<PAGE> 1
WESTCORE TRUST
370 Seventeenth Street
Suite 2700
Denver, Colorado 80202
1-800-392-CORE (2673)
January 1, 1996
This Prospectus describes seven mutual funds offered by Westcore Trust
("Westcore" or the "Trust") including four equity funds, two taxable bond funds
and one tax-exempt bond fund, each with a different investment objective. All
Westcore Funds are no-load investments. This permits you to purchase and sell
shares of a Fund without a sales charge. If you enroll in our Automatic
Investment Plan, you can open your account for as little as $50 a month.
Otherwise, the minimum initial investment is normally $1,000.
Denver Investment Advisors LLC ("Denver Investment Advisors" or the "Investment
Adviser") serves as investment adviser to each Fund. Denver Investment
Advisors and its predecessors have over 37 years of investment management
experience and currently manage over $9.4 billion in assets for clients such as
corporations, insurance companies and individuals. ALPS Mutual Funds Services,
Inc. ("ALPS") serves as the Westcore Funds' distributor.
This Prospectus sets forth information that you should consider before
investing. Please read the Prospectus and keep it for future reference. It
contains important information including how each fund invests and shareholder
services available to you. Additional information is contained in a Statement
of Additional Information ("SAI"), dated January 1, 1996, on file with the
Securities and Exchange Commission (the "SEC"). You may obtain a free copy of
the SAI by writing or calling Westcore at the address or telephone number shown
above. The SAI is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
FUND INFORMATION
Fund Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Expense Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fund Specifics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . 11
Westcore Equity Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Westcore Bond Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Fundamental Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . 18
HOW TO INVEST
How to Open and Add to Your Account . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Minimum Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
How to Exchange Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
How to Redeem Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Price of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Accounts Opened Through a Service Organization . . . . . . . . . . . . . . . . . . . . 23
General Account Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
OTHER INFORMATION
Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Performance Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
APPENDICES
Information on Investment Policies and
Additional Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Rating Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
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<PAGE> 3
FUND INFORMATION
FUND HIGHLIGHTS
This section provides you with a brief overview of the Westcore Funds and
summarizes each Fund's investment objectives. A detailed discussion of their
investment objectives, policies and risks begins on page 11 and complete
information on how to purchase, exchange and redeem Fund shares begins on page
20.
WESTCORE EQUITY FUNDS
WESTCORE MIDCO GROWTH FUND -- seeks to maximize long-term capital appreciation
by investing primarily in medium-sized growth companies.
WESTCORE BLUE CHIP FUND (formerly Modern Value Equity Fund) -- seeks to
maximize long-term total return by investing in stocks of large companies
headquartered in the United States.
WESTCORE GROWTH AND INCOME FUND (formerly Equity Income Fund) -- seeks to
maximize long-term total return by investing in equity securities selected for
their growth potential and income-producing abilities.
WESTCORE SMALL-CAP OPPORTUNITY FUND -- seeks to maximize long-term capital
appreciation primarily through diversified investments in domestic and foreign
equity securities of small-capitalization companies.
WESTCORE BOND FUNDS
WESTCORE LONG-TERM BOND FUND -- seeks to maximize long-term total rate of
return by investing primarily in investment grade bonds that have an average
dollar-weighted maturity of at least 10 years.
WESTCORE INTERMEDIATE-TERM BOND FUND -- seeks current income with less
volatility of principal by investing primarily in investment grade bonds that
have an average weighted maturity of between 3 and 6 years.
WESTCORE COLORADO TAX-EXEMPT FUND -- seeks to provide income exempt from both
federal and Colorado personal income taxes by emphasizing insured Colorado
municipal bonds with intermediate maturities.
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<PAGE> 4
WESTCORE FUNDS SPECTRUM
The spectrum below shows Denver Investment Advisors' current assessment of the
potential risk of the Westcore Funds relative to one another. The spectrum is
not indicative of the future volatility or performance of the Funds and should
not be used to compare the Funds to other mutual funds or types of investments.
<TABLE>
<CAPTION>
FUND CONSERVATIVE MODERATE AGGRESSIVE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Westcore MIDCO Growth Fund X
Westcore Blue Chip Fund X
Westcore Growth and Income Fund X
Westcore Small-Cap Opportunity Fund X
Westcore Long-Term Bond Fund X
Westcore Intermediate-Term Bond Fund X
Westcore Colorado Tax-Exempt Fund X
</TABLE>
-4-
<PAGE> 5
<TABLE>
<CAPTION>
WESTCORE WESTCORE
SMALL- WESTCORE INTER- WESTCORE
WESTCORE WESTCORE WESTCORE CAP LONG- MEDIATE- COLORADO
MIDCO BLUE GROWTH AND OPPOR- TERM TERM TAX-
GROWTH CHIP INCOME TUNITY BOND BOND EXEMPT
FUND FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None None None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of
average net assets)
Management Fees . . . . . . 0.65% 0.65% 0.65% 1.00% 0.45% 0.45% 0.00%(2)
12b-1 Fees . . . . . . . . None None None None None None None
All Other Expenses . . . . 0.50%(1) 0.50%(1) 0.50%(1) 0.30%(1) 0.50%(1) 0.40%(1) 0.50%(1)
----- ----- ----- ----- ----- ----- -----
TOTAL OPERATING EXPENSES . . . 1.15%(1) 1.15%(1) 1.15%(1) 1.30%(1) 0.95%(1) 0.85%(1) 0.50%(1)
===== ===== ===== ===== ===== ===== =====
(after fee waivers and
expense reimbursements)
</TABLE>
- -------------
Example: Assume you invest $1,000, the annual return on each Fund is 5%, and
each Fund's annual operating expenses remain as listed above. The example
below shows the operating expenses that you would indirectly bear as an
investor in the Funds:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
One Year . . . . . . . . . . . . $ 12 $ 12 $ 12 $ 13 $ 10 $ 9 $ 5
Three Years . . . . . . . . . . . 37 37 37 41 30 27 16
Five Years . . . . . . . . . . . 64 64 64 72 53 47 28
Ten Years . . . . . . . . . . . . 140 140 140 157 117 105 63
</TABLE>
- --------------
(1) The Administrators have advised the Trust that they currently intend
to obtain waivers or reimburse expenses of at least 0.02% with respect
to each of the Funds, and to forego a portion of their fees and
reimburse expenses included in the All Other Expenses category shown
above so that the Total Operating Expenses of the Westcore Blue Chip,
Growth and Income, Small-Cap Opportunity, Long-Term Bond,
Intermediate-Term Bond and Colorado Tax-Exempt Funds will not exceed
the amounts shown above for the current fiscal year. Without such fee
waivers and expense reimbursements, the Total Operating Expenses of
the Funds would be 1.17% for MIDCO Growth Fund, and 1.20%, 1.50%,
2.45%, 1.05%, 0.95% and 1.55%, for the other funds, respectively, for
the current fiscal year.
(2) The Investment Adviser has advised the Trust that it presently intends
to forego the fee it is entitled to receive from the Westcore Colorado
Tax-Exempt Fund for investment advisory services to the extent
necessary to not exceed Total Operating Expenses shown above for the
Fund for the current fiscal year. Without such waiver, the advisory
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<PAGE> 6
fee would be payable at the annual rate of 0.50% of the Fund's average
daily net assets.
THE EXAMPLE ILLUSTRATES THE EFFECT OF EXPENSES BUT DOES NOT INDICATE ACTUAL OR
EXPECTED COSTS ON INVESTMENT RETURN WHICH MAY VARY.
EXPENSE INFORMATION
The tables and example above show you the various costs and expenses you will
bear directly or indirectly as an investor in the Westcore Funds. SHAREHOLDER
TRANSACTION EXPENSES are charges you pay when buying, exchanging or selling
shares of a Westcore Fund. The no-load Westcore Funds do not charge any
Shareholder Transaction Expenses. ANNUAL FUND OPERATING EXPENSES, which are
based on estimated expenses for the current fiscal year, are paid out of a
Fund's assets and include fees for portfolio management, maintenance of
shareholder accounts, general Fund administration, shareholder servicing,
accounting and other services.
The fee waivers and expense reimbursements reflected in the table are voluntary
and may be modified or terminated at any time without the Funds' consent.
If you own shares through certain Service Organizations (as described in the
section entitled "How to Invest") you may pay account charges in connection
with the maintenance of your account at the Service Organization. These
account charges are in addition to the expenses shown above.
For more complete descriptions of shareholder transaction expenses and the
Funds' operating expenses, see "How to Invest" and "Management Of The Funds" in
this Prospectus and the financial statements and related notes included in the
Statement of Additional Information.
FINANCIAL HIGHLIGHTS
The tables below provide supplementary information to each Fund's
financial statements contained in the Statement of Additional Information and
set forth certain information concerning the historic investment results of
Fund shares. The financial highlights are based on the financial statements of
each Fund, which have been audited by Deloitte & Touche LLP, the Trust's
independent auditors, except that the information in the Financial Highlights
of the Westcore MIDCO Growth Fund (except for total return) for the period
ended May 31, 1987 was audited by other auditors. You should read the tables
together with the financial statements and related notes included in the
Statement of Additional Information. Further information about the performance
of the Funds is available in the Annual Report to Shareholders. You may obtain
both the Statement of Additional Information and the Annual Report to
Shareholders free of charge by contacting ALPS or the Westcore Trust at
1-800-392-CORE (2673).
-6-
<PAGE> 7
FINANCIAL HIGHLIGHTS
WESTCORE MIDCO GROWTH FUND
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
For the Year Ended May 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987(1)
---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.09 $15.79 $14.38 $14.00 $11.57 $12.18 $9.82 $12.20 $10.00
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.00 0.00 0.04 0.06 0.07 0.24 0.19 0.03 0.20
Net realized and unrealized gain (loss)
on investments 1.56 1.34 2.48 1.84 3.16 1.32 2.52 (1.47) 2.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.56 1.34 2.52 1.90 3.23 1.56 2.71 (1.44) 2.20
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income 0.00 0.00 0.00 (0.32) (0.08) (0.24) (0.10) (0.28) 0.00
Distributions from net realized gain
on investments (0.53) (1.03) (1.11) (1.20) (0.72) (1.93) (0.25) (0.66) (0.00)
Return of Capital 0.00 (0.01) 0.00 (0.00) (0.00) 0.00 (0.00) 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total dividends, distributions and
return of capital to shareholders (0.53) (1.04) (1.11) (1.52) (0.80) (2.17) (0.35) (0.94) 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $17.12 $16.09 $15.79 $14.38 $14.00 $11.57 $12.18 $9.82 $12.20
===================================================================================================================================
Total return 10.05 % 8.37 % 18.04 % 14.09 % 30.44 % 15.33 % 28.46 % (13.09)% 26.53 %(3)
(4)
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $401,760 $335,453 $231,595 $180,681 $131,420 $85,209 $81,948 $557 $439
===================================================================================================================================
Ratio of expenses to average net assets 0.94 % 0.84 % 0.83 % 0.80 % 0.78 % 0.83 % 0.80 % 1.33 % 0.00 %(3)
===================================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.03)% (0.09)% 0.04 % 0.12 % 0.58 % 2.05 % 1.21 % 0.02 % 2.52 %(3)
===================================================================================================================================
Ratio of expenses to average net
assets without fee waivers 0.96 % 0.87 % 0.85 % 0.85 % 0.88 % 0.88 % 0.85 % 2.20 % 2.20 %(3)
===================================================================================================================================
Ratio of net investment income (loss) to
average net assets without fee waivers (0.05)% (0.12)% 0.02 % 0.07 % 0.48 % 2.00 % 1.16 % (0.85)% 0.32 %(3)
===================================================================================================================================
Portfolio turnover rate(2) 50.19 % 52.05 % 56.23 % 48.17 % 75.43 % 86.62 % 74.03 % 91.57 % 54.03 %(3)
===================================================================================================================================
</TABLE>
(1) Commencement of operations was on August 1, 1986.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the
time of acquisition) for a period and dividing it by the monthly
average of the market value of such securities during the period.
Purchases and sales of investment securities (excluding short-term
securities) for the period ended May 31, 1995 were $207,617,530 and
$182,126,502, respectively.
-7-
<PAGE> 8
(3) Annualized.
(4) Unaudited.
-8-
<PAGE> 9
FINANCIAL HIGHLIGHTS
WESTCORE BLUE CHIP FUND (Formerly the Westcore Modern Value Equity Fund)
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
For the Year Ended May 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(1)
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $12.70 $13.87 $13.35 $12.68 $11.74 $11.10 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.40 0.34 0.28 0.29 0.44 0.39
Net realized and unrealized gain
on investments 2.12 0.04 1.13 0.95 1.15 0.82 1.02
- ----------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 2.35 0.44 1.47 1.23 1.44 1.26 1.41
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.16) (0.43) (0.21) (0.35) (0.30) (0.46) (0.31)
Distributions from net realized gain
on investments (0.19) (1.18) (0.74) (0.21) (0.20) (0.16) 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (0.35) (1.61) (0.95) (0.56) (0.50) (0.62) (0.31)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $14.70 $12.70 $13.87 $13.35 $12.68 $11.74 $11.10
==================================================================================================================================
Total return 19.03% 3.12% 11.62% 10.02% 13.08% 11.74% 14.42%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $52,545 $36,674 $28,176 $30,572 $27,208 $25,857 $28,088
==================================================================================================================================
Ratio of expenses to average net assets 1.01% 1.06% 0.99% 0.91% 0.84% 0.85% 0.88%
==================================================================================================================================
Ratio of net investment income
to average net assets 1.78% 2.30% 2.37% 2.17% 2.65% 3.81% 3.54%
==================================================================================================================================
Ratio of expenses to average net
assets without fee waivers 1.06% 1.09% 1.02% 0.97% 0.94% 0.90% 0.93%
==================================================================================================================================
Ratio of net investment income
to average net assets without fee waivers 1.73% 2.27% 2.34% 2.11% 2.55% 3.76% 3.49%
==================================================================================================================================
Portfolio turnover rate(2) 61.72% 41.32% 85.53% 123.91% 142.01% 158.54% 175.23%
==================================================================================================================================
</TABLE>
(1) Commencement of operations occurred on the first day of this period.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the
time of acquisition) for a period and dividing it by the monthly
average of the market value of such securities during the period.
