified in its Charter)
[INSERT NAME OF FILER WHEN APPLICABLE]
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THE CONESTOGA FAMILY OF FUNDS
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
February __, 1996
Dear Conestoga Funds Shareholder:
The Board of Trustees of The Conestoga Family of Funds ("Conestoga
Funds" or the "Funds") is pleased to call a special shareholders meeting, to be
held at 10:00 a.m., on March 22, 1996, at The Wilmington Hilton, 630 Naamans
Road, Wilmington, Delaware.
As you may know, CoreStates Financial Corp ("CoreStates") and Meridian
Bancorp, Inc. ("Meridian") recently announced a plan to merge, in a transaction
expected to close during the second quarter of 1996. Meridian Bancorp, Inc., is
the parent company of the investment adviser to the Conestoga Funds. In
anticipation of the consummation of that merger, management of both companies
deemed it wise to consider the consolidation of the mutual fund investment
advisory activities of Meridian and CoreStates into one entity. Similarly, it
was deemed appropriate to consider the merger of the Conestoga Funds into the
CoreFunds Family of Funds, an open-end management investment company, in order
to create one consolidated family of mutual funds and offer shareholders more
investment options in an efficient manner. The Conestoga Funds Board of Trustees
believes that these actions are in the best interests of the Funds'
shareholders.
The Conestoga Board of Trustees has carefully reviewed the proposal to
combine all portfolios of The Conestoga Family of Funds with the CoreFunds
Family of Funds with similar investment objectives and policies (the
"Transaction"), and has considered the effects of this Transaction on
shareholder value with respect to investment performance, expenses levels, and
shareholders services. The Board of Trustees has also considered the interim
advisory and sub-advisory agreements for the Funds that are described in the
attached materials if the merger of CoreStates Financial Corp and Meridian
Bancorp, Inc. occurs before the Funds' consolidations. In light of their
consideration, the Board of Trustees unanimously recommends the approval of the
<PAGE>
Transaction. As you evaluate the proposal, please note the
following points:
o The absolute dollar value of your investment in the Conestoga Funds
before the Transaction will NOT change, and will be the same immediately after
the transaction although the Funds you have invested in, as well as the number
of shares and the net asset value of each share, may be different.
o The Transaction will be tax-free and will not involve
any sales loads, commissions or transaction charges.
o The investment objective and policies of your new portfolio will be
substantially similar to your portfolio's current objective and policies, except
as stated in the enclosures.
o The CoreFunds service providers have agreed to waive fees and
reimburse expenses for a period of one year after the reorganization, if
necessary, to ensure that the operating expenses of the CoreFunds portfolios are
limited to the ratios stated in the Combined Proxy Statement/Prospectus.
The Board of Trustees recommends the approval of this Transaction in
light of the following shareholder benefits:
o The Transaction will result in a broader array of investment
opportunities available to shareholders.
o Existing purchase and redemption features will remain in place.
o There is the potential for economies of scale in portfolio
management resulting from the larger asset size.
A proxy card is enclosed for your use in the shareholder meeting. This
card represents shares you hold as of the record date, January 26, 1996. IT IS
IMPORTANT THAT YOU COMPLETE, SIGN, AND RETURN YOUR PROXY CARD IN THE ENVELOPE
PROVIDED AS SOON AS POSSIBLE. This will ensure that your shares will be
represented at the shareholders meeting to be held on March 22, 1996.
Sincerely,
Thomas J. Taylor
Chairman of the Board
<PAGE>
CONESTOGA FAMILY OF FUNDS
The document you hold in your hands contains your combined proxy
statement/prospectus and proxy card. A proxy card is, in essence, a ballot. When
you vote your proxy, it tells us how to vote on your behalf on important issues
relating to the Portfolios. If you simply sign the proxy without specifying a
vote, your shares will be voted in accordance with the recommendations of the
Board of Trustees.
We urge you to spend a few minutes with the proxy/prospectus statement, fill out
your proxy card, and return it to us. Voting your proxy, and doing so promptly,
enables the Portfolios to avoid conducting additional mailings. When
shareholders do not return their proxies in sufficient numbers, the Portfolios
may bear the expense of follow-up solicitations.
Please take a few moments to exercise your right to vote. Thank you.
<PAGE>
CONESTOGA FAMILY OF FUNDS
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on March 22, 1996
To Conestoga Shareholders:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders
("Shareholders") of each Portfolio of the Conestoga Family of Funds
("Conestoga") will be held at The Wilmington Hilton, 630 Naamans Road,
Wilmington, Delaware, on March 22, 1996 at 10:00 a.m. (Eastern time) for the
following purposes:
ITEM 1. With respect to each investment portfolio (a
"Conestoga Portfolio") of Conestoga:
To consider and act upon a proposal to approve an Agreement
and Plan of Reorganization (the "Reorganization Agreement")
and the transactions contemplated thereby, including (a) the
transfer of substantially all of the assets and liabilities of
the Cash Management Fund, Tax-Free Fund, U.S. Treasury
Securities Fund, Equity Fund, Special Equity Fund, Bond Fund,
Intermediate Income Fund, Pennsylvania Tax-Free Bond Fund,
Balanced Fund, Short-Term Income Fund and International Equity
Fund to corresponding investment portfolios (the "CoreFunds
Portfolios") of CoreFunds, Inc. in exchange for Institutional
and Individual shares, as applicable, of the CoreFunds
Portfolios; (b) the distribution of such CoreFunds
Portfolio shares to the shareholders of the Conestoga
Portfolios according to their respective interests; (c) the
approval of an interim investment advisory agreement for the
Conestoga Portfolios, and an interim sub-advisory agreement
for the Conestoga International Equity Fund, if the merger of
Meridian Bancorp, Inc. and CoreStates Financial Corp occurs
before the closing of the proposed reorganization; and (d) the
termination under state law and the Investment Company Act of
1940, as amended, of Conestoga.
ITEM 2. With respect to each Conestoga Portfolio:
To transact such other business as may properly come before
the Special Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus.
<PAGE>
Appendix I to the Combined Proxy Statement/Prospectus is a copy of the
Reorganization Agreement.
Shareholders of record as of the close of business on January 26, 1996
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY
CONESTOGA'S BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO CONESTOGA A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
-----------------------------
Henry S. Hilles, Jr.
Secretary
February 1, 1996
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<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated February 1, 1996
CONESTOGA FAMILY OF FUNDS
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
(800) 344-2716
COREFUNDS, INC.
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
(800) 355-CORE
This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of the Conestoga
Family of Funds ("Conestoga") in connection with a Special Meeting (the
"Meeting") of Shareholders ("Shareholders") to be held on March 22, 1996 at
10:00 a.m. (Eastern time) at The Wilmington Hilton, 630 Naamans Road,
Wilmington, Delaware, at which Shareholders will be asked to consider and
approve a proposed Agreement and Plan of Reorganization dated ____________, 1996
(the "Reorganization Agreement"), by and between Conestoga and CoreFunds, Inc.
("CoreFunds") and the matters contemplated therein. A copy of the Reorganization
Agreement is attached as Appendix I.
Conestoga and CoreFunds are both open-end, management investment
companies. Meridian Investment Company ("MIC") currently provides investment
advisory services to Conestoga. CoreStates Investment Advisers, Inc.
("CoreStates Advisers") provides investment advisory services to CoreFunds. In
reviewing the proposed reorganization (the "Reorganization"), the Conestoga
Board considered the pending merger of Meridian Bancorp, Inc., the parent
company of MIC and CoreStates Financial Corp (the "Holding Company Merger); the
effect of such merger on Conestoga; the recommendations of MIC and CoreStates
Advisers with respect to the proposed consolidation of Conestoga and CoreFunds;
the fact that the Reorganization would constitute a tax-free reorganization; and
the fact that the interests of Shareholders would not be diluted as a result of
the Reorganization.
The Reorganization Agreement provides that each of the following eight
investment portfolios of Conestoga (collectively, the "Reorganizing Portfolios")
will transfer substantially all its assets and known liabilities to the existing
CoreFunds investment portfolio (collectively, the "Existing CoreFunds
Portfolios") identified below opposite its name:
<PAGE>
<TABLE>
<CAPTION>
Reorganizing Portfolios Existing CoreFunds Portfolios
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<S> <C>
Cash Management Fund Cash Reserve
Tax-Free Fund Tax-Free Reserve
U.S. Treasury Securities Fund Treasury Reserve
Equity Fund Value Equity Fund
Intermediate Income Fund Intermediate Bond Fund
Pennsylvania Tax-Free Pennsylvania Municipal
Bond Fund Bond Fund
Balanced Fund Balanced Fund
International Equity Fund International Growth Fund
</TABLE>
The Reorganization Agreement also provides that each of the following
three investment portfolios of Conestoga (collectively, the "Continuing
Portfolios") will transfer all its assets and known liabilities to the
newly-organized CoreFunds investment portfolio (collectively, the "New CoreFunds
Portfolios") identified below opposite its name:
<TABLE>
<CAPTION>
Continuing Portfolios New CoreFunds Portfolios
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<S> <C>
Special Equity Fund Special Equity Fund
Bond Fund Bond Fund
Short-Term Income Fund Short-Term Income Fund
</TABLE>
In exchange for the transfer of these assets and liabilities, CoreFunds
will simultaneously issue shares in the eleven CoreFunds investment portfolios
listed above (collectively, the "CoreFunds Portfolios") to the corresponding
Conestoga investment portfolios listed above (collectively, the "Conestoga
Portfolios").
The Conestoga Portfolios have two classes of shares outstanding, as do
the CoreFunds Portfolios. Holders of each class of shares of a Conestoga
Portfolio will receive the class of shares of the corresponding CoreFunds
Portfolio as set forth in the table on page ___ under "Information Relating to
the Proposed Reorganization -- Description of the Reorganization Agreement."
The Conestoga Portfolios will then make a liquidating distribution of
the CoreFunds Portfolios' shares to the Shareholders of the Conestoga
Portfolios, so that a holder of a class of shares in a Conestoga Portfolio at
the Effective Time of the Reorganization (as hereinafter defined) will receive a
class of Shares (as described herein) of the corresponding CoreFunds Portfolio
with the same aggregate net asset value as the Shareholder had in the Conestoga
Portfolio immediately before the Reorganization. Following the Reorganization,
Shareholders of the Conestoga Portfolios will be Shareholders of their
corresponding CoreFunds Portfolios, and Conestoga will be terminated under state
law and the Investment Company Act of 1940, as amended.
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<PAGE>
The Existing CoreFunds Portfolios currently are conducting investment
operations as described in this Combined Proxy Statement/Prospectus. The New
CoreFunds Portfolios have recently been organized for the purpose of continuing
the investment operations of the Conestoga Special Equity Fund, Bond Fund and
Short-Term Income Fund.
The Reorganization Agreement also provides that if the Holding Company
Merger occurs before the Reorganization, Conestoga will enter into an interim
investment advisory agreement with MIC (or its successor), and an interim
sub-advisory agreement with Marvin and Palmer Associates, Inc. for the Conestoga
International Equity Fund. The interim investment advisory and sub-advisory
agreements will be effective for the period between the date of the Holding
Company Merger and the consummation of the proposed Reorganization between
Conestoga and CoreFunds. The interim investment advisory and sub-advisory
agreements will contain substantially the same terms as Conestoga's current
investment advisory and sub-advisory agreements.
This Combined Proxy Statement/Prospectus sets forth the information
that a Shareholder of Conestoga should know before voting on the Reorganization
Agreement (and related transactions), and should be retained for future
reference. The Prospectuses relating to the shares of the Existing CoreFunds
Portfolios, which describe the operations of those Funds, accompany this
Combined Proxy Statement/Prospectus. Additional information is set forth in the
Statements of Additional Information relating to those Funds and this Combined
Proxy Statement/Prospectus, which are dated November 1, 1995 and February 1,
1996, respectively, and in the Prospectuses and Statement of Additional
Information, dated February 21, 1995 (as revised November 3, 1995) and May 1,
1995 (as revised November 3, 1995), respectively, relating to Conestoga. Each of
these documents is on file with the Securities and Exchange Commission (the
"SEC"), and is available without charge upon oral or written request by writing
or calling either Conestoga or CoreFunds at the respective addresses or
telephone numbers indicated above. The information contained in the Prospectuses
and Statement of Additional Information, dated February 21, 1995 (as revised
November 3, 1995) and May 1, 1995 (as revised November 3, 1995), respectively,
relating to Conestoga is incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the Proxy
Statement of Conestoga for the meeting of its Shareholders, and CoreFunds'
Prospectus for the shares of its Existing CoreFunds Portfolios that have been
registered with the SEC and are to be issued in connection with the
Reorganization. Because the operations of the Continuing Portfolios will be
carried on by the New CoreFunds Portfolios, this Combined Proxy
Statement/Prospectus does not constitute a prospectus for the shares that
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<PAGE>
will be issued in the Reorganization with respect to the Continuing Portfolios.
This Combined Proxy Statement/Prospectus is expected to first be sent
to Shareholders on or about February 5, 1996.
THE SECURITIES OF THE COREFUNDS PORTFOLIOS 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 COMBINED PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CONESTOGA OR COREFUNDS.
SHARES OF THE COREFUNDS PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, CORESTATES BANK, N.A., THE PARENT CORPORATION OF EACH
OF THE COREFUNDS PORTFOLIOS' INVESTMENT ADVISER, OR ANY OF ITS AFFILIATES.
SHARES OF THE COREFUNDS PORTFOLIOS ARE NOT FEDERALLY INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE WILL VARY AS A RESULT
OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE COREFUNDS
PORTFOLIOS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
AN INVESTMENT IN THE COREFUNDS PORTFOLIOS INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE
COREFUNDS CASH RESERVE, TAX-FREE RESERVE OR TREASURY RESERVE WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Summary............................................................................................................
Proposed Reorganization...................................................................................
Reasons for Reorganization................................................................................
Federal Income Tax Consequences...........................................................................
Overview of the Conestoga Portfolios and
CoreFunds Portfolios....................................................................................
Voting Information........................................................................................
Risk Factors..............................................................................................
Information Relating to the Proposed Reorganization................................................................
Description of the Reorganization Agreement...............................................................
Capitalization............................................................................................
Federal Income Tax Consequences...........................................................................
Comparison of Investment Policies and Risk Factors................................................................
Conestoga Cash Management Fund and
CoreFunds Cash Reserve..................................................................................
Conestoga Tax-Free Fund and CoreFunds
Tax-Free Reserve........................................................................................
Conestoga U.S. Treasury Securities Fund
and CoreFunds Treasury Reserve..........................................................................
Conestoga Equity Fund and CoreFunds
Value Equity Fund.......................................................................................
Conestoga Intermediate Income Fund and
CoreFunds Intermediate Bond Fund........................................................................
Conestoga Pennsylvania Tax-Free Bond Fund and
CoreFunds Pennsylvania Municipal Bond Fund..............................................................
Conestoga Balanced Fund and CoreFunds
Balanced Fund...........................................................................................
Conestoga International Equity Fund and
CoreFunds International Growth Fund.....................................................................
Investment Policies and Risks -- General..................................................................
Investment Limitations....................................................................................
Purchase and Redemption Information, Exchange
Privileges, Distribution and Pricing....................................................................
Other Information.........................................................................................
Interim Investment Advisory and Sub-Advisory Agreements............................................................
Information Relating to Voting Matters.............................................................................
General Information.......................................................................................
Shareholder and Board Approvals...........................................................................
Appraisal Rights..........................................................................................
Quorum....................................................................................................
Annual Meetings...........................................................................................
Additional Information about CoreFunds.............................................................................
Additional Information about Conestoga.............................................................................
Additional Information about the Investment Advisers and Sub-Advisers..............................................
Litigation.........................................................................................................
Financial Statements...............................................................................................
Other Business.....................................................................................................
<PAGE>
<CAPTION>
Page
Shareholder Inquiries..............................................................................................
Appendix I--Agreement and Plan of Reorganization................................................................A-1
Appendix II - Manager's Discussion of Fund Performance -
Existing CoreFunds Portfolios..........................................................................B-1
Appendix III - Shareholders Transactions and Services...........................................................C-1
Appendix IV - Interim Investment Advisory and Sub-Advisory
Agreements.............................................................................................D-1
</TABLE>
<PAGE>
SUMMARY
The following is a summary of certain information relating to the
proposed Reorganization, the parties thereto and the related transactions, and
is qualified by reference to the more complete information contained elsewhere
in this Combined Proxy Statement/Prospectus, the prospectuses and statements of
additional information of Conestoga and CoreFunds, and the Reorganization
Agreement attached to this Combined Proxy Statement/Prospectus as Appendix I.
Conestoga's Annual Report to Shareholders may be obtained free of charge by
calling 1-800-344-2716 or writing 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658. CoreFunds Annual Report to Shareholders may be obtained free of
charge by calling 1-800-355-CORE or writing 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.
Proposed Reorganization. Based upon their evaluation of the relevant information
presented to them, and in light of their fiduciary duties under federal and
state law, Conestoga's and CoreFunds' Boards, including their members who are
not "interested persons" within the meaning of the Investment Company Act of
1940 (the "1940 Act"), have determined that the proposed Reorganization is in
the best interests of Conestoga's and CoreFunds' Shareholders, respectively, and
that the interests of existing Shareholders of Conestoga and CoreFunds,
respectively, will not be diluted as a result of such Reorganization.
The Reorganization Agreement provides that the Reorganization will occur
contemporaneously with, or shortly after, the consummation of the Holding
Company Merger. Because this merger will result in a change in control of MIC,
the existing investment advisory and sub-advisory agreements for Conestoga will,
by their terms, automatically terminate upon the Holding Company Merger. If this
merger and the Reorganization do not occur contemporaneously, the
Reorganization Agreement provides that Conestoga will enter into an interim
investment advisory agreement with MIC (or its successor) for the period between
the date of the Holding Company Merger and the Effective Time of the
Reorganization. In addition, MIC will enter into an interim sub-advisory
agreement with respect to the Conestoga International Equity Fund with Marvin
and Palmer Associates, Inc. for the same period. The provisions of the interim
investment advisory and sub-advisory agreements, including the fee rates, will
be the same as those of the existing investment advisory and sub-advisory
agreements. See "Interim Investment Advisory and Sub-Advisory Agreements" below.
The Cover Page and pages ___-___ hereof summarize the proposed
Reorganization, including the interim investment advisory and sub-advisory
agreements.
Reasons for the Reorganization. The primary reason for the Reorganization is the
pending merger between Meridian Bancorp,
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<PAGE>
Inc., the parent of MIC, and CoreStates Financial Corp. If this merger is
completed, the currently existing investment advisory contract between the
Conestoga Portfolios and MIC, would be terminated. MIC and CoreStates Advisers
have recommended that each of the Conestoga Portfolios be reorganized as
described in this Combined Proxy Statement/Prospectus contemporaneously with or
shortly after the proposed merger of the bank holding companies. In light of
this recommendation, after consideration of the reasons therefor and the
proposed operations of the combined funds after the Reorganization, and in
consideration of the fact that the Reorganization will be tax-free and will not
dilute the interests of Conestoga Shareholders, the Board of Trustees of
Conestoga has authorized the Agreement and Plan of Reorganization and
recommended approval of the Reorganization by Shareholders.
Federal Income Tax Consequences. Shareholders of the Conestoga Portfolios will
recognize no gain or loss for federal income tax purposes on their receipt of
shares of the CoreFunds Portfolios. Shareholders of the CoreFunds Portfolios
will have no tax consequence from the Reorganization. The Conestoga Portfolios
will incur no federal tax purposes on their issuance of shares in the
Reorganization. See "Information Relating to the Proposed Reorganization --
Federal Income Tax Consequences."
Overview of the Conestoga Portfolios and CoreFunds Portfolios. There are no
material differences between the investment objectives and policies of the
Continuing Portfolios and the corresponding New CoreFunds Portfolios. The
investment objectives and policies of the Reorganizing Portfolios are similar to
those of the corresponding Existing CoreFunds Portfolios.
Conestoga Cash Management Fund and CoreFunds Cash Reserve.
The Conestoga Cash Management Fund's investment objective is to seek
current income with liquidity and stability of principal. CoreFunds Cash
Reserve's investment objective is to provide as high a level of current income
as is consistent with liquidity and relative stability of principal. Each
pursues its investment objective by investing in a diversified portfolio of high
quality money market instruments.
Conestoga Tax-Free Fund and CoreFunds Tax-Free Reserve.
The Conestoga Tax-Free Fund's investment objective is to seek current
income which is exempt from regular federal income tax with liquidity and
stability of principal. CoreFunds Tax-Free Reserve's investment objective is to
provide as high a level of current interest income that is exempt from federal
income taxes as is consistent with liquidity and relative stability of
principal. Both Funds intend, under normal market conditions, to invest at least
80% of their assets in short-term, high quality municipal obligations, the
interest on which is exempt from
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<PAGE>
regular federal income tax. CoreFunds Tax-Free Reserve intends to invest, when
possible, its assets in municipal securities exempt from Pennsylvania income
taxation.
Conestoga U.S. Treasury Securities Fund and CoreFunds
Treasury Reserve.
The Conestoga U.S. Treasury Securities Fund's investment objective is
to seek current income with liquidity and stability of principal. CoreFunds
Treasury Reserve's investment objective is to provide current interest income,
liquidity and safety of principal. Each pursues its investment objective by
investing in short-term obligations of the U.S. Treasury and in repurchase
agreements relating to such Treasury obligations.
Conestoga Equity Fund and CoreFunds Value Equity Fund.
The investment objective of the Conestoga Equity Fund is to seek
capital growth by investing principally in a diversified portfolio of common
stocks of companies with large, medium or small capitalizations. The investment
objective of CoreFunds Value Equity Fund is to provide maximum total return,
including capital appreciation and investment income, in excess of stock market
indices such as the S&P 500 Index, as measured over a period of time. CoreFunds
Value Equity Fund expects to change its name and investment policies before the
Effective Time for the Reorganization to more closely resemble the investment
policies of the Conestoga Equity Fund.
Conestoga Intermediate Income Fund and CoreFunds
Intermediate Bond Fund.
The Conestoga Intermediate Income Fund's primary investment objective
is to seek current income by investing principally in a diversified portfolio of
debt securities with expected or remaining maturities of ten years or less, and
its secondary objective is to seek capital growth. The CoreFunds Intermediate
Bond Fund's investment objective is to provide a moderate level of current
income consistent with conservation of capital, by investing substantially all
of its assets in a diversified portfolio of intermediate-term, fixed income
obligations which will have an expected average weighted maturity of one to five
years.
Conestoga Pennsylvania Tax-Free Bond Fund and CoreFunds
Pennsylvania Municipal Bond Fund.
The Conestoga Pennsylvania Tax-Free Bond Fund's investment objective is
to seek a high level of current income consistent with the preservation of
capital, which income is exempt from federal individual income tax and, to the
extent possible, from Pennsylvania state and local personal income tax, and is
not a tax preference item under the federal alternative minimum tax. CoreFunds
Pennsylvania Municipal Bond Fund seeks current income
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<PAGE>
exempt from federal and Pennsylvania income taxation with preservation of
capital by investing primarily in a non-diversified portfolio of municipal
securities.
Conestoga Balanced Fund and CoreFunds Balanced Fund.
The Conestoga Balanced Fund's investment objective is to seek a balance
of capital appreciation and current income consistent with the preservation of
capital. CoreFunds Balanced Fund's investment objective is to provide total
return while preserving capital. Both Funds pursue their objective by investing
in a combination of equity and fixed income securities.
Conestoga International Equity Fund and CoreFunds
International Growth Fund.
The Conestoga International Equity Fund's investment objective is to
seek long-term growth of capital. CoreFunds International Growth Fund's
investment objective is long-term capital appreciation, consistent with
reasonable risk. Both Funds invest at least 65% of their total assets in
diversified portfolios of equity securities of issuers located outside of the
United States.
See "Comparison of Investment Objectives and Risk Factors" below and
the Conestoga and CoreFunds Prospectuses, which are incorporated by reference
herein, for a description of the similarities and differences between the
investment objectives and policies of the Reorganizing Portfolios and the
corresponding Existing CoreFunds Portfolios.
Certain Arrangements with Service Providers - The Conestoga Portfolios. MIC
serves as investment adviser for Conestoga and is entitled to receive advisory
fees from them, computed daily and paid monthly, at the following annual rates,
expressed as a percentage of average daily net assets:
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<PAGE>
<TABLE>
<CAPTION>
Actual Advisory
Fee For Year
Maximum Ended October 31,
Conestoga Portfolios Advisory Fee 1995 (after waivers)
- -------------------- ------------ --------------------
<S> <C> <C>
Cash Management Fund 0.40% 0.20%
Tax-Free Fund 0.40% 0.16%
U.S. Treasury Securities Fund 0.40% 0.27%
Equity Fund 0.74% 0.74%
Special Equity Fund 1.50% 0%
Bond Fund 0.74% 0.34%
Intermediate Income Fund 0.74% 0.25%
Pennsylvania Tax-Free
Bond Fund 0.74% 0%
Short-Term Income Fund 0.74% 0.29%
Balanced Fund 0.75% 0.49%
International Equity Fund 1.00% 1.00%
</TABLE>
- -----------------------------------------------------------------
Pursuant to the Conestoga investment advisory contract, MIC provides
investment research and management to Conestoga and conducts a continuous
investment program. MIC also directs the investments of the Conestoga Portfolios
in accordance with each Portfolio's investment objectives, policies and
limitations, and creates and maintains all necessary books and records.
Marvin and Palmer Associates, Inc. ("Marvin and Palmer") provides
sub-advisory services to the International Equity Fund under a sub-advisory
agreement between MIC and Marvin and Palmer. The sub-adviser assists MIC in
providing a continuous investment program for the International Equity Fund,
including investment research and management with respect to all securities and
investments and cash equivalents of the portfolio. The sub-adviser provides the
services under this agreement in accordance with the International Equity Fund's
investment objective, policies, and limitations. For the services provided
as the International Equity Fund's sub-adviser, Marvin and Palmer is entitled
to receive a fee from MIC, computed daily and paid monthly, at the annual rate
of .75% of the first $100 million of the Fund's average daily net assets,
.70% of the next $100 million of the Fund's average daily net assets, .65%
of the third $100 million of the Fund's average daily net assets, and .60%
of the Fund's average daily net assets in excess of $300 million.
Since May 1, 1995, Administrative services have been provided to
Conestoga by SEI Financial Management Corporation ("SFM") a wholly-owned
subsidiary of SEI Corporation ("SEI"). For its services, SFM receives a fee,
calculated daily and paid monthly, at the annual rate of .17% of the average
aggregate daily net assets of each Conestoga Portfolio. For the period May
-5-
<PAGE>
1, 1995, through the end of Conestoga's fiscal year (i.e., October 31, 1995),
SFM received administration fees (after fee waivers) at the effective annual
rates of 0.17%, 0.17%, 0.15%, 0.12%, 0.12%, 0.16%, 0.17%, 0.17%, 0.17%, 0.17%
and 0.17% of the average daily net assets of the Cash Management, Tax-Free, U.S.
Treasury Securities, Equity, Special Equity, Bond, Intermediate Income,
Pennsylvania Tax-Free Bond, Short-Term Income, Balanced and International Equity
Funds, respectively. Prior to May 1, 1995, administrative services were provided
to Conestoga by The Winsbury Company ("Winsbury"). For its services, Winsbury
received a fee, calculated daily and paid monthly, at the annual rate of .20% of
the average daily net assets of each Conestoga Portfolio. For the fiscal period
November 1, 1994 through April 30, 1995, Winsbury received administration fees,
net of voluntary fee reductions, at the effective annual rates of 0.20%, 0.09%,
0.20%, 0.20%, 0.09%, 0.16%, 0.15% and 0.10% of the average daily net assets of
the Cash Management, Tax-Free, U.S. Treasury Securities, Equity, Special Equity,
Bond, Intermediate Income and Pennsylvania Tax-Free Bond Funds, respectively.
The Short-Term Income, Balanced and International Equity Funds had not commenced
investment operations prior to May 1, 1995.
SFM also serves as Conestoga's transfer agent and State Street Bank and
Trust Company serves as sub-transfer agent for Conestoga pursuant to an
agreement with the administrator. For these services, SFM receives an annual fee
equal to .02% of each Conestoga Portfolio's total assets, an annual per
shareholder account charge of $25 per account, plus out-of-pocket expenses.
Citibank, N.A. provides custodial services to each Conestoga Portfolio
except the International Equity Fund. The Bank of New York provides custodial
services to the International Equity Fund. It is anticipated that on or about
March 7, 1996, CoreStates Bank, N.A. will begin providing custodial services to
each Conestoga Portfolio except the International Equity Portfolio.
SEI Financial Services Company ("SFS") is the principal distributor for
Conestoga. Under the distribution agreement, SFS acts as the agent of Conestoga
in connection with the offering of shares of each Conestoga Portfolio.
Conestoga has adopted a Distribution and Services Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Conestoga 12b-1 Plan").
Under the Conestoga 12b-1 Plan, the class of shares known as the Retail Shares
of each of the Conestoga Portfolios bears the expense of distribution fees
payable to SFS at an annual rate of up to .40% of the average daily net asset
value of such Portfolio's outstanding Retail Shares to finance activities which
are principally intended to result in the sale of Retail Shares. SFS may enter
into agreements with financial institutions and industry professionals which
provide distribution and/or administrative services as agents for their
customers who beneficially own Retail Shares.
-6-
<PAGE>
Services provided by such financial institutions may include, without
limitation: printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of a Portfolio's
shares, and personnel and communication equipment used in servicing shareholder
accounts and prospective shareholder inquiries.
The Conestoga 12b-1 Plan is a "compensation" type plan as opposed to a
"reimbursement" type plan. Accordingly, payments by Retail Shares under the
Conestoga 12b-1 Plan are based on the expressed fee rather than on the specific
amounts expended by SFS for distribution purposes. SFS may be able to recover
such amounts or may earn a profit from payments made by Retail Shares of
Conestoga under the Conestoga 12b-1 Plan.
For the fiscal year ended October 31, 1995, Conestoga paid, in the
aggregate, fees to SFS pursuant to the Distribution and Services Plan of
$35,000, which represent 0.15% of the Conestoga Portfolios' Retail Shares
average net assets during that period.
Certain Arrangements with Service Providers - CoreFunds Portfolios. Corestates
Advisers, a wholly-owned subsidiary of CoreStates Bank which is itself a
wholly-owned subsidiary of CoreStates Financial Corp, serves as investment
adviser to CoreFunds and is entitled to receive advisory fees from the CoreFunds
Portfolios computed daily and paid monthly, at the following annual rates:
<TABLE>
<CAPTION>
Actual Advisory
Advisory Fee Fee For Year Ended
(% of average June 30, 1995
CoreFunds daily net assets) (after waivers)
--------- ----------------- ---------------
<S> <C> <C>
Cash Reserve 0.40% 0.22%
Tax-Free Reserve 0.40% 0.22%
Treasury Reserve 0.40% 0.22%
Value Equity Fund 0.74% 0.60%
Special Equity Fund 1.50% N/A%*
Bond Fund 0.74% N/A%*
Intermediate Bond Fund 0.50% 0.35%
Pennsylvania Municipal
Bond Fund 0.50% 0%
Short-Term Income Fund 0.74% N/A%*
Balanced Fund 0.70% 0.45%
International Growth Fund 0.80% 0.45%
</TABLE>
* These are new portfolios which have not commenced operations as of the
date hereof.
-7-
<PAGE>
As investment adviser, CoreStates Advisers manages the investments of
each Portfolio, makes decisions with respect to and places orders for all
purchases and sales of a Portfolio's securities, and maintains certain records
relating to such purchases and sales.
CoreStates Advisers has delegated some of its investment management
functions with respect to the Value Equity Fund to Cashman, Farrell and
Associates ("Cashman, Farrell"), and with respect to the International Growth
Fund to Martin Currie, Inc. ("Martin Currie") and Aberdeen Trust, pursuant to
separate sub-advisory agreements between CoreStates Advisers and each of
Cashman, Farrell, Martin Currie and Aberdeen Trust. After the Reorganization, it
is expected that the sub-advisory agreement with Cashman, Farrell will be
terminated.