Purchases and sales of investment securities (excluding short-term
securities) for the period ended May 31, 1995 were $32,109,649 and
$24,376,105, respectively.
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<PAGE> 10
FINANCIAL HIGHLIGHTS
WESTCORE GROWTH AND INCOME FUND (Formerly the Westcore Equity Income Fund)
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
Westcore Equity Income Fund(1)
for the Year Ended May 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(2)
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $10.62 $11.51 $10.99 $10.10 $9.94 $10.43 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.20 0.51 0.32 0.32 0.32 0.36 0.40
Net realized and unrealized gain (loss)
on investments 0.15 (0.30) 0.68 1.05 0.48 1.02 1.05
- ----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.35 0.21 1.00 1.37 0.80 1.38 1.45
- ----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.21) (0.54) (0.20) (0.43) (0.33) (0.37) (0.33)
Distributions from net realized gain
on investments (0.26) (0.56) (0.28) (0.05) (0.31) (1.50) (0.69)
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (0.47) (1.10) (0.48) (0.48) (0.64) (1.87) (1.02)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $10.50 $10.62 $11.51 $10.99 $10.10 $9.94 $10.43
============================================================================================================================
Total return 3.73% 1.71% 9.41% 14.12% 9.07% 14.58% 15.98%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $27,029 $42,644 $35,791 $25,128 $19,932 $16,583 $12,594
============================================================================================================================
Ratio of expenses to average net assets 1.17% 1.03% 0.99% 0.95% 0.90% 0.93% 0.97%
============================================================================================================================
Ratio of net investment income
to average net assets 2.09% 4.45% 2.75% 3.03% 3.51% 3.45% 3.75%
============================================================================================================================
Ratio of expenses to average net
assets without fee waivers 1.22% 1.06% 1.03% 1.02% 1.00% 0.98% 1.02%
============================================================================================================================
Ratio of net investment income
to average net assets without fee waivers 2.04% 4.42% 2.71% 2.96% 3.41% 3.40% 3.70%
============================================================================================================================
Portfolio turnover rate(2) 81.14% 53.86% 61.24% 68.56% 64.94% 59.36% 100.22%
============================================================================================================================
</TABLE>
(1) The Westcore Equity Income Fund is the former name of the Westcore
Growth and Income Fund. The Fund's name was changed as of January 1,
1996 to reflect a different investment objective and different
investment policies. Prior to January 1, 1996, the Fund's investment
objective was to seek reasonable income through investments in
income-producing securities. As of January 1, 1996, the Fund's
investment objective was revised to seek long-term total return
through capital appreciation and current income. A new portfolio
manager has managed the Fund since October 1995. Past performance is
not intended to be indicative or representative of future performance.
(2) Commencement of operations was on the first day of this period.
(3) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the
time of acquisition) for a period and dividing it by the monthly
average of the market value of such securities during the period.
Purchases and sales of investment securities (excluding short-term
securities) for the period ended May 31, 1995 were $32,459,150 and
$46,680,289, respectively.
-10-
<PAGE> 11
FINANCIAL HIGHLIGHTS
WESTCORE SMALL-CAP OPPORTUNITY FUND
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
For the Year Ended May 31,
------------------------------
1995 1994(1)
--------- -------------
<S> <C> <C>
Net asset value - beginning of period: $14.97 $15.00
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.05
Net realized and unrealized gain (loss) on
investments 1.11 (0.05)
- ---------------------------------------------------------------------------------------
Total income from investment operations 1.20 0.00
- ---------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.10) (0.03)
Distributions from net realized gain on
investments (0.12) 0.00
- ---------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (0.22) (0.03)
- ---------------------------------------------------------------------------------------
Net asset value - end of period $15.95 $14.97
=======================================================================================
Total Return (3) 8.15% (0.07%)(3)
=======================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $9,703 $2,159
=======================================================================================
Ratio of expenses to average net assets 1.27% 1.38%(3)
=======================================================================================
Ratio of net investment income to average
net assets 0.61% 1.00%(3)
=======================================================================================
Ratio of expenses to average net assets
without fee waivers 2.77% 6.56%(3)
=======================================================================================
Ratio of net investment income (loss) to average
net assets without fee waivers (0.89%) (4.18%)(3)
=======================================================================================
Portfolio turnover rate(2) 59.17% 64.31%(3)
=======================================================================================
</TABLE>
(1) The Fund commenced operations on December 28, 1993.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the
time of acquisition) for a period and dividing it by the monthly
average of the market value of such securities during the period.
Purchases and sales of investment securities (excluding short-term
securities) for the period ended May 31, 1995 were $11,293,160 and
$3,877,975, respectively.
(3) Annualized.
-12-
<PAGE> 12
FINANCIAL HIGHLIGHTS
WESTCORE LONG-TERM BOND FUND
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
For the Year Ended May 31,
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(1)
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $9.22 $11.25 $10.60 $10.01 $10.11 $10.36 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.59 0.62 0.77 0.80 1.08 0.93 0.91
Net realized and unrealized gain (loss)
on investments 0.66 (0.51) 0.99 0.56 0.04 (0.21) 0.33
- ----------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.25 0.11 1.76 1.36 1.12 0.72 1.24
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.60) (0.62) (0.78) (0.77) (1.11) (0.93) (0.88)
Distributions from net realized gain
on investments 0.00 (1.52) (0.33) 0.00 (0.11) (0.04) 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (0.60) (2.14) (1.11) (0.77) (1.22) (0.97) (0.88)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $9.87 $9.22 $11.25 $10.60 $10.01 $10.11 $10.36
==================================================================================================================================
Total return 14.37% (0.25%) 17.40% 14.04% 11.87% 7.06% 13.03%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $33,440 $26,962 $26,281 $30,800 $27,448 $18,113 $15,403
==================================================================================================================================
Ratio of expenses to average net assets 0.94% 0.89% 0.77% 0.70% 0.65% 0.73% 0.73%
==================================================================================================================================
Ratio of net investment income
to average net assets 6.54% 5.74% 6.63% 7.59% 8.29% 8.99% 8.93%
==================================================================================================================================
Ratio of expenses to average net
assets without fee waivers 0.99% 0.92% 0.80% 0.74% 0.73% 0.78% 0.78%
==================================================================================================================================
Ratio of net investment income
to average net assets without fee waivers 6.49% 5.71% 6.60% 7.55% 8.21% 8.94% 8.88%
==================================================================================================================================
Portfolio turnover rate(2) 25.09% 52.82% 79.16% 51.79% 81.13% 40.21% 68.94%
==================================================================================================================================
</TABLE>
(1) Commencement of operations occurred on the first day of this period.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the
time of acquisition) for a period and dividing it by the monthly
average of the market value of such securities during the period.
Purchases and sales of investment securities (excluding short-term
securities) for the period ended May 31, 1995 were $10,569,427 and
$6,451,507, respectively.
-13-
<PAGE> 13
FINANCIAL HIGHLIGHTS
WESTCORE INTERMEDIATE-TERM BOND FUND
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
For the Year Ended May 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(1)
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $10.02 $10.70 $10.14 $9.80 $9.91 $9.99 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.55 0.67 0.78 0.87 0.84 0.85
Net realized and unrealized gain (loss)
on investments 0.27 (0.52) 0.53 0.39 (0.10) (0.08) (0.04)
- -----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.85 0.03 1.20 1.17 0.77 0.76 0.81
- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.60) (0.53) (0.64) (0.83) (0.88) (0.84) (0.82)
Distributions from net realized gain
on investments 0.00 (0.18) 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (0.60) (0.71) (0.64) (0.83) (0.88) (0.84) (0.82)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $10.27 $10.02 $10.70 $10.14 $9.80 $9.91 $9.99
=============================================================================================================================
Total return 8.93% 0.10% 12.16% 12.42% 8.30% 7.82% 8.53%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $97,619 $88,965 $99,469 $87,712 $68,958 $107,288 $110,962
=============================================================================================================================
Ratio of expenses to average net assets 0.77% 0.68% 0.65% 0.61% 0.59% 0.59% 0.60%
=============================================================================================================================
Ratio of net investment income
to average net assets 5.86% 5.03% 6.37% 7.73% 9.01% 8.32% 8.59%
=============================================================================================================================
Ratio of expenses to average net
assets without fee waivers 0.80% 0.70% 0.67% 0.65% 0.65% 0.64% 0.65%
=============================================================================================================================
Ratio of net investment income
to average net assets without fee waivers 5.83% 5.00% 6.35% 7.69% 8.95% 8.27% 8.54%
=============================================================================================================================
Portfolio turnover rate(2) 60.86% 65.04% 87.17% 53.92% 80.20% 71.42% 63.30%
=============================================================================================================================
</TABLE>
(1) Commencement of operations was on the first day of this period.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the
time of acquisition) for a period and dividing it by the monthly
average of the market value of such securities during the period.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended May 31, 1995 were $59,523,270 and
$52,479,535, respectively.
-14-
<PAGE> 14
FINANCIAL HIGHLIGHTS
WESTCORE COLORADO TAX-EXEMPT FUND
(For a Fund Share Outstanding Throughout the Periods Indicated.)
<TABLE>
<CAPTION>
For the Year Ended May 31,
----------------------------------------------------------
1995 1994 1993 1992(1)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value - beginning of period $10.52 $10.71 $10.25 $10.00
- ---------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.52 0.53 0.57 0.58
Net realized and unrealized gain (loss)
on investments 0.20 (0.19) 0.46 0.23
- ---------------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.72 0.34 1.03 0.81
- ---------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.54) (0.53) (0.57) (0.56)
Distributions from net realized gain on
investments 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (0.54) (0.53) (0.57) (0.56)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $10.70 $10.52 $10.71 $10.25
=====================================================================================================================
Total Return 7.16% 3.22% 10.27% 8.36%
=====================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $10,792 $10,553 $7,326 $4,511
=====================================================================================================================
Ratio of expenses to average net assets 0.42% 0.27% 0.22% 0.11%
=====================================================================================================================
Ratio of net investment income to
average net assets 5.03% 4.98% 5.45% 5.84%
=====================================================================================================================
Ratio of expenses to average net assets
without fee waivers 1.62% 1.59% 1.88% 1.65%
=====================================================================================================================
Ratio of net investment income to average
net assets without fee waivers 3.83% 3.65% 3.79% 4.30%
=====================================================================================================================
Portfolio turnover rate(2) 3.15% 9.76% 1.82% 12.95%
=====================================================================================================================
</TABLE>
(1) Commencement of operations was June 1, 1991.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
May 31, 1995 were $836,808 and $309,894, respectively.
-15-
<PAGE> 15
FUND SPECIFICS -- INVESTMENT OBJECTIVES AND POLICIES
To help you decide which Westcore Fund is appropriate for you, this section
looks more closely at the Funds' investment objectives, policies and securities
in which they invest. You should carefully consider your own investment goals,
time horizon and risk tolerance before investing in a Fund. You should also
review carefully the Appendix "Information on Investment Policies and
Additional Risk Factors" for a more detailed discussion of the instruments in
which the Funds may invest and their associated risks. There can be no
assurance that a Fund will achieve its investment objective.
Upon notice to shareholders each Fund's investment objective and policies may
be changed by the Trust's Board of Trustees without the approval of
shareholders. In the event of a change, you may want to consider whether that
Fund remains a suitable investment for you.
WESTCORE EQUITY FUNDS
The Westcore Equity Funds are designed for long-term investors who can tolerate
the risks associated with investments in common stocks. They are most suitable
for investors with a long-term investment horizon. The following questions are
designed to help you better understand an investment in the Westcore Equity
Funds.
WHAT IS EACH WESTCORE EQUITY FUND'S INVESTMENT OBJECTIVE AND WHAT ARE ITS
PRIMARY INVESTMENTS?
- WESTCORE MIDCO GROWTH FUND seeks to maximize long-term capital
appreciation (rather than current income) by investing primarily in
common stocks. During normal market conditions, the Fund invests at
least 65% of its total assets in companies with market capitalizations
of at least $100 million.
- WESTCORE BLUE CHIP FUND seeks a high level of long-term total return
through capital appreciation and current income consistent with
investment primarily in a diversified portfolio of large company
common stocks.
- WESTCORE GROWTH AND INCOME FUND seeks long-term total return through
capital appreciation and current income. During normal market
conditions, at least 65% of the Fund's total assets will be invested
in equity securities selected for their potential for capital
appreciation and their ability to produce above average earnings and
dividend growth.
-16-
<PAGE> 16
- WESTCORE SMALL-CAP OPPORTUNITY FUND seeks to maximize long-term
capital appreciation primarily through diversified investments in
equity securities of small-capitalization companies. During normal
market conditions, the Fund invests at least 65% of its total assets
in the equity securities of U.S. and foreign companies with
capitalizations of $1 billion or less. Equity securities include
common stock, preferred stock and securities convertible into common
stock or preferred stock. The remaining portion of the Fund's assets
may be invested in securities of companies with larger market
capitalizations.
IN WHAT TYPES OF SECURITIES DO THE WESTCORE EQUITY FUNDS INVEST?
- WESTCORE MIDCO GROWTH FUND primarily invests in medium-sized companies
which generally have market capitalizations of $100 million to $3
billion and revenues of $100 million to $6 billion at the time of
purchase. The Fund does not invest in companies that are ranked among
the largest 100 companies in Fortune Magazine's annual ranking of "The
Fortune 500--The Largest U.S. Industrial and Service Corporations" in
terms of revenues or market capitalization. Up to 25% of the Fund's
assets may be invested in securities issued by foreign companies,
either directly (if the company is listed on a U.S. exchange) or
indirectly through American Depository Receipts ("ADRs"), provided
that their market capitalizations and revenues are $10 billion or less
at the time of purchase.
- WESTCORE BLUE CHIP FUND invests primarily in approximately 50 common
stocks from a universe of the 300 largest dividend-paying companies
(ranked by either market capitalization or revenues) headquartered in
the United States. During normal market conditions, at least 65% of
the Fund's total assets will be invested in securities of companies
within this universe.
- WESTCORE GROWTH AND INCOME FUND purchases common stocks primarily from
a universe of domestic companies that are selected for their growth
potential and established dividend-paying histories.
- WESTCORE SMALL-CAP OPPORTUNITY FUND invests primarily in equity
securities of small-capitalization companies believed to be
undervalued and to have strong potential for price appreciation.
-17-
<PAGE> 17
WHAT ARE THE COMMON INVESTMENT PRACTICES OF THE WESTCORE EQUITY FUNDS?
Each Westcore Equity Fund may also invest in options and futures. The Westcore
MIDCO Growth, Growth and Income and Small-Cap Opportunity Funds may also invest
in preferred stocks, warrants and foreign currency transactions. Additionally,
the Westcore MIDCO Growth, Growth and Income and Small-Cap Opportunity Funds
may invest up to 15% of their total assets in securities convertible into
common stock rated below investment grade (i.e., lower-rated securities) or
unrated securities determined to be of comparable quality. The Westcore MIDCO
Growth and Growth and Income Funds may also invest, directly or indirectly, up
to 25% of their total assets in securities issued by foreign companies. There
is no limitation on the amount of total assets that may be held in foreign
securities in the Westcore Small-Cap Opportunity Fund.
Each Westcore Equity Fund may invest in such short-term instruments as U.S.
government obligations, money market instruments, repurchase agreements and
securities issued by other investment companies (within the limits prescribed
by the Investment Company Act). In addition, each Fund may borrow funds for
temporary purposes by entering into reverse repurchase agreements on a limited
basis. Each Fund may hold uninvested cash reserves (which would not earn
income) pending investment, to meet anticipated redemption requests or during
temporary defensive periods.
WHAT IS THE MAIN RISK OF INVESTING IN AN EQUITY FUND?
The fundamental risk associated with any equity fund is the risk that the value
of the stocks it holds might decrease. Stock values may fluctuate in response
to the activities of an individual company or in response to general market or
economic conditions. Historically, equity securities have provided greater
long-term returns and have entailed greater short-term risks than other
investment choices.
Although smaller or newer issuers are more likely to realize more substantial
growth than larger or more established issuers, they are more likely to suffer
more significant losses. Investments in such companies can be both more
volatile and more speculative.
For a discussion of risks related to such investments as lower rated securities
or "junk bonds," options and futures, foreign currency exchange transactions
and "derivative" instruments in general in which the Funds may invest, see the
Appendix "Information on Investment Policies and Additional Risk Factors."
-18-
<PAGE> 18
WHICH WESTCORE EQUITY FUNDS ARE DIVERSIFIED AND WHAT DOES THAT MEAN?
All the Westcore Equity Funds are diversified. Diversification is a means of
reducing risk by investing a Fund's assets in a broad range of stocks or other
securities in various industries and economic sectors. Diversification does
not provide assurance against the possibility of loss, however.
HOW DO THE WESTCORE EQUITY FUNDS TRY TO REDUCE RISK?
- Diversification of a Fund's assets reduces the effect of any single
holding on its overall portfolio value.
- The Funds may adjust the securities they hold to include issues which
are believed to involve less risk.
- A Fund may use futures, options and similar instruments to attempt to
hedge its portfolio against disadvantageous movements in securities
prices and interest rates. The Westcore MIDCO Growth, Growth and
Income and Small-Cap Opportunity Funds may use various currency
hedging techniques, including forward currency contracts, to manage
exchange rate risk when investing directly in foreign markets.
- To the extent that a Fund holds a larger cash position, it may not
participate in market declines (or advances) to the same degree as a
fund that is more fully invested in common stocks.
WHAT IS MEANT BY "MARKET CAPITALIZATION?"
Market capitalization is the most commonly used measure of the size and value
of a company. It is computed by multiplying the current market price of a
share of the company's stock by the total number of its shares outstanding.
Market capitalization is an important investment criterion for the Westcore
MIDCO Growth, Blue Chip and Small-Cap Opportunity Funds.
WESTCORE BOND FUNDS
The following questions are designed to help you better understand an
investment in the Westcore Bond Funds.
-19-
<PAGE> 19
WHAT ARE THE INVESTMENT OBJECTIVES OF THE WESTCORE BOND FUNDS?
- WESTCORE LONG-TERM BOND FUND seeks a high level of long-term total
rate of return (i.e., income plus capital appreciation).
- WESTCORE INTERMEDIATE-TERM BOND FUND seeks current income with
relatively small volatility of principal through investment in
investment grade securities and high quality money market instruments.
- WESTCORE COLORADO TAX-EXEMPT FUND seeks to provide investors with
income exempt from Federal income taxes and Colorado state income
taxes consistent with safety and stability of principal.
WHAT ARE THE PRIMARY INVESTMENTS OF THE WESTCORE BOND FUNDS?
The Westcore Long-Term Bond and Intermediate-Term Bond Funds are diversified
funds that invest at least 65% of their total assets in a broad range of debt
obligations during normal market conditions. Debt obligations include fixed
and variable-rate bonds, asset-backed and mortgage-backed securities, zero
coupon bonds, debentures, obligations convertible into common stocks,
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, dollar-denominated debt obligations of foreign issuers
including foreign corporations and foreign governments, municipal obligations
and money market instruments.
The Westcore Colorado Tax-Exempt Fund is a non-diversified fund that invests
substantially all of its assets (i.e., at least 80%) in debt instruments issued
by or on behalf of the state of Colorado ("Colorado Obligations"), other
states, territories and possessions of the United States, the District of
Columbia and their respective authorities, agencies, instrumentalities and
political subdivisions ("Municipal Obligations"). The Fund normally will
invest at least 65% of its total assets in Colorado Obligations. The Colorado
Tax-Exempt Fund currently intends to invest at least 75% of its assets in
Municipal Obligations covered by insurance policies.
WHAT ARE THE EXPECTED MATURITIES OF THE WESTCORE BOND FUNDS?
Except during temporary defensive periods or unusual market conditions, Denver
Investment Advisors expects that the average dollar-weighted portfolio maturity
of the Westcore Bond Funds will be as follows:
-20-
<PAGE> 20
<TABLE>
<CAPTION>
FUND AVERAGE DOLLAR-WEIGHTED MATURITY
<S> <C>
Westcore Long-Term Bond Fund at least 10 years
Westcore Intermediate-Term Bond Fund 3-6 years
Westcore Colorado Tax-Exempt Fund 7-10 years
</TABLE>
WHAT IS THE INVESTMENT QUALITY OF THE ASSETS OF THE WESTCORE BOND FUNDS?
Debt obligations acquired by the Westcore Long-Term Bond and Intermediate-Term
Bond Funds will be at least investment grade at the time of purchase. Each
Fund's dollar-weighted average portfolio quality is expected to be "A" or
better.
Municipal Obligations acquired by the Colorado Tax-Exempt Fund will be rated in
one of the three highest investment grade categories at the time of purchase by
one or more rating agencies. The Fund may invest up to 10% of its total assets
in Colorado Obligations rated at the time of purchase in the fourth highest
investment grade category when acceptable Colorado Obligations with higher
ratings are unavailable for investment by the Fund. The Fund may invest in
unrated obligations only if Denver Investment Advisors determines they are
comparable in quality to instruments that meet the Fund's rating requirements.
If the rating of an obligation held by a Fund is reduced below the Fund's
rating requirements, the Investment Adviser will sell the obligation when it is
in the best interests of the Fund to do so.
For a description of ratings, please review the Appendix "Rating Categories."
DO THE WESTCORE BOND FUNDS INVEST IN ANY OTHER TYPES OF SECURITIES?
The Westcore Long-Term Bond and Intermediate-Term Bond Funds may invest in
obligations convertible into common stocks and may acquire common stocks,
warrants or other rights to buy shares only if they are attached to a
fixed-income obligation. Common stock received through the conversion of
convertible debt obligations will normally be sold in an orderly manner as soon
as possible. Each Fund may also invest in options and futures. Additionally,
each Fund may invest in short-term instruments including repurchase agreements
and securities issued by other investment companies (within the limits
prescribed by the Investment Company Act), and borrow funds for temporary
purposes by entering into reverse repurchase agreements on a limited basis.
-21-
<PAGE> 21
The Westcore Colorado Tax-Exempt Fund may invest in short-term taxable money
market instruments, securities issued by other investment companies which
invest in taxable or tax-exempt money market instruments and U.S. Government
obligations. The Fund also may borrow funds for temporary purposes by entering
into reverse repurchase agreements on a limited basis.
During temporary defensive periods, each Fund may invest without limitation in
various short-term investments.
IS AN INVESTMENT IN THE WESTCORE COLORADO TAX-EXEMPT FUND A TAX-FREE
INVESTMENT?
Dividends paid by the Fund which are derived from interest on Colorado
Obligations, as well as certain other governmental issuers, will be exempt from
regular federal income taxes and Colorado state income taxes. Dividends
derived from interest on non-Colorado Obligations will be subject to Colorado
state income tax. Because the Fund may invest up to 20% of its assets in
private activity bonds whose interest may be subject to the federal alternative
minimum tax, a portion of the dividends paid by the Fund may be treated as a
tax preference item for purposes of this tax.
See also "Taxes" in "Other Information" on page 24.
ARE THERE ANY INVESTMENT RISKS UNIQUE TO THE WESTCORE COLORADO TAX-EXEMPT FUND?
Because the Fund concentrates its investments in Colorado Obligations, it is
classified as a non-diversified fund for purposes of the Investment Company
Act. The Fund's performance may be dependent upon fewer securities than is the
case with a diversified portfolio and the Fund may experience greater
fluctuations in net asset value. In addition, although the Fund does not
presently intend to do so on a regular basis, it may invest 25% or more of its
assets in industrial development bonds and in other Municipal Obligations, the
interest on which is paid solely from revenues of similar projects. To the
extent that the Fund's assets are concentrated in these types of Municipal
Obligations and the Fund is non-diversified, it will be more susceptible to
economic, political and legal developments than a diversified Fund with similar
objectives whose assets are not so concentrated.
HOW DO INTEREST RATES AFFECT THE VALUE OF MY INVESTMENT?
A fundamental risk associated with any fund that invests in fixed-income
securities is the risk that the value of the securities it holds will rise or
fall as interest rates change.
-22-
<PAGE> 22
Generally, a fixed-income security will increase in value when interest rates
fall and decrease in value when interest rates rise. Longer-term securities
are generally more sensitive to interest rate changes than shorter-term
securities, but they usually offer higher yields to compensate investors for
the greater risks. A bond fund's average-weighted maturity is a measure of how
the fund will react to interest rate changes.
WHAT IS MEANT BY A FUND'S "AVERAGE DOLLAR-WEIGHTED MATURITY?"
The stated maturity of a bond is the date when the issuer must repay the bond's
entire principal value to an investor, such as a Fund. A bond's term to
maturity is the number of years remaining to maturity. A bond fund does not
have a stated maturity, but it does have an average dollar-weighted maturity.
This is calculated by averaging the terms to maturity of bonds held by a Fund
with each maturity "weighted" according to the percentage of net assets it
represents.
HOW DO THE WESTCORE BOND FUNDS ATTEMPT TO MANAGE INTEREST RATE RISK?
Each Fund may vary the average-weighted maturity of its portfolio to reflect
its portfolio manager's analysis of interest rate trends and other factors. A
Fund's average-weighted maturity will tend to be shorter when its portfolio
manager expects interest rates to rise and longer when its portfolio manager
expects interest rates to fall. The Westcore Long-Term Bond and
Intermediate-Term Bond Funds may also use futures, options and similar
instruments to manage interest rate risk.
WHAT IS MEANT BY "CREDIT QUALITY?"
Another fundamental risk associated with all bond funds is credit risk -- the
risk that an issuer will be unable to make principal and interest payments when
due. U.S. government securities are generally considered to be the safest type
of investment in terms of credit risk. Municipal Obligations generally rank
between U.S. government securities and corporate debt securities in terms of
credit safety. Corporate debt securities, particularly those rated below
investment grade, may present the highest credit risk.
HOW IS CREDIT QUALITY MEASURED?
Ratings published by nationally recognized rating agencies ("Rating Agencies"),
such as Standard & Poor's Ratings Group ("S&P") and Moody's Investors Service,
Inc. ("Moody's"), are
-23-
<PAGE> 23
widely accepted measures of credit risk. The lower a bond issue is rated by an
agency, the more credit risk it is considered to represent. Lower rated bonds
generally pay higher yields to compensate investors for the greater risk.