For the services provided as Value Equity Fund's sub-adviser, Cashman,
Farrell is entitled to receive a fee from CoreStates Advisers, computed daily
and paid monthly, at the annual rate of .50% of such Portfolio's average net
assets. For the services provided as International Growth Fund's sub-advisers,
Martin Currie and Aberdeen Trust are entitled to receive fees from CoreStates
Advisers, computed daily and paid monthly, at the annual rate of .50% and ____%,
respectively, of such Portfolio's average net assets under management by each
sub-adviser.
As sub-advisers to Value Equity Fund and International Growth Fund,
Cashman, Farrell, Martin Currie and Aberdeen Trust manage the investments of
their respective Portfolios, make decisions with respect to and place orders for
the majority of the purchases and sales of such Portfolio's securities, and
maintain certain records relating to such purchases and sales.
See "Management--Investment Adviser, Sub-Advisers" in CoreFunds'
Prospectuses accompanying this Combined Proxy Statement/Prospectus which are
incorporated herein by reference, for additional information on CoreFunds'
Adviser.
Administrative services are provided to CoreFunds by SFM. For its
services, SFM is entitled to receive a fee, computed daily and paid monthly, on
a Portfolio's average daily net assets at a rate of 0.25%. However, SFM has
voluntarily agreed to reduce its fee for administration to the annual rate of
0.16% of the undertaken daily net assets of each portfolio for the one year
period following the Reorganization.
For the fiscal year ended June 30, 1995, SFM received administration
fees at the annual rate of 0.16% of the average daily net assets of each of the
Value Equity, International Growth, Balanced, Intermediate Bond, Cash Reserve,
Treasury Reserve, and Tax-Free Reserve Funds. For this same period, SFM waived
all administration fees with respect to the Pennsylvania Municipal Bond Fund.
The Special Equity, Short-Term Income and Bond Funds were not operational during
this time period.
-8-
<PAGE>
See "Management--Administrator" in CoreFunds' Prospectuses accompanying
this Combined Proxy/Prospectus, which are incorporated herein by reference, for
additional information on CoreFunds' administrator.
State Street Bank and Trust Company serves as CoreFunds' transfer and
dividend disbursing agent. For these services, State Street Bank and Trust
Company receives fees based on annual per shareholder account charges for
account maintenance and fees for certain shareholder-generated transactions,
plus out-of-pocket expenses. The minimum annual transfer agency fee for each
class of each Portfolio is $15,000. See "Administrator" in the CoreFunds'
Prospectuses accompanying this Combined Proxy/Prospectus, which are incorporated
herein by reference, for additional information on CoreFunds' transfer agent.
Custodial services are provided to CoreFunds by CoreStates Bank, N.A.
See "Custodian and Transfer Agent" in CoreFunds' Statement of Additional
Information, which is incorporated herein by reference, for additional
information about CoreFunds' custodian.
SFS serves as distributor of the shares of CoreFunds' Portfolios.
CoreFunds has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "CoreFunds 12b-1 Plan"). Under the CoreFunds
12b-1 Plan, the class of shares known as the Individual Shares of each of the
CoreFunds' Portfolios bears the expense of distribution fees payable to SFS at
an annual rate of up to .25% of the average daily net asset value of such
Portfolio's outstanding Individual Shares to finance activities which are
principally intended to result in the sale of Individual Shares. SFS may enter
into agreements with financial institutions and industry professionals which
provide distribution and/or administrative services as agents for their
customers who beneficially own Individual Shares. Services provided by such
financial institutions may include, without limitation: printing and
distributing advertising and sales literature and reports to shareholders used
in connection with the sale of a Portfolio's shares, and personnel and
communication equipment used in servicing shareholder accounts and prospective
shareholder inquiries.
The CoreFunds 12b-1 Plan is a "compensation" type plan as opposed to a
"reimbursement" type plan. Accordingly, payments by Individual Shares under the
CoreFunds 12b-1 Plan are based on the expressed fee rather than on the specific
amounts expended by SFS for distribution purposes. SFS may be able to recover
such amounts or may earn a profit from payments made by Individual Shares of
CoreFunds under the CoreFunds 12b-1 Plan.
For the fiscal year ended June 30, 1995, CoreFunds paid, in the
aggregate, fees to SFS pursuant to the Distribution Plan of $120,490, which
represent 0.25% of the CoreFunds' Portfolios Individual Shares average net
assets during that period.
-9-
<PAGE>
Comparative Fee Tables. Set forth in the tables below is (i) information
regarding the fees and expenses paid by each class of shares of each Conestoga
Portfolio and of each class of shares of each CoreFunds Portfolio as of their
most recent fiscal years, restated to reflect expenses the Conestoga Portfolio
and the CoreFunds Portfolio, respectively, expect to incur during the current
fiscal year and (ii) pro forma information for each combined Portfolio assuming
the Reorganization had taken place on November 1, 1994.
Comparative Fee Table For Each Portfolio
<TABLE>
<CAPTION>
Conestoga Cash
Management CoreFunds Pro Forma
Fund Cash Reserve Combined
-------------- ------------ ----------
Class Y Class C Class Y Class C
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
------------- ------ --------------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .20%(1) .20%(1) .29%(2) .29%(2) .28% .28%
12b-1 Fees (after fee waivers) None .25%(3) None .25% None .25%
Other Expenses(4)
(after fee waivers and/or
expense reimbursements) .36% .36% .24% .24% .23% .23%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) 0.56%(5) 0.81%(5) 0.53%(6) 0.78%(6) .51%(7) .76%(7)
</TABLE>
(1) The maximum advisory fee for the Institutional Shares and Retail
Shares of the Conestoga Cash Management Fund is 0.40%.
(2) The maximum advisory fee for the Class Y (Institutional) Shares and
Class C (Individual) Shares of the CoreFunds Cash Reserve is 0.50%.
(3) 12b-1 fees for the Retail Shares of the Conestoga Cash Management Fund
have been reduced to reflect the voluntary waiver of fees by that
Fund's distributor. The Conestoga Cash Management Fund can pay up to
0.40% of the average daily net assets of its Retail Shares as a 12b-1
fee to the distributor.
(4) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of 0.25% of
the Class Y (Institutional) Shares and Class C (Individual) Shares of
the CoreFunds Cash Reserve, and 0.17% of the Institutional Shares
and Retail Shares of the Conestoga Cash Management Fund.
(5) Absent the voluntary waivers and reimbursements, which can be
terminated at any time, the operating expenses for the Institutional
Shares and Retail Shares of the Conestoga Cash Management Fund would
have been 0.76% and 1.16%, respectively.
(6) Absent the voluntary waivers by the investment adviser and
administrator, which can be terminated at any time, the operating
expenses for the Class Y (Institutional) Shares and Class C
(Individual) Shares of the CoreFunds Cash Reserve would have been
0.83% and 1.08%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses for the Class Y (Institutional) Shares and
Class C (Individual) Shares of the CoreFunds Cash Reserve would be
0.72% and 0.97%, respectively.
-10-
<PAGE>
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Cash Management Fund
Institutional Shares $ 6 $18 $ 31 $ 70
Retail Shares $ 8 $26 $ 45 $100
CoreFunds Cash Reserve
Class Y (Institutional) Shares $ 5 $17 $ 30 $ 66
Class C (Individual) Shares $ 8 $25 $ 43 $ 97
Pro Forma Combined
Class Y (Institutional) Shares $5 $16 $29 $64
Class C (Individual) Shares $8 $24 $42 $94
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Conestoga
Tax-Free CoreFunds Pro Forma
Fund Tax-Free Reserve Combined
Class Y Class C Class Y Class C
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .16%(1) .16%(1) .29%(2) .29%(2) .28% .28%
12b-1 Fees (after fee waivers) None .05%(3) None .25% None .25%
Other Expenses(4)
(after fee waivers and/or
expense reimbursements) .30% .30% .24% .24% .23% .23%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .46%(5) .51%(5) .53%(5) .78%(6) .51%(7) .76%(7)
</TABLE>
- --------------------------
(1) The maximum advisory fee for the Institutional Shares and Retail Shares of
the Conestoga Tax-Free Fund is .40%.
(2) The maximum advisory fee for the Class Y (Institutional) Shares and Class C
(Individual) Shares of the CoreFunds Tax-Free Reserve is .50%.
(3) 12b-1 fee(s) for the Retail Shares of the Conestoga Tax-Free Fund have been
reduced to reflect the voluntary waiver of fees by that Fund's distributor.
The Conestoga Tax-Free Fund can pay up to .40% of the average daily net
assets of its Retail Shares as a 12b-1 fee to its distributor.
(4) Includes administration fees. Absent voluntary fee waivers, administration
fees are payable at the maximum annual rate of .25% of the Class Y
(Institutional) Shares and Class C (Individual) Shares of the CoreFunds
Tax-Free Reserve, and .17% of the Institutional Shares and Retail Shares of
the Conestoga Tax-Free Fund.
(5) Absent the voluntary waivers and reimbursements by the investment adviser
and administrator, which can be terminated at any time, the operating
expenses for the Institutional Shares and Retail Shares of the Conestoga
Tax-Free Fund would be 0.70% and 1.10%, respectively.
(6) Without voluntary waivers by its investment adviser and administrator, which
can be terminated at any time, operating expenses for the Class Y
(Institutional) Shares and Class C (Individual) Shares of the CoreFunds
Tax-Free Reserve would be 0.83% and 1.08%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the pro forma
operating expenses for the Class Y (Institutional) Shares and Class C
(Individual) Shares of the CoreFunds Tax-Free Reserve would be 0.72% and
0.97%, respectively.
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Tax-Free Fund
Institutional Shares $5 $15 $26 $58
Retail Shares $5 $16 $29 $64
CoreFunds Tax-Free Reserve
Class Y (Institutional) Shares $5 $17 $30 $66
Class C (Individual) Shares $8 $25 $43 $97
Pro Forma
Class Y (Institutional) Shares $5 $16 $29 $64
Class C (Individual) Shares $8 $24 $42 $94
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Conestoga
U.S. Treasury
Securities CoreFunds Pro Forma
Fund Treasury Reserve Combined
Class Y Class C Class Y Class C
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .27%(1) .27%(1) .29%(2) .29%(2) .28% .28%
12b-1 Fees (after fee waivers) None .15%(3) None .25% None .25%
Other Expenses(4)
(after fee waivers and/or
expense reimbursements) .35% .35% .24% .24% .23% .23%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .62%(5) .77%(5) .53%(6) .78%(6) .51%(7) .76%(7)
</TABLE>
- --------------------------
(1) The maximum advisory fee for the Institutional Shares and Retail Shares
of the Conestoga U.S. Treasury Securities Fund is .40%.
(2) The maximum advisory fee for the Class Y (Institutional) Shares and
Class C (Individual) Shares of the CoreFunds Treasury Reserve is .50%.
(3) 12b-1 fees for the Retail Shares of the Conestoga U.S. Treasury
Securities Fund have been reduced to reflect the voluntary waiver of
fees by that Fund's distributor. The Conestoga U.S. Treasury Securities
Fund can pay up to .40% of the average daily net assets of its Retail
Shares as a 12b-1 fee to its distributor.
(4) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .25% of
the Class Y (Institutional) Shares and Class C (Individual) Shares of
the CoreFunds Treasury Reserve, and .17% of the Institutional Shares
and Retail Shares of the Conestoga U.S. Treasury Securities Fund.
(5) Absent the voluntary waivers and reimbursements by the investment
adviser, which can be terminated at any time, the operating expenses
for the Institutional Shares and Retail Shares of the Conestoga U.S.
Treasury Securities Fund are 0.77% and 1.17%, respectively.
(6) Absent the voluntary waivers and/or expense reimbursements by the
investment adviser and administrator, which can be terminated at any
time, operating expenses for the Class Y (Institutional) Shares and
Class C (Individual) Shares of the CoreFunds Treasury Reserve would be
0.83% and 1.08%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses for the Class Y (Institutional) Shares and
Class C (Individual) Shares of the CoreFunds Treasury Reserve would be
0.72% and 0.97%, respectively.
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga U.S. Treasury Securities Fund
Institutional Shares $6 $20 $35 $77
Retail Shares $8 $25 $43 $95
CoreFunds Treasury Reserve
Class Y (Institutional) Shares $5 $17 $30 $66
Class C (Individual) Shares $8 $25 $43 $97
Pro Forma Combined
Class Y (Institutional) Shares $5 $16 $29 $64
Class C (Individual) Shares $8 $24 $42 $94
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Conestoga
Equity CoreFunds Pro Forma
Fund Value Equity Fund* Combined
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None 3.25% None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .74% .74% .75% .75% .74% .74%
12b-1 Fees (after fee waivers) None .25%(1) None .25% None .25%
Other Expenses(2)
(after fee waivers and/or
expense reimbursements) .31% .31% .24% .24% .26 .26
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) 1.05%(3) 1.30%(3) .99%(4) 1.24%(4) 1.00%(5) 1.25%(5)
</TABLE>
- --------------------------
* It is expected that the CoreFunds Value Equity Fund will change its
name and investment policies upon consummation of the Reorganization
and that it will continue the operations of the Conestoga Equity Fund.
(1) 12b-1 fees for the Retail Shares of the Conestoga Equity Fund have been
reduced to reflect the voluntary waiver of fees by that Fund's
Distributor. Conestoga Equity Fund can pay up to 0.40% of the average
daily net assets of its Retail Shares as a 12b-1 fee to the
distributor.
(2) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .25% of
the Class Y (Institutional) Shares and Class A (Individual) Shares of
the CoreFunds Value Equity Fund, and .17% of the Institutional Shares
and Retail Shares of the Conestoga Equity Fund.
(3) Absent the voluntary waivers and reimbursements by the investment
adviser, which can be terminated at any time, the operating expenses of
the Institutional Shares and Retail Shares of the Conestoga Equity Fund
would be 1.10% and 1.50%, respectively.
(4) Absent fee waivers by the investment adviser and administrator, which
can be terminated at any time, the operating expenses for Class Y
(Institutional) Shares and Class A (Individual) Shares of the CoreFunds
Value Equity Fund would be 1.08% and 1.33%, respectively.
(5) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Value Equity Fund would be
1.09% and 1.34%, respectively.
-14-
<PAGE>
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Equity Fund
Institutional Shares $11 $33 $58 $128
Retail Shares $33 $60 $90 $174
CoreFunds Value Equity Fund
Class Y (Institutional) Shares $10 $32 $55 $121
Class A (Individual) Shares $45 $71 $98 $178
Pro Forma Combined
Class Y (Institutional) Shares $10 $32 $55 $122
Class A (Individual) Shares $45 $71 $99 $179
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds
Special Equity Special Equity Pro Forma
Fund Fund* Combined
---- ----- --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None None None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .0%(1) .0%(1) N/A N/A .10% .10%
12b-1 Fees (after fee waivers) None .0%(2) N/A N/A None .25%
Other Expenses(3)
(after fee waivers and/or
expense reimbursements) .32% .32% N/A N/A .21% .21%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .32%(4) .32%(4) N/A N/A .31%(5) .56%(5)
</TABLE>
- --------------------------
* The CoreFunds Special Equity Fund has not yet commenced operations. The
CoreFunds Special Equity Fund will continue the operations of the
Conestoga Special Equity Fund upon consummation of the Reorganization
relating to that Fund.
(1) The maximum advisory fee for the Institutional Shares and Retail
Shares of the Conestoga Special Equity Fund is 1.50%.
(2) 12b-1 fees for the Retail Shares of the Conestoga Special Equity Fund
have been reduced to reflect the voluntary waiver of fees by that
Fund's distributor. The Conestoga Special Equity Fund can pay up to
0.40% of the average daily net assets of its Retail Shares as a 12b-1
fee to the distributor.
(3) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .17% of
the Institutional Shares and Retail Shares of the Conestoga Special
Equity Fund.
(4) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, which can be terminated at any time, the
operating expenses of the Institutional Shares and Retail Shares of the
Conestoga Special Equity Fund would be 1.87% and 2.27%, respectively.
(5) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Special Equity Fund would
be 1.80% and 2.05%, respectively.
-16-
<PAGE>
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Special Equity Fund
Institutional Shares $ 3 $10 $18 $41
Retail Shares $23 $30 $38 $60
CoreFunds Special Equity Fund
Class Y (Institutional) Shares N/A N/A N/A N/A
Class A (Individual) Shares N/A N/A N/A N/A
Pro Forma Combined
Class Y (Institutional) Shares $ 3 $10 $17 $ 39
Class A (Individual) Shares $38 $50 $63 $100
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds
Bond Bond Pro Forma
Fund Fund* Combined
---- ----- --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None None None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .34%(1) .34%(1) N/A N/A .35% .35%
12b-1 Fees (after fee waivers) None .25%(2) N/A N/A None .25%
Other Expenses(2)
(after fee waivers and/or
expense reimbursements) .37% .37% N/A N/A .21% .21%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .71%(4) .96%(4) N/A N/A .56%(4) .81%(4)
</TABLE>
- --------------------------
* The CoreFunds Bond Fund has not yet commenced operations. The CoreFunds
Bond Fund will continue the operations of the Conestoga Bond Fund upon
consummation of the Reorganization relating to that Fund.
(1) The maximum advisory fee for the Institutional Shares and Retail
Shares of the Conestoga Bond Fund is 0.74%.
(2) 12b-1 fees for the Retail Shares of the Conestoga Bond Fund have been
reduced to reflect the voluntary waiver of fees by that Fund's
distributor. The Conestoga Bond Fund can pay up to .40% of its average
daily net assets of its Retail Shares as a 12b-1 fee to its
distributor.
(3) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .17% of
the Institutional Shares and Retail Shares of the Conestoga Bond Fund.
(4) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, which can be terminated at any time, the
operating expenses for the Institutional Shares and Retail Shares of
the Conestoga Bond Fund would have been 1.12% and 1.52%, respectively.
(5) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Bond Fund would be 1.04%
and 1.29%, respectively.
-18-
<PAGE>
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Bond Fund
Institutional Shares $ 7 $23 $40 $ 88
Retail Shares $30 $50 $72 $135
CoreFunds Bond Fund
Class Y (Institutional) Shares N/A N/A N/A N/A
Class A (Individual) Shares N/A N/A N/A N/A
Pro Forma Combined
Class Y (Institutional) Shares $ 6 $18 $31 $ 70
Class A (Individual) Shares $41 $58 $76 $129
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds
Intermediate Intermediate Pro Forma
Income Fund Bond Fund Combined
----------- --------- --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None 3.25% None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .25%(1) .25%(1) .37%(2) .37%(2) .25% .25%
12b-1 Fees (after fee waivers) None .25%(3) None .25% None .25%
Other Expenses(4)
(after fee waivers and/or
expense reimbursements) .39% .39% .23% .23% .26% .26%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .64%(5) .89%(5) .60%(6) .85%(6) .51%(7) .76%(7)
</TABLE>
- --------------------------
(1) The maximum advisory fee for the Institutional Shares and Retail Shares
of the Conestoga Intermediate Income Fund is .74%.
(2) The maximum advisory fee for the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Intermediate Bond Fund is
.50%.
(3) 12b-1 fees for the Retail Shares of the Conestoga Intermediate Income
Fund have been reduced to reflect the voluntary waiver of fees by that
Fund's distributor. The Conestoga Intermediate Income Fund can pay up
to .40% of its daily net assets as a 12b-1 fee to its distributor.
(4) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .25% of
the Class Y (Institutional) Shares and Class A (Individual) Shares of
the CoreFunds Intermediate Bond Fund, and .17% of the Institutional
Shares and Retail Shares of the Conestoga Intermediate Income Fund.
(5) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, the operating expenses for the Institutional
Shares and Retail Shares of the Conestoga Intermediate Income Fund
would be 1.13% and 1.53%, respectively.
(6) Absent voluntary waivers by its investment adviser and administrator,
which can be terminated at any time, operating expenses for the Class Y
(Institutional) Shares and Class A (Individual) Shares of the CoreFunds
Intermediate Bond Fund would be 0.82% and 1.07%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses for the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Intermediate Bond Fund
would be 0.85% and 1.10%, respectively.
-20-
<PAGE>
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption at the end of the
following periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Intermediate Income Fund
Institutional Shares $ 7 $20 $36 $ 80
Retail Shares $29 $48 $68 $127
CoreFunds Intermediate Bond Fund
Class Y (Institutional) Shares $ 6 $19 $33 $ 75
Class A (Individual) Shares $41 $59 $78 $134
Pro Forma Combined
Class Y (Institutional) Shares $ 5 $16 $29 $64
Class A (Individual) Shares $40 $56 $73 $124
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
Conestoga Pennsylvania CoreFunds Pennsylvania
Tax-Free Bond Municipal Bond Pro Forma
Fund Fund Combined
---- ---- --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None 3.25% None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .0%(1) .0%(1) .0%(2) .0%(2) .0% .0%
12b-1 Fees (after fee waive None .0%(3) None .25% None .25%
Other Expenses(4)
(after fee waivers and/or
expense reimbursements) .51% .51% .37% .37% .14% .14%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .51%(5) .51%(5) .37%(6) .62%(6) .14%(7) .39%(7)
</TABLE>
- --------------------------
(1) The maximum advisory fee for the Institutional Shares and Retail Shares
of the Conestoga Pennsylvania Tax-Free Bond Fund is .74%.
(2) The maximum advisory fee for the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Pennsylvania Municipal
Bond Fund is .50%.
(3) 12b-1 fees for the Retail Shares of the Conestoga Pennsylvania Tax-Free
Bond Fund have been reduced to reflect the voluntary waiver of fees by
that Fund's distributor. The Conestoga Pennsylvania Tax-Free Bond Fund
can pay up to .40% of the average daily net assets of its Retail Shares
as a 12b-1 fee to its distributor.
(4) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .25% of
the Class Y (Institutional) Shares and Class A (Individual) Shares of
the CoreFunds Pennsylvania Municipal Bond Fund, and .17% of the
Institutional Shares and Retail Shares of the Conestoga Pennsylvania
Tax-Free Bond Fund.
(5) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, which can be terminated at any time, the
operating expenses for the Institutional Shares and Retail Shares of
the Conestoga Pennsylvania Tax-Free Bond Fund would be 1.25% and 1.65%,
respectively.
(6) Absent the voluntary fee waivers by the investment adviser and
administrator, which can be terminated at any time, operating expenses
for the Class Y (Institutional) Shares and Class A (Individual) Shares
of the CoreFunds Pennsylvania Municipal Bond Fund would be 0.96% and
1.21%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses for the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Pennsylvania Municipal
Bond Fund would be 0.89% and 1.14%, respectively.
-22-
<PAGE>
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption at the end of the
following periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Pennsylvania Tax-Free Bond Fund
Institutional Shares $ 5 $16 $29 $64
Retail Shares $25 $36 $48 $83
CoreFunds Pennsylvania Municipal Bond Fund
Class Y (Institutional) Shares $ 4 $12 $21 $ 47
Class A (Individual) Shares $39 $52 $66 $107
Pro Forma Combined
Class Y (Institutional) Shares $ 1 $ 5 $ 8 $ 18
Class A (Individual) Shares $36 $45 $54 $ 80
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds
Balanced Balanced Pro Forma
Fund Fund Combined
---- ---- --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None 3.25% None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .49%(1)% .49%(1)% .67%(2) .67%(2) .56% .56%
12b-1 Fees (after fee waivers) None .25%(3) None .25% None .25%
Other Expenses(4)
(after fee waivers and/or
expense reimbursements) .33% .33% .26% .26% .24% .24%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .82%(5) 1.07%(5) .93%(6) 1.18%(6) .80%(7) 1.05%(7)
</TABLE>
- --------------------------
(1) The maximum advisory fee for the Institutional Shares and Retail Shares
of the Conestoga Balanced Fund is 0.75%.
(2) The maximum advisory fee for the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Balanced Fund is .70%.
(3) 12b-1 fees for the Retail Shares of the Conestoga Balanced Fund have
been reduced to reflect the voluntary waiver of fees by that Fund's
distributor. The Conestoga Balanced Fund can pay up to 0.40% of its
average daily net assets of its Retail Shares as a 12b-1 fee to its
distributor.
(4) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .25% of
the Class Y (Institutional) Shares and Class A (Individual) Shares, and
.17% of the Institutional Shares and Retail Shares of the Conestoga
Balanced Fund.
(5) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, which can be terminated at any time, the
operating expenses of the Institutional Shares and Retail Shares of the
Conestoga Balanced Fund would be 1.08% and 1.48%, respectively.
(6) Absent the voluntary fee waivers by the investment adviser and
administrator, which can be terminated at any time, the operating
expenses for the Class Y (Institutional) Shares and Class A
(Individual) Shares of the CoreFunds Balanced Fund would be 1.05% and
1.30%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Balanced Fund would be
1.03% and 1.28%, respectively.
-24-
<PAGE>
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption at the end of the
following periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Balanced Fund
Institutional Shares $ 8 $26 $46 $101
Retail Shares $31 $53 $78 $148
CoreFunds Balanced Fund
Class Y (Institutional) Shares $ 9 $30 $51 $114
Class A (Individual) Shares $44 $69 $95 $171
Pro Forma Combined
Class Y (Institutional) Shares $ 8 $26 $44 $ 99
Class A (Individual) Shares $43 $65 $89 $157
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds
Short-Term Short-Term Pro Forma
Income Fund Income Fund* Combined
----------- ------------ --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None None None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) .29%(1) .29%(1) N/A N/A .25% .25%
12b-1 Fees (after fee waivers) None .25%(2) N/A N/A None .25%
Other Expenses(3)
(after fee waivers and/or
expense reimbursements) .34% .34% N/A N/A .21% .21%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .63%(4) .88%(4) N/A N/A .46%(5) .71%(5)
</TABLE>
- --------------------------
* The CoreFunds Short-Term Income Fund has not yet commenced operations.
The CoreFunds Short-Term Income Fund will continue the operations of
the Conestoga Short-Term Income Fund upon consummation of the
Reorganization relating to that Fund.
(1) The maximum advisory fee for the Conestoga Short-Term Income Fund is
.74%.
(2) 12b-1 fees for the Retail Shares of the Conestoga Short-Term Income
Fund have been reduced to reflect the voluntary waiver of fees by that
Fund's distributor. The Conestoga Short-Term Income Fund can pay up to
0.40% of the average daily net assets of its Retail Shares as a 12b-1
fee to the distributor.
(3) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .17% of
the Institutional Shares and Retail Shares of the Conestoga Short-Term
Income Fund.
(4) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, which can be terminated at any time, the
operating expenses for the Institutional and Retail Shares of the
Conestoga Short-Term Income Fund would be 1.08% and 1.48%,
respectively.
(5) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds Short-Term Income Fund
would be 1.04% and 1.29%, respectively.
-26-
<PAGE>
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption at the end of the
following periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga Short-Term Income Fund
Institutional Shares $ 6 $20 N/A N/A
Retail Shares $29 $48 N/A N/A
CoreFunds Short-Term Income Fund
Class Y (Institutional) Shares N/A N/A N/A N/A
Class A (Individual) Shares N/A N/A N/A N/A
Pro Forma Combined
Class Y (Institutional) Shares $ 5 $15 N/A N/A
Class A (Individual) Shares $40 $54 N/A N/A
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds
International International Pro Forma
Equity Fund Growth Fund Combined
----------- ----------- --------
Class Y Class A Class Y Class A
Institutional Retail (Institutional) (Individual) (Institutional) (Individual)
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases None 2.00% None 3.25% None 3.25%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price) None None None None None None
Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) None None None None None None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees
(after fee waivers) 1.00% 1.00% .80% .80% .80% .80%
12b-1 Fees (after fee waivers) None .25%(1) None .25% None .25%
Other Expenses(2)
(after fee waivers and/or
expense reimbursements) .88% .88% .41% .41% .34% .34%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) 1.88%(3) 2.13%(3) 1.21%(4) 1.46%(4) 1.14%(5) 1.39%(5)
</TABLE>
- --------------------------
(1) 12b-1 fees for the Retail Shares of the Conestoga International Equity
Fund have been reduced to reflect the voluntary waiver of fees by that
Fund's distributor. The Conestoga International Equity Fund can pay up
to 0.40% of the average daily net assets of its Retail Shares as a
12b-1 fee to the distributor.
(2) Includes administration fees. Absent voluntary fee waivers,
administration fees are payable at the maximum annual rate of .25% of
the Class Y (Institutional) Shares and Class A (Individual) Shares of
the CoreFunds International Growth Fund.
(3) Absent the voluntary waivers and reimbursements by the investment
adviser and administrator, which can be terminated at any time, the
operating expenses for the Institutional Shares and Retail Shares of
the Conestoga International Equity Fund would be 1.88% and 2.28%,
respectively.
(4) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds International Growth Fund
would be 1.30% and 1.55%, respectively.
(5) Absent voluntary waivers, which can be terminated at any time, the pro
forma operating expenses of the Class Y (Institutional) Shares and
Class A (Individual) Shares of the CoreFunds International Growth Fund
would be 1.23% and 1.48%, respectively.
-28-
<PAGE>
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption at the end of the
following periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Conestoga International Equity Fund
Institutional Shares $19 $59 N/A N/A
Retail Shares $41 $85 N/A N/A
CoreFunds International Growth Fund
Class Y (Institutional) Shares $12 $38 $ 66 $147
Class A (Individual) Shares $44 $77 $110 $201
Pro Forma Combined
Class Y (Institutional) Shares $12 $36 $ 63 $139
Class A (Individual) Shares $46 $75 $106 $194
</TABLE>
-29-
<PAGE>
Expense Ratios -- Conestoga Portfolios. The following table sets forth (i) the
ratios of operating expenses to average net assets of the Conestoga Portfolios
for the fiscal year ended October 31, 1995 (a) after fee waivers and expense
reimbursements, and (b) absent fee waivers and expense reimbursements:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31, 1995
----------------------------------
Ratio of Operating Ratio of Operating
Expenses to Average Expenses to Average
Net Assets After Net Assets Absent
Fee Waivers and Fee Waivers and
Expense Expense
Reimbursements Reimbursements
------------------- -------------------
<S> <C> <C>
Conestoga Portfolios
Conestoga Cash Management Fund
Institutional Shares .56% .79%
Retail Shares .74% .97%
Conestoga Tax-Free Fund
Institutional Shares .46% .83%
Retail Shares .48% .88%
Conestoga U.S. Treasury Securities
Fund
Institutional Shares .62% .78%
Retail Shares .73% .79%
Conestoga Equity Fund
Institutional Shares 1.05% 1.10%
Retail Shares 1.34% 1.53%
Conestoga Special Equity Fund
Institutional Shares .32% 1.97%
Retail Shares .27% 2.24%
Conestoga Bond Fund
Institutional Shares .71% 1.12%
Retail Shares .97% 1.44%
Conestoga Intermediate Income Fund
Institutional Shares .64% 1.15%
Retail Shares .93% 1.51%
Conestoga Pennsylvania Tax-Free Bond Fund
Institutional Shares .51% 1.65%
Retail Shares .51% 1.62%
Conestoga Balanced Fund
Institutional Shares .82% 1.07%
Retail Shares 1.07% 1.32%
Conestoga Short-Term Income Fund
Institutional Shares .63% 1.08%
Retail Shares .88% 1.33%
Conestoga International Equity Fund
Institutional Shares 1.88% 1.88%
Retail Shares 2.13% 2.26%
</TABLE>
-30-
<PAGE>
Expense Ratios -- CoreFunds Portfolios. The following tables set forth (i) the
ratios of operating expenses to average net assets of the CoreFunds Portfolios
for the fiscal year ended June 30, 1995 (a) after fee waivers and expense
reimbursements, and (b) absent fee waivers and expense reimbursements:
-31-
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1995
-------------------------------
Ratio of Operating Ratio of Operating
Expenses to Average Expenses to Average
Net Assets After Net Assets Absent
Fee Waivers and Fee Waivers and
Expense Expense
Reimbursements Reimbursements
------------------- -------------------
<S> <C> <C>
CoreFunds Portfolios
CoreFunds Cash Reserve
Class Y (Institutional) Shares .48% .85%
Class C (Individual) Shares .73% 1.10%
CoreFunds Tax-Free Reserve
Class Y (Institutional) Shares .48% .85%
Class C (Individual) Shares .73% 1.10%
CoreFunds Treasury Reserve
Class Y (Institutional) Shares .48% .85%
Class C (Individual) Shares .73% 1.10%
CoreFunds Value Equity Fund
Class Y (Institutional) Shares .86% 1.10%
Class A (Individual) Shares 1.11% 1.35%
CoreFunds Special Equity Fund --(1) --(1)
CoreFunds Bond Fund --(1) --(1)
CoreFunds Intermediate Bond Fund
Class Y (Institutional) Shares .60% .84%
Class A (Individual) Shares .85% 1.09%
CoreFunds Pennsylvania Municipal Bond Fund
Class Y (Institutional) Shares .39% 1.14%
Class A (Individual) Shares .64% 1.39%
CoreFunds Balanced Fund
Class Y (Institutional) Shares .73% 1.07%
Class A (Individual) Shares .98% 1.32%
CoreFunds Short-Term Income Fund --(1) --(1)
CoreFunds International Growth Fund
Class Y (Institutional) Shares 1.05% 1.19%
Class A (Individual) Shares 1.30% 1.44%
</TABLE>
(1) The CoreFunds Special Equity, Bond and Short-Term Portfolios will not
commence operations until the Reorganization is effective.
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<PAGE>
Voting Information. This Combined Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies by Conestoga's Board of Trustees
in connection with a Special Meeting of Shareholders to be held at The
Wilmington Hilton, 630 Naamans Road, Wilmington, Delaware, on Friday, March 22,
1996 at 10:00 a.m. Eastern time (such meeting and any adjournments thereof
hereinafter referred to as the "Meeting"). Only Shareholders of record at the
close of business on January 26, 1996 will be entitled to notice of and to vote
at the Meeting. Each share or fraction thereof is entitled to one vote or
fraction thereof and all shares will vote separately by Portfolio. Shares
represented by a properly executed proxy will be voted in accordance with the
instructions thereon, or if no specification is made, the persons named as
proxies will vote in favor of each proposal set forth in the Notice of Meeting.
Proxies may be revoked at any time before they are exercised by submitting to
Conestoga a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person. For additional information,
including a description of the Shareholder vote required for approval of the
Reorganization Agreement and related transactions contemplated thereby,
including for the approval of the interim investment advisory and sub-advisory
agreements, see "Information Relating to Voting Matters."
Risk Factors. The following discussion highlights the principal risk factors
associated with an investment in the Conestoga Reorganizing Portfolios and the
Existing CoreFunds Portfolios and is qualified in its entirety by the more
extensive discussion of risk factors in "Comparison of Investment Policies and
Risk Factors."
Because of the similarities of the investment objectives and policies
of the Conestoga Reorganizing Portfolios and the corresponding Existing
CoreFunds Portfolios, management believes that an investment in an Existing
CoreFunds Portfolio involves risks that are similar to those of the
corresponding Conestoga Reorganizing Portfolio. These investment risks include
those typically associated with investing in a portfolio of high quality,
short-term money market instruments in the case of the money market portfolios;
government or investment grade bonds in the case of the taxable and tax-exempt
bond portfolios; common stocks in the case of the stock portfolios; and foreign
securities in the case of the international portfolios.
There are differences, however, between the Conestoga Reorganizing
Portfolios and the Existing CoreFunds Portfolios as noted above under "Summary
- -- Overview of the Conestoga Portfolios and the CoreFunds Portfolios" and below
under "Comparison of Investment Policies and Risk Factors." These differences
can result in different risks. For example, the Conestoga Tax-Free Fund may
invest in securities with lower credit ratings than CoreFunds Tax-Free Reserve.
In addition, unlike the Existing CoreFunds Portfolios, the Conestoga
Reorganizing Portfolios may
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<PAGE>
invest its assets in securities rated in the lowest investment grade rating
category. Debt securities with the lowest investment grade rating do not have
outstanding investment characteristics and may have speculative characteristics
as well.
Although the money market portfolios offered by both Conestoga and
CoreFunds seek to maintain a stable net asset value of $1.00 per share, there is
no assurance they will be able to do so. The per share price of the other
portfolios will fluctuate with changes in value of the investments held by each
portfolio. Generally, the market value of debt securities will vary inversely to
changes in prevailing interest rates. Certain portfolios may seek to achieve
their investment objectives through investments in securities of foreign issuers
that involve risks not typically associated with U.S. issuers; debt instruments
with the lowest investment grade rating which are speculative; mortgage-backed
and asset-backed securities; illiquid instruments; and certain options, futures
and foreign currency transactions. Some of the Conestoga fixed-income and equity
portfolios may have higher portfolio turnover rates, resulting in higher
portfolio costs. Both the Conestoga Reorganizing Portfolios and the Existing
CoreFunds Portfolios may engage in the use of reverse repurchase agreements that
can cause their net asset values to rise or fall faster than they otherwise
would. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a portfolio may decline below the price of the securities
the portfolio is obligated to purchase. The policy of CoreFunds Tax-Free
Reserve, Conestoga Pennsylvania Tax-Free Bond Fund and CoreFunds Pennsylvania
Municipal Bond Fund to invest primarily in municipal obligations of Pennsylvania
and the non-diversified status of Conestoga Pennsylvania Tax-Free Bond Fund and
CoreFunds Pennsylvania Municipal Bond Fund, present additional risks as stated
in their current prospectuses. There is no assurance that any portfolio will
achieve its investment objective.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Conestoga has entered into an agreement whereby its investment
portfolios are to be acquired by portfolios of CoreFunds. Significant provisions
of this Reorganization Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Agreement, a copy
of which is attached as Appendix I to this Combined Proxy Statement and
Prospectus.
Description of the Reorganization Agreement. There are eleven separate
Conestoga investment portfolios. The assets of eight of them are being acquired
by eight similar investment portfolios currently offered by CoreFunds. Three
portfolios will be acquired by three new CoreFunds portfolios which have been
organized to continue the operations of these Conestoga Portfolios.
-34-
<PAGE>
The Reorganization Agreement provides that at the Effective Time of the
Reorganization substantially all of the assets and liabilities of the Conestoga
Reorganizing Portfolios will be transferred to the Existing CoreFunds Portfolios
identified in the table below. On a date not less than seven calendar days
following the Effective Time of the Reorganization for the Conestoga
Reorganizing Portfolios, substantially all of the assets and liabilities of the
Continuing Portfolios will be transferred to the New Core Funds Portfolios
identified in the table below. The holders of each class of shares of a
Conestoga Portfolio will receive the Class of shares of the corresponding
CoreFunds Portfolio identified in the table. In the tables, (a) opposite the
name of each Conestoga Portfolio is the name of the CoreFunds Portfolio which
will issue shares to such Conestoga Portfolio, and (b) opposite the name of each
class of shares of the Conestoga Portfolio is the name of the class of shares of
the CoreFunds Portfolio to be distributed to the holders of such Conestoga
class. The number of each class of shares to be issued by the CoreFunds
Portfolios will have an aggregate net asset value equal to the aggregate net
asset value of the corresponding class or classes of shares of the particular
Conestoga Portfolio as of the regular close of the New York Stock Exchange,
currently 4:00 p.m. New York time, on the Valuation Date.
<TABLE>
<CAPTION>
Conestoga Reorganizing Existing CoreFunds Portfolios
Portfolios and Classes and Classes
- ---------------------- -----------------------------
<S> <C>
Cash Management Fund Cash Reserve
Institutional Shares Class Y Shares-Institutional
Retail Shares Class C Shares-Individual
Tax-Free Fund Tax-Free Reserve
Institutional Shares Class Y Shares-Institutional
Retail Shares Class C Shares-Individual
U.S. Treasury Securities Fund Treasury Reserve
Institutional Shares Class Y Shares-Institutional
Retail Shares Class C Shares-Individual
Equity Fund Value Equity Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
Intermediate Income Fund Intermediate Bond Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
Pennsylvania Tax-Free Bond Fund Pennsylvania Municipal Bond Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
Balanced Fund Balanced Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
International Equity Fund International Growth Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
Continuing Portfolios and Classes New CoreFunds Portfolios and Classes
- --------------------------------- ------------------------------------
<S> <C>
Special Equity Fund Special Equity Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
Bond Fund Bond Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
Short-Term Income Fund Short-Term Income Fund
Institutional Shares Class Y Shares-Institutional
Retail Shares Class A Shares-Individual
</TABLE>
Conestoga expects to liquidate a limited number of holdings of certain
of the Conestoga Portfolios in light of the investment policies of CoreFunds and
the strategies of its investment adviser. Similarly, CoreFunds Value Equity Fund
expects to liquidate a limited number of holdings in light of its intention to
change its investment policies to resemble those of Conestoga Equity Portfolio.
The transaction costs that will result from such sales are expected to be
minimal.
The Reorganization Agreement provides that the Effective Time of the
Reorganization with respect to the Conestoga Reorganizing Portfolios will occur
contemporaneously with, or after, the Holing Company Merger. If the Effective
Time of the Reorganization with respect to the Conestoga Reorganizing Portfolios
and the Holding Company Merger do not occur contemporaneously, the
Reorganization Agreement provides for interim investment advisory and
sub-advisory arrangements as discussed below.
The Reorganization Agreement provides that Conestoga will declare a
dividend or dividends prior to the Effective Time of the Reorganization which,
together with all previous dividends, will have the effect of distributing to
the Shareholders of each of the Conestoga Reorganizing Portfolios all
undistributed ordinary income earned and net capital gains realized up to and
including the Effective Time of the Reorganization.
Following the transfer of assets and liabilities from the Conestoga
Portfolios to the CoreFunds Portfolios, and the issuance of shares by the
CoreFunds Portfolios to the Conestoga Portfolios, each of the Conestoga
Portfolios will distribute the class of shares of the CoreFunds Portfolios pro
rata to the holders of classes of shares of the Conestoga Portfolios as
described above in liquidation of the Conestoga Portfolios. Each holder of a
class of shares of a Conestoga Portfolio at the Effective Time of the
Reorganization will receive an amount of the corresponding class of shares of
the corresponding CoreFunds Portfolio of equal value, plus the right to receive
any dividends or distributions which were declared before the Effective Time of
the Reorganization but which remained unpaid at that time.
-36-
<PAGE>
Following the Reorganization, the registration of Conestoga as an investment
company under the 1940 Act will be terminated, and Conestoga will be terminated
under state law.
The stock transfer books of Conestoga will be permanently closed at the
Effective Time of the Reorganization.
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the transactions contemplated
thereby described in this Combined Proxy Statement/Prospectus by the
Shareholders of Conestoga; the receipt of certain legal opinions described in
the Reorganization Agreement; the receipt of certain certificates from the
parties concerning the continuing accuracy of the representations and warranties
in the Reorganization Agreement and other matters; and the parties' performance
in all material respects of their agreements and undertakings in the
Reorganization Agreement. Assuming satisfaction of the conditions in the
Reorganization Agreement, the Effective Time of the Reorganization is expected
to occur on April 1, 1996 or such other date as is agreed to by the parties.
The expenses of CoreFunds and of Conestoga incurred in connection with
the Reorganization will be borne by CoreStates Financial Corp and/or Meridian
Bancorp., Inc.
The Reorganization may be abandoned at any time prior to the Effective
Time of the Reorganization by the mutual consent of the parties to the
Reorganization Agreement. The Reorganization Agreement provides further that at
any time prior to or (to the fullest extent permitted by law) after approval of
the Reorganization Agreement by the Shareholders of Conestoga (a) the parties
thereto may, by written agreement approved by their respective Boards of
Trustees or Directors, or authorized officers and with or without the approval
of their Shareholders, amend any of the provisions of the Reorganization
Agreement; and (b) either party may waive any breach by the other party or the
failure to satisfy any of the conditions to its obligations with or without the
approval of such party's shareholders.
The Reorganization Agreement also provides that the Reorganization will
be contingent upon the consummation of the Holding Company Merger.
In its consideration and approval of the Reorganization at a meeting on
December 21, 1995, the Board of Trustees of Conestoga considered, primarily, the
pending merger between Meridian Bancorp, Inc., the parent company of MIC, and
CoreStates Financial Corp. If this merger is completed, the currently existing
investment advisory contract between Conestoga and MIC would be terminated.
Given that fact, MIC and CoreStates Advisers have recommended that each of the
Conestoga Portfolios
-37-
<PAGE>
be reorganized as described in this Combined Proxy Statement/Prospectus
contemporaneously with or shortly after the proposed merger of the bank holding
companies. The Board of Trustees of Conestoga considered the effect of the
proposed merger of the bank holding companies on Conestoga; the recommendation
of MIC and CoreStates Advisers with respect to the proposed consolidation of
Conestoga and CoreFunds; the fact that the Reorganization would constitute a
tax-free reorganization; and that the interests of Shareholders would not be
diluted as a result of the Reorganization.
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 as
long as, among other things, no "unfair burden" is imposed on the investment
company as a result of the transaction relating to the change of control, or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" as defined in the 1940 Act includes 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 for bona fide principal
underwriting services).
After consideration of all of the foregoing factors, together with
certain other factors and information considered to be relevant, Conestoga's
Trustees unanimously approved the Reorganization Agreement and directed that it
be submitted to shareholders for approval. CONESTOGA'S BOARD OF TRUSTEES
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE REORGANIZATION
AGREEMENT.
The Board of Trustees of Conestoga has not determined what action it
will take in the event the shareholders of any Conestoga Portfolio fail to
approve the Reorganization Agreement or for any reason the Reorganization is not
consummated. In either such event, the Trustees may choose to consider approval
-38-
<PAGE>
of a new investment advisory agreement with CoreStates Advisers, alternative
dispositions of Conestoga's assets, including the sales of assets to, or merger
with, another investment company, or the possible liquidation of any of its
Portfolios.
At a meeting held on December 7, 1995, the CoreFunds Board of Directors
considered the proposed Reorganization. Based upon their evaluation of the
relevant information provided to them, and in light of their fiduciary duties
under federal and state law, the Board of Directors unanimously determined that
the proposed Reorganization was in the best interests of CoreFunds and their
respective shareholders that the interests of existing shareholders of CoreFunds
would not be diluted as a result of effecting the transaction.
Capitalization. Because the Reorganizing Portfolios will be combined in
the Reorganization with the Existing CoreFunds Portfolios, the total
capitalization of each of the Existing CoreFunds Portfolios after the
Reorganization is expected to be greater than the current capitalization of the
corresponding Conestoga Reorganizing Portfolios. The following table sets forth
as of October 31, 1995, (i) the capitalization of each of the Reorganizing
Portfolios and (ii) the pro forma capitalization of each of the Existing
CoreFunds Portfolios as adjusted to give effect to the Reorganization. If
consummated, the capitalization of each Portfolio is likely to be different at
the Effective Time of the Reorganization as a result of daily share purchase and
redemption activity in the Portfolios.
<TABLE>
<CAPTION>
Conestoga Cash CoreFunds Cash Pro Forma
Management Fund Reserve Combined
--------------- -------------- ---------
<S> <C> <C> <C>
Total Net Assets $237,878,356 $589,145,282 $827,023,638
Retail/Individual Shares 3,358,438 19,112,811 22,471,249
Institutional Shares 234,519,918 570,032,471 804,552,389
Shares Outstanding 238,013,959 589,151,299 827,165,258
Retail/Individual Shares 3,361,129 19,113,426 22,474,555
Institutional Shares 234,652,830 570,037,873 804,690,703
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $1.00 $1.00 $1.00
Institutional Shares $1.00 $1.00 $1.00
Conestoga Core Funds Pro Forma
Tax-Free Fund Tax-Free Reserve Combined
------------- ---------------- ---------
Total Net Assets $61,791,142 $69,441,351 $131,232,493
Retail/Individual Shares 1,282,263 1,494,128 2,776,391
Institutional Shares 60,508,879 67,947,223 128,456,102
Shares Outstanding 61,773,578 69,490,610 131,264,188
Retail/Individual Shares 1,281,648 1,495,186 2,776,834
Institutional Shares 60,491,930 67,995,424 128,487,354
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $1.00 $1.00 $1.00
Institutional Shares $1.00 $1.00 $1.00
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
Conestoga
U.S. Treasury CoreFunds Pro Forma
Securities Fund Treasury Reserve Combined
--------------- ---------------- ---------
<S> <C> <C> <C>
Total Net Assets $445,258,938 $490,560,703 $935,819,641
Retail/Individual Shares 730,223 16,316,781 17,047,004
Institutional Shares 444,528,715 474,243,922 918,772,637
Shares Outstanding 445,152,418 490,544,813 935,697,231
Retail/Individual Shares 729,855 16,316,145 17,046,000
Institutional Shares 444,422,563 474,228,668 918,651,231
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $1.00 $1.00 $1.00
Institutional Shares $1.00 $1.00 $1.00
Conestoga CoreFunds Pro Forma
Equity Fund Value Equity Fund Combined
----------- ----------------- ---------
Total Net Assets $384,942,920 $33,132,707 $418,075,627
Retail/Individual Shares 6,590,598 3,444,452 10,035,050
Institutional Shares 878,352,322 $29,688,255 408,040,577
Shares Outstanding 22,545,761 2,377,850 24,923,611
Retail/Individual Shares 385,954 246,805 632,759
Institutional Shares 22,159,807 2,131,045 24,290,852
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $17.08 $13.96 $17.08
Institutional Shares $17.07 $13.93 $17.07
CoreFunds
Conestoga Intermediate Intermediate Pro Forma
Income Fund Bond Fund Combined
----------- --------- ---------
Total Net Assets $139,472,996 $57,389,991 $196,862,987
Retail/Individual Shares 1,229,481 2,025,303 3,254,784
Institutional Shares 138,243,515 55,364,688 193,608,203
Shares Outstanding 13,024,666 5,807,248 18,831,914
Retail/Individual Shares 114,721 204,958 319,679
Institutional Shares 12,909,945 5,602,290 18,512,235
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $10.72 $9.88 $9.88
Institutional Shares $10.71 $9.88 $9.88
Conestoga CoreFunds
Pennsylvania Pennsylvania Pro Forma
Tax-Free Bond Fund Municipal Bond Fund Combined
------------------ ------------------- ---------
Total Net Assets $6,796,328 $3,095,793 $9,892,121
Retail/Individual Shares 819,697 306,516 1,126,213
Institutional Shares 5,976,630 2,789,277 8,765,907
Shares Outstanding 664,126 297,107 961,233
Retail/Individual Shares 584,020 29,416 613,436
Institutional Shares 80,106 267,691 347,797
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $10.23 $10.42 $10.42
Institutional Shares $10.23 $10.42 $10.42
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
Conestoga CoreFunds Pro Forma
Balanced Fund Balanced Fund Combined
------------- ------------- --------
<S> <C> <C> <C>
Total Net Assets $38,563,960 $67,973,567 $106,537,527
Retail/Individual Shares 69,340 2,539,380 2,608,720
Institutional Shares 38,494,620 65,434,187 103,928,807
Shares Outstanding 3,713,929 5,785,948 9,499,877
Retail/Individual Shares 6,675 216,129 222,804
Institutional Shares 3,707,254 5,569,819 9,277,073
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $10.39 $11.75 $11.75
Institutional Shares $10.38 $11.75 $11.75
Conestoga CoreFunds
International International Pro Forma
Equity Fund Growth Fund Combined
----------- ----------- ---------
Total Net Assets $13,381,000 $112,404,878 $125,785,878
Retail/Individual Shares 9,000 1,932,923 1,941,923
Institutional Shares 13,372,000 110,471,955 123,843,955
Shares Outstanding 1,215,740 8,832,512 10,048,252
Retail/Individual Shares 758 152,205 152,963
Institutional Shares 1,214,982 8,680,307 9,895,289
Net Asset Value Per Share _____________ _____________ _____________
Retail/Individual Shares $10.99 $12.70 $12.70
Institutional Shares $11.01 $12.73 $12.73
</TABLE>
Federal Income Tax Consequences. Consummation of the Reorganization is subject
to the condition that Conestoga and CoreFunds receive an opinion from Morgan,
Lewis & Bockius LLP to the effect that for federal income tax purposes: (i) the
transfer of all of the assets and liabilities of each of the Conestoga
Reorganizing Portfolios (except in each case for a cash reserve in an amount
necessary for the discharge of all known and reasonably anticipated liabilities
of each of the Conestoga Reorganizing Portfolios) and each of the Continuing
Funds to the corresponding CoreFunds Portfolio in exchange for shares of the
corresponding CoreFunds Portfolio and liquidating distributions to Shareholders
of the Conestoga Portfolios of the shares of the CoreFunds Portfolio so
received, as described in the Reorganization Agreement, will constitute
reorganizations within the meaning of Section 368(a)(1)(C), Section 368(a)(1)(D)
or Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended, and
with respect to the Reorganization, each Conestoga Portfolio and CoreFunds
Portfolio will be considered "a party to a reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized by the
Conestoga Portfolios as a result of such transactions; (iii) no gain or loss
will be recognized by the CoreFunds Portfolios as a result of such transactions;
(iv) no gain or loss will be recognized by the Shareholders of any Conestoga
Portfolio on the distribution to them by Conestoga of shares of any Class of the
corresponding CoreFunds Portfolio in exchange for their shares of any class of
the Conestoga Portfolio; (v) the aggregate basis of the CoreFunds Portfolio
shares received by a shareholder of a Conestoga Portfolio will be the same as
the aggregate basis of the Shareholder's Conestoga Portfolio shares immediately
prior to the Reorganization; (vi) the basis of each CoreFunds Portfolio in the
assets of the corresponding Conestoga Portfolio received pursuant to the
Reorganization will be the same as the basis of the assets
-41-
<PAGE>
in the hands of the Conestoga Portfolio immediately before the Reorganization;
(vii) a shareholder's holding period for CoreFunds Portfolio shares will be
determined by including the period for which the shareholder held the Conestoga
Portfolio shares exchanged therefor, provided that the shareholder held such
Conestoga Portfolio shares as a capital asset; and (viii) each CoreFunds
Portfolio's holding period with respect to the assets received in the
Reorganization will include the period for which such assets were held by the
corresponding Conestoga Portfolio.
CoreFunds and Conestoga have not sought a tax ruling from the Internal
Revenue Service ("IRS"), but are acting in reliance upon the opinion of counsel
discussed in the previous paragraph. That opinion is not binding on the IRS and
does not preclude the IRS from adopting a contrary position. Shareholders should
consult their own advisers concerning the potential tax consequences to them,
including state and local income taxes.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
The investment objectives and policies of the Conestoga Reorganizing
Portfolios are, in many respects, similar to those of the corresponding Existing
CoreFunds Portfolios. There are, however, certain differences. The following
discussion summarizes some of the more significant similarities and differences
in the investment policies and risk factors of the Conestoga Reorganizing
Portfolios and corresponding Existing CoreFunds Portfolios and is qualified in
its entirety by the discussion elsewhere herein, and in the prospectuses and
statements of additional information of the Conestoga Reorganizing Portfolios
and the Existing CoreFunds Portfolios incorporated herein by reference.
Conestoga Cash Management Fund and CoreFunds Cash Reserve
Each Fund is a money market fund that seeks to maintain a net asset
value of $1.00 per share, although there is no assurance either will be able to
do so. Both the Conestoga Cash Management Fund and CoreFunds Cash Reserve may
invest in a broad range of U.S. dollar-denominated, high quality, short-term
instruments, including government obligations, commercial paper, asset-backed
securities, bank obligations and repurchase agreements.
Both Funds may invest their assets in securities that are rated in the
highest two rating categories by a nationally recognized statistical rating
organization (a "Rating Agency"), provided that investments in securities that
are not "First Tier Securities" (as defined below) may not exceed 5% of their
assets, and investments in securities of any single issuer that is not
-42-
<PAGE>
"First Tier" may not exceed the greater of 1% of a Fund's total assets or $1
million. "First Tier Securities" are securities that (i) are rated in the
highest rating category by a Rating Agency; (ii) are rated in the highest rating
category by at least two Rating Agencies, if rated by more than one Rating
Agency; (iii) have no short-term rating, but have been issued by an issuer that
has other outstanding short-term obligations that have been so rated and are of
comparable quality; and (iv) are unrated but have been determined to be of
comparable quality. Commercial paper purchased by either Fund must be rated in
the highest rating category.
Both Funds may invest in "stripped" U.S. Treasury obligations
("STRIPS"), may purchase receipts in U.S. Treasury obligations (e.g., "TIGRs"
and "CATS") and zero coupon securities. These securities may exhibit greater
price volatility than ordinary debt securities because of the manner in which
their principal and interest are returned to investors. Conestoga Cash
Management Fund may not purchase zero coupon securities if, immediately after
such purchase, more than 5% of its net assets would be invested in such
obligations. CoreFunds Cash Reserve has no explicit limit on its investment in
such securities.
Both Funds may invest in U.S. dollar denominated bank obligations of
foreign and domestic banks such as certificates of deposit, time deposits,
bankers' acceptances, Eurodollar Certificates of Deposit, Eurodollar Time
Deposits, Canadian Time Deposits and Yankee Certificates of Deposit.
The Conestoga Cash Management Fund will not invest in excess of 10% of
its total assets in time deposits, including Eurodollar Time Deposits and
Canadian Time Deposits but not including certificates of deposit, with
maturities in excess of seven days which are subject to penalties upon early
withdrawal. CoreFunds Cash Reserve is not bound by this restriction.
Conestoga U.S. Treasury Securities Fund and CoreFunds Treasury Reserve.
Each Fund is a money market fund that seeks to maintain a net asset
value of $1.00 per share, although there is no assurance either will be able to
do so. Both Funds invest exclusively in short-term obligations issued by the
U.S. Treasury, including STRIPS, some of which may be subject to repurchase
agreements collateralized by the underlying U.S. Treasury obligations.
Conestoga Tax-Free Fund and CoreFunds Tax-Free Reserve
Each Fund is a money market fund that seeks to maintain a net asset
value of $1.00 per share, although there is no
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assurance they will be able to do so. Both Funds invest at least 80% of their
assets in municipal securities, the interest on which is both exempt from
regular Federal income tax and is not an item of tax preference for purposes of
the Federal alternative minimum tax.
Conestoga Tax-Free Fund may invest in securities rated in the two
highest rating categories by a Rating Agency, or, if unrated, are determined to
be of comparable quality. CoreFunds Tax-Free Reserve's investments in securities
that are not "First Tier Securities" may not exceed 5% of its assets, and
investment in securities of any single issuer that is not "First Tier" may not
exceed the greater of 1% of the Fund's total assets of $1 million.
Both Funds invest in the same types of municipal securities. Both are
permitted to invest up to 20% of their total assets in taxable obligations for
temporary defensive purpose or when sufficient tax-exempt securities are not
available. Conestoga Tax-Free Fund's investment policies permit that Fund to
invest up to 100% of its assets in taxable obligations for temporary defensive
purposes. Taxable obligations eligible for purchase by the Funds include, but
are not limited to obligations of the U.S. Government, its agencies and
instrumentalities, debt securities (including taxable commercial paper) of
issuers having the highest short-term rating assigned by a Rating Agency, bank
obligations, repurchase agreements and reverse repurchase agreements.
Both Funds may enter into when-issued transactions. These transactions
are arrangements in which a fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause a fund to miss a price or a yield considered to be advantageous.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchases may vary from the purchase
prices. Accordingly, a fund may pay more or less than the market value of the
securities on the settlement date. Commitments to purchase when-issued
securities will not exceed 25% of either Fund's total assets and will not be
purchased for speculative purposes.
CoreStates Advisers intends to invest, when possible, the CoreFunds
Tax-Free Reserve's assets in municipal securities, the interest on which is
exempt from Pennsylvania personal income tax ("Pennsylvania Municipal
Securities"), provided the investment is consistent with the Fund's investment
objective, policies and status as a diversified investment company. To the
extent that the Fund's assets are so concentrated in Pennsylvania Municipal
Securities, it would be subject to the peculiar risks presented by the laws and
economic conditions of Pennsylvania to a greater extent than it would be if its
assets were not so concentrated.
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CoreFunds Tax-Free Reserve may, unlike Conestoga Tax-Free Fund, invest
in municipal lease obligations. Municipal lease obligations are issued by a
state or local government or authority to acquire land and a wide variety of
equipment and facilities. These obligations typically are not fully backed by
the municipality's credit, and their interest may become taxable if the lease is
assigned. If funds are not appropriated for the following year's lease payments,
the lease may terminate, with the possibility of default on the lease obligation
and significant loss to a Fund. Certificates of participation in municipal lease
obligations or installment sales contracts entitle the holder to a proportionate
interest in the lease-purchase payments made.
Conestoga Equity Fund and CoreFunds Value Equity Fund.
It is expected that the CoreFunds Value Equity Fund will change its
name to "CoreFunds Equity Fund" and adopt investment policies that are
substantially identical to Conestoga Equity Fund at the time of the
Reorganization.
The investment policies of both Funds are similar. The principal
difference between the policies is that under normal market condition, 80% of
the Conestoga Equity Fund's assets will be invested in common stock whereas
CoreFunds Value Equity Fund is only required to hold 75% of its assets in equity
securities which may include common stock. CoreFunds Value Equity Fund has a
broader range of eligible investments which include common stocks, preferred
stocks and convertible securities. Both Funds may invest portions of their
assets in short-term and fixed income vehicles. There are differences in the
quality of the debt investments each Fund may make. Conestoga Equity Fund may
invest in fixed income securities rated in the four highest rating categories by
a Rating Agency whereas CoreFunds Value Equity Fund is limited to fixed income
securities rated in the highest rating category. Similarly, short-term debt
securities invested in by Conestoga Equity Fund may be rated in the two highest
rating categories by a Rating Agency whereas CoreFunds Value Equity is limited
to short-term debt securities rated in the highest rating category.
Conestoga Equity Fund may also purchase put and call options on
securities for the purposes of hedging against market risks related to its
portfolio securities. Such put and call options must be listed on a national
securities exchange and may not exceed 5% of the Fund's net assets. Purchasing
options is a specialized investment technique that entails a substantial risk of
a complete loss of the amounts paid as premiums to writers of options. Conestoga
Equity Fund may also engage in writing call options. Conestoga Equity Fund will
write only covered call options (options on securities owned by the Fund).
Conestoga Equity Fund will forego any capital appreciation above the
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exercise price on securities on which it has written a call option. In order to
close out a call option it has written, Conestoga Equity Fund will enter into a
"closing purchase transaction" -- the purchase of a call option on the same
security with the same exercise price and expiration date as the call option
which the Fund previously wrote on a particular security. When a portfolio
security subject to a call option is sold, Conestoga Equity Fund will effect a
closing purchase transaction to close out any existing call option on that
security. If Conestoga Equity Fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or the Fund delivers the underlying security upon exercise. Under
normal conditions, it is not expected that the underlying value of portfolio
securities subject to such options would exceed 50% of the net assets of
Conestoga Equity Fund. CoreFunds Value Equity Fund, as a matter of fundamental
policy, is not permitted to engage in options transactions.
Conestoga Equity Fund may invest in the securities of foreign issuers
by acquiring both sponsored and unsponsored American Depositary Receipts
("ADRs"). ADRs are receipts issued by a bank or trust company in the United
States evidencing ownership of underlying securities of a foreign issuer.
Unsponsored ADRs are organized independently and without the cooperation of the
issuer of the underlying securities. As a result, available information
concerning the issuer may not be as current as for sponsored ADRs, and the
prices of unsponsored ADRs may be more volatile than if such instruments were
sponsored by the issuer. Conestoga Equity Fund may also invest in securities
issued by foreign branches of U.S. banks and foreign banks, in Canadian
commercial paper, and in Europaper (U.S. dollar-denominated commercial paper of
a foreign issuer). By contrast, CoreFunds Value Equity Fund is not expressly
permitted to invest in securities of foreign issuers and may only invest in
short-term debt obligations of domestic branches of U.S. banks.
For many foreign securities, U.S. dollar-denominated ADRs, which are
traded in the United States on exchanges or over-the-counter, are issued by
domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a correspondent bank. ADRs do not
eliminate the risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of foreign issuers,
the Conestoga Equity Fund can avoid currency risks during the settlement period
for either purchases or sales. In general, there is a large, liquid market in
the United States for many ADRs. The information available for ADRs is subject
to the accounting, auditing and financial reporting standards of the domestic
market or exchange on which they are traded, which standards are more uniform
and more exacting than those to which many foreign issuers may be subject.
Conestoga Equity Fund may
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also invest in European Depositary Receipts, or EDRs, which are receipts
evidencing an arrangement with a European bank similar to that for ADRs and are
designed for use in the European securities markets. EDRs are not necessarily
denominated in the currency of the underlying security.
Certain ADRs and EDRs, typically those denominated as unsponsored,
require the holders thereof to bear most of the costs of such facilities while
issuers of sponsored facilities normally pay more of the costs thereof. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders in respect
to the deposited securities, whereas the depositary of a sponsored facility
typically distributes shareholder communications and passes through the voting
rights.