IN GENERAL
WHAT POTENTIAL RISKS AND REWARDS MAY I EXPERIENCE IF I INVEST IN THE WESTCORE
FUNDS?
An investment in the Westcore Funds presents the potential rewards and risks
common to securities investments. The Westcore MIDCO Growth, Blue Chip, Growth
and Income and Small-Cap Opportunity Funds invest in common stocks. Although
stocks historically have presented greater potential for capital appreciation
than debt obligations, they do not provide the same assurance of income and may
carry greater risk of loss. The value of an investment in the Westcore
Small-Cap Opportunity Fund, in particular, may experience significant
fluctuations over time due to the Fund's investments in smaller companies and
in convertible securities rated below investment grade which present greater
potential price volatility, i.e., the price may go up or down.
The market value of debt obligations held by the Westcore Funds will also
fluctuate, normally rising when interest rates fall and falling when interest
rates rise. The value of some debt obligations (such as collateralized
mortgage obligations, asset-backed securities, municipal leases and structured
notes) may be more volatile than other types of instruments.
Several of the Funds may invest in foreign securities that are considered
attractive by Denver Investment Advisors. In addition to being more costly,
foreign securities may be subject to potentially adverse political,
governmental and economic developments and changes in foreign currency exchange
rates.
Each Fund may purchase certain derivative instruments which derive their value
from the performance of underlying assets, interest or currency exchange rates,
or indices. Derivative instruments present, to varying degrees, special
market, volatility, leveraging, liquidity, pricing and operations risks. See
"Risk Factors Associated with Derivative Instruments" in the Appendix
"Information on Investment Policies and Additional Risk Factors" on page A-6.
The Funds may lend their securities and enter into repurchase agreements and
reverse repurchase agreements with banks and broker/dealers that could
experience financial difficulties, and may make limited investments in illiquid
securities.
-24-
<PAGE> 24
As the Funds' investment adviser, Denver Investment Advisors will evaluate the
rewards and risks presented by all securities purchased by the Funds and will
determine how they will be used in furtherance of the investment objectives of
the Funds. It is possible, however, that Denver Investment Advisors'
evaluations will prove to be inaccurate and, even when accurate, it is possible
that the Funds will incur losses.
FUNDAMENTAL INVESTMENT LIMITATIONS
WHAT ARE FUNDAMENTAL INVESTMENT LIMITATIONS?
Fundamental investment limitations are those investment limitations that a Fund
may not change without the approval of the holders of a majority of the Fund's
outstanding shares. Some are summarized in the tables on the facing page (a
complete statement is set forth in the Statement of Additional Information).
The Westcore MIDCO Growth, Blue Chip, Growth and Income, Small-Cap Opportunity,
Long-Term Bond and Intermediate-Term Bond Funds may not:
- Purchase securities if more than 5% of a Fund's total assets
will be invested in the securities of any one issuer.
However, up to 25% of the Fund's total assets may be invested
without regard to this 5% limitation. Certain investments
such as U.S. government securities are not subject to this
limitation.
- Make loans, except that each Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance
with its investment objective and policies. Each Fund may
also lend portfolio securities in an amount not exceeding 30%
of its total assets.
The Westcore Long-Term Bond, Intermediate-Term Bond and Colorado Tax-Exempt
Funds may not:
- Borrow money or issue senior securities except that each Fund
may borrow from banks and enter into reverse repurchase
agreements for temporary purposes in amounts up to 10% of its
total assets at the time of such borrowing. No Fund may
mortgage, pledge or hypothecate any assets, unless it is in
connection with a permissible borrowing and the amounts do not
exceed the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such
borrowing.
-25-
<PAGE> 25
In addition, the Westcore Colorado Tax-Exempt Fund may not:
- Invest less than 80% of its net assets in securities the
interest on which is exempt from federal income tax, except
during periods of unusual market conditions. For purposes of
this limitation only, securities the interest on which is
treated as a specific tax preference item under the federal
alternative minimum tax are considered taxable.
- Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance
with its investment objective and policies.
- Purchase securities if more than 5% of its total assets will
be invested in the securities of any one issuer. However, up
to 50% of the Fund's total assets may be invested without
regard to the 5% limitation as long as not more than 25% of
the Fund's total assets are invested in the securities of any
one issuer. Certain investments such as U.S. government
securities are not subject to this limitation.
No Fund will purchase securities so long as its outstanding borrowings
(including reverse repurchase agreements) exceed 5% of its total assets.
If a percentage limitation or other statistical requirement is met at the time
a Fund makes an investment, a later change in the percentage due to a change in
the value of the Fund's portfolio securities generally will not constitute a
violation.
HOW TO INVEST
This section tells you how to purchase, exchange and redeem your shares. It
also explains various services and features offered in connection with your
account. PLEASE CALL WESTCORE FUNDS AT 1-800-392-CORE (2673) IF YOU HAVE ANY
QUESTIONS OR NEED ANY INFORMATION.
ALPS is the distributor for Westcore Funds and has its principal office at 370
Seventeenth Street, Suite 2700, Denver, Colorado 80202.
-26-
<PAGE> 26
HOW TO OPEN AND ADD TO YOUR ACCOUNT
You may open an account and purchase shares of the Westcore Funds by completing
a new Account Application and returning it to Westcore with your check made
payable to Westcore/SSB. You may obtain an Account Application by calling
1-800-392-CORE (2673).
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
===================================================================================================================
<S> <C> <C>
BY TELEPHONE - Call 1-800-392-CORE (2673). - Call 1-800-392-CORE (2673).
BY MAIL - Send a completed Account Application - Send a check or money order
and a check or money order payable in payable in U.S. dollars and drawn
U.S. dollars and drawn on a bank on a bank located in the U.S. to
located in the U.S. to Westcore Westcore Trust, P.O. Box 8319,
Trust, P.O. Box 8319, Boston, MA Boston, MA 02266-8319. Specify
02266-8319. your account number and the name
of the Fund(s) in which you are
investing.
IN PERSON - Bring your completed Account - Bring your check or money order
Application and a check or money payable to Westcore/SSB, to
order payable to Westcore/SSB, to Westcore Trust, 370 Seventeenth
Westcore Trust, 370 Seventeenth Street, Suite 2700, Denver, CO
Street, Suite 2700, Denver, CO 80202. 80202.
AUTOMATICALLY - Complete the Automatic Investment - Complete at any time an Automatic
(from your Plan Section of your new Account Investment Plan application to
bank account) Application ($50 minimum per have $50 or more automatically
transaction) and return it to withdrawn from your bank account
Westcore Trust, P.O. Box 8319, monthly or quarterly.
Boston, MA 02266-8319.
BY WIRE - Call 1-800-392-CORE (2673) to receive - Call 1-800-392-CORE (2673) to
wiring instructions. receive wiring instructions.
===================================================================================================================
</TABLE>
MINIMUM INVESTMENTS*
<TABLE>
<S> <C>
To open a new account $1,000
To open a new retirement or certain other accounts 250
To open a new account with an Automatic Investment
Plan 0
To add to any type of an account 50
</TABLE>
* The minimum investment requirements do not apply to reinvested dividends,
purchases by Service Organizations acting on behalf of
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<PAGE> 27
their customers, officers, trustees, directors, employees and retirees of the
Trust, Investment Adviser, Administrators or any direct or indirect subsidiary,
or any spouse, parent or child of any of these persons.
HOW TO EXCHANGE FUND SHARES
You may exchange your Fund shares for shares of the other Westcore Funds or the
PNC Money Market Portfolio.* Exchanges must be for at least $1,000 in value
per cransaction. You should read the Prospectus for the Fund into which you
are exchanging. For further information on the exchange privilege, please call
a Westcore Investor Service Representative at 1-800-392-CORE (2673).
Westcore Trust may modify or terminate the exchange privilege, but will not
materially modify or terminate it without giving shareholders 60 days' notice.
- ---------------
* PNC Money Market Portfolio is a no-load money market fund advised by
PNC Institutional Management Corporation and sub-advised by PNC Bank
National Association and distributed by Provident Distributors, Inc.
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<PAGE> 28
<TABLE>
HOW TO EXCHANGE SHARES
=========================================================================================================
<S> <C>
BY TELEPHONE - Call 1-800-392-CORE (2673) and give the account
available only if you checked the name, account number, name of Fund and amount of
appropriate box on the Account exchange ($1,000 minimum per transaction).
Application
- If you have an account and would like to add the
telephone feature, send a written request to
Westcore Trust, P.O. Box 8319, Boston, MA 02266-
8319. The request must be signed by each account
owner with the signatures guaranteed by an
authorized financial institution.
BY MAIL - Send a written request to Westcore Trust, P.O. Box
8319, Boston, MA 02266-8319. Submit any share
certificates being exchanged, endorsed for
transfer.
- YOUR WRITTEN REQUEST MUST:
- be signed (and signatures
guaranteed) by each
account owner;
- state the number or dollar
amount of shares to be
redeemed ($1,000 minimum);
- include your account number and tax
identification number.
=========================================================================================================
</TABLE>
HOW TO REDEEM FUND SHARES
You may redeem your Fund shares on any business day. If you have any questions
on how to redeem your shares, please call a Westcore Investor Service
Representative at 1-800-392-CORE (2673).
Redemption proceeds generally will be sent by check to the shareholder(s) of
record at the address of record within 7 days
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<PAGE> 29
after receipt of a valid redemption request. If you have authorized the wire
redemption service, your redemption proceeds will be wired directly into your
designated bank account normally within 3 business days after receipt of a
valid redemption request. If you have selected the Systematic Withdrawal Plan,
your redemption proceeds will be electronically transferred to your designated
bank account within 7 days after withdrawal.
-30-
<PAGE> 30
<TABLE>
<CAPTION>
HOW TO REDEEM SHARES
===========================================================================================================
<S> <C>
BY TELEPHONE - Call 1-800-392-CORE (2673) and give the account name,
(available only if you checked the account number, name of Fund and amount of redemption
appropriate box on the Account ($1,000 minimum).
Application)
- If you do not have and would like to add the telephone
- Not available for redemption feature, send a written request to Westcore
retirement accounts or Trust, P.O. 8319, Boston, MA 02266-8319. The request must
shares held in certificate be signed (and signatures guaranteed) by each account
form. owner.
IN PERSON - Bring your written request to Westcore Trust, 370
Seventeenth Street, Suite 2700, Denver, CO 80202.
BY MAIL - Send a written request to Westcore Trust, P.O. Box 8319,
Boston, MA 02266-8319. Submit any share certificates being
redeemed, endorsed for transfer.
- Your written request must:
- be signed (and signatures guaranteed)
by each account owner;
- state the number or dollar amount
of shares to be redeemed;
- include your account number and tax
identification number.
BY WIRE - Call 1-800-CORE (2673) or write Westcore Trust, P.O. Box
(available only if you checked the 8319, Boston, MA 02266-8319. You will need to provide:
appropriate box in the Account account name and number; name of Fund; and amount of
Application) redemption ($1,000 minimum per transaction if made by
telephone).
- If you have already opened your account and would like to
have the wire redemption feature, send a written request to
Westcore Trust, P.O. Box 8319, Boston, MA 02266-8319. The
request must be signed (and signatures guaranteed) by each
account owner.
BY SYSTEMATIC WITHDRAWAL - Request quarterly or monthly withdrawals in any multiple of
$50. Call 1-800-392-CORE (2673) for more information or a
form.
===========================================================================================================
</TABLE>
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<PAGE> 31
PRICE OF FUND SHARES
All purchases, redemptions and exchanges will be processed at the net asset
value ("NAV") next calculated after your request is received in proper form. A
Fund's NAV is determined by the Administrators as of the close of regular
trading on the New York Stock Exchange (the "NYSE"), currently 4:00 p.m.
(Eastern time), on each day that the NYSE is open. In order to receive a day's
price, your order must be received by the close of regular trading on the NYSE
on that day. If not, your request will be processed at the Fund's NAV at the
close of regular trading on the next day. To be in proper form, your order
must include your account number and must state the Fund shares you wish to
purchase, redeem or exchange.
In the case of participants in certain employee benefit plans investing in
certain Funds, their purchase orders will be processed at the NAV next
determined after the Service Organization acting on their behalf receives the
purchase order.
A Fund's NAV is calculated by dividing the total value of its investments and
other assets, less liabilities, by the total number of shares outstanding.
Each Fund's investments are valued at market value or, where market quotations
are not readily available, at fair value as determined in good faith by or
under the direction of the Board of Trustees. Debt securities with maturities
of 60 days or less are valued at amortized cost, which generally equals market
value.
ACCOUNTS OPENED THROUGH A SERVICE ORGANIZATION
You may purchase or sell Fund shares through an account you have with Denver
Investment Advisors, any qualified broker/dealer, any bank or any other
institution (your "Service Organization"). Your Service Organization may
charge transaction fees on the purchase and/or sale of Fund shares and may
require different minimum initial and subsequent investments than Westcore.
Service Organizations may also impose other charges, restrictions or cut-off
times different from those applicable to shareholders who invest in Westcore
directly.
A Service Organization may receive fees from the Trust or Denver Investment
Advisors for providing services to the Trust or its shareholders. In certain
cases, a Service Organization may elect to credit against the fees payable by
its customers all or a portion of the fees received from the Trust or Denver
Investment Advisors with respect to their customers' assets invested in the
Trust. The Service Organization, rather than you, may be the shareholder of
record of your Fund shares. Westcore is not responsible for the failure of any
Service Organization to carry out its obligations to its customers.
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<PAGE> 32
GENERAL ACCOUNT POLICIES
If your account balance falls below $750 as a result of redemption and you do
not increase the amount to at least $750 within 60 days after notice, your
account may be closed and the proceeds sent to you.