Investment in securities of foreign issuers involves certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, difficulties in predicting
international trade patterns, political, social and economic instability in the
country of the issuer, foreign trading practices (including higher trading
commissions, custodial charges and delayed settlements), foreign withholding and
income taxation, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions (which might adversely affect the
payment of principal and interest), difficulty in obtaining and enforcing
judgments against foreign issuers, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. With respect to
certain countries, there is also the possibility of expropriation of assets,
nationalization of assets, limits on removal of currency or other assets,
confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.
Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the U.S.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries. In addition, foreign branches of U.S. banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks and U.S. domestic issuers.
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Conestoga Intermediate Income Fund and CoreFunds Intermediate
Bond Fund
The investment policies of these Funds are similar. The principle
difference is that Conestoga Intermediate Income Fund will normally invest 80%
of its total assets in debt securities of all types whereas CoreFunds
Intermediate Bond Fund intends, under normal market conditions, to invest 65% of
its total assets in bonds and 35% or less in other debt securities. Both Funds
are permitted to have an average weighted maturity of three to ten years,
however, CoreFunds Intermediate Bond Fund currently maintains a maximum average
maturity of no more than five years pursuant to a non-fundamental investment
policy which can be changed without shareholder approval. CoreFunds expects to
present to the shareholders of the Intermediate Bond Fund a change in
fundamental policy requiring the Fund to have an average weighted maturity
between one and five years. The types of debt securities eligible for investment
by both Funds are the same, with the exception that debt securities in Conestoga
Intermediate Bond Fund may be rated in the four highest rating categories by a
Rating Agency whereas CoreFunds Intermediate Bond Fund is limited to investments
in the three highest rating categories.
Conestoga Pennsylvania Tax-Free Bond Fund and CoreFunds
Pennsylvania Municipal Bond Fund
The Funds have similar, but not identical, investment policies. Since
both invest primarily in Pennsylvania Municipal Securities, the Funds are
subject to the risk that the value of their shares may be especially affected by
factors pertaining to the economy of Pennsylvania and the ability of issuers of
Pennsylvania Municipal Securities to meet their obligations. Both Funds are
classified as non-diversified investment companies under the 1940 Act, which
means that since a relative high percentage of assets of each Fund may be
invested in the obligations of a limited number of issuers, the value of the
shares of a Fund may be more susceptible to any single economic, political or
regulatory occurrence then shares of a diversified investment company.
Both Funds invest 80% of their total assets in municipal securities,
the interest on which is exempt from federal income tax. Conestoga Pennsylvania
Tax-Free Bond Fund normally invests at least 80% of its total assets in
Pennsylvania Municipal Securities whereas the policies of CoreFunds Pennsylvania
Municipal Bond Fund state that it is only required to invest 65% of its total
assets in Pennsylvania Municipal Securities.
Conestoga Pennsylvania Tax-Free Bond Fund may invest in debt
obligations rated in one of the four highest rating categories by a Rating
Agency, whereas CoreFunds Pennsylvania Municipal Bond
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Fund may only purchase securities rated in one of the three highest rating
categories. CoreStates Advisers, however, does have the discretion to permit it
to invest 20% of the Fund's assets in municipal securities rated in the fourth
highest category. Both Funds may invest in municipal notes. CoreFunds
Pennsylvania Municipal Bond Fund may invest in municipal notes rated in one of
the two highest rating categories by a Rating Agency whereas Conestoga
Pennsylvania Tax-Free Bond Fund is limited to municipal notes in the highest
rating category. Both Funds may invest in when-issued securities and municipal
leases. See "Comparison of Investment Policies and Risk Factors -- Conestoga
Tax-Free Fund and CoreFunds Tax-Free Reserve" for a discussion of when-issued
securities and municipal leases.
Conestoga Balanced Fund and CoreFunds Balanced Fund
The investment policies of these Funds are similar. The principal
difference is that Conestoga Balanced Fund invests at least 30% of its total
assets in fixed income securities and no more than 80% in equity securities,
whereas CoreFunds Balanced Fund is required to invest only 25% of its total
assets in fixed income securities with the remainder in common stocks. Fixed
income securities acquired by Conestoga Balanced Fund are rated in one of the
four highest rating categories by a Rating Agency whereas fixed income
securities acquired by CoreFunds Balanced Fund must be rated in one of the three
highest rating categories. The equity and fixed income securities eligible for
purchase by both Funds are substantially the same. Both Funds may invest in
securities of foreign issuers using ADRs. See "Comparison of Investment Policies
and Risk Factors -- Conestoga Equity Fund and CoreFunds Value Equity Fund" for a
description of ADRs and the risk factors of investment in foreign issuers.
Conestoga International Equity Fund and CoreFunds International
Growth Fund
The investment policies of both Funds are similar. Conestoga
International Equity Fund invests at least 65% of its assets in an
internationally diversified portfolio of equity securities and may invest up to
35% of its assets in U.S. companies. CoreFunds International Growth Fund has the
same 65% diversification requirement but has no express statement as to
permissible investments in U.S. companies. Both Funds intend to invest at least
65% of their total assets in securities traded in at least three foreign
countries.
Both Funds invest directly in the securities of foreign issuers. Direct
investments in foreign securities generally involve higher costs than
investments in U.S. securities, including higher transaction costs as well as
the imposition of additional taxes by foreign governments. In addition, foreign
investments may include additional risks associated with currency
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exchange rates, less complete financial information about the issuers, less
market liquidity and political instability. See "Investment Policies and Risk
Factors -- Conestoga Equity Fund and CoreFunds Value Equity Fund" for a
discussion of ADRs and the risk factors of investment in foreign issuers. In
furtherance of their investment objectives, each Fund may engage in foreign
currency transactions including forward currency contracts, futures, contracts
or options transactions. The principal difference is that Conestoga
International Equity Fund may only purchase puts and calls up to 5% of its net
assets and write covered calls up to 50% of its net assets whereas CoreFunds
International Growth Fund may purchase, write or sell options on securities
(including puts and calls) only to the extent obligations under such
transactions represent not more than 20% of its total assets.
Investment Policies and Risks -- General
The investment objective of each of the Conestoga Cash Management Fund,
Tax-Free Fund, U.S. Treasury Securities Fund, Equity Fund, Special Equity Fund,
Bond Fund, Intermediate Income Fund, Pennsylvania Tax-Free Bond Fund and of each
of the Existing CoreFunds Portfolios is fundamental, meaning that it may not be
changed without a vote of the holders of a majority of the Fund's outstanding
shares, as defined by the 1940 Act. The investment objective of each of the
Conestoga International Equity Fund, Short-Term Income Fund and Balanced Fund is
not fundamental and may be changed by Conestoga's Board of Trustees. The
investment policies of the Conestoga Portfolios and CoreFunds are not
fundamental and may be changed by the respective Board of Trustees and
Directors.
This section describes certain policies and risks that are common to a
number of Conestoga Reorganizing Portfolios and Existing CoreFunds Portfolios.
Each Reorganizing Conestoga Portfolio and each Existing CoreFunds
Portfolio is permitted to (i) enter into repurchase agreements and reverse
repurchase agreements; and (ii) purchase obligations of the U.S. Government, its
agencies and instrumentalities. Each Conestoga Reorganizing Portfolio may invest
in bank obligations of issuers having capital, surplus and undivided profits in
excess of $100 million (as of the date of its most recently published financial
statements) whereas each Existing CoreFund Portfolio may only invest in bank
obligations of domestic branches of U.S. banks having total assets at the time
of purchase of $1 billion.
Each Conestoga Reorganizing Portfolio and the CoreFunds Tax-
Free Reserve, Intermediate Bond Fund and Pennsylvania Municipal
Bond Fund may enter into when-issued transactions. See
"Investment Policies and Risk Factors -- Conestoga Tax-Free Fund
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and CoreFunds Tax-Free Reserve" for a discussion of the risk
factors involved in when-issued transactions.
The Conestoga Pennsylvania Tax-Free Bond Fund is permitted to enter
into stand-by commitments with respect to municipal securities. None of the
Existing CoreFunds Portfolios is permitted to participate in these transactions.
There are similarities between the Funds with respect to the types of
money market instruments they are permitted to purchase. Each Conestoga
Reorganizing Portfolio may invest in a broad array of money market instruments,
all rated in one of the top two rating categories by a Rating Agency and (with
the exception of Conestoga Cash Management Fund, U.S. Treasuries Securities Fund
and Tax-Free Fund) may invest in commercial paper rated in the top two rating
categories. Conestoga Cash Management Fund, U.S. Treasury Securities Fund and
Tax-Free Fund may only invest in commercial paper rated in the highest rating
category by a Rating Agency. Each Existing CoreFunds Portfolio may also purchase
money market instruments and commercial paper; the CoreFunds Cash Reserve,
Treasury Reserve, Tax-Free Reserve, Value Equity Fund and International Growth
Fund may only purchase money market instruments and commercial paper that are
rated by a Rating Agency in the highest rating category for such instruments,
and the CoreFunds Balanced Fund, Intermediate Bond Fund and Pennsylvania
Municipal Bond Fund may purchase money market instruments and commercial paper
that are within the two highest rating categories by a Rating Agency.
Each of the Conestoga Equity Fund, Intermediate Income Fund, Balanced
Fund and International Equity Fund may lend its portfolio securities. There is
no limit on the amount of securities which these Funds may lend, except that the
Conestoga International Equity Fund may only lend portfolio securities up to
one-third the value of its total assets. Such loans involve risks of delay in
receiving additional collateral or in recovering the securities loaned or even
loss of rights in the collateral, should the borrower of the securities fail
financially. Any portfolio securities purchased with cash collateral would also
be subject to possible depreciation. The Existing CoreFunds Portfolios (with the
exception of CoreFunds International Growth Fund) have a fundamental investment
limitation prohibiting loans.
Conestoga Cash Management Fund, Intermediate Income Fund and Balanced
Fund and CoreFunds Cash Reserve and Intermediate Bond Fund may invest in
asset-backed securities. These securities may be backed by either credit card
receivables or motor vehicle installment purchase obligations. Asset-backed
securities entail certain risks, including the risk that credit card receivables
are generally unsecured, and the debtors are entitled to the protection of a
number of state and federal consumer credit laws,
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many of which give such debtors the right to set off certain amounts owned on
the credit cards, thereby reducing the balance due. Most issuers of asset-backed
securities backed by motor vehicle installment purchase obligations permit the
servicer of such receivable to retain possession of the underlying obligations.
If the servicer sells these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. Further, if a vehicle is registered in one
state and is then reregistered because the owner and obligor move to another
state, such reregistration could defeat the original security interest in the
vehicle in certain cases. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.
Conestoga Intermediate Income Fund and Balanced Fund and CoreFunds
Intermediate Bond Fund and Balanced Fund may invest in mortgage-backed
securities. To the extent that a Fund purchases mortgage-backed securities at a
premium, mortgage foreclosures and prepayments of principal by mortgagors (which
may be made at any time without penalty) may result in some loss of the Fund's
principal investment to the extent of the premium paid. The yield of a Fund that
invests in mortgage-backed securities may be affected by reinvestment of
prepayments at higher or lower rates than the original investment.
Mortgage-backed securities have either fixed or adjustable interest rates. The
rate of return on mortgage-backed securities may be affected by prepayments on
principal on the underlying loans, which generally increase as interest rates
decline. As a result, when interest rates decline, holders of these securities
normally do not benefit from appreciation in market value to the same extent as
holders of other non-callable debt securities. In addition, the value of
mortgage-backed securities will fluctuate in response to market interest rates.
Investment Limitations
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may change their fundamental investment limitations without
the affirmative vote of the holders of a majority of the outstanding shares (as
defined in the 1940 Act) of the particular Conestoga Reorganizing Portfolio or
Existing CoreFunds Portfolio. The investment limitations of the Conestoga
Reorganizing Portfolios and the corresponding Existing CoreFunds Portfolios are
similar, but not identical.
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Each of the Conestoga Reorganizing Portfolios (except the Conestoga
Pennsylvania Tax-Free Bond Fund) and each of the corresponding Existing
CoreFunds Portfolios (except the CoreFunds Pennsylvania Municipal Bond Fund) is
a "diversified" investment portfolio and, therefore, has a fundamental policy
limiting investments in securities of any one issuer, other than securities
issued by the U.S. Government, its agencies and instrumentalities and repurchase
agreements collateralized by such securities, to 5% of the value of a fund's
total assets, except that up to 25% of the value of a fund's total assets may be
invested without regard to this 5% limitation. In addition, none of the
Conestoga Reorganizing Portfolios (except the Conestoga Cash Management Fund,
Tax-Free Fund, U.S. Treasury Securities Fund and Pennsylvania Tax-Free Bond
Fund) may acquire more than 10% of the outstanding voting securities of any one
issuer, except that the Conestoga Equity Fund, Intermediate Income Fund,
Balanced Fund and International Equity Fund may invest up to 25% of their
respective assets without regard to such limitation. Of the CoreFunds, only the
Value Equity Fund, Balanced Fund and International Growth Fund have the same 10%
voting securities limitation, although CoreFunds Cash Reserve, Tax-Free Reserve,
Treasury Reserve, Intermediate Bond Fund and Pennsylvania Municipal Bond Fund
have a fundamental limitation prohibiting the purchase of any common stock or
voting securities.
With respect to at least 50% of the total assets of each of the
Conestoga Pennsylvania Tax-Free Bond Fund and CoreFunds Pennsylvania Municipal
Bond Fund, no more than 5% may be invested in securities of a single issuer, and
no more than 25% of each Fund's total assets may be invested in the securities
of a single issuer at the close of each quarter of each fiscal year. For
purposes of this limitation, governmental subdivisions, including states,
territories, possessions of the United States, or their political subdivisions,
agencies, authorities, instrumentalities, or similar entities, will be
considered a separate issuer if their assets and revenues are separate from
those of the government body creating it and the security is backed only by its
own assets and revenues. Industrial revenue bonds backed only by the assets and
revenues of a non-governmental issuer are considered to be issued solely by that
user. If, in the case of an industrial development bond or government-issued
security, a governmental or other entity guarantees the security, such guarantee
would be considered a separate security issued by the guarantor, as well as the
other issuer, subject to limited exclusions allowed by the 1940 Act.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may borrow money directly except that each Fund may borrow
money from banks and enter into reverse repurchase agreements for temporary
purposes, and then in amounts not in excess of 10% of the value of each Fund's
total assets. A
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Conestoga Reorganizing Portfolio (except the Conestoga Tax-Free Fund) will not
purchase securities while its borrowings, including reverse repurchase
agreements, exceed 5% of the total assets of the Portfolio. Conestoga Tax-Free
Fund and each Existing CoreFunds Portfolio will not purchase securities while
its borrowings, including reverse repurchase agreements, are outstanding.
The Conestoga Reorganizing Portfolios and the Existing CoreFunds
Portfolios may only mortgage, pledge or hypothecate their assets to secure
permitted indebtedness, and then may only pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 10% of the value of
total assets.
The investment limitations described in the foregoing paragraphs
regarding diversification, borrowing and pledging of assets are fundamental with
respect to both Conestoga and CoreFunds.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may make loans, except that: (i) Conestoga Equity Fund,
Intermediate Income Fund, Balanced Fund and International Equity Fund may lend
portfolio securities; and (ii) the Conestoga Reorganizing Portfolios may
purchase or hold certain debt instruments and may enter into repurchase
agreements; and (iii) each Existing CoreFunds Portfolio may purchase or hold
debt instruments and enter into repurchase agreements. The foregoing limitations
on securities lending are fundamental limitations for both the Conestoga
Reorganizing Portfolios and the Existing CoreFunds Portfolios.
The Conestoga Reorganizing Portfolios and the Existing CoreFunds
Portfolios will not invest 25% or more of the value of their respective total
assets in any one industry, provided that there is no limitation with respect to
(i) obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; (ii) tax-exempt securities issued by governments or political
subdivisions of governments; (iii) wholly-owned finance companies will be
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their partners; and (iv)
utilities will be divided according to their services. The foregoing investment
limitations of each of the Conestoga Reorganizing Portfolios and the Existing
CoreFunds Portfolios with respect to industry concentration of investments is a
fundamental investment limitation.
Each of the Conestoga Reorganizing Portfolios must limit its
investments in illiquid securities to 15% of its net assets, except that the
Conestoga Cash Management Fund, Tax-Free Fund and U.S. Treasury Securities are
subject to a 10% limitation and the Conestoga Equity Fund and Intermediate
Income Fund will not
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invest in repurchase agreements maturing in excess of seven days if such
investment, together with other investments of such Fund that are not readily
marketable, exceeds 10% of such Fund's total assets. By contrast, each of the
Existing CoreFunds Portfolios must limit its investments in illiquid securities
to 10% of its net assets (except for the CoreFunds Balanced and Pennsylvania
Municipal Bond Funds). With respect to the Conestoga Reorganizing Portfolios,
Rule 144A securities will not be considered illiquid if the Funds' investment
adviser determines that an adequate trading market exists with respect to such
securities. The foregoing limitations on investments in illiquid securities are
fundamental as to the Existing CoreFunds Portfolios but are not fundamental as
to the Conestoga Reorganizing Portfolios.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may purchase or sell real estate, except that the Funds may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
None of the Conestoga Reorganizing Portfolios (except Conestoga Cash
Management Fund, Tax-free Fund and U.S. Treasury Securities Fund) and the
Existing CoreFunds Portfolios may acquire any other investment company or
investment company security except in connection with a merger, consolidation,
reorganization or acquisition of assets or where otherwise permitted by the 1940
Act. The Conestoga Cash Management Fund, Tax-Free Fund and U.S. Treasury
Securities Fund are not permitted to acquire investment company securities,
except in connection with a merger, consolidation, reorganization or acquisition
of assets.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may act as an underwriter of securities within the meaning
of the Securities Act of 1933 except to the extent that the purchase of
obligations directly from the issuer thereof, or the disposition of securities,
in accordance with a Fund's investment objective, policies and limitations may
be deemed to be underwriting.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may purchase securities of companies for the purpose of
exercising control.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may purchase securities on margin, make short sales of
securities or maintain a short position, except that each Conestoga Reorganizing
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities.
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None of the Existing CoreFunds Portfolios may invest in puts, calls,
straddles, spreads, or any combination thereof, except that (i) CoreFunds
International Growth Fund may enter into forward currency contracts, purchase
futures contracts and options thereon, and purchase, sell and write options on
securities (including puts and calls) to a limited extent; and (iii) CoreFunds
Pennsylvania Municipal Bond Fund may engage in put transactions.
Neither the Conestoga Reorganizing Portfolios nor the Existing
CoreFunds Portfolios may purchase or sell commodity contracts, or invest in oil,
gas or mineral exploration or development programs or leases.
The following fundamental investment limitations of the Existing
CoreFunds Portfolios have no counterpart in the Conestoga Reorganizing
Portfolios:
Each Existing CoreFunds Portfolio is prohibited from investing more
than 10% of its total assets in the securities of any company not in operation
continuously for at least three years (including any predecessor company).
Each Existing CoreFunds Portfolio is prohibited from purchasing or
retaining the securities of any issuer if officers and directors of CoreFunds,
or its advisor, owning beneficially more than one-half of 1% of the securities
of such issuer together own more than 5% of the securities of such issuer.
The Existing CoreFunds Portfolios may not invest in securities with
legal or contractual restrictions.
See "Additional Investment Restrictions" in CoreFunds' Statement of
Additional Information which is incorporated by reference herein for additional
investment limitations of the Existing CoreFunds Portfolios.
Purchase and Redemption Information, Exchange Privileges, Distribution and
Pricing. The purchase, redemption, exchange privileges and distribution policies
of the Conestoga Portfolios and the CoreFunds Portfolios are discussed above
under "Summary - - Overviews of the Conestoga Portfolios and CoreFunds
Portfolios" and below in Appendix III to this Combined Proxy
Statement/Prospectus.
Other Information. Conestoga and CoreFunds are registered as open-end management
investment companies under the 1940 Act. Currently, Conestoga offers eleven
investment portfolios and CoreFunds offers seventeen investment portfolios.
Conestoga is organized as a Massachusetts business trust and
is subject to the provisions of its Declaration of Trust and Code
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of Regulations. CoreFunds is organized as a Maryland corporation and subject to
the provisions of its Articles of Incorporation and By-laws. Shares of both
Conestoga and CoreFunds: (i) are entitled to one vote for each full share held
and a proportionate fractional vote for each fractional share held; (ii) will
vote in the aggregate and not by class except as otherwise expressly required by
law or when class voting is permitted by the respective Board of Trustees or
Directors; and (iii) are entitled to participate equally in the dividends and
distributions that are declared with respect to a particular investment
portfolio and in the net distributable assets of such portfolio on liquidation.
Shares of both the Conestoga Portfolios and the CoreFunds Portfolios have a par
value of $.001. In addition, shares of the Conestoga Portfolios and CoreFunds
Portfolios have no preemptive rights and only such conversion and exchange
rights as the respective Boards of Trustees or Directors may grant in their
discretion. When issued for payment as described in their prospectuses,
Conestoga Portfolio shares and CoreFunds Portfolio shares are fully paid and
non-assessable by such entities except as required under Massachusetts law with
respect to Conestoga. CoreFunds is not required under Maryland General
Corporation Law to hold annual shareholder meetings and intends to do so only if
required by the 1940 Act. Shareholders have the right to remove Directors. To
the extent required by law, CoreFunds will assist in shareholder communications
in such matters.
The foregoing is only a summary. Shareholders may obtain copies of the
Declaration of Trust and By-laws of Conestoga and the Articles of Incorporation
and By-laws of CoreFunds upon written request at the addresses shown on the
cover page of this Combined Proxy Statement/Prospectus.
INTERIM INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS
The Reorganization Agreement provides that the Effective Time of the
Reorganization will occur contemporaneously with, or after, the Holding
Company Merger. As stated above, because the Holding Company Merger will result
in a change in control of MIC, the existing investment advisory and sub-advisory
agreements will, by their terms, automatically terminate on the date the Holding
Company Merger occurs. The Reorganization Agreement provides, therefore, that if
the Holding Company Merger and the Reorganization do not occur
contemporaneously, subject to the approval of the Reorganization Agreement by
Conestoga's shareholders, Conestoga will enter into an interim investment
advisory agreement with MIC (or its successor) and MIC will enter into an
interim sub-investment advisory agreement with respect to the Conestoga
International Equity Fund with Marvin and Palmer (collectively, the "Interim
Agreements") which will take effect between the Holding Company Merger and the
Reorganization (the "Interim Period"). It is contemplated that the firms that
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currently provide investment advisory and sub-advisory services for the
Conestoga Portfolios will continue to provide services during the Interim Period
under the Interim Agreements.
The investment advisory and sub-advisory fee rates stated in the
Interim Agreements will be the same, and the other provisions of the Interim
Agreements will be substantially the same, as those in the current investment
and sub-advisory agreements for the Conestoga Portfolios.
Copies of the proposed Interim Agreements are attached as Appendix IV.
In the Interim Agreements, the investment adviser agrees, subject to the
supervision of the Conestoga Board of Trustees, to provide a continuous
investment program for the Conestoga Portfolios and to determine from time to
time what securities and other investments will be purchased, retained or sold
in accordance with that Portfolio's investment objectives, policies and
restrictions. An investment adviser's responsibilities include, but are not
limited to, placing purchase and sale orders for portfolio transactions;
maintaining books and records with respect to a Portfolio's securities
transactions; and furnishing periodic and special reports to the Conestoga Board
of Trustees as requested. The Interim Agreements further provide that a
Portfolio's investment adviser will pay all expenses incurred by it in
connection with its advisory activities, other than the cost of securities
(including brokerage commissions, if any) purchased for a Portfolio.
With respect to the Conestoga International Equity Fund, some of an
investment adviser's responsibilities under the Interim Agreement will be
performed by the sub-adviser. In particular, Marvin and Palmer will, subject to
supervision by MIC (or its successor) and the Conestoga Board of Trustees,
manage the investment operations of the Conestoga International Equity Fund
during the Interim Period and determine the composition of the Fund, including
the purchase, retention and disposition of securities in accordance with the
Fund's investment objective, policies and restrictions. In addition, Marvin and
Palmer will prepare, subject to MIC's approval, lists of foreign countries for
investment by the Fund.
Under the Interim Agreements, in placing orders with brokers and
dealers, the investment adviser and sub-adviser are to attempt to obtain prompt
execution of orders at the most favorable price. Consistent with this
obligation, when the execution and price offered by two or more brokers or
dealers are comparable, the investment adviser or sub-adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers that provide research advice and other services. These brokerage and
research services might consist of reports and statistics on specific companies
of industries, general summaries of groups of stocks or bonds and their
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<PAGE>
comparative earnings and yields, or broad overviews of the securities markets
and the economy.
Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by the investment adviser or
sub-adviser, and does not reduce the advisory fees payable by the Conestoga
Portfolios. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which the investment adviser or sub-adviser exercises
investment discretion. Conversely, the Conestoga Portfolios may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
Investment decisions for the Conestoga Portfolios and for other
investment accounts managed by the investment adviser and sub-adviser during the
Interim Period will be made independently of each other in light of differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then allocated in a manner believed by the investment
adviser or sub-adviser to be equitable to each such account. While in some cases
this practice could have a detrimental effect on the price or value of the
security as far as a Conestoga Portfolio is concerned, in other cases it may be
beneficial to the portfolio. To the extent permitted by law, the investment
adviser or sub-adviser may aggregate the securities to be sold or purchased for
the Conestoga Portfolios with those to be sold or purchased for other investment
companies or accounts in executing transactions. Portfolio securities will not
be purchased from or sold to the investment adviser, sub-adviser, or any
affiliated person (as defined in the 1940 Act) during the Interim Period.
If in any fiscal year the aggregate expenses of any Conestoga Portfolio
exceeds the expense limitation of any state having jurisdiction over Conestoga,
the Interim Agreements provide that the Portfolio's investment adviser will
reimburse the Portfolio for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by the Portfolio to the
investment adviser to the aggregate fees otherwise payable by the Portfolio to
the investment adviser and to the Portfolio's administrator under its
administration agreement. The obligation of the investment adviser to reimburse
a Portfolio is limited in any fiscal year to the amount of its fee for such
fiscal year, provided that an investment adviser will reimburse a Portfolio for
such proportion of such excess expenses regardless of the amount of fees paid to
it during such fiscal year to the extent that the securities regulations of any
state having jurisdiction over Conestoga so require. As of the
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<PAGE>
date hereof, the most restrictive expense limitation applicable to a Conestoga
Portfolio limits its aggregate annual expenses (as defined by applicable
regulations) to 2 1/2% of the first $30 million of its average net assets, 2% of
the next $70 million of its average net assets, and 1 1/2% of its remaining net
assets.
The investment adviser or sub-adviser will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Conestoga Portfolio
in connection with the performance of its agreements, except a loss arising from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from wilful misfeasance, bad faith or gross
negligence on the part of the investment adviser or sub-adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the agreements.
Unless sooner terminated, the Interim Agreement for a Conestoga
Portfolio will continue in effect until the Effective Time of the Reorganization
for that Portfolio. If the Effective Time of the Reorganization has not
occurred, the Interim Agreements may thereafter be renewed for successive
periods with respect to a Conestoga Portfolio if specifically approved at least
annually (a) by the vote of a majority of those members of the Conestoga Board
of Trustees who are not parties to the agreements or interested persons of any
party to the agreements, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the Conestoga
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding shares of the Portfolio.
The Interim Agreements will terminate upon their assignment (as defined
in the 1940 Act). In addition, the Interim Agreements may be terminated with
respect to any Conestoga Portfolio by the Conestoga Board of Trustees, by vote
of a majority of the outstanding shares of that Portfolio, by the investment
adviser or, in the case of an Interim Sub-Advisory Agreement, by either the
investment adviser or sub-adviser upon notice as stated in the particular
agreement.
The table at page ___ shows (i) the current contractual fee rates for
the Portfolios, which will be the same throughout the Interim Period until the
Effective Time of the Reorganization, and (ii) the advisory/sub-advisory fees
actually paid by the Conestoga Portfolios for their last fiscal year net of
waivers. All fee rates are annualized, and are computed daily and payable
monthly based on a Portfolio's average daily net assets.
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INFORMATION RELATING TO VOTING MATTERS
General Information. This Combined Proxy Statement/Prospectus is being furnished
in connection with the solicitation of proxies by Conestoga's Board of Trustees
in connection with the Meeting. It is expected that the solicitation of proxies
will be primarily by mail. Officers and service contractors of Conestoga may
also solicit proxies by telephone, telegraph, facsimile or personal interview.
Any shareholder giving a proxy may revoke it at any time before it is exercised
by submitting to Conestoga a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person.
Only shareholders of record at the close of business on January 26,
1996 will be entitled to vote at the Meeting. On that date there were
outstanding and entitled to be voted __________ shares of the Conestoga Cash
Management Fund, __________ shares of the Conestoga Tax-Free Fund, __________
shares of the Conestoga U.S. Treasury Securities Fund, __________ shares of the
Conestoga Equity Fund, __________ shares of the Conestoga Special Equity Fund,
__________ shares of the Conestoga Bond Fund, __________ shares of the Conestoga
Intermediate Income Fund, __________ shares of the Conestoga Pennsylvania
Tax-Free Bond Fund, __________ shares of the Conestoga Balanced Fund, __________
shares of the Conestoga Short-Term Income Fund and __________ shares of the
Conestoga International Equity Fund. Each share or fraction thereof is entitled
to one vote or fraction thereof, and all shares will vote separately by Fund.
Conestoga and CoreFunds have been advised by MIC that the shares of
each Conestoga Portfolio over which Meridian Bancorp, Inc. or its affiliates
have voting power will be voted in accordance with instructions received
from beneficial owners and fiduciaries of such shares who are not related to
Meridian Bancorp, Inc. or its affiliates. The remaining shares over which
Meridian Bancorp, Inc. or its affiliates have voting power will (i) be voted FOR
or AGAINST the Reorganization and any other matters properly brought before the
meeting in the same proportions as the total votes that are cast FOR or AGAINST
the proposals by such unrelated beneficial owners and fiduciaries, (ii) be voted
by a fiduciary that is not related to Meridian Bancorp, Inc. or its affiliates,
or (iii) not be voted.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting or any adjournment
thereof. For information on adjournment of the meeting, see "Quorum" below.
Shareholder and Board Approvals. The Reorganization Agreement (and the
transactions contemplated thereby including the implementation of the interim
investment advisory and Sub- advisory agreements), is being submitted for
approval at the
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Meeting by the holders of a majority of the outstanding shares of the Conestoga
Cash Management Fund, Tax-Free Fund, U.S. Treasury Securities Fund, Equity Fund,
Special Equity Fund, Bond Fund, Intermediate Income Fund, Pennsylvania Tax-Free
Bond Fund, Balanced Fund, Short-Term Income Fund and International Equity Fund
in accordance with the provisions of Conestoga's Declaration of Trust and the
requirements of the 1940 Act. The term "majority of the outstanding shares" of a
Conestoga Portfolio as used herein means the lesser of (a) 67% of the shares of
the particular Conestoga Portfolio present at the Meeting if the holders of more
than 50% of the outstanding shares of the Conestoga Portfolio are present in
person or by proxy, or (b) more than 50% of the outstanding shares of such
Conestoga Portfolio.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the meeting. On the Reorganization proposal abstentions
and broker non-votes will be considered to be a vote against the Reorganization
proposal.
The approval of the shareholders of CoreFunds of the Reorganization is
being separately solicited.
At January 26, 1996, MIC and its affiliates held of record ____% of the
Conestoga Cash Management Fund, Tax-Free Fund, U.S. Treasury Securities Fund,
Equity Fund, Special Equity Fund, Bond Fund, Intermediate Income Fund,
Pennsylvania Tax-Free Bond Fund, Balanced Fund, Short-Term Income Fund and
International Equity Fund.
At January 26, 1996, the name, address and share ownership of the
persons who beneficially owned 5% or more of the Conestoga Portfolios are as
follows:
At January 26, 1996, the trustees and officers of Conestoga, as a
group, owned less than 1% of the outstanding shares of each of the Conestoga
Portfolios. At January 26, 1996, the trustees and officers of CoreFunds owned
less than 1% of the outstanding shares of each of the corresponding CoreFunds
Portfolios.