You may choose to initiate certain transactions by telephone. Westcore Funds
and their agents will not be responsible for any losses resulting from
unauthorized transactions when procedures designed to verify the identity of
the caller are followed. It may be difficult to reach the Funds by telephone
during periods of unusual market activity. If this happens, you may redeem
your shares by mail as described above.
Westcore Funds or your Service Organization will send you a statement of your
account quarterly and a confirmation after every transaction that affects your
share balance or your account registration. A statement with tax information
will be mailed to you by January 31 of each year and filed with the Internal
Revenue Service. At least twice a year, you will receive financial statements
in the form of Annual and Semi-Annual Reports of the Funds.
Duplicate mailings of Fund materials to shareholders who reside at the same
address may be eliminated.
The Funds will issue share certificates upon written request only.
OTHER INFORMATION
DISTRIBUTIONS AND TAXES
A Fund's income from dividends and interest and any net realized short-term
capital gains are paid to shareholders as income dividends. A Fund realizes
capital gains whenever it sells securities for a higher price than it paid for
them. Net realized long-term gains are paid to shareholders as capital gain
dividends. A dividend will reduce the net asset value of a Fund share by the
amount of the dividend.
DISTRIBUTION SCHEDULE
When you open an account, you must specify on your Account Application whether
you want to receive your distributions in cash or reinvest them in the
distributing Fund or another Fund.
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<PAGE> 33
You may change your distribution option at any time by writing or calling
1-800-392-CORE (2673).
<TABLE>
<CAPTION>
INCOME DIVIDENDS CAPITAL GAINS
---------------- -------------
<S> <C> <C>
Equity Funds Declared and paid Declared and paid
quarterly* in December
Bond Funds Declared and paid Declared and paid
monthly in December
</TABLE>
- ---------------
* The Westcore MIDCO Growth Fund declares and pays income dividends in
December only.
TAXES
FEDERAL
As with any investment, you should consider the tax implications of an
investment in the Funds. The following briefly summarizes some of the
important tax considerations generally affecting the Funds and their
shareholders. You should consult your tax adviser with specific reference to
your own tax situation, including the applicability of any state and local
taxes. You will be advised at least annually regarding the federal tax
treatment of dividends paid to you.
Dividends paid by the Westcore Equity Funds and the Westcore Long-Term Bond and
Intermediate-Term Bond Funds will be subject to federal income tax, whether
they were paid in cash or reinvested in additional shares. Federal income
taxes for dividends paid to an IRA or other qualified retirement plan are
generally deferred. Income dividends will qualify for the dividends received
deduction for corporations to the extent of the total qualifying dividends
received by the distributing Fund from domestic corporations for the year.
The Colorado Tax-Exempt Fund anticipates that substantially all of its income
dividends will be exempt from federal income tax (these dividends are known as
"exempt-interest dividends") although any dividends derived from occasional
taxable investments will be subject to federal income tax. In addition,
shareholders must treat the portion of dividends paid by the Fund derived from
interest received on certain private activity bonds as an item of tax
preference for purposes of the federal alternative minimum tax.
Any capital gain dividend paid by a Fund will be taxable as a long-term capital
gain, no matter how long you have held the Fund's shares.
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<PAGE> 34
Any dividends declared by a Fund in October, November or December and payable
to shareholders of record during those months will be deemed to have been paid
by the Fund and received by shareholders on December 31 of the same year where
the amounts are actually paid the following January.
If you purchase Fund shares before the record date of a dividend, the entire
amount of the dividend, although in effect a return of capital, will be subject
to federal income taxes.
You may realize a taxable gain or loss when you redeem, transfer or exchange
shares of a Fund. If you hold shares for six months or less, and during that
time you received a capital gain dividend, any loss you realize on the sale of
those shares will be treated as a long-term loss to the extent of the earlier
distribution.
Because each Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (the "Code"), it generally will not be required to
pay federal income taxes on its income and capital gains.
COLORADO STATE TAXES
Shareholders who are subject to Colorado state income tax will not be subject
to such tax on dividends paid by the Westcore Colorado Tax-Exempt Fund to the
extent that they qualify as exempt-interest dividends of a regulated investment
company under Section 852(b)(5) of the Code and are attributable to any of the
following:
- obligations of the State of Colorado or its political
subdivisions issued on or after May 1, 1980;
- obligations of the State of Colorado or its political
subdivisions issued prior to May 1, 1980 to the extent such
interest is specifically exempt from income taxation under the
laws of Colorado authorizing the issuance of such obligations;
- obligations of possessions and territories of the United
States to the extent federal law exempts such obligations from
state taxes; or
- obligations of the United States or its possessions to the
extent such obligations are subject to federal income tax.
However, to the extent distributions are received that are not attributable to
the sources described above, such as
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<PAGE> 35
distributions of short or long-term capital gain, they will not be exempt from
Colorado income tax.
There are no municipal income taxes in Colorado. Moreover, because shares of
the Westcore Colorado Tax-Exempt Fund are intangibles, they are not subject to
Colorado property tax. Shareholders of the Westcore Colorado Tax-Exempt Fund
should consult their tax advisers about other state and local tax consequences
of their investment in the Fund.
PERFORMANCE REPORTING
This section will help you understand various terms that are commonly used to
describe a Fund's performance. You may see references to these terms in
newsletters, advertisements and in media articles. Newsletters, advertisements
and other publications may include comparisons of a Fund's performance to the
performance of various indices and investments for which reliable performance
data are available and to averages, performance rankings or other information
compiled by recognized mutual fund statistical services.
AGGREGATE TOTAL RETURN -- reflects the total percentage change in the value of
an investment in a Fund over a specified measuring period.
AVERAGE ANNUAL TOTAL RETURN -- represents the average annual percentage change
in the value of an investment in a Fund over a specified measuring period. It
is calculated by taking the aggregate total return for the measuring period and
determining what constant annual return would have produced the same aggregate
return. Average annual returns for more than one year tend to smooth out
variations in a Fund's return and are not the same as actual annual results.
Both methods of calculating total return assume that you have reinvested
dividends made by a Fund during the period in Fund shares.
YIELD -- shows the rate of income a Fund earns on its investments as a
percentage of its share price. It is calculated by dividing the Fund's net
investment income for a 30-day period by the product of the average daily
number of shares entitled to receive dividends and the Fund's NAV per share at
the end of the 30-day period. The result is then annualized. This represents
the amount you would earn if you remained invested in a Fund for a year and the
Fund continued to have the same yield for the year. Yield does not include
changes in NAV.
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<PAGE> 36
TAX-EQUIVALENT YIELD -- of the Westcore Colorado Tax-Exempt Fund shows the
level of the taxable yield needed to produce an after-tax yield equivalent to
the Fund's tax-free yield. It is calculated by increasing the Fund's yield by
the amount necessary to reflect the payment of federal and Colorado personal
income taxes at a stated tax rate. The Fund's tax-equivalent yield will always
be higher than its yield.
Any fees charged by your Service Organization directly to your account in
connection with an investment in a Fund will not be included in the Fund's
calculations of yield and/or total return.
Performance quotations of a Fund represent its past performance, and you should
not consider them representative of future results. The investment return and
principal value of an investment in a Fund will fluctuate so that your shares,
when redeemed, may be worth more or less than their original cost. Since
performance will fluctuate, you cannot necessarily compare an investment in
Fund shares with bank deposits, savings accounts and similar investment
alternatives which often provide an agreed or guaranteed fixed yield for a
stated period of time.
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES
The business and affairs of each Fund are managed under the direction of the
Trust's Board of Trustees. The Statement of Additional Information contains
information about the Board of Trustees.
INVESTMENT ADVISER
Denver Investment Advisors LLC ("Denver Investment Advisors") serves as the
investment adviser to the Funds. The Investment Adviser has its principal
offices at 1225 17th Street, 26th Floor, Denver, Colorado 80202. As of
September 30, 1995, Denver Investment Advisors had approximately $9.4 billion
in assets under active management. In addition to the Trust, Denver Investment
Advisors also advises or sub-advises two other investment company portfolios,
the Blue Chip Value Fund, Inc. and the PaineWebber Managed Assets Trust-Paine
Webber Capital Appreciation Fund.
Subject to the overall authority of the Trust's Board of Trustees, Denver
Investment Advisors has agreed to provide a continuous investment program for
the Funds, including investment research and management. These management
responsibilities include, among other things, furnishing economic and
statistical information as requested by the Trust's trustees and officers.
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<PAGE> 37
The Investment Adviser makes investment decisions for the Funds and places
orders for all purchases and sales of the Funds' portfolio securities.
INVESTMENT PERSONNEL
Todger Anderson, CFA, President of Denver Investment Advisors, has been
primarily responsible for the day-to-day management of Westcore MIDCO Growth
Fund since its inception. Mr. Anderson has been a portfolio manager with
Denver Investment Advisors and its predecessor, Denver Investment Advisors,
Inc., since 1975. He received his B.A. from Colby College and his M.B.A. from
the University of Denver.
Varilyn K. Schock, CFA, a Vice President and Director of Quantitative
Strategies with Denver Investment Advisors, has been primarily responsible for
the day-to-day management of Westcore Blue Chip Fund since 1991 and Westcore
Small-Cap Opportunity Fund since its inception. Ms. Schock has been with
Denver Investment Advisors and its predecessor, Denver Investment Advisors,
Inc., since 1984 and has been a portfolio manager with the company since 1987.
She received her B.A. from the University of Denver.
Milford H. Schulhof, II, a Vice President of Denver Investment Advisors, has
been primarily responsible for the day-to-day management of Westcore Growth and
Income Fund since October 1995. Mr. Schulhof has been a Vice President and
portfolio manager with Denver Investment Advisors and its predecessor, Denver
Investment Advisors, Inc. since 1985. He received his B.S.B.A. from Drake
University and his M.B.A. from the University of Denver.
John Cormey, CFA, a Vice President of Denver Investment Advisors, has been
primarily responsible for the day-to-day management of Westcore Long-Term Bond
Fund and Intermediate-Term Bond Fund since 1991. Prior to managing these
Funds, Mr. Cormey was Vice President and Director of Quantitative Research for
the Investment Adviser. Mr. Cormey joined the company as a security analyst in
1972. He received his B.S. from the University of Colorado.
Robert Lindig is a Vice President of Denver Investment Advisors. He has been
primarily responsible for the day-to-day management of the Westcore Colorado
Tax-Exempt Fund since its inception. Mr. Lindig has 34 years experience in the
institutional bond market. Prior to his employment with the Investment
Adviser, Mr. Lindig was Vice President and Trust Officer of First Interstate
Bank of Denver, N.A. Mr. Lindig received his B.A. degree from Dartmouth
College and his M.B.A. from Columbia University.
-38-
<PAGE> 38
BREAKDOWN OF MANAGEMENT EXPENSES AND EXPENSE LIMITS
Each Fund pays the Investment Adviser a management fee under an advisory
agreement. The fees are set forth below and are expressed as an annual
percentage of the Funds' average daily net assets:
<TABLE>
<CAPTION>
===================================================================================================
CONTRACTUAL EXPENSE
ANNUAL LIMIT
FEE SCHEDULE PERCENTAGE (%) PERCENTAGE (%)
<S> <C> <C>
Westcore MIDCO Growth Fund .65% None
Westcore Blue Chip Fund .65% 1.15%(2)
Westcore Growth and Income Fund .65% 1.15%(2)
Westcore Small-Cap 1.00%(1) 1.30%(2)
Opportunity Fund
Westcore Long-Term Bond Fund .45% .95%(2)
Westcore Intermediate-Term .45% .85%(2)
Bond Fund
Westcore Colorado .50% .50%(2)
Tax-Exempt Fund
===================================================================================================
</TABLE>
(1) Although the fee payable by Westcore Small-Cap Opportunity Fund is
higher than the fee payable by the other Funds, the Investment Adviser
believes that it is within the range of fees payable by Funds with
comparable investment objectives and policies.
(2) The Administrators will waive certain fees and/or reimburse expenses
to the extent that total expenses exceed the stated limits. You will
be notified of any changes in these limits.
The Investment Adviser may from time to time voluntarily waive all or any
portion of these fees and reimburse expenses of a Fund; however, it may modify
or discontinue this practice at any time, at its discretion.
CO-ADMINISTRATORS
ALPS and Denver Investment Advisors serve as co-administrators to the Funds
(the "Administrators"). As Administrators, they have agreed to: assist in
maintaining the Funds' office; furnish the Funds with clerical and certain
other services required by them; compile data for and prepare notices and
semi-annual reports to the SEC; prepare filings with state securities
commissions;
-39-
<PAGE> 39
coordinate federal and state tax returns; monitor each Fund's expense accruals;
monitor compliance with each Fund's investment policies and limitations; and
generally assist in each Fund's operations. The Administrators are entitled to
receive a fee from each Fund for administrative services, computed daily and
payable monthly, at the aggregate annual rate of .30% of the Fund's average
daily net assets. The Administrators may voluntarily waive all or any portion
of their administration fees from time to time.
Pursuant to a separate agreement, ALPS has agreed to maintain the financial
accounts and records of each Fund and to compute the net asset value and
certain other financial information relating to each Fund. As authorized by
the agreement, ALPS has currently subcontracted certain of its bookkeeping and
pricing duties to American Data Services, Inc., a provider of accounting
services to investment companies.