At January 26, 1996, the name, address, and share ownership of the
persons who beneficially owned 5% or more of the CoreFunds Portfolios are as
follows:
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Appraisal Rights. Shareholders are not entitled to any rights of share appraisal
under Conestoga's Declaration of Trust or under the laws of the Commonwealth of
Massachusetts in connection with the Reorganization. Shareholders have, however,
the right to redeem from Conestoga their Conestoga Portfolio shares at net asset
value until the Effective Time of the Reorganization, and thereafter
shareholders may redeem from CoreFunds the CoreFunds shares acquired by them in
the Reorganization at net asset value.
Quorum. In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
the Reorganization Agreement and the transactions contemplated thereby are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares affected by the
adjournment that are represented at the Meeting in person or by proxy. If a
quorum is present, the persons named as proxies will vote those proxies which
they are entitled to vote FOR the Reorganization Agreement, in favor of such
adjournments, and will vote those proxies required to be voted AGAINST such
proposals against any adjournment. A shareholder vote may be taken with respect
to one or more Conestoga Portfolios prior to any such adjournment if sufficient
votes have been received for approval with respect to any such Conestoga
Portfolio. A quorum is constituted with respect to a Conestoga Portfolio by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at the Meeting. Conestoga
proxies properly executed and marked with a negative vote or an abstention will
be considered to be present at the Meeting for the purposes of determining the
existence of a quorum for the transaction of business.
Annual Meetings. CoreFunds does not presently intend to hold annual meetings of
shareholders for the election of directors and other business unless and until
such time as less than a majority of the directors holding office have been
elected by the shareholders, at which time the directors then in office will
call a shareholders' meeting for the election of directors. Shareholders have
the right to call a meeting of shareholders to consider the removal of one or
more directors or for other matters and such meetings will be called when
requested in writing by the holders of record of 10% or more of CoreFunds'
outstanding shares of common stock. To the extent required by law, CoreFunds
will assist in shareholder communications on such matters.
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<PAGE>
ADDITIONAL INFORMATION ABOUT COREFUNDS
Information about the Existing CoreFunds Portfolios is included in the
Prospectuses accompanying this Combined Proxy Statement/Prospectus, which are
incorporated by reference herein. Additional information about these Portfolios
is included in their Statement of Additional Information dated November 1, 1995
which has been filed with the SEC. A copy of the Statement of Additional
Information may be obtained without charge by writing to CoreFunds c/o 680 East
SwedesFord Road, Wayne, PA 19087, or by calling CoreFunds at 1-800-355-CORE.
CoreFunds is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, as applicable, and, in accordance with
such requirements, files proxy materials, reports and other information with the
SEC. These materials can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the offices of listed above and at the SEC's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
The current directors and officers of CoreFunds will continue as
directors and officers following the Reorganization. The name of each such
director as well as information concerning his principal occupations during the
past five years are set forth below.
<TABLE>
<CAPTION>
Position(s) held Principal Occupations
Name and Address Age with CoreFunds During Past 5 Years
---------------- --- ---------------- --------------------
<S> <C> <C> <C>
Erin Anderson 40 Director Professor of Marketing, INSEAD,
Fountainebleu, France since 1994;
Associate Professor of Marketing,
The Wharton School of the
University of Pennsylvania until
1994.
Emil J. Mikity 67 Director Retired; Senior Vice President
Investments, Atochem North
America until 1989.
George H. Strong 69 Director Financial Consultant.
David G. Lee 43 President Senior Vice President of SFM and
SFS since 1993; Vice President of
SFM and SFS since 1991;
President, GW Sierra Trust Funds
prior to 1991.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Position(s) held Principal Occupations
Name and Address Age with CoreFunds During Past 5 Years
---------------- --- ---------------- --------------------
<S> <C> <C> <C>
Carmen V. Romeo 43 Treasurer, Assistant Director, Executive Vice
Secretary President, Chief Financial
Officer and Treasurer of SEI
Corporation; Director and
Treasurer of SFM and SFS.
James W. Jennings 59 Secretary Partner of the law firm of
Morgan, Lewis & Bockius.
Kevin P. Robins 34 Vice President, Senior Vice President and General
Assistant Secretary Counsel of SEI Corporation and
SFS since 1994; Vice President
and Assistant Secretary of SFM
and SFS, 1992-1994; Associate of
the law firm of Morgan, Lewis &
Bockius prior to 1992.
Sandra K. Orlow 42 Vice President, Vice President and Assistant
Assistant Secretary Secretary of SFM and SFS.
Robert B. Carroll 35 Vice President, Vice President and Assistant
Assistant Secretary Secretary of SEI Corporation, SFM
and SFS since 1994. United
States Securities and Exchange
Commission, Division of
Investment Management, 1990-1994.
Kathryn L. Stanton 37 Vice President, Vice President and Assistant
Assistant Secretary Secretary of SFM and SFS since
1994. Associate of the law firm
of Morgan, Lewis & Bockius before
1994.
Richard J. Shoch 29 Vice President and Vice President and Assistant
Assistant Secretary Secretary of SEI Corporation
since 1995; prior thereto
Regulatory Manager of SEI
Corporation.
Joseph Lydon 36 Vice President and Director of Business
Assistant Secretary Administration of Fund Resources
for SEI Corporation since April
1995. Prior thereto, Vice
President - Dreman Value
Management, LP and President -
Dreman Financial Services, Inc.
Stephen G. Meyer 30 Controller and Chief Vice President and Controller -
Accounting Officer Fund Resources, a division of SEI
Corporation; Director - Internal
Audit and Risk Management - SEI
Corporation, 1992 - 1995.
Coopers & Lybrand, Senior
Associate, 1990 - 1992.
</TABLE>
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ADDITIONAL INFORMATION ABOUT CONESTOGA
Information about Conestoga is incorporated herein by reference from
its Prospectuses dated February 21, 1995 (as revised through November 3, 1995)
and Statement of Additional Information, dated May 1, 1995 (as revised through
November 3, 1995), copies of which may be obtained without charge by writing or
calling Conestoga at the address and telephone number shown on the cover page of
this Combined Proxy Statement/Prospectus. Reports and other information filed by
Conestoga can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of such material can be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
The name and address of each trustee and officer of Conestoga as well
as information concerning his or her principal occupations during the past five
years are as follows:
<TABLE>
<CAPTION>
Position(s) Held Principal Occupations
Name and Address Age With Conestoga During Past 5 Years
- ---------------- --- ---------------- -------------------
<S> <C> <C> <C>
Thomas J. Taylor 56 Chairman and Consultant; Trustee, Community
1015 Darby Drive Trustee Heritage Fund
Yardley, PA 19067
*Dominic S. Genuardi, Sr. 72 Trustee Retired; Chief Executive
805 East Germantown Pike Officer, Genuardi Supermarkets,
Norristown, PA 19401 Inc. until October 1990.
*Steven I. Gross 49 Trustee Managing Partner, Gross &
2655 Philmont Avenue Company (certified public
Huntingdon Valley, PA 19006 accountants).
Robert C. Kingston 67 Trustee Consultant; Member of the
1603 River Farm Drive Special Operations Policy
Alexandria, VA 22308 Group of the Secretary of
Defense; Director, Vinnell
Corporation; Founder, Military
Professional Resources, Inc.
Dale E. Smith 65 Trustee Retired; Formerly President,
230 West Washington Square Farm Journal, Inc.
Philadelphia, PA 19106 until November 1995
- ---------------------------
* May be deemed to be an "interested person" of the Company as
defined in the Investment Company Act of 1940.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address Age With Conestoga During Past 5 Years
- ---------------- --- ---------------- -------------------
<S> <C> <C> <C>
David G. Lee 43 President and Senior Vice President of SFM
Chief Executive and SFS since 1993; Vice President
Officer of SFM and SFS since 1991;
President of G.W. Sierra Trust Funds
since 1991.
Sandra K. Orlow 42 Vice President Vice President and Assistant
and Assistant Secretary of SFM and SFS.
Secretary
Robert B. Carroll 35 Vice President Vice President and Assistant
and Assistant Secretary of SEI Corporation, SFM
Secretary and SFS since 1994. United States
Securities and Exchange Commission,
Division of Investment Management,
1990-1994.
Kathryn L. Stanton 37 Vice President Vice President and Assistant
and Assistant Secretary of SFM and SFS since
Secretary 1994. Associate of the law firm of
Morgan, Lewis & Bockius before 1994.
Kevin P. Robins 34 Vice President Senior Vice President and General
and Assistant Counsel of SEI Corporation and SFS
Secretary since 1994; Vice President and
Assistant Secretary of SFM and SFS,
1992-1994; Associate of the law firm
of Morgan, Lewis & Bockius prior to
1992.
Henry S. Hilles, Jr. 56 Secretary Partner in the law firm of Drinker
Biddle & Reath.
Stephen G. Meyer 30 Treasurer Vice President and Controller - Fund
Resources, a division of SEI; Director -
Internal Audit and Risk Management - SEI
Corporation, 1992-1995. Coopers & Lybrand,
Senior Associate, 1990-1992.
</TABLE>
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<PAGE>
ADDITIONAL INFORMATION ABOUT THE INVESTMENT
ADVISER AND SUB-ADVISER
MIC's principal offices are located at 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355. MIC is a wholly-owned subsidiary of Meridian Asset
Management, Inc., which is located at 55 Valley Stream Parkway, Malvern,
Pennsylvania 19355. Meridian Asset Management, Inc. is a wholly-owned subsidiary
of Meridian Bancorp, Inc., a regional multi-bank holding company located at 35
North Sixth Street, Reading, Pennsylvania 19603. MIC is registered as an
investment adviser under the Investment Advisers Act of 1940. The current
advisory contract was most recently submitted for shareholder approval on
February 28, 1991. MIC does not serve as investment advisor to any other
investment companies.
At January 26, 1996, the name, address and share ownership of the
persons who beneficially owned 10% or more of any class of issued and
outstanding voting securities of Meridian Bancorp, Inc. are as follows:
The name and principal occupation of the directors and principal
executive officers of MIC are as follows:
MERIDIAN INVESTMENT COMPANY
<TABLE>
<CAPTION>
Position With
Meridian Other
Investment Business Type of
Company Name Connection(s) Business
- ------- ---- ------------- --------
<S> <C> <C> <C>
Director George J. Baxter Director, Asset
Meridian Asset Management
Management, Inc.
Trust Company
Meridian Trust
Company, P.O. Box
2000, Valley Forge,
PA 19482
Director, Trust Company
Delaware Trust Capital
Management, Inc.
Delaware Trust Company Banking
900 Market Street
Wilmington, DE 19801
Senior Vice President Brokerage
Chicago Corporation
16 South Main Street
Yardley, PA 19067
Director DeLight E. Breidegam, President
</TABLE>
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<TABLE>
<CAPTION>
Position With
Meridian Other
Investment Business Type of
Company Name Connection(s) Business
- ------- ---- ------------- --------
<S> <C> <C> <C>
Jr. East Penn Battery
Manufacturing Co., Manufac-
Inc. turing
Lyon Station, PA
19536
Director
Meridian Bancorp, Bank
Inc. Holding Co.
Meridian Bank Bank
35 North Sixth Street
Reading, PA 19603
Director
Meridian Asset Asset
Management, Inc. Management
Meridian Trust Trust
Company Company
P.O. Box 2000
Valley Forge, PA
19482
Director
Spotts, Stevens & Engineering
McCoy
345 N. Wyomissing
Blvd.
Reading, PA 19610
President and Philip H. Brown, II Director
Director Meridian Securities, Broker-Dealer
Inc.
35 North Sixth St.
Reading, PA 19603
Director Walter J. Laird, Jr. Senior Vice President Broker-Dealer
Dean Witter Reynolds,
Inc.
P.O. Box 749
Wilmington, DE 19899
Director Investment
Wentz Corporation Management
707 Foulk Rd.
Suite 102
Wilmington, DE
19803-3700
Director Investment
Sinkler Corporation Management
707 Foulk Rd.
Suite 102
Wilmington, DE 19803-3700
Director Banking
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Position With
Meridian Other
Investment Business Type of
Company Name Connection(s) Business
- ------- ---- ------------- --------
<S> <C> <C> <C>
Delaware Trust
Company
900 Market Street
Wilmington, DE 19801
Director Trust Company
Delaware Trust
Capital Management
900 Market Street
Wilmington, DE 19801
Director Asset
Meridian Asset Management
Management
P.O. Box 2000
Valley Forge, PA 19482
Director Nancy Pearlstine 182 Oaks Road Homemaker
Conger, C.F.P. Millington, NJ 07946
Director
Meridian Asset Asset
Management, Inc. Management
Meridian Trust Trust
Company Company
P.O. Box 2000
Valley Forge, PA
19482
Director Sidney D. Kline, Jr. Attorney and
Principal
Stevens and Lee Law
607 Washington Street
Reading, PA 19601
Director
Meridian Bancorp, Bank Holding
Inc. Co.
Meridian Bank Bank
35 North Sixth Street
Reading, PA 19603
Director
Meridian Asset Asset
Management, Inc. Management
Meridian Trust Trust
Company Company
P.O. Box 2000
Valley Forge, PA 19482
</TABLE>
-70-
<PAGE>
<TABLE>
<CAPTION>
Position With
Meridian Other
Investment Business Type of
Company Name Connection(s) Business
- ------- ---- ------------- --------
<S> <C> <C> <C>
Director
Meridian Title Title
Insurance Company Insurance
101 N. 6th Street
Reading, PA 19603
Director
American Title Title
Insurance Company Insurance
1101 Brickell Avenue
Miami, FL 33131
Director
Horrigan American, Equipment
Inc. Leasing
Flying Hills
Corporate Center
Reading, PA 19607
Director
Reading Eagle Company Newspaper
345 Penn Street
Reading, PA 19601
Director
FCP, Inc. Manufacturer
Flying Hills Building
Reading, PA 19607 Material
Director
The Bachman Company Snack Food
50 N. 4th Street
Reading, PA 19601
Director Blaine T. Phillips Partner Law Firm
Potter Anderson &
Corroon
350 Delaware Trust
Building
P.O. Box 951
Wilmington, DE 19899
Director Banking
Delaware Trust
Company
900 Market Street
Wilmington, DE 19801
Director Trust Company
Delaware Trust
Capital Management
900 Market Street
Wilmington, DE 19801
Director Trust Company
Meridian Trust Company
</TABLE>
-71-
<PAGE>
<TABLE>
<CAPTION>
Position With
Meridian Other
Investment Business Type of
Company Name Connection(s) Business
- ------- ---- ------------- --------
<S> <C> <C> <C>
P.O. Box 2000
Valley Forge, PA 19482
Director Asset
Meridian Asset Management
Management
P.O. Box 2000
Valley Forge, PA
19482
Director George Strawbridge, Jr. Owner Thoroughbred
Augustine Stables Racing and
3801 Kennett Pike Breeding
Suite 100-B
Wilmington, DE 19807
Director Foods
Campbell Soup Company
Campbell Place
Camden, NJ 08101
Partner Venture
Philadelphia Ventures Capital
200 S. Broad Street
Philadelphia, PA 19102
Co-owner Survey
GAR, Inc. Company
3801 Kennett Pike
Suite 100-B
Wilmington, DE 19807
Co-owner Survey
Keystone Aerial Company
Surveys
P.O. Box 21059
Philadelphia, PA 19114
Director National
Niagara Frontier Hockey
Hockey Corporation League
140 Main Street
Buffalo, NY 14202
Director Banking
Delaware Trust
Company
900 Market Street
Wilmington, DE 19801
Director Trust Company
Delaware Trust
Capital Management
900 Market Street
Wilmington, DE 19801
</TABLE>
-72-
<PAGE>
<TABLE>
<CAPTION>
Position With
Meridian Other
Investment Business Type of
Company Name Connection(s) Business
- ------- ---- ------------- --------
<S> <C> <C> <C>
Director Bank Holding
Meridian Bancorp, Company Inc.
Meridian Bank
35 North Sixth Street
Reading, PA 19603
Senior Craig A. Moyer None
Investment
Manager
Senior Joseph E. Stocke None
Investment
Manager
Assistant Cathy L. Rahab None
Vice
President
Vice Leslie M. Varrelman None
President
Investment Christine M. Frampton None
Officer
</TABLE>
Marvin and Palmer's principal offices are located at 1201 N. Market Street,
Suite 2300, Wilmington, Delaware 19801. Marvin and Palmer is a privately held
company owned by Messrs. Marvin, Palmer and twenty one other holders. Marvin and
Palmer is registered as an investment adviser under the Investment Advisers Act
of 1940.
The table below sets forth information concerning other investment
companies that have similar investment objectives for which Marvin and Palmer
act as investment adviser or sub-adviser.
<TABLE>
<CAPTION>
================================================================================
Name of Investment Net Assets as of Annual Fee
Company December 27, 1995 (Based on Average
Net Assets)
<S> <C> <C>
First American $1.3 million .75% of the first $100 million of the Fund's average
International Fund daily net assets, .70% of the next $100 million of
the Fund's average daily net assets, .65% of the
third $100 million of the Fund's average daily net
assets, and .60% of the Fund's average daily net
assets in excess of $300 million.
================================================================================
</TABLE>
SFM serves as administrator and SFC serves as distributor for both
Conestoga and CoreFunds. The principal address of SFM and SFC is 680 East
Swedesford Road, Wayne, Pennsylvania 19087.
-73-
<PAGE>
LITIGATION
Neither Conestoga nor CoreFunds is involved in any litigation that
would have any material adverse financial effect upon either the Conestoga
Portfolios or the CoreFunds Portfolios.
FINANCIAL HIGHLIGHTS
Conestoga Financial Highlights. The tables set forth below
present financial information for the Institutional Shares and Retail Shares of
the Conestoga Cash Management, Tax-Free, U.S. Treasury Securities, Equity,
Special Equity, Bond, Intermediate Income, Pennsylvania Tax-Free Bond, Balanced,
Short-Term Income and International Equity Portfolios. This information is
derived from the Conestoga Portfolios' audited financial statements for the
fiscal year ended October 31, 1995. The data should be read in conjunction with
the audited financial statements and related notes which are included in the
Statement of Additional Information related to this Combined Proxy
Statement/Prospectus. The financial highlights for the Conestoga Portfolios for
prior periods are contained in Conestoga's Prospectuses dated February 21, 1995,
as supplemented November 3, 1995, and the financial statements for the Conestoga
Portfolios for prior periods are contained in Conestoga's Annual Report to
Shareholders and are incorporated by reference into Conestoga's Statement of
Additional Information dated May 1, 1995 (as revised November 3, 1995), which
Prospectuses and Statement of Additional Information are incorporated herein by
reference.
-74-
<PAGE>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
Cash Management Fund
<TABLE>
<CAPTION>
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .05 .05
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .0 .0
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. .05 .05
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.05) (.05)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.05) (.05)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 5.43% 5.25%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $234,520 $3,358
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .56% .74%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 5.32% 5.16%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ .79% .97%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 5.09% .93%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... N/A N/A
========================================================================================================================
- -------------------------------
</TABLE>
-75-
<PAGE>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
<TABLE>
<CAPTION>
Tax-Free Fund
--------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .03 .03
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .0 .0
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. .03 .03
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.03) (.03)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.03) (.03)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 3.43% 3.39%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $60,509 $1,282
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .46% .48%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 3.37% 3.35%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ .83% .88%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 3.00% 2.95%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... N/A N/A
========================================================================================================================
- -------------------------------
</TABLE>
-76-
<PAGE>
<TABLE>
<CAPTION>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
U.S. Treasury Securities Fund
-----------------------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .05 .05
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .0 .0
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. .05 .05
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.05) (.05)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.05) (.05)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 5.27% 5.16%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $444,259 $730
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .62% .73%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 5.14% 5.26%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ .78% .79%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 4.98% 5.20%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... N/A N/A
========================================================================================================================
- -------------------------------
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
Equity Fund
-----------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $15.00 $15.00
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .19 .18
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... 2.87 2.87
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 18.06 18.05
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.19) (.17)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (.80) (.80)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.99) (.97)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $17.07 $17.08
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 22.00% 21.94%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $378,352 $6,591
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... 1.05% 1.34%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 1.44% 1.23%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.10% 1.53%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 1.49% 1.04%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 119% 119%
========================================================================================================================
- -------------------------------
</TABLE>
-78-
<PAGE>
<TABLE>
<CAPTION>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
Special Equity Fund
-------------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $9.37 $9.37
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .12 .12
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... 2.12 2.12
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 11.61 11.61
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.12) (.12)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (.07) (.07)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.19) (.19)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $11.42 $11.42
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 24.44% 24.44%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $57,396 $734
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .32% .27%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 1.14% 1.29%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.97% 2.24%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. (.51)% (.68)%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 129% 129%
========================================================================================================================
- -------------------------------
</TABLE>
-79-
<PAGE>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
<TABLE>
<CAPTION>
Bond Fund
---------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $9.81 $9.81
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .61 .60
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .71 .72
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 11.13 11.13
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.58) (.57)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.58) (.57)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $10.55 $10.56
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 13.87% 13.83%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $194,442 $1,373
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .71% .97%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 6.09% 6.02%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.12% 1.44%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 5.68% 5.55%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 352% 352%
========================================================================================================================
- -------------------------------
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
Intermediate Income Fund
------------------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $10.27 $10.27
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .57 .55
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .42 .44
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 11.26 11.26
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.55) (.54)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.55) (.54)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $10.71 $10.72
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 9.92% 9.90%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $138,243 $1,230
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .64% .93%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 5.72% 5.47%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.15% 1.51%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 5.21% 4.89%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 260% 260%
========================================================================================================================
- -------------------------------
</TABLE>
-81-
<PAGE>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
<TABLE>
<CAPTION>
Pennsylvania Tax-Free Bond Fund
-------------------------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $9.56 $9.56
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .47 .47
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .67 .67
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 10.70 10.70
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.46) (.46)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (.01) (.01)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.47) (.47)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $10.23 $10.23
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 12.30% 12.30%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $5,977 $820
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .51% .51%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 4.64% 4.64%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.65% 1.62%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 3.50% 3.53%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 15% 15%
========================================================================================================================
- -------------------------------
</TABLE>
-82-
<PAGE>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
<TABLE>
<CAPTION>
Balanced Fund
-------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $10.00 $9.97
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .12 .11
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .37 .42
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 10.49 10.50
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.11) (.11)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.11) (.11)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $10.38 $10.39
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 4.89% 5.27%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. 38,494 $69
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .82% 1.07%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 3.66% 3.37%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.07% 1.32%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 3.41% 3.12%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 65% 65%
========================================================================================================================
- -------------------------------
</TABLE>
-83-
<PAGE>
<TABLE>
<CAPTION>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
Short-Term Income Fund
----------------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $10.00 $10.01
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ .25 .23
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... .03 .02
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 10.28 10.26
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (.23) (.22)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (.23) (.22)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $10.05 $10.04
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 2.87% 2.57%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $36,059 $11
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... .63% .88%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... 5.43% 5.05%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.08% 1.33%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. 4.98% 4.60%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 40% 40%
========================================================================================================================
- -------------------------------
</TABLE>
-84-
<PAGE>
<TABLE>
<CAPTION>
Selected data for a Conestoga Share of capital stock
outstanding throughout the period indicated:
International Equity Fund
-------------------------
Fiscal Year Ended
October 31, 1995
========================================================================================================================
Institutional Retail
Shares Shares
------ ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning
of period....................................................... $10.00 $10.00
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income............................................ 0.00 (0.01)
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain/(Loss) on Investments...................................... 1.01 1.00
- ------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations................................. 11.01 10.99
- ------------------------------------------------------------------------------------------------------------------------
Dividends to Shareholders from
Net Investment Income........................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
from Net Realized Gain on
Investment Transactions......................................... (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (0) (0)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period................................... $11.01 $10.99
- ------------------------------------------------------------------------------------------------------------------------
Total Return..................................................... 10.10% 9.90%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
(000 omitted).................................................. $13,372 $9
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets.......................... 1.88% 2.13%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets..................................................... (.10)% (.69)%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
(Excluding Waivers)............................................ 1.88% 2.26%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers)................................. (.10)% (.83)%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate.......................................... 23% 23%
========================================================================================================================
- -------------------------------
</TABLE>
-85-
<PAGE>
FINANCIAL STATEMENTS
The financial statements for the Conestoga Portfolios for the fiscal
year ended October 31, 1995, are included in the Statement of Additional
Information related to this Combined Proxy Statement/Prospectus. The financial
highlights and the financial statements for Institutional and Individual shares
of the Existing CoreFunds Portfolios for the fiscal year ended June 30, 1995 are
contained in CoreFunds' Annual Report to Shareholders and in CoreFunds'
Prospectuses and Statement of Additional Information dated November 1, 1995,
each of which is incorporated by reference in this Combined Proxy
Statement/Prospectus.
The financial statements for the Conestoga Portfolios as of October 31,
1995, and the related statements of operations, changes in net assets and
financial highlights for the periods indicated in the financial statements
contained in Conestoga's Annual Report and incorporated by reference in this
Combined Proxy/Prospectus, have been incorporated herein in reliance on the
reports of Coopers & Lybrand L.L.P., independent auditors, given on the
authority of that firm as experts in accounting and auditing.
The financial statements of the Existing CoreFunds Portfolios as of
June 30, 1995, and the related statements of operations, changes in net assets
and financial highlights for the periods indicated in the financial statements
are included in CoreFunds' Prospectuses and contained in CoreFunds' Statement of
Additional Information, and incorporated by reference in this Combined
Proxy/Prospectus, have been incorporated by reference herein in reliance on the
reports of Ernst & Young LLP, independent auditors, given on the authority of
that firm as experts in accounting and auditing.
OTHER BUSINESS
Conestoga's Board knows of no other business to be brought before the
Meeting. However, if any other matters come before the Meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
-86-
<PAGE>
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Conestoga in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-344-2716.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-87-
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APPENDIX I
AGREEMENT AND PLAN OF
REORGANIZATION
BY AND BETWEEN
COREFUNDS, INC.
AND
CONESTOGA FAMILY OF FUNDS
DATED __________________, 1996
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TABLE OF CONTENTS
Page
----
I. Transfer of Assets of Conestoga Portfolios..........................
II. Liquidating Distributions and Termination of Conestoga..............
III. Valuation Times.....................................................
IV. Certain Representations, Warranties and Agreements
of Conestoga........................................................
V. Certain Representations, Warranties and Agreements
of CoreFunds........................................................
VI. Shareholder Action on behalf of the Acquired Funds..................
VII. N-14 Registration Statement and Proxy Solicitation
Materials...........................................................
VIII. Effective Times of the Reorganization...............................
IX. CoreFunds Conditions................................................
X. Conestoga Conditions................................................
XI. Tax Documents.......................................................
XII. Finder's Fees.......................................................
XIII. Announcements.......................................................
XIV. Further Assurances..................................................
XV. Termination of Representations and Warranties.......................
XVI. Termination of Agreement............................................
XVII. Amendment and Waiver................................................
XVIII. Governing Law.......................................................
XIX. Successors and Assigns..............................................
XX. Beneficiaries.......................................................
XXI. Conestoga Liability.................................................
XXII. Notices.............................................................
XXIII. Expenses............................................................
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XXIV. Entire Agreement....................................................
XXV. Counterparts........................................................
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made as of ________________, 1996
between COREFUNDS, INC., a Maryland corporation ("CoreFunds"), and CONESTOGA
FAMILY of FUNDS, a Massachusetts business trust ("Conestoga").
WHEREAS, the parties desire that substantially all of the known assets
and liabilities of Conestoga's portfolios be transferred to, and be acquired and
assumed by, certain CoreFunds portfolios in exchange for Individual Shares or
Institutional Shares of the CoreFunds portfolios which shall thereafter be
distributed by Conestoga to the holders of Retail Shares or Institutional Shares
of its portfolios, all as described in this Agreement (the "Reorganization");
WHEREAS, the parties intend that the CoreFunds Special Equity Fund,
Bond Fund and Short-Term Income Fund portfolios will have nominal assets and
liabilities before the Reorganization and will continue the investment
operations of the Conestoga Special Equity Fund, Bond Fund and Short-Term Income
Fund (the "Continuing Funds"), respectively, after the Reorganization;
WHEREAS, the Reorganization with respect to Conestoga's Cash Management
Fund, Tax-Free Fund, U.S. Treasury Securities Fund, Equity Fund, Intermediate
Income Fund, Pennsylvania Tax-Free Bond Fund, Balanced Fund and International
Equity Fund (the
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"Reorganizing Funds") shall occur on a date that is prior to the Reorganization
with respect to the Continuing Funds;
WHEREAS, the parties intend that the transfers of assets, assumptions
of liabilities, and distributions of Individual Shares or Institutional Shares,
as the case may be, be treated as tax-free reorganizations under Section
368(a)(1)(C), 368(a)(1)(D), or 368(a)(1)(F) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, the parties intend that in connection with the Reorganization
each of the Conestoga portfolios shall be terminated and Conestoga shall be
terminated under state law and deregistered as described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, and
intending to be legally bound hereby, CoreFunds and Conestoga agree as follows:
I. Transfer of Assets of Conestoga Portfolios.
1.01 (a) At the Effective Time of the Reorganization (as defined in
Article VIII) with respect to each of the Conestoga portfolios
(each, an "Acquired Fund"), all property of every description,
and all
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interests, rights, privileges and powers of each Acquired Fund
other than cash in an amount necessary to pay any unpaid
dividends and distributions as provided in Article IV(g) (such
assets, the "Acquired Fund Assets") shall be transferred and
conveyed by such Acquired Fund to CoreFunds on behalf of one
of its portfolios as set forth in Section 1.02 (each, an
"Acquiring Fund"), and shall be accepted by CoreFunds on
behalf of such Acquiring Fund, and CoreFunds, on behalf of
such Acquiring Fund, shall assume all known liabilities
whether accrued, absolute, contingent or otherwise, of such
Acquired Fund reflected in the calculation of such Acquired
Fund's net asset value (the "Acquired Fund Liabilities"), so
that at and after the Effective Time of the Reorganization
with respect to such Acquired Fund: (i) all assets of such
Acquired Fund shall become and be the assets of its Acquiring
Fund; and (ii) all known liabilities of such Acquired Fund
reflected as such in the calculation of the Acquired Fund's
net asset value shall attach to its Acquiring Fund as
aforesaid and may thenceforth be enforced against such
Acquiring Fund to the extent as if the same had been incurred
by it. Without limiting the
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generality of the foregoing, the Acquired Fund Assets shall
include all property and assets of any nature whatsoever,
including, without limitation, all cash, cash equivalents,
securities, claims and receivables (including dividend and
interest receivables) owned by an Acquired Fund, and (subject
to Section 1.01(b)) any deferred or prepaid expenses shown as
an asset on an Acquired Fund's books, at the Effective Time of
the Reorganization of such Acquired Fund, and all good will,
all other intangible property and all books and records
belonging to an Acquired Fund. Recourse by any person for the
Acquired Fund Liabilities assumed by an Acquiring Fund shall,
at and after the Effective Time of the Reorganization of such
Acquired Fund, be limited to such Acquiring Fund.
(b) Notwithstanding Section 1.01(a), unamortized organizational
expenses of the Reorganizing Funds shall not be transferred or
assumed hereunder. The parties have been advised that such
expenses will be paid to such Reorganizing Funds by one or
more third parties and will be eliminated from the balance
sheets of such Reorganizing Funds prior to
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the applicable Effective Time of the Reorganization of the
Reorganizing Funds.
1.02 The assets of each Acquired Fund shall be acquired by the
Acquiring Fund identified below opposite its name, and the holders of each class
of shares of such Acquired Fund shall receive the class of shares of common
stock of the Acquiring Fund identified below opposite the name of such class:
Conestoga Portfolios and Classes CoreFunds Portfolios and Class
- -------------------------------- ------------------------------
Cash Management Fund Cash Reserve Fund
Institutional Shares Class Y-Institutional Shares
(Class A Common Stock)
Retail Shares Class C-Individual Shares
(Class A Common Stock, Class B)
Tax-Free Fund Tax-Free Reserve Fund
Institutional Shares Class Y-Institutional Shares
(Class J Common Stock)
Retail Shares Class C-Individual Shares
(Class J Common Stock, Class B)
U.S. Treasury Securities Fund Treasury Reserve Fund
Institutional Shares Class Y-Institutional Shares
(Class B Common Stock)
Retail Shares Class C-Individual Shares
(Class B Common Stock, Class B)
Intermediate Income Fund Short Intermediate Bond Fund
Institutional Shares Class Y-Institutional Shares
(Class H Common Stock)
Retail Shares Class A-Individual Shares
(Class H Common Stock, Class B)
Pennsylvania Tax-Free Bond Fund Pennsylvania Municipal Bond Fund
Institutional Shares Class Y-Institutional Shares
(Class P Common Stock)
Retail Shares Class A-Individual Shares
(Class P Common Stock, Class B)
Balanced Fund Balanced Fund
Institutional Shares Class Y-Institutional Shares
(Class L Common Stock)
Retail Shares Class A-Individual Shares
(Class L Common Stock, Class B)
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Conestoga Portfolios and Classes CoreFunds Portfolios and Class
- -------------------------------- ------------------------------
International Equity Fund International Growth Fund
Institutional Shares Class Y-Institutional Shares
(Class E Common Stock)
Retail Shares Class A-Individual Shares
(Class E Common Stock, Class B)
Equity Fund Equity Fund
Institutional Shares Class Y-Institutional Shares
(Class D Common Stock)
Retail Shares Class A-Individual Shares
(Class D Common Stock, Class B)
Special Equity Fund Special Equity Fund
Institutional Shares Class Y-Institutional Shares
Retail Shares Class A-Individual Shares
Bond Fund Bond Fund
Institutional Shares Class Y-Institutional Shares
Retail Shares Class A-Individual Shares
Short-Term Income Fund Short-Term Income Fund
Institutional Shares Class Y-Institutional Shares
Retail Shares Class A-Individual Shares
The Board of Directors of CoreFunds has adopted resolutions authorizing the
change of names of the Intermediate Bond Fund to the Short Intermediate Bond
Fund and of the Value Equity Fund to the Equity Fund and the change of
designations of the classes of each Acquiring Fund (i) from Individual-Class A
to Class A for each Acquiring Fund except the Cash Reserve Fund, Tax-Free
Reserve Fund and Treasury Reserve Fund, which will be designated Class C, and
(ii) from Institutional-Class B to Class Y for each Acquiring Fund. These
changes will be effective by the Effective Time of the Reorganization with
respect to each Acquired Fund.
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1.03 In exchange for the transfer of the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities, CoreFunds shall simultaneously
issue at the applicable Effective Time of the Reorganization to each Acquired
Fund a number of full and fractional shares to the third decimal place, of the
Acquiring Fund specified in Section 1.02 and of the class or classes identified
in Section 1.02, all determined and adjusted as provided in this Agreement. The
number of each class of shares of the Acquiring Funds so issued will have an
aggregate net asset value equal to the value of the Acquired Fund Assets that
are represented by the class of shares of the Acquired Fund, the holders of
which shall receive such class of shares of the Acquiring Fund, as specified in
Section 1.02, all determined and adjusted as provided in this Agreement.
1.04 The net asset value of each class of shares of the Acquiring Funds
and the net asset value of each class of shares of the Acquired Funds shall be
determined as of the applicable Valuation Time with respect to each Acquired
Fund specified in Article III.
1.05 The net asset value of each class of shares of each Acquiring Fund
shall be computed in the manner set forth in such Acquiring Fund's then current
prospectuses under the Securities Act of 1933, as amended (the "1933 Act"). The
net value of the Acquired Fund Assets to be transferred by the Conestoga
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portfolios shall be computed by Conestoga and shall be subject to adjustment by
the amount, if any, agreed to by CoreFunds and Conestoga. In determining the
value of the securities transferred by the Acquired Funds to the Acquiring
Funds, each security shall be priced in accordance with the policies and
procedures of CoreFunds described in its then current prospectuses and
statements of additional information and adopted by CoreFunds' Board of
Directors, which are and shall be consistent with the policies now in effect for
Conestoga. For such purposes, price quotations and the security characteristics
relating to establishing such quotations shall be determined by CoreFunds,
provided that such determination shall be subject to the approval of Conestoga.
The value of the Acquired Fund Assets of the Conestoga Cash Management
Fund, Tax-Free Fund and U.S. Treasury Securities Fund (each, a "Conestoga Money
Market Fund") and the value of the shares of the corresponding Acquiring Funds
for purposes of sales and redemptions shall be based on the amortized cost
valuation procedures that have been adopted by the Board of Trustees of
Conestoga and the Board of Directors of CoreFunds, respectively. Any provision
in this Agreement to the contrary notwithstanding, if the difference between the
per share net asset values of a Conestoga Money Market Fund and its
corresponding Acquiring Fund equals or exceeds $.0025 at the applicable
Valuation Time, as computed by using such market values in accordance with the
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policies and procedures established by CoreFunds (or as otherwise mutually
determined by the Board of Trustees of Conestoga and the Board of Directors of
CoreFunds), either the Board of Trustees of Conestoga or the Board of Directors
of CoreFunds shall have the right to postpone the applicable Valuation Time and
the applicable Effective Time of the Reorganization with respect to such
Conestoga Money Market Fund until such time as the per share difference is less
than $.0025.
II. Liquidating Distributions and Termination of Conestoga.
Immediately after the Effective Time of the Reorganization with respect to each
Acquired Fund, such Acquired Fund shall distribute in complete liquidation pro
rata to the record holders of each class of its shares at the applicable
Effective Time of the Reorganization the shares of the class of the Acquiring
Fund identified in Section 2.01 to be received by the record holders of such
class of such Acquired Fund. In addition, each shareholder of record of an
Acquired Fund shall have the right to receive any unpaid dividends or other
distributions which were declared before the applicable Effective Time of the
Reorganization with respect to the shares of an Acquired Fund that are held by
the shareholder at the applicable Effective Time of the Reorganization. In
accordance with instructions it receives from Conestoga, CoreFunds shall record
on its books the ownership of each class of shares of each Acquiring Fund by the
record holders of the class of shares of the Acquired Fund
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identified in Section 1.02. All of the issued and outstanding shares of each
class of each Acquired Fund shall be redeemed and canceled on the books of
Conestoga at the Effective Time of the Reorganization of such Acquired Fund and
shall thereafter represent only the right to receive the class of shares of the
Acquiring Fund identified in Section 1.02, and the Acquired Fund's transfer
books shall be closed permanently. As soon as practicable after the Effective
Time of the Reorganization with respect to the Continuing Funds, Conestoga shall
make all filings and take all other steps as shall be necessary and proper to
effect its complete dissolution, and shall file an application pursuant to
Section 8(f) of the 1940 Act for an order declaring that it has ceased to be an
investment company and any and all documents that may be necessary to terminate
its existence under state law. After the Effective Time of the Reorganization
with respect to the Continuing Funds, Conestoga shall not conduct any business
except in connection with its liquidation, dissolution, and deregistration.
III. Valuation Times. Subject to Section 1.05 hereof, (a) the Valuation
Time for the Reorganization with respect to the Reorganizing Funds shall be 4:00
P.M., Eastern Time, on such date as may be agreed in writing by the duly
authorized officers of both parties hereto, which date shall not be later than
the thirty-first calendar day following the consummation of the
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merger between CoreStates Financial Corp and Meridian Bancorp, Inc. described in
an Agreement and Plan of Merger dated October 10, 1995 (the "Bank Holding
Company Merger"), and (b) the Valuation Time for the Reorganization with respect
to the Continuing Funds shall be 4:00 p.m., Eastern Time, on such date as may be
agreed in writing by the duly authorized officers of both parties hereto, which
date shall be not less than seven calendar days following the Valuation Time for
the Reorganization with respect to the Reorganizing Funds.
IV. Certain Representations, Warranties and Agreements of Conestoga.
Conestoga, on behalf of itself and each Acquired Fund, represents and warrants
to, and agrees with, CoreFunds as follows:
(a) It is a Massachusetts business trust duly created pursuant to
its Agreement and Declaration of Trust for the purpose of
acting as a management investment company under the 1940 Act
and is validly existing under the laws of, and duly authorized
to transact business in, the Commonwealth of Massachusetts.
It is registered with the Securities and Exchange Commission
(the "SEC") as an open-end management investment company under
the 1940 Act and such registration is in full force and
effect.
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(b) It has power to own all of its properties and assets and,
subject to the approvals of shareholders referred to herein,
to carry out and consummate the transactions contemplated
hereby, and has all necessary federal, state and local
authorizations to carry on its business as now being conducted
and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by Conestoga, and represents Conestoga's valid and
binding contract, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar
laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The
execution and delivery of this Agreement does not and will
not, and the consummation of the transactions contemplated by
this Agreement will not, violate Conestoga's Agreement and
Declaration of Trust or Code of Regulations or any agreement
or arrangement to which it is a party or by which it is bound.
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(d) Each Acquired Fund has elected to qualify and has qualified
as a regulated investment company under Part I of Subchapter M
of the Code, as of and since its first taxable year; has been
a regulated investment company under such Part of the Code at
all times since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as a
regulated investment company until the Effective Time of the
Reorganization with respect to such Acquired Fund.
(e) All federal, state, local and foreign income, profits,
franchise, sales, withholding, customs, transfer and other
taxes, including interest, additions to tax and penalties
(collectively, "Taxes") relating to the Acquired Fund Assets
due or properly shown to be due on any return filed by any
Acquired Fund with respect to taxable periods ending on or
prior to, and the portion of any interim period up to, the
date hereof have been fully and timely paid or provided for;
and there are no levies, liens, or other encumbrances relating
to Taxes existing, threatened or pending with respect to the
Acquired Fund Assets.
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(f) The financial statements of Conestoga's U.S. Treasury
Securities Fund, Cash Management Fund, Tax-Free Fund,
Intermediate Income Fund, Bond Fund, Equity Fund, Special
Equity Fund, and Pennsylvania Tax-Free Bond Fund for the
fiscal year ended October 31, 1995, and the financial
statements of Conestoga's Balanced Fund, Short- Term Income
Fund, and International Equity Fund for their respective
fiscal periods ended October 31, 1995, examined by Coopers &
Lybrand L.L.P., copies of which have been previously furnished
to CoreFunds, present fairly the financial position of each
Acquired Fund as of October 31, 1995 and the results of its
operations for the year or period then ending, in conformity
with generally accepted accounting principles.
(g) Prior to the Valuation Time applicable to the Reorganizing
Funds, each of the Reorganizing Funds shall have declared a
dividend or dividends, with a record date and ex-dividend date
prior to such Valuation Time, which, together with all
previous dividends, shall have the effect of distributing to
its shareholders all of its net investment company income, if
any, for the taxable periods or years ended on or before
October 31, 1995 and for
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the period from said date to and including the Effective Time
of the Reorganization applicable to the Reorganizing Funds
(computed without regard to any deduction for dividends paid),
and all of its net capital gain, if any, realized in taxable
periods or years ended on or before October 31, 1995 and in
the period from said date to and including the Effective Time
of the Reorganization applicable to the Reorganizing Funds.
(h) At both the Valuation Time and the Effective Time of the
Reorganization with respect to each Acquired Fund, there shall
be no known liabilities of such Acquired Fund, whether
accrued, absolute, contingent or otherwise, not reflected in
the net asset values per share of its outstanding classes of
shares.
(i) There are no legal, administrative or other proceedings
pending or, to Conestoga's knowledge threatened, against
Conestoga or an Acquired Fund which could result in liability
on the part of Conestoga or an Acquired Fund.
(j) Subject to the approvals of shareholders referred to herein,
at both the Valuation Time and the
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Effective Time of the Reorganization with respect to each
Acquired Fund, it shall have full right, power and authority
to sell, assign, transfer and deliver the Acquired Fund Assets
of such Acquired Fund and, upon delivery and payment for the
Acquired Fund Assets as contemplated herein, an Acquiring Fund
shall acquire good and marketable title thereto, free and
clear of all liens and encumbrances, and subject to no
restrictions on the ownership or transfer thereof (except as
imposed by federal or state securities laws).
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by
Conestoga of the transactions contemplated by this Agreement,
except such as may be required under the 1933 Act, the
Securities Exchange Act of 1934, as amended ("1934 Act"), the
1940 Act, the rules and regulations under those Acts, and
state securities laws.
(l) Insofar as the following relate to Conestoga, the registration
statement filed by CoreFunds on Form N-14 relating to the
shares of certain Acquiring Funds that will be registered with
the SEC
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pursuant to this Agreement, which, without limitation, shall
include a proxy statement of Conestoga and the prospectuses of
CoreFunds with respect to the transactions contemplated by
this Agreement, and any supplement or amendment thereto or to
the documents contained or incorporated therein by reference
(the "N-14 Registration Statement"), on the effective date of
the N-14 Registration Statement, at the time of any
shareholders' meeting referred to herein and at each Effective
Time of the Reorganization: (i) shall comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and
the 1940 Act, the rules and regulations thereunder, and state
securities laws, and (ii) shall 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 not misleading.
(m) All of the issued and outstanding shares of each class of each
Acquired Fund have been duly and validly issued, are fully
paid and non-assessable, and were offered for sale and sold in
conformity with all applicable federal and state securities
laws, and no shareholder of an Acquired Fund has
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any preemptive right of subscription or purchase in respect of
such shares.
(n) Conestoga shall not sell or otherwise dispose of any shares of
an Acquiring Fund to be received in the transactions
contemplated herein, except in distribution to its
shareholders as contemplated herein.
V. Certain Representations, Warranties and Agreements of CoreFunds.
CoreFunds, on behalf of itself and each Acquiring Fund, represents and warrants
to, and agrees with, Conestoga as follows:
(a) It is a Maryland corporation duly organized and validly
existing under the laws of the State of Maryland. It is
registered with the SEC as an open-end management investment
company under the 1940 Act and such registration is in full
force and effect.
(b) It has power to own all of its properties and assets and to
carry out and consummate the transactions contemplated herein,
and has all necessary federal, state and local authorizations
to carry on its business as now being conducted
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and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by CoreFunds, and represents CoreFunds' valid and
binding contract, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar
laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The
execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this
Agreement will not, violate CoreFunds' Articles of
Incorporation or By-laws or any agreement or arrangement to
which it is a party or by which it is bound.
(d) Each Acquiring Fund has elected or will elect to qualify, and
each of the first eight Acquiring Funds listed in Section 1.02
has qualified, as a regulated investment company under Part I
of Subchapter M of the Code, as of and since its first taxable
year; each of the first eight Acquiring Funds listed in
Section 1.02 has been a
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regulated investment company under such Part of the Code at
all times since the end of its first taxable year when it so
qualified and intends to continue to qualify as a regulated
investment company.
(e) The financial statements of each of the first eight Acquiring
Funds listed in Section 1.02 for its fiscal year ended June
30, 1995 examined by Ernst & Young LLP, and for the six-month
period ended December 31, 1995, copies of which have been
previously furnished to Conestoga, present fairly the
financial position of each such Acquiring Fund as of the dates
indicated and the results of its operations for the year and
period ended as of such dates, in conformity with generally
accepted accounting principles.
(f) At both the Valuation Time and the Effective Time of the
Reorganization with respect to each Acquiring Fund, there
shall be no known liabilities of such Acquiring Fund, whether
accrued, absolute, contingent or otherwise, not reflected in
the net asset values per share of its outstanding classes to
be issued pursuant to this Agreement.
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(g) There are no legal, administrative or other proceedings
pending or, to its knowledge, threatened against CoreFunds or
an Acquiring Fund which could result in liability on the part
of CoreFunds or an Acquiring Fund.
(h) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by
CoreFunds of the transactions contemplated by this Agreement,
except such as may be required under the 1933 Act, the 1934
Act, the 1940 Act, the rules and regulations under those Acts,
and state securities laws.
(i) Insofar as the following relate to CoreFunds, the N-14
Registration Statement on its effective date, at the time of
any shareholders' meetings referred to herein and at each
Effective Time of the Reorganization: (i) shall comply in all
material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act, the rules and regulations
thereunder, and state securities laws, and (ii) shall not
contain any untrue statement of a material fact or omit to
state a material fact
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required to be stated therein or necessary to make the
statements therein not misleading.
(j) The shares of each class of each Acquiring Fund to be issued
and delivered to an Acquired Fund for the account of record
holders of shares of an Acquired Fund, pursuant to the terms
hereof, shall have been duly authorized as of the Effective
Time of the Reorganization application to such Acquiring Fund
and, when so issued and delivered, shall be registered under
the 1933 Act and under applicable state securities laws, duly
and validly issued, fully paid and non-assessable, and no
shareholder of CoreFunds shall have any preemptive right of
subscription or purchase in respect thereto.
VI. Shareholder Action on Behalf of the Acquired Funds.
6.01 As soon as practicable after the effective date of the N-14
Registration Statement, but in any event prior to the Effective Time of the
Reorganization applicable to the Reorganizing Funds and as a condition to the
Reorganization, the Board of Trustees of Conestoga shall call, and Conestoga
shall hold, a meeting of the shareholders of the Acquired Funds for the purpose
of considering and voting upon:
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(a) Approval of this Agreement and the transactions contemplated
hereby, including, without limitation:
(i) The transfer of the Acquired Fund Assets belonging to
each Acquired Fund to an Acquiring Fund, and the
assumption by such Acquiring Fund of the Acquired Fund
Liabilities of such Acquired Fund, in exchange for a
class or classes of shares of an Acquiring Fund, as set
forth in Section 1.02.
(ii) The liquidation of each Acquired Fund through the
distribution to its record holders of shares of the
class or classes of shares of an Acquiring Fund as
described in this Agreement.
(b) Approval of interim investment advisory and/or sub-advisory
agreements which would be effective with respect to each
Acquired Fund for the period from the Bank Holding Company
Merger until the Effective Time of the Reorganization with
respect to such Acquired Fund.
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(c) Such other matters as may be determined by the Boards of
Trustees or authorized officers of the parties.
6.02 Approval of this Reorganization Agreement by the shareholders of
the Acquired Funds shall constitute the waiver of the application of any
fundamental policy of such Acquired Funds that might be deemed to prevent them
from taking the actions necessary to effectuate the Reorganization as described,
and such policies, if any, shall be deemed to have been amended accordingly.
VII. N-14 Registration Statement and Proxy Solicitation Materials.
CoreFunds shall file the N-14 Registration Statement under the 1933 Act, and
Conestoga shall file the combined prospectus/proxy statement contained therein
under the 1934 Act and 1940 Act proxy rules, with the SEC as promptly as
practicable. Each of CoreFunds and Conestoga has cooperated and shall continue
to cooperate with the other, and has furnished and shall continue to furnish the
other with the information relating to itself that is required by the 1933 Act,
the 1934 Act, the 1940 Act, the rules and regulations under each of those Acts
and state securities laws, to be included in the N-14 Registration Statement.
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VIII. Effective Times of the Reorganization. Delivery of the Acquired
Fund Assets of each Acquired Fund and the shares of the classes of its Acquiring
Fund to be issued pursuant to Article I and the liquidation of each Acquired
Fund pursuant to Article II shall occur at the opening of business on the next
business day following the Valuation Time applicable to such Acquired Fund, or
on such other date, and at such place and time and date, as may be determined by
the President or any Vice President of each party hereto. The respective date
and time at which such actions are taken with respect to an Acquired Fund are
referred to herein as the "Effective Time of the Reorganization." To the extent
any Acquired Fund Assets are, for any reason, not transferred at the applicable
Effective Time of the Reorganization, Conestoga shall cause such Acquired Fund
Assets to be transferred in accordance with this Agreement at the earliest
practicable date thereafter.
IX. CoreFunds Conditions. The obligations of CoreFunds hereunder with
respect to each Acquired Fund shall be subject to the following conditions
precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders of such
Acquired Fund, in the manner required by law.
I-28
<PAGE>
(b) Conestoga shall have duly executed and delivered to CoreFunds
such bills of sale, assignments, certificates and other
instruments of transfer ("Transfer Documents") as may be
necessary or desirable to transfer all right, title and
interest of Conestoga and such Acquired Fund in and to the
Acquired Fund Assets of such Acquired Fund. The Acquired Fund
Assets shall be accompanied by all necessary state stock
transfer stamps or cash for the appropriate purchase price
therefor.
(c) All representations and warranties of Conestoga made in this
Agreement shall be true and correct in all material respects
as if made at and as of each Valuation Time and each Effective
Time of the Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization applicable to each
Acquired Fund, there shall have been no material adverse
change in the financial position of such Acquired Fund since
October 31, 1995 other than those changes incurred in the
ordinary course of business as an investment company. 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
I-29
<PAGE>
obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
(d) CoreFunds shall have received an opinion of Drinker Biddle &
Reath addressed to CoreFunds in form reasonably satisfactory
to it and dated the Effective Time of the Reorganization
applicable to each Acquired Fund, substantially to the effect
that: (i) Conestoga is a Massachusetts business trust duly
organized and validly existing under the laws of the
Commonwealth of Massachusetts; (ii) the shares of such
Acquired Fund outstanding at such time are duly authorized,
validly issued, fully paid and non-assessable by such Acquired
Fund, and to such counsel's knowledge, no shareholder of such
Acquired Fund has any option, warrant or pre-emptive right to
subscription or purchase in respect thereof; (iii) this
Agreement and the Transfer Documents have been duly
authorized, executed and delivered by Conestoga and represent
legal, valid and binding contracts, enforceable in accordance
with their terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights
I-30
<PAGE>
generally and court decisions with respect thereto, and such
counsel shall not be required to express an opinion with
respect to the application of equitable principles in any
proceeding, whether at law or in equity, or with respect to
the provisions of this Agreement intended to limit liability
for particular matters to an Acquired Fund and its assets;
(iv) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated by this
Agreement will not, violate the Agreement and Declaration of
Trust or Code of Regulations of Conestoga or any material
agreement known to such counsel to which Conestoga is a party
or by which Conestoga is bound; and (v) to such counsel's
knowledge, no consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Conestoga of the transactions contemplated by
this Agreement, except such as have been obtained under the
1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts and such as may be required under
the state securities laws. Such opinion may rely on the
opinion of other counsel to the extent set forth in such
opinion, provided
I-31
<PAGE>
such other counsel is reasonably acceptable to CoreFunds.
(e) CoreFunds shall have received an opinion of Morgan, Lewis &
Bockius LLP, addressed to CoreFunds and Conestoga in form
reasonably satisfactory to them and dated the Effective Time
of the Reorganization applicable to each Acquired Fund,
substantially to the effect that for federal income tax
purposes (i) the transfers of all of the Acquired Fund Assets
hereunder, and the assumption by its Acquiring Fund of
Acquired Fund Liabilities, in exchange for shares of each
class of such Acquiring Fund, and the distribution of said
shares to the shareholders of such Acquired Fund, as provided
in this Agreement, will each constitute a reorganization
within the meaning of Section 368(a)(1)(C), 368(a)(1)(D) or
368(a)(1)(F) of the Code and with respect to each
reorganization, the Acquired Fund and the Acquiring Fund will
each be considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in accordance with
Sections 361(a), 361(c)(1) and 357(a) of the Code, no gain or
loss will be recognized by such Acquired Fund as a result of
such transactions;
I-32
<PAGE>
(iii) in accordance with Section 1032 of the Code, no gain or
loss will be recognized by an Acquiring Fund as a result of
such transactions; (iv) in accordance with Section 354(a)(1)
of the Code, no gain or loss will be recognized by the
shareholders of such Acquired Fund on the distribution to them
by such Acquired Fund of shares of any class of an Acquiring
Fund in exchange for their shares of the corresponding class
of the Acquired Fund; (v) in accordance with Section 358(a)(1)
of the Code, the aggregate basis of Acquiring Fund shares
received by each shareholder of any class of an Acquired Fund
will be the same as the aggregate basis of the shareholder's
Acquired Fund shares immediately prior to the transactions;
(vi) in accordance with Section 362(b) of the Code, the basis
of the Acquired Fund Assets to any Acquiring Fund will be the
same as the basis of such Acquired Fund Assets in the hands of
the corresponding Acquired Fund immediately prior to the
exchange; (vii) in accordance with Section 1223 of the Code, a
shareholder's holding period for Acquiring Fund shares will be
determined by including the period for which the shareholder
held the shares of an Acquired Fund exchanged therefor,
provided that
I-33
<PAGE>
the shareholder held such shares of an Acquired Fund as a
capital asset; and (viii) in accordance with Section 1223 of
the Code, the holding period of an Acquiring Fund with respect
to the Acquired Fund Assets will include the period for which
such Acquired Fund Assets were held by an Acquired Fund.
(f) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any
proceeding seeking to enjoin consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940
Act.
(g) The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge
of CoreFunds, contemplated by the SEC and the parties shall
have received all permits and other authorizations necessary
under state securities laws to consummate the transactions
contemplated by this Agreement.
I-34
<PAGE>
(h) The President or a Vice President of Conestoga shall have
certified that Conestoga has performed and complied in all
material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by
it prior to or at each Valuation Time and each Effective Time
of the Reorganization.
(i) Conestoga shall have delivered or caused to be delivered to
CoreFunds each account, book, record or other document of
Conestoga applicable to such Acquired Fund which is required
to be maintained by Section 31(a) of the 1940 Act and Rules
31a-1 to 31a-3 thereunder (regardless of what person possesses
the same). Conestoga has instructed its service contractors
to provide CoreFunds upon request with access to and copies of
all documents belonging to Conestoga.
(j) The Bank Holding Company Merger shall have been consummated.
(k) With respect to the Reorganization of the Continuing Funds,
the Reorganization of all of the Reorganizing Funds shall have
been consummated.
I-35
<PAGE>
X. Conestoga Conditions. The obligations of Conestoga hereunder with
respect to each Acquired Fund shall be subject to the following conditions
precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders of such
Acquired Fund, in the manner required by law.
(b) All representations and warranties of CoreFunds made in this
Agreement shall be true and correct in all material respects
as if made at and as of each Valuation Time and each Effective
Time of the Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization applicable to each
Acquired Fund, there shall have been no material adverse
change in the financial condition of its Acquiring Fund since
June 30, 1995 other than those changes incurred in the
ordinary course of business as an investment company. 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.
I-36
<PAGE>
(c) Conestoga shall have received an opinion of Morgan, Lewis &
Bockius LLP, addressed to Conestoga in form reasonably
satisfactory to it and dated the Effective Time of the
Reorganization applicable to each Acquired Fund, substantially
to the effect that: (i) CoreFunds is a Maryland corporation
duly organized and validly existing under the laws of the
State of Maryland and is qualified to do business and in good
standing in each state in which such qualification is
required; (ii) the shares of each class of each Acquiring Fund
to be delivered at such time to an Acquired Fund as provided
for by this Agreement are duly authorized and upon delivery
will be validly issued, fully paid and non-assessable by such
Acquiring Fund and to such counsel's knowledge, no shareholder
of an Acquiring Fund has any option, warrant or pre-emptive
right to subscription or purchase in respect thereof; (iii)
this Agreement has been duly authorized, executed and
delivered by CoreFunds and represents a legal, valid and
binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court
I-37
<PAGE>
decisions with respect thereto, and such counsel shall not be
required to express an opinion with respect to the application
of equitable principles in any proceeding, whether at law or
in equity, or with respect to the provisions of this Agreement
intended to limit liability for particular matters to an
Acquiring Fund and its assets; (iv) the execution and delivery
of this Agreement did not, and the consummation of the
transactions contemplated by this Agreement will not, violate
the Articles of Incorporation or By-laws of CoreFunds, or any
material agreement known to such counsel to which CoreFunds is
a party or by which CoreFunds is bound; and (v) to such
counsel's knowledge no consent, approval, authorization or
order of any court or governmental authority is required for
the consummation by CoreFunds of the transactions contemplated
by this Agreement, except such as have been obtained under the
1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts and such as may be required under
the state securities laws. Such opinion may rely on the
opinion of other counsel to the extent set forth in such
opinion, provided such other counsel is reasonably acceptable
to CoreFunds.
I-38
<PAGE>
(d) Conestoga shall have received an opinion of Morgan, Lewis &
Bockius LLP, addressed to CoreFunds and Conestoga in the form
reasonably satisfactory to them and dated the Effective Time
of the Reorganization applicable to each Acquired Fund, with
respect to the matters specified in Section IX(e).
(e) The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending such
effectiveness shall have been instituted, or to the knowledge
of CoreFunds, contemplated by the SEC and the parties shall
have received all permits and other authorizations necessary
under state securities laws to consummate the transactions
contemplated by this Agreement.
(f) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any
proceeding seeking to enjoin consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940
Act.
I-39
<PAGE>
(g) The President or Vice President of CoreFunds shall have
certified that CoreFunds has performed and complied in all
material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by
it prior to or at each Valuation Time and each Effective Time
of the Reorganization.
(h) The Bank Holding Company Merger shall have been consummated.
(i) With respect to the Reorganization of the Continuing Funds,
the Reorganization of all of the Reorganizing Funds shall have
been consummated.
XI. Tax Documents. Conestoga shall deliver to CoreFunds at each
Effective Time of the Reorganization confirmations or other adequate evidence as
to the adjusted tax basis of the Acquired Fund Assets then delivered to an
Acquiring Fund in accordance with the terms of this Agreement.
XII. Finder's Fees. Each party represents and warrants to each of the
other parties hereto that there is no person who is entitled to any finder's or
other similar fee or commission arising out of the transactions contemplated by
this Agreement.
I-40
<PAGE>
XIII. Announcements. Any announcements or similar publicity with
respect to this Agreement or the transactions contemplated herein shall be at
such time and in such manner as the parties shall agree; provided, that nothing
herein shall prevent any party upon notice to the other parties from making such
public announcements as such party's counsel may consider advisable in order to
satisfy the party's legal and contractual obligations in such regard.
XIV. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments, and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
XV. Termination of Representations and Warranties. The representations
and warranties of the parties set forth in this Agreement shall terminate at the
Effective Time of the Reorganization of the Continuing Funds.
I-41
<PAGE>
XVI. Termination of Agreement.
16.01 This Agreement may be terminated by a party at any time at or
prior to (i) the Effective Time of the Reorganization of the Reorganizing Funds,
or (ii) with respect to the Continuing Funds and the corresponding Acquiring
Funds at any time at or prior to the Effective Time of the Reorganization of the
Continuing Funds, by the Board of Directors of CoreFunds or the Board of
Trustees of Conestoga, as provided below:
(a) By CoreFunds if the conditions set forth in Article IX are
not satisfied as specified in said Section;
(b) By Conestoga if the conditions set forth in Article X are not
satisfied as specified in said Section;
(c) By the mutual consent of the parties.
16.02 If a party terminates this Agreement as to any investment
portfolio because one or more of its conditions precedent have not been
fulfilled, or if this Agreement is terminated by mutual consent, this Agreement
will become null and void without any liability of either party or any of their
investment portfolios to the other; provided, however, that if such termination
is by CoreFunds pursuant to Section 16.01(a) as
I-42
<PAGE>
a result of a breach by Conestoga of any of its representations, warranties or
covenants in this Agreement, or such termination is by Conestoga pursuant to
Section 16.01(b) as a result of a breach by CoreFunds of any of its
representations, warranties or covenants in this Agreement, nothing herein shall
affect the non-breaching party's right to damages on account of such other
party's breach.
XVII. Amendment and Waiver. At any time prior to or (to the fullest
extent permitted by law) after approval of this Agreement by the shareholders of
Conestoga, (a) the parties hereto may, by written agreement authorized by their
respective Boards of Directors or Trustees, as the case may be, or their
respective Presidents or any Vice Presidents, and with or without the approval
of their shareholders, amend any of the provisions of this Agreement, and (b)
either party may waive any breach by the other party or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing and
authorized by the President or Vice President of the waiving party with or
without the approval of such party's shareholders).
XVIII. Governing Law. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts, without giving effect to the conflicts of law
principles otherwise applicable therein.
I-43
<PAGE>
XIX. Successors and Assigns. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
XX. Beneficiaries. Nothing contained in this Agreement shall be deemed
to create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
XXI. Conestoga Liability.
21.01 The names "Conestoga Family of Funds" and "Trustees of Conestoga
Family of Funds" refer respectively to the trust created and the trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated August 1, 1989, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of Conestoga. The
obligations of Conestoga entered into in the name or on behalf thereof by any of
the trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the trustees, shareholders or
representatives of Conestoga personally, but bind only the trust property, and
all persons dealing with any portfolio of Conestoga
I-44
<PAGE>
must look solely to the trust property belonging to such portfolio for the
enforcement of any claims against Conestoga.