The Trust has agreed to reimburse Denver Investment Advisors for payments made
by Denver Investment Advisors to various shareholders of record for providing
recordkeeping and sub-accounting services to persons who beneficially own
shares of a Fund. The amount reimbursed with respect to a Fund will not exceed
the lesser of the payments made by Denver Investment Advisors or the per share
cost of transfer agency services borne by the Fund with respect to its other
outstanding shares. The Administrators are also authorized to make payments
from their administrative fees or other sources to persons for providing
services to a Fund or its shareholders.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on behalf of each Fund are executed by
broker-dealers selected by Denver Investment Advisors. In allocating purchase
and sale orders, the Investment Adviser may consider the amount of its shares
sold by broker/dealers and other financial institutions, including those that
may be connected with it. Denver Investment Advisors will not allocate orders
on this basis unless it believes that the broker/dealer's or institution's
execution capability and the amount of the commission to be paid are comparable
to what they would be with other qualified firms.
PERSONAL INVESTING
Denver Investment Advisors permits investment and other personnel to purchase
and sell securities for their own accounts, including securities that may be
held by the Funds, subject to Denver Investment Advisor's policy governing
personal investing. Denver Investment Advisor's policy requires investment and
other personnel to conduct their personal investment activities in a manner
that Denver Investment Advisors believes is not
-40-
<PAGE> 40
detrimental to the Trust or Denver Investment Advisor's other advisory
clients. See the Statement of Additional Information for more detailed
information.
OTHER SERVICE PROVIDERS
The following parties provide the Funds with other services in return for
compensation:
- CUSTODIAN
First Interstate Bank of Denver, N.A.
633 Seventeenth Street
Denver, Colorado 80202
- TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02015
OTHER INFORMATION CONCERNING THE TRUST AND ITS SHARES
Westcore Trust was originally organized as a Maryland corporation on January
11, 1982. It was reorganized as a Massachusetts business trust on December 10,
1985.
The Trust's Amended and Restated Declaration of Trust authorizes the Board of
Trustees to classify or reclassify any unissued shares of the Trust into one or
more classes of shares. Pursuant to such authority, the Board has authorized
the issuance of an unlimited number of shares representing interests in the
Westcore MIDCO Growth Fund (Class B-1), Westcore Blue Chip Fund (Class I),
Westcore Growth and Income Fund (Class J-1), Westcore Small-Cap Opportunity
Fund (Class X-1), Westcore Long-Term Bond Fund (Class G), Westcore
Intermediate-Term Bond Fund (Class H- 1), and Westcore Colorado Tax-Exempt Fund
(Class S). No other classes of shares are currently offered.
SHAREHOLDER MEETINGS
Westcore Trust does not presently intend to hold meetings of shareholders
except as required by the Investment Company Act or other applicable law.
Under the Investment Company Act, the Board of Trustees is required to call a
meeting of shareholders for the purpose of voting upon the removal of any
trustee or trustees when requested in writing to do so by the record holders of
at least 10% of the outstanding shares. If a shareholders meeting is held, you
will be entitled to one vote for each full share you hold and proportionate
fractional votes for fractional shares you hold. It is contemplated that the
shareholders of each Fund will vote separately by Fund on matters pertaining to
-41-
<PAGE> 41
its investment advisory agreement and any changes in its fundamental investment
limitations.
As of December 18, 1995, First Interstate Bank and its affiliated banks
possessed, on behalf of their underlying customer accounts, voting or investment
power with respect to a majority of all of the outstanding shares of
Westcore Trust, and the Bank of New York held as Trustee 34.69% of the
outstanding shares of the Westcore Small-Cap Opportunity Fund, and therefore
they may be deemed to be a controlling person of the Trust and Fund,
respectively, under the Investment Company Act.
INQUIRIES
Please write or call Westcore Trust at the address or telephone number listed
on the cover of this Prospectus with any inquiries you may have regarding the
Funds.
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<PAGE> 42
APPENDIX A
INFORMATION ON INVESTMENT POLICIES
AND ADDITIONAL RISK FACTORS
Denver Investment Advisors uses a range of different investments and investment
techniques in seeking to achieve a Fund's investment objective. All Funds do
not use all of the investments and investment techniques described below.
Westcore MIDCO Growth, Blue Chip, Growth and Income and Small-Cap Opportunity
Funds are referred to collectively as the "Westcore Equity Funds." Westcore
Long-Term Bond, Intermediate-Term Bond and Colorado Tax-Exempt Funds are
referred to collectively as the "Westcore Bond Funds."
MUNICIPAL OBLIGATIONS (WESTCORE BOND FUNDS)
Municipal Obligations include: (i) "general obligation" securities which are
secured by the issuer's full faith, credit and taxing power; (ii) revenue
securities which are payable only from the revenues derived from a particular
facility or other specific revenue source such as the user of the facility
being financed; (iii) "moral obligation" securities which are normally issued
by special purpose public authorities; and (iv) private activity bonds (such as
bonds issued by industrial development authorities) which are usually revenue
securities issued by or for public authorities to finance a privately-operated
facility.
In many cases, the Internal Revenue Service has not ruled on whether the
interest received on a Municipal Obligation is tax-exempt and, accordingly,
purchases of these securities are based on the opinion of bond counsel to the
issuers at the time of issuance. The Funds and the Investment Adviser rely on
these opinions and will not review the bases for them.
SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN COLORADO OBLIGATIONS (WESTCORE
COLORADO TAX-EXEMPT FUND)
The Fund normally invests at least 65% of its total assets in Colorado
Obligations. If Colorado or any of its political subdivisions suffers serious
financial difficulties such that its ability to pay its obligations might be
jeopardized, the ability of such entities to market their securities, and the
value of the Fund, could be adversely affected.
U.S. GOVERNMENT OBLIGATIONS (ALL WESTCORE FUNDS)
Each Fund may invest in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Direct obligations of the U.S.
government such as Treasury bills, notes
A-1
<PAGE> 43
and bonds are supported by its full faith and credit. Indirect obligations
issued by federal agencies and government sponsored entities generally are not
backed by the full faith and credit of the U.S. Treasury. Some of these
indirect obligations may be supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; still others are supported
only by the credit of the instrumentality.
MONEY MARKET INSTRUMENTS (ALL WESTCORE FUNDS)
Each Fund may invest from time to time in money market instruments such as bank
obligations, commercial paper and corporate bonds with remaining maturities of
13 months or less. Bank obligations include bankers' acceptances, certain
negotiable certificates of deposit and time deposits such as U.S.
dollar-denominated instruments issued or supported by the credit of U.S. or
foreign banks. Commercial paper is a short- term debt obligation with a
maturity ranging from 1 to 270 days issued by banks, corporations and other
borrowers.
VARIABLE AND FLOATING RATE INSTRUMENTS (WESTCORE BOND FUNDS)
These Funds may purchase variable and floating rate demand instruments,
including variable amount master demand notes, issued by corporations,
industrial development authorities and governmental entities.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
(ALL WESTCORE FUNDS)
In a repurchase agreement, a Fund agrees to purchase portfolio securities
subject to the seller's agreement to repurchase them at a mutually agreed upon
date and price. Repurchase agreements involve the risk that the seller will
fail to repurchase the securities, as agreed. In that event, the Fund will
bear the risk of possible loss due to adverse market action or delays in
liquidating the underlying obligations. Repurchase agreements are considered
to be loans under the Investment Company Act.
Each Fund may borrow money for temporary purposes by entering into reverse
repurchase agreements. Under these agreements, a Fund sells portfolio
securities to financial institutions and agrees to buy them back later at an
agreed upon time and price. Reverse repurchase agreements involve the risk of
counterparty default and possible loss of collateral held by the counterparty.
A-2
<PAGE> 44
LOWER-RATED SECURITIES (WESTCORE MIDCO GROWTH, GROWTH AND INCOME AND SMALL-CAP
OPPORTUNITY FUNDS)
Investments in issuers of securities rated below investment grade (commonly
known as "junk bonds") are considered to be more speculative than securities
rated investment grade and higher. There are particular risks associated with
these securities, including: (a) the relative youth and growth of the market;
(b) their greater sensitivity to interest rate and economic changes which could
negatively affect their value and the ability of issuers to make principal and
interest payments; (c) the relatively low trading market liquidity for the
securities which may adversely affect the price at which they could be sold;
(d) a greater risk of default or price changes due to changes in the issuer's
creditworthiness; and (e) the adverse impact that legislation restricting
lower-rated securities may have on their market.
SECURITIES LENDING (ALL WESTCORE FUNDS, OTHER THAN COLORADO TAX-EXEMPT FUND)
These Funds may lend their portfolio securities to institutional investors as a
means of earning additional income. Securities loans present risks of delay in
receiving collateral or in recovering the securities loaned or even a loss of
rights in the collateral if the borrower of the securities fails financially.
A loan will not be made if, as a result, the total amount of a Fund's
outstanding loans exceeds 30% of its total assets.
RESTRICTED SECURITIES (ALL WESTCORE FUNDS)
No Fund will knowingly invest more than 15% of the value of its net assets in
securities that are illiquid. Illiquid securities include repurchase
agreements, securities loans and time deposits that are not terminable within 7
days, certain municipal leases and certain securities that are not registered
under the securities laws. Pursuant to guidelines adopted by the Board of
Trustees, the Investment Adviser may determine that certain securities that are
not registered under the Securities Act of 1933 are not illiquid and therefore
are not subject to this 15% limitation. However, there can be no assurance
that a liquid market will exist for any security at a particular time.
In addition, the purchase of such securities could have the effect of
increasing the level of illiquidity of the Funds during periods that qualified
institutional buyers become uninterested in purchasing these restricted
securities.
A-3
<PAGE> 45
CONVERTIBLE SECURITIES (ALL WESTCORE FUNDS, OTHER THAN BLUE CHIP AND COLORADO
TAX-EXEMPT FUNDS)
These Funds may invest in convertible securities, including bonds and preferred
stocks, that may be converted into common stock at a specified price or
conversion ratio. The Funds use the same research intensive approach and
valuation techniques for selecting convertible securities as are used for the
selection of common stocks.
The value of a convertible security is influenced by both interest rates and
the value of the underlying common stock. Investments in convertible
securities, including in particular those with lower ratings, involve the risk
that the securities, when converted, may be worth less than the prestated
price.
ASSET-BACKED SECURITIES (WESTCORE BOND FUNDS, OTHER THAN COLORADO TAX-EXEMPT
FUND)
These Funds may purchase asset-backed securities which are securities backed
by installment sale contracts, credit card receivables or other assets. The
yield characteristics of asset-backed securities differ from traditional debt
securities. A major difference is that the principal amount of the obligations
may be prepaid at any time because the underlying assets (i.e., loans)
generally may be prepaid at any time. The prepayment rate is primarily a
function of current market rates and conditions. In periods of rising interest
rates, the rate of prepayment tends to increase. During periods of falling
interest rates, the reinvestment of prepayment proceeds by a Fund will
generally be at a lower rate than the rate on the prepaid obligation.
Prepayments may also result in some loss of a Fund's principal investment if
any premiums were paid. As a result of these yield characteristics, some
high-yielding asset-backed securities may have less potential for growth in
value than conventional bonds with comparable maturities. These
characteristics may result in a higher level of price volatility for these
assets under certain market conditions.
Asset-backed securities are subject to greater risk of default during periods
of economic downturn than conventional debt instruments and the holder
frequently has no recourse against the entity that originated the security. In
addition, the secondary market for certain asset-backed securities may not be
as liquid as the market for other types of securities which could result in the
Funds' experiencing difficulty in valuing or liquidating such securities.
A-4
<PAGE> 46
MORTGAGE-RELATED SECURITIES (WESTCORE BOND FUNDS, OTHER THAN COLORADO
TAX-EXEMPT FUND)
These Funds may invest in mortgage-related securities issued or guaranteed by
U.S. government agencies and private issuers. They may include mortgage
pass-through certificates, which provide the holder with a pro rata interest in
the underlying mortgages, and collateralized mortgage obligations ("CMOs"),
which provide the holder with a specified interest in the cash flow of a pool
of underlying mortgages or other mortgage-backed securities. Issuers of CMOs
frequently elect to be taxed as pass-through entities known as real estate
mortgage investment conduits ("REMICs"). CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date.
Mortgage-related securities involve risks similar to those described above
under "Asset-Backed Securities" including prepayment risks. In addition, CMOs
may exhibit more price volatility and interest rate risk than other types of
mortgage-related obligations.
OPTIONS AND FUTURES (ALL WESTCORE FUNDS, OTHER THAN COLORADO TAX-EXEMPT FUND)
These Funds may buy put options and call options and write covered call and
secured put options on securities and securities indices. A put option gives
the buyer the right to sell, and the writer the obligation to buy, the
underlying security at the stated exercise price at any time prior to the
expiration date of the option. Writing a secured put option means that a Fund
maintains in a segregated account with its custodian cash or U.S. Government
securities in an amount not less than the exercise price of the option at all
times during the option period. A call option gives the buyer the right to buy
the underlying security at the stated exercise price at any time prior to the
expiration of the option. Writing a covered call option means that a Fund owns
or has the right to acquire the underlying security subject to call at the
stated exercise price at all times during the option period. Options involving
securities indices provide the holder with the right to make or receive a cash
settlement upon exercise of the option based on movements in the index.
Options purchased by a Fund will not exceed 5%, and options written by a Fund
will not exceed 25%, of its net assets. All options will be listed on a
national securities exchange and issued by the Options Clearing Corporation.
These Funds may also invest to a limited extent in futures contracts and
options on futures contracts in order to reduce their exposure to movements of
security prices pending investment, for hedging purposes or to maintain
liquidity.
A-5
<PAGE> 47
Futures contracts obligate a Fund, at maturity, to take or make delivery of
certain securities or the cash value of a contract or securities index. Each
Fund may also purchase and sell call and put options on futures contracts
traded on an exchange or board of trade.
In accordance with regulations of the Commodity Futures Trading Commission, a
Fund's commodities transactions must constitute bona fide hedging or other
permissible transactions. In addition, a Fund may not engage in commodities
transactions if the sum of the amount of initial margin deposits and premiums
paid for related options, other than for bona fide hedging transactions, would
exceed 5% of its assets (after certain adjustments). In connection with a
position in a futures contract or related option, a Fund will create a
segregated account of liquid high-grade assets or will otherwise cover its
position in accordance with SEC requirements.
Options trading and futures transactions are highly specialized activities and
carry greater than ordinary investment risks. The primary risks associated
with the use of options and futures contracts are: (1) options and futures may
fail as hedging techniques where the price movements of the securities
underlying them do not follow the price movements of the portfolio securities
subject to the hedge; (2) a Fund will likely be unable to control losses by
closing its position in these investments where a liquid secondary market does
not exist; (3) losses from investing in futures transactions due to
unanticipated market movements are potentially unlimited; and (4) gains and
losses on investments in options and futures depend on the Investment Adviser's
ability to predict correctly the direction of securities prices, interest rates
and other economic factors.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS (WESTCORE EQUITY FUNDS, OTHER THAN BLUE
CHIP FUND)
Because these Funds may buy and sell securities and receive amounts denominated
in currencies other than the U.S. dollar, they may enter into currency exchange
transactions from time to time. A Fund will purchase foreign currencies on a
"spot" or cash basis at the prevailing rate in the foreign currency exchange
market or enter into forward foreign currency exchange contracts. Under these
contracts the Fund would agree with a financial institution to purchase or sell
a stated amount of a foreign currency at a specified price, with delivery to
take place at a specified date in the future. Because there is a risk of loss
to a Fund if the other party does not complete the transaction, these contracts
will be entered into only with parties approved by the Fund's Board of
Trustees.
A-6
<PAGE> 48
A Fund may maintain "short" positions in forward foreign currency exchange
transactions whereby the Fund would agree to exchange currency that it
currently did not own for another currency at a future date and at a specified
price. This would be done in anticipation of a decline in the value of the
currency sold short relative to the other currency and not for speculative
purposes. In order to ensure that the short position is not used to achieve
leverage with respect to a Fund's investments, the Fund would establish with
its custodian a segregated account consisting of cash or certain liquid
high-grade debt securities equal in value to the market value of the currency
involved.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS (ALL WESTCORE FUNDS)
Each Fund may purchase or sell securities on a "when-issued" or "forward
commitment" basis which involves a commitment by the Fund to purchase or sell
particular securities with payment and delivery taking place at a future date.
These transactions permit a Fund to lock-in a price or yield on a security it
owns or intends to purchase, regardless of future changes in interest rates.
The Fund would bear the risk, however, that the price or yield obtained in a
transaction may be less favorable than the price or yield available in the
market when the delivery occurs. Because a Fund is required to set aside cash
or liquid high-grade debt obligations in a segregated account to satisfy these
purchase commitments, its liquidity and ability to manage its portfolio might
be affected during periods in which its commitments exceed 25% of the value of
its assets. The Funds do not intend to engage in when-issued purchases and
forward commitments for speculative purposes.
SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES (ALL WESTCORE FUNDS)
Each Fund may invest in securities issued by other investment companies subject
to the requirements of applicable securities laws. When a Fund invests in
another investment company, it pays a pro rata portion of the advisory and
other expenses of that company as a shareholder of that company. These
expenses would be in addition to the Fund's own expenses.
FOREIGN SECURITIES (ALL WESTCORE FUNDS, OTHER THAN BLUE CHIP FUND)
There are risks and costs involved in investing in securities of foreign
issuers (including foreign governments), which are in addition to the usual
risks inherent in U.S. investments. Investments in foreign securities may
involve higher costs than
A-7
<PAGE> 49
investments in U.S. securities, including higher transaction costs as well as
the imposition of additional taxes by foreign governments. Foreign investments
may involve further risks associated with the level of currency exchange rates,
less complete financial information about the issuer, less market liquidity and
political instability. Future political and economic developments, the
possible imposition of withholding taxes on interest income, the possible
seizure or nationalization of foreign holdings, the possible establishment of
exchange controls or the adoption of other governmental restrictions might
adversely affect the payment of principal and interest on foreign obligations.
Moreover, foreign banks and foreign branches of domestic banks may be subject
to less stringent reserve requirements and to different accounting, auditing
and recordkeeping requirements.
Investments in foreign securities may be in the form of American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and similar
securities. These securities may not be denominated in the same currency as
the securities they represent. ADRs are receipts typically issued by a United
States bank or trust company, and EDRs are receipts issued by a European
financial institution evidencing ownership of the underlying foreign
securities.
STAND-BY COMMITMENTS (WESTCORE COLORADO TAX-EXEMPT FUND)
The Fund may acquire stand-by commitments under which a dealer agrees to
purchase certain Municipal Obligations at the Fund's option at a price equal to
their amortized cost value plus interest. These commitments will be used only
to assist in maintaining the Fund's liquidity and not for trading purposes.
PORTFOLIO TURNOVER (ALL WESTCORE FUNDS)
A Fund may sell a portfolio investment soon after it is purchased if the
Investment Adviser believes that a sale is consistent with the Fund's
investment objective. A high rate of portfolio turnover involves
correspondingly greater brokerage commission expenses, tax consequences
(including the possible realization of additional taxable capital gains and
income) and other transaction costs, which must be borne directly by the Fund
involved and ultimately by its shareholders.
RISK FACTORS ASSOCIATED WITH DERIVATIVE INSTRUMENTS (ALL WESTCORE FUNDS)
Each Fund may purchase certain "derivative" instruments as described above
under various headings. Derivative instruments
A-8
<PAGE> 50
are instruments that derive value from the performance of underlying assets,
interest or currency exchange rates, or indices, and include, but are not
limited to, futures contracts, options, forward currency contracts and
structured debt obligations (including collateralized mortgage obligations and
other types of asset-backed securities and various floating rate instruments,
including inverse floaters).
Derivative instruments present, to varying degrees, market risk that the
performance of the underlying assets, exchange rates or indices will decline;
credit risk that the dealer or other counterparty to the transaction will fail
to pay its obligations; volatility and leveraging risk that, if interest or
exchange rates change adversely, the value of the derivative instrument will
decline more rapidly than the assets, rates or indices on which it is based;
liquidity risk that a Fund will be unable to sell a derivative instrument when
it wants because of lack of market depth or market disruption; pricing risk
that the value of a derivative instrument (such as an option) will not
correlate exactly to the value of the underlying assets, rates or indices on
which it is based or may be difficult to determine because of a lack of
reliable objective information and an established secondary market; and
operations risk that loss will occur as a result of inadequate systems and
controls, human error or otherwise. Many of these instruments are proprietary
products that have been recently developed by investment banking firms and it
is uncertain how they will perform under different economic and interest rate
scenarios.
A-9
<PAGE> 51
APPENDIX B
RATING CATEGORIES
<TABLE>
<CAPTION>
BOND
RATING EXPLANATION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
STANDARD & POOR'S RATINGS AAA Highest rating; extremely strong capacity to pay interest
GROUP, DIVISION OF MCGRAW HILL and repay principal.
AA High quality; very strong capacity to pay interest and
repay principal.
A Strong capacity to pay interest and repay principal;
somewhat more susceptible to the adverse effects of
changing circumstances and economic conditions.
BBB Adequate capacity to pay interest and repay principal;
normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances
more likely to lead to a weakened capacity to pay
interest and repay principal than for higher rated bonds.
BB, B, CCC, Predominantly speculative with respect to the issuer's
CC, C capacity to meeting required interest and principal
payments. BB-lowest degree of speculation; C-the highest
degree of speculation. Quality and protective
characteristics outweighed by large uncertainties or
major risk exposure to adverse conditions.
D In default.
- -----------------------------------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC. Aaa Highest quality, smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose the
high-grade bond group.
A Upper medium-grade obligations; some favorable investment
attributes.
</TABLE>
B-1
<PAGE> 52
<TABLE>
<S> <C>
Baa Medium-grade obligations; neither highly protected nor
poorly secured. Interest and principal payments appear
adequate for the present but certain protective elements
may be lacking or may be unreliable over any great length
of time. Some speculative characteristics.
Ba More uncertain, with speculative elements. Questionable
protection of interest and principal payments.
B Lack characteristics of desirable investment; potentially
low assurance of timely interest and principal payments
or maintenance of other contract terms over time.
Caa Poor standing, may be in default; elements of danger with
respect to principal or interest payments.
Ca Speculative in a high degree; may be in default.
C Lowest-rated; extremely poor prospects of ever attaining
investment standing.
D In default.
</TABLE>
B-2
<PAGE> 53
WESTCORE TRUST
Statement of Additional Information
for
MIDCO Growth Fund
Blue Chip Fund
Growth and Income Fund
Small-Cap Opportunity Fund
Long-Term Bond Fund
Intermediate-Term Bond Fund
Colorado Tax-Exempt Fund
January 1, 1996
TABLE OF CONTENTS
Page
----
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . 2
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . 34
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . . . 38
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . 51
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS . . . . . . . . . . . . 53
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
This Statement of Additional Information is meant to be read
in conjunction with the Funds' Prospectus dated January 1, 1996, as the same is
revised from time to time, and is incorporated by reference in its entirety
into the Prospectus. Because this Statement of Additional Information is not
itself a prospectus, no investment in shares of the Funds should be made solely
based upon the information contained herein. Audited financial statements for
the Funds as of May 31, 1995 are attached hereto. Copies of the Funds'
Prospectus and financial statements may be obtained by calling 1-800-392-CORE
(2673) or by writing ALPS Mutual Funds Services, Inc. at 370 Seventeenth
Street, Suite 2700, Denver, Colorado 80202. Capitalized terms used but not
defined herein have the same meanings as in the Prospectus.
<PAGE> 54
THE TRUST
Westcore Trust (the "Trust") is a Massachusetts business trust
which was organized on December 10, 1985 as an open-end management investment
company. The Trust's predecessor was originally incorporated in Maryland on
January 11, 1982.
The Trust is authorized to issue separate classes of shares
representing interests in separate investment portfolios. This Statement of
Additional Information pertains to the MIDCO Growth Fund, Blue Chip Fund,
Growth and Income Fund, Small-Cap Opportunity Fund, Long-Term Bond Fund,
Intermediate-Term Bond Fund and Colorado Tax-Exempt Fund (each, a "Fund" and
collectively, the "Funds"). The MIDCO Growth Fund, Blue Chip Fund, Growth and
Income Fund and Small-Cap Opportunity Fund are sometimes referred to as the
"Equity Funds." The Long-Term Bond Fund, Intermediate-Term Bond Fund and
Colorado Tax-Exempt Fund are sometimes referred to as the "Bond Funds." For
information concerning any investment portfolios offered by the Trust, contact
ALPS Mutual Fund Services, Inc. ("ALPS") at 370 Seventeenth Street, Suite 2700,
Denver, Colorado 80202 or call 1-800-392-CORE (2673).
INVESTMENT OBJECTIVES AND POLICIES
The Prospectus for the Funds describes the Funds' investment
objectives. The following information supplements and should be read in
conjunction with the description of the investment objective and policies for
each Fund in the Prospectus.
Portfolio Transactions
Denver Investment Advisors LLC ("Denver Investment Advisors"
or the "Investment Adviser") serves as the investment adviser to the Funds
pursuant to an investment advisory agreement (the "Advisory Agreement").
Subject to the general supervision of the Trust's Board of
Trustees and the provisions of the Trust's Advisory Agreement relating to the
Funds, Denver Investment Advisors makes decisions with respect to and places
orders for all purchases and sales of portfolio securities for the Funds.
The annualized portfolio turnover rate for each Fund is
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average value of the portfolio securities. The
calculation excludes all securities, including options, that have maturities or
expiration dates at the time of acquisition of one year or less. Portfolio
turnover may vary greatly from year to year as well as within a
-2-
<PAGE> 55
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Funds to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making
portfolio decisions, and each Fund may engage in short-term trading to achieve
its investment objective.
For the fiscal years ended May 31, 1995 and 1994, each Fund's
portfolio turnover rates were as follows:
Portfolio Turnover Rate
<TABLE>
<CAPTION>
Year Ended Year Ended
Fund May 31, 1995 May 31, 1994
- ---- ------------ ------------
<S> <C> <C>
MIDCO Growth Fund 50.19% 52.05%
Blue Chip Fund 61.72% 41.32%
Growth and Income Fund 81.14% 53.86%
Small-Cap Opportunity Fund(1) 59.17% 64.31%
Long-Term Bond Fund 25.09% 52.82%
Intermediate-Term Bond Fund 60.86% 65.04%
Colorado Tax-Exempt Fund 3.15% 9.76%
- ----------------------
</TABLE>
(1) 1994 figure is annualized.
Transactions on U.S. stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. During
the fiscal years ended May 31, 1995, 1994 and 1993, the Funds paid the
following amounts in brokerage commissions:
Brokerage Commissions Paid
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
May 31, May 31, May 31,
Fund 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
MIDCO Growth Fund $ 394,695 $ 283,999 $ 221,030
Blue Chip Fund 68,775 42,353 71,724
Growth and Income Fund 100,312 58,385 49,121
Small-Cap Opportunity Fund 30,619 4,918 N/A
- -------------------------- --------- -------- ---------
Aggregate Commissions $ 594,401 $ 582,274 $ 526,103
</TABLE>
-3-
<PAGE> 56
For the same periods the Long-Term Bond Fund, Intermediate-Term Bond Fund and
Colorado Tax-Exempt Fund did not pay any brokerage commissions. During the
fiscal years ended May 31, 1995, 1994, and 1993, no brokerage commissions were
paid by any Funds to an affiliated broker of the Trust.