21.02 Both parties specifically acknowledge and agree that any
liability of Conestoga under this Agreement with respect to an Acquired Fund, or
in connection with the transactions contemplated herein with respect to an
Acquired Fund, shall be discharged only out of the assets of that Acquired Fund
and that no other portfolio of Conestoga shall be liable with respect thereto.
XXII. Notices. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to a nationally recognized
overnight courier service, in each case properly addressed to the party entitled
to receive such notice at the address or telecopier number stated below or to
such other address or telecopier number as may hereafter be furnished in writing
by notice similarly given by one party to the other party hereto:
If to CoreFunds:
CoreFunds, Inc.
c/o David G. Lee, President
680 East Swedesford Road
Wayne, PA 19087-1658
Telecopier Number: (610) 254-1040
I-45
<PAGE>
With a copy to:
James W. Jennings, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Telecopier Number: (215) 963-5299
If to Conestoga:
Conestoga Family of Funds
c/o David G. Lee, President
680 East Swedesford Road
Wayne, PA 19087-1658
Telecopier Number: (610) 254-1040
With a copy to:
Henry S. Hilles, Jr., Esq.
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier Number: (215) 988-2757
XXIII. Expenses. Each party represents to the other that its expenses
incurred in connection with the Reorganization will be borne by one or both of
the parties to the Bank Holding Company Merger, provided, however, that (a)
CoreFunds shall bear any filing fees under the 1933 Act and state securities
laws in connection with its Individual Shares and Institutional Shares to be
distributed to shareholders of the Acquired Funds, and (b) Conestoga shall bear
any custody termination fees incurred by Conestoga as a result of effecting the
transactions contemplated by this Agreement.
XXIV. Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto and supersedes
I-46
<PAGE>
any and all prior agreements, arrangements and understandings relating to
matters provided for herein.
XXV. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the date
first written above.
COREFUNDS, INC.
ATTEST:
___________________________ By: _______________________
CONESTOGA FAMILY OF FUNDS
ATTEST:
____________________________ By: ________________________
I-47
<PAGE>
APPENDIX II
COREFUND
VALUE EQUITY FUND
The CoreFund Value Equity Fund, Series A, returned 17.29% for the 12-
month period ending June 30, 1995. While in absolute terms this was an
acceptable return, the S&P 500 returned 26.0% in the same timeframe.
For Series B shares from which a sales charge has been deducted, the
return for the period was 11.7%; for those without a sales load it was 17.0%.
The most significant economic event during the period was the series
of moves made by the Federal Reserve Board to tighten interest rates. With
the Fund's exposure to industrial issues that are more economically sensitive,
the Fed's actions negatively affected performance. Investors in the broad market
sold industrial issues and purchased so-called defensive issues in groups such
as pharmaceuticals, tobacco, and food and beverage, where earnings are less
dependent on economic activity. The Fund's exposure in these sectors is
underweighted compared to the broader market.
As the new fiscal year begins, we are optimistic that the industrial
sector will come back into favor. Even as the economy has slowed,
industrial issues have continued to display positive fundamentals and solid
earnings. Productivity enhancements, careful control of inventories and costs,
and exposure to still-healthy global economies have helped these companies
maintain steady results during boom/bust cycles. The interest rate decrease
instituted by the Fed at the beginning of the new fiscal year, combined with
excellent company fundamentals, should bring investors back to the sector.
The Fund has also benefitted from
(continued)
QUICK FUND FACTS VALUE EQUITY (6/30/95)
Inception Date: February 6, 1990
Portfolio Size: $34.71 million
Shares Outstanding: 2,432,599 (A&B combined)
<TABLE>
<CAPTION>
Top Five Holdings (as of June 30, 1995)
% of fund investments
<S> <C>
Salomon Inc. 3.3%
Allied Signal Inc. 3.1%
Sears Roebuck & Co. 3.1%
Mobil Corp 3.0%
Conrail Inc. 3.0%
<CAPTION>
Average Annual Total Return 1
1 Year 5 Year Inception
<S> <C> <C> <C>
Series A 17.29% 9.21% 9.32%
Series B without Load 16.96% 9.10% 9.22%
Series B with Load 11.73% 8.10% 8.29%
{GRAPHIC]
Data for chart to follow:
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
<S> <C>
Value Equity (Series A) $16,111
Value Equity (Series B) $15,314
S&P 500 Index $19,293
<CAPTION>
Initial Investment Date 2/28/90 Jun 90 Jun 91 Jun 92 Jun 93 Jun 94 Jun 95
<S> <C> <C> <C> <C> <C> <C> <C>
CoreFund Value Equity Fund,
Class A $10,000 $10,369 $10,718 $11,788 $13,946 $13,736 $16,111
CoreFund Value Equity Fund,
Class B (Synthetic)
4.50% load $9,550 $9,902 $10,236 $11,258 $13,319 $13,094 $15,314
S&P 500 Composite Index $10,000 $10,909 $11,717 $13,289 $15,099 $15,312 $19,293
</TABLE>
1 For the period ended June 30, 1995. Past performance of the portfolio is
not predictive of future performance. Individual Series B shares were offered
beginning January 4, 1993. The performance shown for Value Equity Portfolio
Series B (synthetic) prior to that date is based on the performance of
Institutional Series A shares adjusted to reflect the maximum sales charge of
4.5% for the Series B shares. Series A shares of the Value Equity Portfolio
commenced operations on February 6, 1990.
9
<PAGE>
June 30, 1995
MANAGERS' DISCUSSION OF FUND PERFORMANCE (continued)
VALUE EQUITY FUND (CONTINUED)
investment in financial issues such as security brokerages, investment
management firms, and mutual fund companies. Specific investments have
included Merrill Lynch, Charles Schwab, Salomon Brothers, and Franklin
Resources. As the "graying of America" continues and more government
policies are instituted that reward investment, the long-term outlook
for financial issues remains strong.
Overall, we continue to maintain a constructive outlook for the value
equity market. The breadth of issues participating in the rally indicates that
excesses can be worked off individually, without damaging the fabric of an
overall market that is healthy and improving.
10
<PAGE>
INTERNATIONAL GROWTH FUND
The International Growth Fund, Series A shares, returned (0.21)% for
the year ended June 30, 1995. This compared favorably with the 0.1% increase of
the MSCI EAFE Index during the same period.
For Series B shares from which a sales charge has been deducted, the
return for the period was (4.95)%; for those without a load it was (0.48)%.
Despite continued growth in most of the world's major economies,
international stock markets have been affected by considerable
currency volatility. In December, the Mexican crisis caused investors to
repatriate funds that had been invested in many of the world's smaller or
"emerging" markets.
The International Growth Fund's largest single area of investment is
Japan (34%). This was the worst-performing major market in the period,
falling by 28%. A currency gain softened the damage for the U.S. investor,
however. The Kobe earthquake in February 1995 disrupted Japan's infrastructure
and manufacturing industries, and had a considerable, albeit short-term, impact
on economic activity.
The rise of the Yen is of greater long-term significance. This has
made Japan's exports less competitive, and encouraged a flood of imports.
In turn, this has put pressure on economic growth and corporate margins, and
kept the domestic investor away from the stock market. Although the Japanese
financial sector is hardly in the best of health, the manufacturing sector has
suffered the worst.
One bright spot has been the technology sector, in which the Fund has
a large position.
(continued)
11
<PAGE>
June 30, 1995
MANAGERS' DISCUSSION OF FUND PERFORMANCE (continued)
INTERNATIONAL GROWTH FUND (continued)
This allowed the Fund to outperform the Tokyo Stock Exchange
Index over the 12-month period.
Through most of the year, the Fund was partially hedged against
weakness in the Yen, through a forward sale of Yen for U.S. dollars. This hedge
expired in February, shortly before another sharp rise in the Yen (to Y80/US$).
The hedge was subsequently reinstated; currently, 28% of the Fund's Japanese
assets are protected.
Southeast Asia, which currently accounts for 17% of the Fund's
portfolio, was an unrewarding region for most of the year. In Hong Kong,
Singapore and Malaysia, where local currencies are linked to the U.S. dollar,
stock markets suffered at a time when U.S. interest rates were rising. However,
there was a strong recovery toward the end of the period, spurred by the
strengthening U.S. bond market. In Hong Kong (at 6% the Fund's largest position
in the region), the Index rose by 5%, despite concerns about
Chinese politics and weakness in local real estate prices.
In Western Europe, which currently accounts for 40% of the Fund's
holdings, the past 12 months was a period of economic recovery. The improvement
was largely led by exports, as high rates of unemployment in the region
discouraged local consumption. However, the strength of the Deutschemark in the
first half of 1995 created problems for export industries in Germany, where
there is now considerable pressure on corporate earnings.
International confidence in Latin America was dealt a heavy blow at
the end of 1994 by a series of political scandals and a mishandling of the
Mexican economy. This led to a 40% devaluation of the Peso and a collapse in the
Mexican stock market, as international capital, on which the Mexican economy
relies so heavily, was quickly repatriated. Stock markets in Brazil and
Argentina suffered a similar fate (somewhat unfairly, as the commitment to
economic discipline appears much stronger in those countries than in Mexico).
Despite some recovery toward the end of the period, indices in both countries
remain well below their December levels.
The Fund's position in the region had been reduced prior to the
Mexican crisis, and further sales were made thereafter. The Fund now has
only 5% of its portfolio in Latin America, with no holdings in Mexico.
12
<PAGE>
COREFUND
Quick Fund Facts International Growth (6/30/95)
Inception Date: February 12, 1990
Portfolio Size: $112.78 million
Shares Outstanding: 9,180,295 (A&B combined)
<TABLE>
<CAPTION>
Top Five Holdings (as of June 30, 1995)
% of fund investments
<S> <C>
Rohm 1.8%
Hutchinson Whampoa 1.7%
Swire Pacific "A" 1.6%
Kyocera 1.6%
Mitsubishi Heavy Industries 1.6%
<CAPTION>
Average Annual Total Return 1
1 Year 5 Year Inception
<S> <C> <C> <C>
Series A (0.21)% 5.82% 7.24%
Series B without Load (0.48)% 5.73% 7.15%
Series B with Load (4.95)% 4.75% 6.24%
[GRAPHIC]
Data for chart below:
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
<S> <C>
International Growth Equity (Series A) $14,578
International Growth Equity (Series B) $13,861
MSCI EAFE Index $12,352
<CAPTION>
Initial Investment Date 2/28/90 Jun 90 Jun 91 Jun 92 Jun 93 Jun 94 Jun 95
<S> <C> <C> <C> <C> <C> <C> <C>
CoreFund International Growth
Equity Fund, Class A $10,000 $10,985 $10,688 $11,211 $12,563 $14,609 $14,578
CoreFund International Growth
Equity Fund, Class B
(Synthetic) 4.50% load $9,550 $10,491 $10,207 $10,707 $11,998 $13,927 $13,861
Morgan Stanley EAFE Index $10,000 $9,814 $8,690 $8,635 $10,385 $12,151 $12,352
</TABLE>
1 For the period ended June 30, 1995. Past performance of the portfolio is not
predictive of future performance. Individual Series B shares were offered
beginning January 4, 1993. The performance shown for International Growth
Portfolio Series B (synthetic) prior to that date is based on the performance of
Institutional Series A shares adjusted to reflect the maximum sales charge of
4.5% for the Series B shares. Series A shares of the International Growth
Portfolio commenced operations on February 12, 1990.
BALANCED FUND
Performance of Series A shares of the Balanced Fund improved
significantly during the year ended June 30, 1995, generating a 16.21% gain for
the period. This compared with a 26.01% return for the Standard & Poor's 500
Index, and a 10.37% return for the Lehman Brothers Intermediate
Government/Corporate Bond Index.
For Series B shares from which a sales charge has been deducted, the
return for the period was 10.58%; for those without a load it was 15.84%.
The Balanced Fund grew in asset size through June 30 to $63,436,000.
The Balanced Fund's equity holdings modestly underperformed a very
strong S&P Index during the period, rising 24.0%. Returns from the Fund's
holdings in the technology sector and from pharmaceutical issues matched or
outperformed those sectors in the broader market. Additionally, strong positions
in the cable television, entertainment and gaming industries more than offset
weakness in the Fund's underweighted holdings (relative to the broader market)
in interest-sensitive sectors.
The Fund's fixed-income holdings underperformed the fixed-income
benchmark during the 12-month period (9.2% vs. the
Bond Index's 10.37%). The Fund's bond holdings were overweighted in the
two-years-or-less portion of the yield curve; this market segment generated
smaller returns than longer-dated securities. Our defensive posture, which
served the Fund well during the first six months of the period, made it
difficult to fully exploit the rapid and sharp rally in bond prices during
the final three months of the period.
(continued)
13
<PAGE>
June 30, 1995
MANAGERS' DISCUSSION OF FUND PERFORMANCE (continued)
BALANCED FUND (CONTINUED)
Cash levels in the Fund are fairly low, reflecting a fully invested
position in stocks and bonds. We anticipate continued volatility in the capital
markets, with an upward bias, during the second half of 1995. During periods of
weakness, we plan to seek opportunities to add high-coupon, high-quality bonds,
while intensifying our focus on attractively valued stocks of companies with
visible earnings growth and improving fundamentals.
<TABLE>
<CAPTION>
Asset Allocation (as of June 30, 1995)
% of fund investments
<S> <C>
Glenayre Technologies 1.3%
Comcast Corp CI.A 1.2%
Texas Utilities 1.2%
Public Service Enter Group 1.2%
Glaxo 1.2%
<CAPTION>
Average Annual Total Return 1
1 Year Inception
<S> <C> <C>
Series A 16.21% 7.84%
Series B without Load 15.84% 6.91%
Series B with Load 10.58% 4.80%
[GRAPHIC]
Data for chart below:
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
<S> <C>
Balanced (Series A) $11,980
Balanced (Series B) $11,373
S&P 500 Index $13,290
Lehman Govt/Corp Bond $11,475
<CAPTION>
Initial Investment Date 1/31/93 Jun 93 Jun 94 Jun 95
<S> <C> <C> <C> <C>
CoreFund Balanced Fund, Class A $10,000 $10,478 $10,309 $11,980
CoreFund Balanced Fund, Class B
(Synthetic) 4.50% load $9,550 $10,004 $9,818 $11,373
S&P 500 Composite Index $10,000 $10,400 $10,547 $13,290
Lehman Government/Corporate
Bond Index $10,000 $10,551 $10,397 $11,475
</TABLE>
1 For the period ended June 30, 1995. Past performance of the portfolio is not
predictive of future performance. Individual Series B shares were offered
beginning March 16, 1993. The performance shown for Balanced Portfolio
Series B (synthetic) prior to that date is based on the performance of
Institutional Series A shares adjusted to reflect the maximum sales charge of
4.5% for the Series B shares. Series A shares of the Balanced Portfolio
commenced operations on January 4, 1993.
14
<PAGE>
INTERMEDIATE BOND FUND
The CoreFund Intermediate Bond Fund Series A shares returned 8.22% for
the year ended June 30, 1995. This compared with a 7.71% return for the Merrill
Lynch 1-3 year Treasury Index. The Fund's assets changed during the period from
$57,744,000 to $57,089,000.
For Series B shares from which a sales charge has been deducted, the
return for the period was 3.13%; for those without a load it was 7.95%.
The extremely volatile bond market conditions that characterized the
past year were particularly evident in the intermediate part of the yield curve.
This is evidenced by the wide yield fluctuations in the two-year Treasury note,
which rose by 1.52% during the second half of 1994, and rallied by 1.89% in the
first half of 1995.
The Intermediate Bond Fund was able to outperform its benchmark during
both of these periods. In 1994, the Fund benefitted from a shorter average
maturity, large cash positions (as high as 18%), and large exposure to the
mortgage-backed securities market, which performed well on a relative basis
in 1994.
16
<PAGE>
COREFUND
In late 1994, the Fund began to extend its average maturity and reduce
its cash position, allowing it to benefit from the broad market rally. It
further benefitted from its large holdings of asset-backed securities (as much
as 23% of the portfolio), which performed extremely well in 1995. A shortage of
high-quality corporate bonds allowed spreads to narrow significantly, compared
to Treasuries of similar maturity.
The Fund has maintained its emphasis on credit quality, with over 85%
of its holdings being U.S. government and agency obligations or AAA-rated
securities. Recently, the Fund raised its cash position to 9.9%, due to the
relative unattractiveness of short-to-intermediate Treasuries, which currently
yield less than cash equivalents. We expect this to be a temporary holding.
Looking to the rest of 1995, we expect the Fed to follow through on
market expectations and reduce short-term rates by at least another 25 basis
points. A steepening of the yield curve should accompany this action, creating a
more friendly environment for mortgage-backed securities.
While a further drop in rates is possible, we would also expect
volatility in the fixed-income markets to subside. This would place more
emphasis on yield enhancement, rather than price movement, as a source of
investor return.
Quick Fund Facts Intermediate Bond (6/30/95)
Inception Date: February 3, 1992
Portfolio Size: $57.09 million
Shares Outstanding: 5,800,877 (A&B combined)
Average Weighted Maturity: 3.5 years
QUALITY DIVERSIFICATION (AS OF JUNE 30, 1995)
[GRAPHIC]
Data for chart to follow:
Maturity in years
% of fund investments
AAA
66%
AA
4%
A
10%
NR
20%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN 1
1 Year Inception
<S> <C> <C>
Series A 8.22% 5.32%
Series B without Load 7.95% 5.12%
Series B with Load 3.13% 3.71%
[GRAPHIC]
Data for chart to follow:
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
<S> <C>
Intermediate Bond (Series A) $11,930
Intermediate Bond (Series B) $11,337
Lehman Govt/Corp Bond Index $12,594
Merrill Lynch 1-3 Yr Treasury $11,997
<CAPTION>
Initial Investment Date 2/29/92 Jun 92 Jun 93 Jun 94 Jun 95
<S> <C> <C> <C> <C> <C>
CoreFund Intermediate-Term Bond Fund, Class A $10,000 $10,249 $11,059 $11,024 $11,930
CoreFund Intermediate-Term Bond Fund, Class B
(Synthetic) 4.50% load $9,550 $9,788 $10,561 $10,502 $11,337
Lehman Intermediate Government/Corporate
Bond Index $10,000 $10,355 $11,442 $11,412 $12,594
Merrill Lynch 1-3 Year Short-Term Treasury $10,000 $10,284 $10,961 $11,138 $11,997
</TABLE>
1 For the period ended June 30, 1995. Past performance of the portfolio is not
predictive of future performance. Individual Series B shares were offered
beginning January 4, 1993. The performance shown for Intermediate Bond Portfolio
Series B (synthetic) prior to that date is based on the performance of
Institutional Series A shares adjusted to reflect the maximum sales charge of
4.5% for the Series B shares. Series A shares of the Intermediate Bond Portfolio
commenced operations on February 3, 1992.
17
<PAGE>
June 30, 1995
MANAGERS' DISCUSSION OF FUND PERFORMANCE (continued)
PA Municipal Bond Fund
The PA Municipal Bond Fund, Series A, provided its shareholders with a
return of 7.50% for the 12 months ended June 30, 1995. This compared to a return
for the Lehman PAState Bond Index of 8.84% in the same period. For Series B
shares from which a sales charge has been deducted, the return was 2.41%;
for those without a load, the return was 7.25%.
As of June 30, 1995, the 30-day yield was 5.39% and 4.90%,
respectively, for A and B shares. Assets in the Fund increased from $597,000 to
$2,589,000.
The Fund's lower performance, relative to the benchmark index, was
mainly due to supply factors. During the third quarter of 1994, the Fund grew
dramatically. At that time, supply of municipal bonds was very light (down 40%
from 1993). This forced managers to carry unusually high cash levels due to a
lack of coupon income.
In the municipal bond market was driven mostly by ebbs and flows in
demand during the year. In late 1994, many tax-exempt mutual funds experienced
large withdrawals, because of the bond market's poor performance. As
dealer inventories swelled, demand for bonds decreased and prices fell. Then,
when Orange County, CA declared bankruptcy, investors temporarily fled the
munibond market, causing prices to drop further.
In the first half of 1995, yields on fixed-income securities fell, as
the economy showed signs of a slowdown. The municipal bond market has been
unable to attract investors, and has underperformed the Treasury market as a
result. Demand has been slowed by concern over enactment of a flat tax, the
Orange County default, and the strong appeal of the stock market.
We believe the Fed will lower interest rates further if inflation
remains under control. In addition, the municipal bond market is technically
positioned to outperform the Treasury market in the coming months. We continue
to seek attractive opportunities to swap or make new purchases, as the market
reacts to these various factors.
QUICK FUND FACTS PA MUNICIPAL BOND (6/30/95)
Inception Date: May 16, 1994
Portfolio Size: $2.59 million
Shares Outstanding: 254,865 (A&B combined)
Average Weighted Maturity: 15.6 years
<TABLE>
<CAPTION>
Average Annual Total Return 1
1 Year Inception
<S> <C> <C>
Series A 7.50% 7.65%
Series B without Load 7.25% 6.52%
Series B with Load 2.41% 2.25%
[GRAPHIC]
Data for chart to follow:
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
<S> <C>
Pennsylvania Municipal Bond (Series A) $10,656
Pennsylvania Municipal Bond (Series B) $10,232
Lehman Pennsylvania State Bond Index $10,958
<CAPTION>
Initial Investment Date 5/31/94 Jun 94 Jun 95
<S> <C> <C> <C>
CoreFund Pennsylvania Municipal Bond Fund, Class A $10,000 $9,913 $10,656
CoreFund Pennsylvania Municipal Bond Fund, Class B
4.50% load $9,550 $9,540 $10,232
Lehman Pennsylvania State Bond Index (MF) $10,000 $9,946 $10,958
</TABLE>
1 For the period ended June 30, 1995. Past performance of the portfolio is not
predictive of future performance. Series A and Series B shares were offered
beginning May 16, 1994. The maximum sales charge for Series B shares is 4.5%.
20
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE (CONTINUED)
CASH RESERVE
Quick Fund Facts -- Cash Reserve (6/30/95)
Inception Date: August 16, 1985
Portfolio Size: $527.92 million (A&B combined)
Average Weighted Maturity: 43 days
Seven Day Yield: 5.75 Series A
5.48 Series B
The CoreFund Cash Reserve continued to offer strong returns to the
money-market investor during the period ending June 30, 1995. The annual total
return for Series A shares during that period was 5.15%. Series B shares, from
which a 12b-1 fee is deducted, had an annual return of 4.89%. These returns
compared favorably to that of the IBC/Donoghue's All-Taxable Money Fund Average,
which was 4.98% on June 30, 1995.
The Cash Reserve experienced modest growth in assets during the
period. The Fund totaled $527,924,000 on June 30, 1995, up from $516,724,000
a year earlier.
The average maturity of the portfolio had been as short as 28 days in
the first quarter of 1995. In a defensive move against declining rates, the
average maturity was then gradually extended. By June 30, it was 43 days.
Portfolio structure of the Cash Reserve has favored commercial paper,
due to the widening spread of returns relative to other investment vehicles. As
spreads fluctuate, we will routinely evaluate the structure, to add value to the
portfolio.
Interest rates appear to have peaked, and the negative tone of the
forward curve would indicate further reductions in rates. In coming months, we
look for further declines on the heels of the recent lowering of the Fed Funds
rate. To maintain yield, we will pursue an extension strategy with the Cash
Reserve, targeting an average weighted maturity of 50 to 55 days.
TREASURY RESERVE
Quick Fund Facts -- Treasury Reserve (6/30/95)
Inception Date: November 21, 1988
Portfolio Size: $500.82 million (A&B combined)
Average Weighted Maturity: 47 days
Seven Day Yield: 5.68 Series A
5.42 Series B
During a period when short-term interest rates increased 50 basis
points, the Treasury Reserve continued to deliver excellent investment results
for the period ending June 30, 1995. Series A shares returned an effective
average annual yield of 4.98%. The six-month total return for Series A shares
was 5.58%. Series B shares returned an effective average annual yield of 4.72%.
The six-month total return for Series B shares, from which a 12b-1 fee has been
deducted, was 5.32%.
22
<PAGE>
COREFUND
Since June 30, 1994, the CoreFund Treasury Reserve increased in size
by 1.7%. Assets as of June 30, 1995, totaled $500,818,000. The average
maturity increased by 13 days, to 47.
Although assets increased by $8 million, the increase in maturities
was mainly due to the purchase of longer-term Treasury securities. These
securities were purchased in order to hedge against the possibility of an easing
in short-term rates by the Federal Reserve Board.
As of this writing the Fed has lowered the funds rate by 25 basis
points. Economic data is expected to be mixed and inflation should remain under
control during the second half of 1995. Our near-term position remains
biased towards a gradual decline in short-term rates as long as inflationary
pressures remain subdued. For this reason we will continue to look for buying
opportunities along the treasury bill yield curve while keeping the average
maturity in the 45 to 55 day range.
TAX-FREE RESERVE
Quick Fund Facts -- Tax-Free Reserve (6/30/95)
Inception Date: April 16, 1991
Portfolio Size: $64.28 million (A&B combined)
Average Weighted Maturity: 34 days
Seven Day Yield: 3.56 Series A
3.30 Series B
The CoreFund Tax-Free Reserve, Series A shares, returned 3.12% for
the year ending June 30, 1995. This compared favorably to the 3.11% return
provided by Donoghue's Tax-Free Fund during the same period. For Series B
shares of the CoreFund Tax-Free Reserve, from which a 12b-1 fee has been
deducted, the return for the same period was 2.86%.
The average maturity of the Tax-Free Reserve was shortened from 44 to
34 days during the period, to take advantage of rising interest rates. Net
assets in the Tax-Free Reserve decreased 22% to $64,280,000 on June 30,
1995 from $80,330,000 on December 31, 1994.
The decrease in assets was caused by the volatility of the tax-exempt
money market. Although rates increased steadily throughout the year, the spread
between taxables and non-taxables widened. The taxable equivalent yields on
many tax-exempt money market securities did not compare favorably to their
taxable counterparts. This prompted crossover buyers to move out of their
tax-exempt funds, and into taxable funds.
In coming months, management of the Fund will focus on extending the
average maturity, to pick up yield.
23
<PAGE>
APPENDIX III
SHAREHOLDER TRANSACTIONS AND SERVICES
This Appendix compares the shareholder transactions and services that
are available in connection with: (1) Individual Shares and Institutional Shares
of the CoreFunds Portfolios, and (2) Retail and Institutional Shares of the
Conestoga Portfolios.
I. COREFUNDS PORTFOLIOS - INDIVIDUAL SHARES AND INSTITUTIONAL
SHARES AND CORRESPONDING CONESTOGA PORTFOLIOS*
*(Includes Retail and Institutional Shares of the Conestoga Cash
Management Fund, Tax-Free Fund, U.S. Treasury Securities Fund (collectively, the
"Conestoga Money Market Portfolios"); the Equity Fund, Special Equity Fund,
Balanced Fund and International Equity Fund (collectively, the "Conestoga Equity
Portfolios"); and the Bond Fund, Intermediate Income Fund, Pennsylvania Tax-Free
Bond Fund and Short-Term Income Fund (collectively, the "Conestoga Fixed Income
Portfolios").
A. Sales Charges and Exemptions
CoreFunds Portfolios - Individual and Institutional Shares
(a) Institutional Shares of each CoreFunds Portfolio
are sold without a sales charge.
(b) Individual Shares of the CoreFunds Equity and
Fixed Income Portfolios are sold with a 3.25% sales charge.
Individual Shares of CoreFunds Money Market Portfolios are sold without a sales
charge.
(c) The CoreFunds Portfolios offer sales charge exemptions to
the following classes of shareholders: (a) employees (including members of their
immediate families and significant others) of CoreStates Financial Corp,
Cashman, Farrell, Martin Currie, Alpha Global and Investment Alternatives, Inc.
and their affiliates; (b) employees of the administrator and distributor; (c)
Directors and officers of CoreFunds; (d) customers who purchase their shares
under a shareholder servicing arrangement between CoreFunds and CoreStates
Financial Corp or its affiliates, having met specific standards which CoreStates
Financial Corp or its affiliates will publish periodically and which qualify
those customers as customers of the Private Banking Groups or UniFinancial
Groups of those affiliates, (e) Individual Retirement Account rollovers from
qualified employee benefit plans, Keogh plans, and Simplified Employee Benefit
Plans where CoreStates Financial Corp or its affiliate serves as trustee or
investment manager; (f) any retirement plan qualified under Section 401(a) of
the code or any other non-qualified benefit
III-1
<PAGE>
plan; and (g) any participant-directed retirement plan qualified under Section
401(a) of the Code or any participant-directed non-qualified defined
compensation plan described in Section 457 of the Code. In addition, the initial
sales charge will be waived for (a) investors who are transferring shares from
another investment company which has a broker/dealer relationship with CoreFunds
for which they have already paid a sales charge since October 26, 1992, (b)
customers converting from CoreStates Personal Financial Services Asset
Allocation Program (CorePath) to Individual Shares of a Portfolio and (c)
shareholders who have purchased shares of a mutual fund through an asset
allocation program offered by a company which has been acquired by CoreStates
Financial Corp, and who wishes to transfer those shares to Individual Shares of
a portfolio. Subsequent investments in the Portfolios by these investors will be
subject to the applicable sales charge.
The sales charge will not apply to purchases made
through reinvested dividends and distributions. The sales charge also will not
apply to exchanges between CoreFunds Portfolios to the extent that a shareholder
has credit for previously paid sales charges on purchases of any of the
CoreFunds Portfolios.
(d) The CoreFunds Portfolios also offer rights of accumulation
and letter of intent programs that can reduce the sales charge payable on
Individual share purchases.
Conestoga Portfolios - Retail and Institutional Shares
(a) Institutional Shares of the Conestoga Portfolios
are sold without a sales charge.
(b) Retail Shares of the Conestoga Equity and Fixed
Income Portfolios are sold with a 2.0% maximum front-end sales
charge. Retail Shares of the Money Market Portfolios are sold
without a sales charge.
(c) The following classes of Conestoga investors may purchase
Retail Shares of the Equity and Fixed Income Portfolios with no sales charge:
(1) existing shareholders of the applicable Portfolios upon the automatic
reinvestment of dividend and capital gain distributions; (2) Trustees of
Conestoga and officers, directors, employees and retired employees of the
investment advisor and its affiliates, SFS and its affiliates, and spouses and
minor children of each of the foregoing; (3) Investors for whom the investment
advisor or one of its affiliates (except a Conestoga IRA (as defined below)),
acts in a fiduciary, advisory, custodial, agency or similar capacity and for
whom purchases are made through such accounts; (4) Investors who purchase Retail
Shares of the applicable portfolio through a payroll deduction plan, a 401(k)
plan, a 403(b) plan or other similar retirement plans which by its terms permits
purchases of
III-2
<PAGE>
such shares; (5) Investors investing in a Conestoga Portfolio direct individual
retirement account (a "Conestoga IRA") may make both initial and subsequent
purchases without a sales charge if the initial purchase is funded in whole or
in part by assets directly transferred to the Conestoga IRA from a distribution
made by a qualified retirement plan maintained through the asset management
affiliates of Meridian Bancorp, Inc.; (6) Employees (and their spouses and
children under the age of 21) of any broker-dealer with which the distributor
enters into a dealer agreement to sell shares of the Portfolios; and (7) Orders
placed on behalf of other investment companies distributed by the distributor or
any of its affiliates. The distributor may change or eliminate the foregoing
waivers at any time. The distributor may also periodically waive the sales
charge for all investors with respect to any portfolio.
(d) The Conestoga Portfolios also offer rights of accumulation
and letter of intent programs that can reduce the sales charge payable on Retail
Share purchases.
B. Purchase Policies
<TABLE>
<CAPTION>
==========================================================================================================================
CoreFunds Portfolios - Conestoga Portfolios
Individual and - Retail and
Institutional Shares Institutional Shares
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Minimum Initial $1,000,000 for initial $1,000 for initial
Investments purchases of Institu- purchases of Retail
tional Shares and $500 and Institutional
for initial purchases Shares ($100 for
of Individual Shares Auto Invest Plan).
(No minimum for The minimum
Automatic Investment investment may be
Plan). waived if share
purchases are made
in connection with
a qualified pension
plan, payroll savings
plans or other employer
plans.
- --------------------------------------------------------------------------------------------------------------------------
Minimum No minimum (except $50 No minimum (except
Subsequent for Automatic $50 for Auto Invest
Investments Investment Plan). Plan).
</TABLE>
III-3
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Yes. Individual Yes. Retail Shares
Investment Plan Shares may be may be purchased on
purchased monthly a monthly or
through automatic quarterly basis
deductions from a through automatic
shareholder's checking deductions from a
or savings account. shareholder's
There is no minimum checking or savings
initial investment account with a $100
amount for Automatic initial and $50
Investment Plans, subsequent
however the minimum investment minimum.
pre-authorized The minimum initial
investment amount is purchase amounts and
$50 per month per minimum maintained
account. balance requirements
may be waived for
purchases under the
Auto Invest Plan.
- --------------------------------------------------------------------------------------------------------------------------
Purchase Methods Shares are sold by SFS Shares are sold by
directly and through SFS directly and
broker/dealers having through
a dealer agreement broker/dealers
with SFS and may also having a dealer
be purchased through agreement with SFS
CoreStates Securities by mail, by
Corp.; by mail, by telephone, by wire.
telephone, by wire.
- --------------------------------------------------------------------------------------------------------------------------
Payment methods By check (or other By check (or other
negotiable bank negotiable bank
instrument or money instrument or money
order), by wire, by order), by wire, by
Automated Clearing ACH.
House (ACH).
==========================================================================================================================
</TABLE>
A Conestoga Institutional shareholder who, at the Effective Time of the
Transaction, meets the Conestoga, but not the CoreFunds, minimum investment
requirement, will not be required to redeem the CoreFunds shares received in
connection with the Transaction, unless the balance in the shareholder's account
drops below the Conestoga minimum as a result of redemptions.
The CoreFunds Portfolios and Conestoga Portfolios each reserve the
right to reject any purchase order.
C. Redemption Policies
<TABLE>
<CAPTION>
==========================================================================================================================
CoreFunds Conestoga
Portfolios - Portfolios - Retail
Individual and and Institutional
Institutional Shares
Shares
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Redemption Methods By mail or By mail or
telephone. telephone.
- --------------------------------------------------------------------------------------------------------------------------
Payment Methods By check, by wire, By check, by wire
by ACH. There is a or ACH. There is a
$10.00 charge for $7 charge for
wiring redemption wiring redemption
proceeds Payment is proceeds. Payment
normally made on made within 7 days,
the next business but Conestoga
day, but CoreFunds attempts to honor
may take up to 7 requests for next
days to honor day payment of
redemption redemption
requests). proceeds.
- --------------------------------------------------------------------------------------------------------------------------
Check Writing Yes, for CoreFunds Yes, for Conestoga
Privilege Money Market Money Market
Portfolios ($250 Portfolios ($1,000
minimum). minimum).
- --------------------------------------------------------------------------------------------------------------------------
Automatic Cash Yes. ($5,000 Yes. (No minimum
Withdrawal Plan minimum balance/$50 balance required/
minimum per $100 minimum per
transaction). transaction).
==========================================================================================================================
</TABLE>
A shareholder of record may be required to redeem Individual Shares in
any CoreFunds Portfolio if the balance in the shareholder's account in that
Portfolio drops below $500 as the result of a redemption request and the
shareholder does not increase the balance to at least $500 upon sixty days'
notice. The Conestoga Portfolios may redeem involuntarily, upon sixty days'
notice, Retail shares of a shareholder whose account decreases to a value of
less than $1,000 because of redemptions unless the shareholder makes an
additional investment during that period in an amount that will increase the
value of the account to at least $500. CoreFunds Portfolios and the Conestoga
Portfolios may also redeem shares involuntarily when appropriate in light of
their responsibilities under the 1940 Act, and may make payment for redemptions
in securities in lieu of cash.
III-4
<PAGE>
D. Share Exchanges
<TABLE>
<CAPTION>
==========================================================================================================================
CoreFunds Portfolios - Conestoga Portfolios -
Individual and Retail and
Institutional Shares Institutional Shares
==========================================================================================================================
<S> <C> <C>
By Mail Yes. Yes.
- --------------------------------------------------------------------------------------------------------------------------
By Telephone Yes. Yes.
- --------------------------------------------------------------------------------------------------------------------------
Minimum Inapplicable. $1,000 minimum.
==========================================================================================================================
</TABLE>
CoreFunds Individual Shares may be exchanged for Individual Shares in
any other CoreFunds Portfolios. Shareholders who exchange into any CoreFunds
Portfolio that imposes a sales charge may be subject to such sales charge, if
applicable and not previously paid. With respect to the Conestoga Portfolios, a
shareholder who has paid a sales load on purchases of Retail Shares of an Equity
or Fixed Income Portfolio may exchange those Retail Shares for Retail Shares of
another Conestoga Equity or Fixed Income Portfolio at net asset value.
Shareholders of Retail Shares of the Conestoga Money Market Portfolios may
exchange these for Retail Shares of another Conestoga Money Market Portfolio at
net asset value. Shareholders who want to move investments in a Conestoga Money
Market Portfolio to a Conestoga Equity or Fixed Income Portfolio must follow the
redemption and purchase procedures for Retail Shares. If however, those Retail
Shares of a Conestoga Money Market Portfolio were acquired by a previous
exchange from Retail Shares of a Conestoga Equity or Fixed Income Portfolio,
these may be exchanged without payment of a sales charge. Exchanges are only
available in states where exchanges can lawfully be made from one Portfolio to
another, and must satisfy the requirements relating to the minimum initial
investment in a Portfolio. CoreFunds and Conestoga reserve the right to reject
any telephone exchange request and to modify or terminate exchange privileges at
any time.
E. Responsibility for Telephone Instructions
The CoreFunds and Conestoga Portfolios, their administrators and their
distributors are not liable for any loss, liability, cost or expense for acting
upon telephone instructions that are reasonably believed to be genuine. In
attempting to confirm that telephone instructions are genuine, procedures are
used that are considered reasonable, which may include recording telephone
instructions and requesting information as to account registration such as the
shareholder account number and/or tax identification number (in the case of
CoreFunds) or sending confirmations within 72 hours of the exchange, verifying
the name in which an account is registered, the account number, and the
III-5
<PAGE>
account holder's Social Security number, and sending proceeds only to the
address of record or to a previously authorized bank account (in the case of
Conestoga).
II. DIVIDENDS AND DISTRIBUTIONS
All CoreFunds Portfolios and Conestoga Portfolios distribute their net
capital gains to shareholders at least annually. The following table shows the
Portfolios' policies concerning the declaration and payment of dividends from
net investment income.
A. Dividends Declared Daily/Paid Monthly
<TABLE>
<CAPTION>
======================================================================================================================
CoreFunds Portfolios Conestoga Portfolios
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash Reserve Cash Management Fund
- ----------------------------------------------------------------------------------------------------------------------
Tax-Free Reserve Tax-Free Fund
- ----------------------------------------------------------------------------------------------------------------------
Treasury Reserve U.S. Treasury Securities Fund
- ----------------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Bond
Fund
- ----------------------------------------------------------------------------------------------------------------------
Short-Term Fund
- ----------------------------------------------------------------------------------------------------------------------
Bond Fund
======================================================================================================================
B. Dividends Declared Monthly/Paid Monthly
======================================================================================================================
CoreFunds Portfolios Conestoga Portfolios
- ----------------------------------------------------------------------------------------------------------------------
(None) Intermediate Income Fund
- ----------------------------------------------------------------------------------------------------------------------
Tax-Free Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
Short-Term Income Fund
- ----------------------------------------------------------------------------------------------------------------------
Bond Fund
======================================================================================================================
C. Dividends Declared Quarterly/Paid Quarterly
======================================================================================================================
CoreFunds Portfolios Conestoga Portfolios
- ----------------------------------------------------------------------------------------------------------------------
Value Equity Fund Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
Balanced Fund Balanced Fund
- ----------------------------------------------------------------------------------------------------------------------
Special Equity Fund Special Equity Fund
======================================================================================================================
</TABLE>
III-6
<PAGE>
D. Dividends Declared Annually/Paid Annually
<TABLE>
<CAPTION>
======================================================================================================================
CoreFunds Portfolios Conestoga Portfolios
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
(None) International Equity Fund
======================================================================================================================
E. Dividends Declared Periodically/Paid Periodically
======================================================================================================================
CoreFunds Portfolios Conestoga Portfolios
- ----------------------------------------------------------------------------------------------------------------------
International Growth Fund (None)
======================================================================================================================
</TABLE>
F. The CoreFunds Portfolios and Conestoga Portfolios all offer
dividend reinvestment programs.
III-7
<PAGE>
APPENDIX IV
INTERIM INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS
IV-1
<PAGE>
FORM OF
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of _______________, 1996 between CONESTOGA FAMILY OF
FUNDS, a Massachusetts trust with transferrable shares (the "Company"), and
Meridian Investment Company or its successor (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 ("1940 Act"); and
WHEREAS, the Company desires to retain the Investment Adviser to
furnish investment advisory services to the Cash Management Fund, Tax-Free Fund,
U.S. Treasury Securities Fund, Equity Fund, Special Equity Fund, Bond Fund,
Intermediate Income Fund, Pennsylvania Tax-Free Bond Fund, Balanced Fund,
Short-Term Income Fund and International Equity Fund and such other investment
portfolios of the Company as the Company and the Investment Adviser may agree
upon from time to time (each, a "Fund" and collectively, the "Funds") and the
Investment Adviser represents that it is willing and possesses legal authority
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 Fund or Funds identified on Schedule A hereto
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. Additional Funds may be added to
this Agreement from time to time by the parties executing a new Schedule A which
shall become effective upon its execution and shall supersede any Schedule A
having an earlier date.
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 Agreement and Declaration of Trust, as
executed on August 1, 1989 and as filed with the Secretary of State of the
Commonwealth of Massachusetts on August 2, 1989, and all amendments thereto or
restatements thereof;
(b) the Company's Code of Regulations and any amendments
thereto;
<PAGE>
(c) resolutions of the Company's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this Agreement;
(d) the Company's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission on
August 9, 1989 and any amendments thereto;
(e) the Company's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended ("1933 Act") (File No. 33-30431) and
under the 1940 Act as filed with the Securities and Exchange Commission and all
amendments thereto; and
(f) the most recent prospectus and Statement of Additional
Information of each Fund (such prospectuses and Statement of Additional
Information, as presently in effect, and all amendments and supplements thereto
are herein collectively called the "Prospectus").
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
Trustees, the Investment Adviser will provide a continuous investment program
for each Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Company with respect to each Fund.
The Investment Adviser will provide the services under this Agreement in
accordance with each Fund's investment objective, policies, and restrictions as
stated in the Prospectus and resolutions of the Company's Board of Trustees. The
Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to other accounts for which it has
investment responsibilities;
(b) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission and in addition will conduct its
activities under this Agreement in accordance with any applicable regulations of
any governmental authority pertaining to the investment advisory activities of
the Investment Adviser;
(c) will not make loans to any person to purchase or carry
units of beneficial interest in the Company or make interest-bearing loans to
the Company;
-3-
<PAGE>
(d) will place orders pursuant to its investment
determinations for the Company either directly with the issuer or with any
broker or dealer. In placing orders with brokers and dealers, the Investment
Adviser will attempt to obtain prompt execution of orders in an effective manner
at the most favorable price. Consistent with this obligation, when the execution
and price offered by two or more brokers or dealers are comparable, the
Investment Adviser may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide the Investment Adviser
with research advice and other services; In no instance will portfolio
securities be purchased from or sold to SEI Financial Management Corporation,
SEI Financial Services Company, the Investment Adviser, or any affiliated person
of either the Company, SEI Financial Management Corporation, SEI Financial
Services Company, or the Investment Adviser;
(e) will maintain all books and records with respect to the
Company's securities transactions and will furnish the Company's Board of
Trustees such periodic and special reports as the Board may request;
(f) will treat confidentially and as proprietary information
of the Company all records and other information relative to the Company and
prior, present, or potential interestholders, 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; and
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations for the
Company, the Investment Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or sale
for the Company's account are customers of the Investment Adviser or of its
parent or its subsidiaries or affiliates. In dealing with such customers, the
Investment Adviser and its parent, subsidiaries, and affiliates will not inquire
or take into consideration whether securities of those customers are held by the
Company.
4. Assistance. The Investment Adviser may employ or contract with other
persons to assist it in the performance of this Agreement (herein, a
"Sub-Adviser"); provided, however, that the retention of any Sub-Adviser shall
be approved as may be required by the 1940 Act. A Sub-Adviser may perform under
the
-4-
<PAGE>
supervision of the Investment Adviser any or all services described under
Section 3. Sub-Advisers may include other investment advisory or management
firms and officers or employees who are employed by both the Investment Adviser
and the Company. The fees or other compensation of any Sub-Adviser shall be paid
by the Investment Adviser and no obligation may be incurred on the Company's
behalf to any such person.
In the event that the Investment Adviser appoints a Sub-Adviser, the
Investment Adviser will review, monitor, and report to the Company's Board of
Trustees on the performance and investment procedures of any such Sub-Adviser;
assist and consult with any Sub-Adviser in connection with the Fund's continuous
investment program; and approve lists of foreign countries which may be
recommended by any Sub-Adviser for investment by the Fund.
5. 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.
6. 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 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.
7. 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.
8. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each Fund will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee equal to the
lesser of (i) the fee computed daily and paid monthly at the applicable annual
rate set forth on Schedule A hereto, or (ii) such fee as may from time to time
be agreed upon in writing by the Company and the Investment Adviser in advance
of the period to which the fee relates. Each Fund's obligation to pay the
above-described fee to the Investment Adviser will begin as of the date of the
initial public sale of shares in that Fund.
If in any fiscal year the aggregate expenses of any Fund (as defined
under the securities regulations of any state having
-5-
<PAGE>
jurisdiction over the Company) exceed the expense limitations of any such state,
the Investment Adviser will reimburse such Fund for a portion of such excess
expenses equal to such excess times the ratio of the fees otherwise payable by
such Fund to the Investment Adviser hereunder to the sum of the aggregate fees
otherwise payable by the Fund to the Investment Adviser hereunder and to SEI
Financial Management Corporation under the Administration Agreement between SEI
Financial Management Corporation and the Company. The obligation of the
Investment Adviser to reimburse the Funds hereunder is limited in any fiscal
year to the amount of its fee hereunder for such fiscal year, provided, however,
that notwithstanding the foregoing, the Investment Adviser shall reimburse the
Funds for such proportion of such excess expenses regardless of the amount of
fees paid to it during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Company so require. Such
expense reimbursement, if any, will be estimated daily and reconciled and paid
on a monthly basis.
The fee attributable to each Fund shall be the several (and not joint
or joint and several) obligation of each such Fund.
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 any Fund
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 as
to a Fund as of the date first written above, provided that it shall have been
approved by vote of a majority of the outstanding voting securities of such Fund
in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect for two years after such
effective date. Thereafter, if not terminated, this Agreement shall continue in
effect as to each Fund for successive yearly periods, provided that such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Company's Board of Trustees 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 vote of a majority of the Company's Board of Trustees or by the vote of a
majority of the outstanding voting securities of such Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to a particular Fund at any time
on 60 days' written notice, without the payment of any penalty, by the Company
(by vote of the Company's Board of Trustees or by vote of a majority of the
-6-
<PAGE>
outstanding voting securities of such Fund) 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 meaning given to such terms
by the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge
or-termination is sought.
12. 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 the law of the Commonwealth of Pennsylvania.
The names "Conestoga Family of Funds" and "Trustees of
Conestoga Family of Funds" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated August 1, 1989 which is hereby referred
to and a copy of which is on file at the office of the State Secretary of The
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Conestoga Family of Funds" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the Trust Property, and all persons dealing with any class of shares of the
Trust must look solely to the Trust Property
-7-
<PAGE>
belonging to such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day and
year first above written.
CONESTOGA FAMILY OF FUNDS
Seal By: s/
Title:
MERIDIAN INVESTMENT COMPANY
Seal By: s/
Title:
-8-
<PAGE>
Schedule A
to the
Investment Advisory Agreement
between Conestoga Family of Funds and
Meridian Investment Company
dated ______________, 1996
Name of Fund Compensation*
- ------------ -------------
Cash Management Fund 0.40%
Tax-Free Fund 0.40%
U.S. Treasury Securities Fund 0.40%
Equity Fund 0.74%
Special Equity Fund 1.50%
Bond Fund 0.74%
Intermediate Income Fund 0.74%
Pennsylvania Tax-Free Bond Fund 0.74%
Short-Term Income Fund 0.74%
Balanced Fund 0.75%
International Equity Fund 1.00%
CONESTOGA FAMILY OF FUNDS
By: s/
Title:
Date:
MERIDIAN INVESTMENT COMPANY
By: s/
Title:
Date:
- ---------------------------
* All fees are stated as an annual rate based upon the Fund's average daily net
assets and are computed daily and payable monthly.
-9-
<PAGE>
FORM OF
INTERIM SUB-ADVISORY AGREEMENT
AGREEMENT made as of _______________, 1996 between Meridian Investment
Company or its successor (the "Adviser") and Marvin and Palmer Associates, Inc.
(the "Sub-Adviser").
WHEREAS, Conestoga Family of Funds (the "Company") is registered as an
open-end diversified, management investment company under the Investment Company
Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment advisory services to the Company's International Equity Fund (the
"Fund") and the Sub-Adviser represents that it is willing and possesses legal
authority 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 Advisor hereby appoints the Sub-Advisor to act as
Sub-adviser to the Fund for the period and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Adviser has furnished the Sub-Adviser
with copies properly certified or authenticated of each of the following:
(a) the Company's Agreement and Declaration of Trust, as
executed on August 1, 1989 and as filed with the Secretary of State of the
Commonwealth of Massachusetts on August 2, 1989, and all amendments thereto or
restatements thereof;
(b) the Company's Code of Regulations and any amendments
thereto;
(c) resolutions of the Company's Board of Trustees authorizing
the appointment of the Sub-Adviser, approving this Agreement, and establishing
the investment objective, policies and restrictions of the Fund;
(d) the Company's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission on
August 9, 1989 and any amendments thereto;
-10-
<PAGE>
(e) the amendments to the Company's Registration Statement on
Form N-1A under the Securities Act of 1933, as amended ("1933 Act"), (File No.
33-30431) and under the 1940 Act relating to the Fund as filed with the
Securities and Exchange Commission and all amendments thereto; and
(f) the Fund'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 collectively called the "Prospectus").
The Adviser will furnish the Sub-Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. Duties of Sub-Adviser. Subject to the supervision of the Company's
Board of Trustees, the Sub-Adviser will assist the Adviser in providing a
continuous investment program for the Fund, including investment research and
management with respect to all securities and investments and cash equivalents
of the Fund. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's investment objective, policies, and restrictions as
stated in the Prospectus and resolutions of the Company's Board of Trustees.
Without limiting the generality of the foregoing, Sub-Adviser further
agrees that it will:
(a) prepare, subject to the Adviser's approval, lists of
foreign countries for investment by the Fund and determine from time to time
what securities and other investments will be purchased, retained or sold for
the Fund, including, with the assistance of the Adviser, the Fund's investments
in futures and forward currency contracts;
(b) manage in consultation with the Adviser the Fund's
temporary investments in securities;
(c) manage the Fund's overall cash position, and determine
from time to time what portion of the Fund's assets will be held in different
currencies;
(d) provide the Adviser with foreign broker research, a
quarterly review of international economic and investment developments, and
occasional analyses on international investment issues;
(e) attend regular business and investment-related meetings
with the Company's Board of Trustees and the Adviser if requested to do so by
the Company and/or the Adviser; and
-11-
<PAGE>
(f) maintain books and records with respect to the securities
transactions for the Fund, furnish to the Adviser and the Company's Board of
Trustees such periodic and special reports as they may request with respect to
the Fund, and provide in advance to the Adviser all reports to the Company's
Board of Trustees for examination and review within a reasonable time prior to
the Company's Board meetings.
4. Covenants by Sub-Adviser. Sub-Adviser agrees with respect to the
services provided to the Fund that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to other accounts for which it has
investment responsibilities, and will conform with all applicable Rules and
Regulations of the Securities and Exchange Commission ("SEC Regulations") and in
addition will conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to the
investment advisory activities of the Sub-Adviser;
(b) will telecopy trade information to the Adviser on the
first business day following the day of the trade and cause broker confirmations
to be sent directly to the Adviser; and
(c) will treat confidentially and as proprietary information
of the Company all records and other information relative to the Fund 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 may not be withheld where Sub-Adviser would 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).
5. Services Not Exclusive.
(a) The services furnished by Sub-Adviser hereunder are deemed
not to be exclusive, and nothing in this Agreement shall (i) prevent Sub-Adviser
or any affiliated person (as defined in the 1940 Act) of Sub-Adviser from acting
as investment adviser or manager for any other person or persons, including
other management investment companies with investment objectives and policies
the same as or similar to those of the Fund or (ii) limit or restrict
Sub-Adviser or any such affiliated person from buying, selling or trading any
securities or other investments (including any securities or other investments
which the Fund is eligible to buy) for its or their own accounts or for the
accounts of others for whom it or they may be acting; provided, however, that
Sub-Adviser agrees that it will not undertake any
-12-
<PAGE>
activities which, in its reasonable judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement.
(b) Nothing contained herein, however, shall prohibit
Sub-Adviser from advertising or soliciting the public generally with respect to
other products or services, regardless of whether such advertisement or
solicitation may include prior, present or potential shareholders of the
Company.
6. Portfolio Transactions. Investment decisions for the Fund shall be
made by Sub-Adviser independently from those for any other investment companies
and accounts advised or managed by Sub-Adviser. The Fund and such investment
companies and accounts may, however, invest in the same securities. When a
purchase or sale of the same security is made at substantially the same time on
behalf of the Fund and/or another investment company or account, the transaction
will be averaged as to price, and available investments allocated as to amount,
in a manner which Sub-Adviser believes to be equitable to the Fund and such
other investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or sold by the Fund. To the extent permitted by
law, Sub-Adviser may aggregate the securities to be sold or purchased for the
Fund with those to be sold or purchased for other investment companies or
accounts in order to obtain best execution.
Sub-Adviser shall place orders for the purchase and sale of
portfolio securities and will solicit broker-dealers to execute transactions in
accordance with the Fund's policies and restrictions regarding brokerage
allocations. Sub-Adviser shall place orders pursuant to its investment
determination for the Fund either directly with the issuer or with any broker or
dealer selected by Sub-Adviser. In executing portfolio transactions and
selecting brokers or dealers, Sub-Adviser shall use its reason- able best
efforts to seek the most favorable execution of orders, after taking into
account all factors Sub-Adviser deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing basis.
Consistent with this obligation, Sub-Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (within the meaning of Section 28(e) of
the Securities Exchange Act of 1934) to or for the benefit of the Fund and/or
other accounts over which Sub-Adviser or any of its affiliates exercises
investment discretion. Sub-Adviser is authorized to pay to a broker or dealer
who provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the
-13-
<PAGE>
amount of commission another broker or dealer would have charged for effecting
that transaction if Sub-Adviser determines in good faith that such commission
was reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or Sub-Adviser's overall responsibilities to the Fund and to the
Company. In no instance will portfolio securities be purchased from or sold to
Sub-Adviser, or the Fund's principal underwriter, or any affiliated person
thereof except as permitted by SEC Regulations.
7. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Sub-Adviser acknowledges that all records which it maintains
for the Company are the property of the Company and agrees to surrender promptly
to the Company any of such records upon the Company's request, provided, that
Sub-Adviser may retain copies thereof at its own expense. Sub-Adviser further
agrees to preserve for 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.
8. Expenses. During the term of this Agreement, Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for the Fund.
9. Compensation. For the services provided by the Sub-Adviser pursuant
to this Agreement, the Adviser will pay to the Sub-Adviser a fee, payable
monthly, at the annual rates of seventy-five one-hundredths of one percent
(0.75%) of the average of the first $100,000,000 of the daily net assets of the
Fund, seventy one-hundredths of one percent (0.70%) of the average of the next
$100,000,000 of such assets, sixty-five one-hundredths of one percent (0.65%) of
the average of the next $100,000,000 of such assets, and sixty one-hundredths of
one percent (0.60%) of the average of such assets in excess of $300,000,000. If
this Agreement shall become effective subsequent to the first day of a month, or
shall terminate before the last day of a month, the Sub-Adviser's compensation
for such fraction of the month shall be determined by applying the foregoing
percentages to the average daily net asset value of the Fund during such
fraction of a month and in the proportion that such fraction of a month bears to
the entire month.
10. Limitation of Liability. The Sub-Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund or
the Adviser 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,
-14-
<PAGE>
bad faith or gross negligence on the part of the Sub-Adviser in the performance
of its duties or from reckless disregard by it of its obligations and duties
under this Agreement.
The Sub-Adviser agrees to indemnify the Adviser with respect to any
loss, liability, judgment, cost or penalty which the Fund or the Adviser may
directly or indirectly suffer or incur in any way arising out of or in
connection with any material breach of this Agreement by the Sub-Adviser. The
Adviser agrees to indemnify the Sub-Adviser with respect to any loss, liability,
judgment, cost or penalty which the Sub-Adviser may directly or indirectly
suffer or incur in any way arising out of the performance of its duties under
this Agreement as provided in the following paragraph.
The Sub-Adviser shall give the Adviser the benefit of its best judgment
and effort in rendering services hereunder, but the Sub-Adviser shall not be
liable for any act or omission or for any loss sustained by the Adviser in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties, under this Agreement. The Sub-Adviser shall be entitled
to full indemnification from the Adviser for any loss, liability, judgment, cost
or penalty arising from (a) any act by any person or entity (including the
Adviser) for which the Sub-Adviser was not involved directly in either the act
itself or the decision making process leading up to such act, (b) any act by the
Sub-Adviser taken upon the written instructions of the Adviser or (c) the
performance of the Sub-Adviser's duties under this Agreement; provided, however,
the Sub-Adviser shall not be entitled to indemnity under clause (c) of this
sentence for any loss, liability, judgment, cost or penalty resulting from
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties, under this
Agreement.
11. Duration and Termination. This Agreement will become effective as
to the Fund as of the date first written above, provided that it shall have been
approved by vote of a majority of the outstanding voting securities of the Fund
in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect for two years after such
effective date. Thereafter, if not terminated, this Agreement shall continue in
effect for successive yearly periods, provided that such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Company's Board of Trustees who are not parties to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of a majority of the Company's Board of Trustees
or by the vote of a majority of the
-15-
<PAGE>
outstanding voting securities of the Fund. Notwithstanding the foregoing, this
Agreement may be terminated at any time on 60 days' written notice, without the
payment of any penalty, by the Company (by vote of the Company's Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund), by the Adviser, or by the Sub-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 meaning given to such terms by the 1940 Act.)
12. Amendment of this Agreement. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought. No amendment of this Agreement shall be effective with
respect to the Fund until approved by the vote of a majority of the outstanding
voting securities of the Fund.
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 the law of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day and
year first above written.
MERIDIAN INVESTMENT COMPANY
By: s/
Title:
MARVIN AND PALMER ASSOCIATES, INC.
By: s/
Title:
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<PAGE>
[PRELIMINARY COPY]
PROXY
CONESTOGA FAMILY OF FUNDS
SPECIAL EQUITY FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of CONESTOGA FAMILY OF
FUNDS (the "Company") for use at a Meeting of Shareholders to be held at The
Wilmington Hilton, 630 Naamans Road, Wilmington, Delaware on March 22, 1996 at
10:00 a.m.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the Special
Equity Fund (the "Fund"), held of record by the undersigned on January 26, 1996,
the record date for the meeting, upon the following matters and upon any other
matter which may come before the meeting, in their discretion:
FOR AGAINST ABSTAIN
/ / / / / / 1. Proposal to approve an Agreement
and Plan of Reorganization and
the transactions contemplated
thereby, including the transfer
of substantially all of the
assets of the Company's Special
Equity Fund (the "Reorganizing
Portfolio") to CoreFunds Special
Equity Fund (the "Existing
CoreFunds Portfolio") in exchange
for shares of the Existing
CoreFunds Portfolio, the
distribution of the Existing
CoreFunds Portfolio's shares so
received to shareholders of the
Reorganizing Portfolio, the
approval of an interim investment
advisory agreement with Meridian
Investment Company (or its
successor) if the Merger of
Meridian Bancorp, Inc. and
CoreStates Financial Corp occurs
before the proposed
reorganization, and the
termination of the Company's
existence under state law and the
Investment Company Act of 1940,
as amended.
2. In their discretion, the proxies
are authorized to vote upon such
other business as may properly
come before the meeting.
Every properly signed proxy will be voted in the manner specified hereon
and, in the absence of specification, will be treated as GRANTING authority to
vote FOR Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney or as
executor, administrator, trustee or guardian,
please give full title as such. If a corporation,
please sign in full corporate name by president
or other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
Dated:____________________________________________
X ________________________________________________
Signature
X ________________________________________________
Signature, if held jointly
<PAGE>
[PRELIMINARY COPY]
PROXY
CONESTOGA FAMILY OF FUNDS
BOND FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of CONESTOGA FAMILY OF
FUNDS (the "Company") for use at a Meeting of Shareholders to be held at The
Wilmington Hilton, 630 Naamans Road, Wilmington, Delaware on March 22, 1996 at
10:00 a.m.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the Bond
Fund (the "Fund"), held of record by the undersigned on January 26, 1996, the
record date for the meeting, upon the following matters and upon any other
matter which may come before the meeting, in their discretion:
FOR AGAINST ABSTAIN
/ / / / / / 1. Proposal to approve an Agreement
and Plan of Reorganization and
the transactions contemplated
thereby, including the transfer
of substantially all of the
assets of the Company's Bond
Fund (the "Reorganizing
Portfolio") to CoreFunds Bond
Fund (the "Existing CoreFunds
Portfolio") in exchange for
shares of the Existing CoreFunds
Portfolio, the distribution of
the Existing CoreFunds
Portfolio's shares so received to
shareholders of the Reorganizing
Portfolio, the approval of an
interim investment advisory
agreement with Meridian
Investment Company (or its
successor) if the Merger of
Meridian Bancorp, Inc. and
CoreStates Financial Corp occurs
before the proposed
reorganization, and the
termination of the Company's
existence under state law and the
Investment Company Act of 1940,
as amended.
2. In their discretion, the proxies
are authorized to vote upon such
other business as may properly
come before the meeting.
Every properly signed proxy will be voted in the manner specified hereon
and, in the absence of specification, will be treated as GRANTING authority to
vote FOR Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should
sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please sign
in full corporate name by president or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
Dated:__________________________________________
X ______________________________________________
Signature
X ______________________________________________
Signature, if held jointly
<PAGE>
[PRELIMINARY COPY]
PROXY
CONESTOGA FAMILY OF FUNDS
SHORT-TERM INCOME FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of CONESTOGA FAMILY OF
FUNDS (the "Company") for use at a Meeting of Shareholders to be held at The
Wilmington Hilton, 630 Naamans Road, Wilmington, Delaware on March 22, 1996 at
10:00 a.m.
The undersigned hereby appoints Sandra A. Oechslin and Kevin P. Robins, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the
Short-Term Income Fund (the "Fund"), held of record by the undersigned on
January 26, 1996, the record date for the meeting, upon the following matters
and upon any other matter which may come before the meeting, in their
discretion:
FOR AGAINST ABSTAIN
/ / / / / / 1. Proposal to approve an Agreement
and Plan of Reorganization and
the transactions contemplated
thereby, including the transfer
of substantially all of the
assets of the Company's Short-
Term Income Fund (the
"Reorganizing Portfolio") to
CoreFunds Short-Term Income Fund
(the "Existing CoreFunds
Portfolio") in exchange for
shares of the Existing CoreFunds
Portfolio, the distribution of
the Existing CoreFunds
Portfolio's shares so received to
shareholders of the Reorganizing
Portfolio, the approval of an
interim investment advisory
agreement with Meridian
Investment Company (or its
successor) if the Merger of
Meridian Bancorp, Inc. and
CoreStates Financial Corp occurs
before the proposed
reorganization, and the
termination of the Company's
existence under state law and the
Investment Company Act of 1940,
as amended.
2. In their discretion, the proxies
are authorized to vote upon such
other business as may properly
come before the meeting.
Every properly signed proxy will be voted in the manner specified hereon
and, in the absence of specification, will be treated as GRANTING authority to
vote FOR Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should
sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please sign
in full corporate name by president or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
Dated: _________________________________________
X ______________________________________________
Signature
X ______________________________________________
Signature, if held jointly