There is generally no stated commission in the case of
portfolio securities traded in the over-the-counter market, but the price
includes an undisclosed commission or mark-up. Securities purchased and sold
by the Funds are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through dealers, or otherwise involve transactions
directly with the issuer of an instrument. Transactions in the
over-the-counter market are generally principal transactions with dealers and
the costs of such transactions involve dealer spreads rather than brokerage
commissions. With respect to over-the-counter transactions, Denver Investment
Advisors will normally deal directly with the dealers who make a market in the
securities involved, except in those circumstances where better prices and
execution terms are available elsewhere or as described below. The cost of
securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.
The Funds may participate, if and when practicable, in bidding
for the purchase of portfolio securities directly from an issuer in order to
take advantage of the lower purchase price available to members of a bidding
group. A Fund will engage in this practice, however, only when the Investment
Adviser, in its sole discretion, believes such practice to be otherwise in the
Fund's interests.
The Advisory Agreement for the Funds provides that the
Investment Adviser will seek to obtain the best overall terms available in
executing portfolio transactions and selecting brokers or dealers. In
assessing the best overall terms available for any transaction, Denver
Investment Advisors will consider all factors it 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. In addition, the Advisory Agreement authorizes Denver
Investment Advisors to cause any of the Funds to pay a broker-dealer that
furnishes brokerage and research services a higher commission than that charged
by another broker-dealer for effecting the same transaction, provided that
Denver Investment Advisors determines in good faith that the commission is
reasonable in relation to the value of the brokerage and research services
provided by the broker-dealer, viewed in terms of that particular transaction
or the overall responsibilities of Denver Investment Advisors to the
-4-
<PAGE> 57
Fund. Such brokerage and research services might consist of reports and
statistics of specific companies or industries, general summaries of groups of
stocks or bonds and their comparative earnings and yields, or broad overviews
of the stock, bond and government securities markets and the economy.
Supplemental research information so received is in addition
to, and not in lieu of, services required to be performed by the Investment
Adviser and does not reduce the advisory fees payable by the Funds. The
Trustees will periodically review the commissions paid by the Funds to consider
whether the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Funds. 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 investment discretion is exercised by the Investment Adviser.
Conversely, a Fund 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.
The Funds may from time to time purchase securities issued by
the Trust's regular broker/dealers (as defined in Rule 10b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") or their parents.
As of May 31, 1995, the Intermediate-Term Bond Fund held securities of the
Trust's regular broker/dealers (or their parents) that derive more than 15% of
their gross revenues from securities-related activities. As of that date, the
Fund's aggregate holdings of securities of Merrill Lynch & Co. was $2,040,000.
Portfolio securities will not be purchased from or sold to
(and savings deposits will not be made in and repurchase and reverse repurchase
agreements will not be entered into with) the Investment Adviser, ALPS or an
affiliated person (as the term is defined in the 1940 Act) acting as principal,
except to the extent permitted by the Securities and Exchange Commission (the
"SEC"). However, Denver Investment Advisors is authorized in allocating
purchase and sale orders for portfolio securities to broker/dealers and other
financial institutions (including institutions that are affiliated with the
Investment Adviser or principal underwriter) to take into account the sale of
Fund shares if Denver Investment Advisors believes that the quality of the
transaction and the amount of the commission are comparable to those of other
qualified brokerage firms. In addition, the Colorado Tax-Exempt Fund will not
purchase securities during the existence of any underwriting group or related
selling group of which ALPS, the Investment Adviser, or any affiliated person
of any of them, is a member, except to the extent permitted by the SEC. In
certain circumstances, the Funds may be at a disadvantage because of these
limitations in comparison with
-5-
<PAGE> 58
other investment companies which have similar investment objectives but are not
subject to such limitations.
Investment decisions for each Fund are made independently from
those for the other Funds and investment companies and accounts advised or
managed by the Investment Adviser. Such other investment companies and
accounts also may invest in the same securities as the Funds. When a purchase
or sale of the same security is made at substantially the same time on behalf
of a Fund and another investment company or account, the available securities
will be allocated between the Fund and the other purchaser in a manner which
Denver Investment Advisors believes to be equitable to both. In some
instances, this may adversely affect the price paid or received by a Fund or
the size of the position obtained by or disposed of by the Fund. To the extent
permitted by law, Denver Investment Advisors may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for other
investment companies or accounts in executing transactions.
Moody's and S&P Ratings
The ratings of ratings agencies represent their opinions as to
the quality of debt securities. It should be emphasized, however, that ratings
are general and are not absolute standards of quality, and debt securities with
the same maturity, interest rate and rating may have different yields while
debt securities of the same maturity and interest rate with different ratings
may have the same yield. Subsequent to purchase by a Fund, an issue of debt
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by a Fund. Denver Investment Advisors will
consider such an event in determining whether the Fund involved should continue
to hold the obligation.
The payment of principal and interest on most debt securities
purchased by the Funds will depend upon the ability of the issuers to meet
their obligations. An issuer's obligations under its debt securities are
subject to the provisions of bankruptcy, insolvency, and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Code, and
laws, if any, which may be enacted by federal or state legislatures extending
the time for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or, in the case of
governmental entities, upon the ability of such entities to levy taxes. The
power or ability of an issuer to meet its obligations for the payment of
interest and principal of its debt securities may be materially adversely
affected by litigation or other conditions.
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Municipal Obligations (Bond Funds)
Municipal Obligations include "general obligation" securities,
"revenue" securities, private activity bonds and "moral obligation" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power. Revenue securities are payable only from the
revenues derived from a particular facility, the proceeds of a special excise
tax or another specific revenue source such as the user of the facility being
financed. Private activity bonds (e.g., bonds issued by industrial development
authorities) are issued by or on behalf of public authorities to finance
various privately-operated facilities. Such bonds are included within the term
"Municipal Obligations" only if the interest paid thereon is exempt from
regular federal income tax and, for the Colorado Tax-Exempt Fund, not treated
as a specific tax preference item under the federal alternative minimum tax.
Private activity bonds are in most cases revenue securities and are not payable
from the unrestricted revenues of the issuer. The credit quality of such bonds
is usually directly related to the credit standing of the corporate user of the
facility involved. Moral obligation securities are normally issued by special
purpose public authorities. If the issuer is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
Certain of the Municipal Obligations held by the Colorado
Tax-Exempt Fund may be insured as to the timely payment of principal and
interest. There is no guarantee, however, that the insurer will meet its
obligations in the event of the issuer's default. In addition, such insurance
will not protect against market fluctuations caused by changes in interest
rates and other factors.
Although the Colorado Tax-Exempt Fund will invest most of its
assets, under normal circumstances, in intermediate-term Municipal Obligations,
the Fund may also purchase short-term General Obligation Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes,
Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term tax-exempt loans. Such instruments are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues.
Within the types of Municipal Obligations described above
there are other categories, including municipal leases, which are often sold in
the form of certificates of participation. These obligations are issued by
state and local governments or authorities to finance the acquisition of
equipment and facilities. Certain of these obligations present
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the risk that a municipality may not appropriate funds for the lease payments.
Moreover, lease obligations may be limited by municipal charter or other
provisions that do not permit acceleration of the lease obligation upon
default. Because certificates of participation are generally subject to
redemption by the issuing municipal entity under specified circumstances, they
are not as liquid or marketable as other types of Municipal Obligations and are
generally valued at par or less than par in the open market.
There are variations in the quality of Municipal Obligations
both within a particular classification and between classifications, and the
yields on Municipal Obligations depend upon a variety of factors, including
general money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue.
Payment on Municipal Obligations relating to certain projects
may be secured by mortgages or deeds of trust. In the event of a default,
enforcement of the mortgages or deeds of trust will be subject to statutory
enforcement procedures and limitations.
In the event of a foreclosure, collection of proceeds may be
delayed and may not be sufficient to pay the principal or accrued interest on
the defaulted Municipal Obligations.
Stand-By Commitments (Colorado Tax-Exempt Fund)
The Fund may acquire stand-by commitments with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment, a
dealer or bank agrees to purchase from the Fund, at the Fund's option,
specified Municipal Obligations at a specified price. The amount payable to
the Fund upon its exercise of a stand-by commitment is normally (i) the Fund's
acquisition cost of the Municipal Obligations (excluding any accrued interest
which the Fund paid on their acquisition), less any amortized market premium
plus any amortized market or original issue discount during the period the Fund
owned the securities, plus (ii) all interest accrued on the securities since
the last interest payment date during that period. Stand-by commitments may be
sold, transferred or assigned by the Fund only with the underlying instrument.
The Fund intends to enter into stand-by commitments only with
dealers, banks and broker-dealers which, in the Investment Adviser's opinion,
present minimal credit risks. The Fund's reliance upon the credit of these
dealers, banks and broker-dealers will be secured by the value of the
underlying Municipal Obligations that are subject to the commitment. In
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evaluating the creditworthiness of the issuer of a stand-by commitment, the
Investment Adviser will review periodically the issuer's assets, liabilities,
contingent claims and other relevant financial information.
The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a stand-by commitment
would not affect the valuation or assumed maturity of the underlying Municipal
Obligations, which would continue to be valued in accordance with the Fund's
normal method of valuation. Stand-by commitments acquired by the Fund would be
valued at zero in determining net asset value.
Special Considerations Regarding Investments in Colorado Obligations (Colorado
Tax-Exempt Fund)
The concentration of the Colorado Tax-Exempt Fund in
securities issued by governmental units of only one state exposes the Fund to
risks greater than those of a more diversified portfolio holding securities
issued by governmental units of different states and different regions of the
country.
The Fund believes the information summarized below describes
some of the more significant developments relating to Securities of (i)
municipalities or other political subdivisions or instrumentalities of the
State of Colorado (the "State") which rely, in whole or in part, on ad valorem
real property taxes and other general funds of such municipalities or political
subdivisions or (ii) the State. The sources of such information include the
official publications of the State, as well as other publicly available
documents. The Fund has not independently verified any of the information
contained in such official publications and other publicly available documents,
but is not aware of any facts which would render such information inaccurate.
ECONOMIC FACTORS. Based on data published by the State of Colorado, Office of
State Planning and Budgeting as presented in the Colorado Economic Perspective,
Second Quarter, FY 1995-96, December 20, 1995 (the "Economic Report"), over 50%
of non-agricultural employment in Colorado in 1995 was concentrated in the
retail and wholesale trade and service sectors, reflecting the importance of
tourism to the State's economy and of Denver as a regional economic and
transportation hub. The government and manufacturing sectors followed as the
third and fourth largest employment sectors in the State, representing
approximately 16.7% and 10.6%, respectively, of non-agricultural employment in
the State in 1995. The Office of Planning and Budgeting projects similar
concentrations for the years 1996 and 1997.
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According to the Economic Report, the unemployment rate
improved from an average of 4.2% during 1994 to 4.0% during 1995. Total retail
sales increased by only 5.5% during 1995. Colorado continues to surpass the
job growth rate of the U.S. by a marginal amount with a 1.8% rate of growth
projected for Colorado in 1996, as compared with 1.6% for the nation as a
whole. However, the rate of job growth in Colorado is projected to continue to
drop in 1996 as a result of the closure of the Resolution Trust Corporation,
major staff reductions at the Bureau of Reclamations, significant cuts in other
departments and the anticipated closure of Fitzsimons Medical Facility and the
Bureau of Mines.
Personal income rose 6.2% in Colorado during 1994 and 7.6% in
1993. During 1995, personal income rose 6.6% in Colorado, as compared with
6.1% for the nation as a whole.
RESTRICTIONS OF APPROPRIATION AND REVENUES. The State Constitution requires
that expenditures for any fiscal year not exceed revenues for such fiscal year.
By statute, the amount of State General Fund revenues available for
appropriation is based upon revenue estimates which, together with other
available resources, must exceed annual appropriations by the amount of the
unappropriated reserve (the "Unappropriated Reserve"). The Unappropriated
Reserve requirement for fiscal years 1991, 1992 and 1993 was set at 3% of total
appropriations from the General Fund. For fiscal years 1994 and thereafter,
the Unappropriated Reserve requirement is set at 4%. In addition to the
Unappropriated Reserve, a constitutional amendment approved by Colorado voters
in 1992 requires the State and each local government to reserve a certain
percentage of its fiscal year spending (excluding bonded debt service) for
emergency use (the "Emergency Reserve"). The minimum Emergency Reserve was set
at 1% for 1993 and 2% for 1994 and is set at 3% for 1995 and later years. The
1994 fiscal year ending fund balance was $405.1 million, which was $234.0
million over the combined Unappropriated Reserve and Emergency Reserve
requirement. The 1995 fiscal year ending fund balance was $483.5 million, or
$257.4 million over the required Unappropriated Reserve and Emergency Reserve.
Based on December 20, 1995 estimates, the 1996 fiscal year ending fund balance
is expected to be $502.8 million, or $168.6 million over the required
Unappropriated Reserve and Emergency Reserve.
On November 3, 1992, voters in Colorado approved a
constitutional amendment (the "Amendment") which, in general, became effective
December 31, 1992, and could restrict the ability of the State and local
governments to increase revenues and impose taxes. The Amendment applies to
the State and all local governments, including home rule entities
("Districts"). Enterprises, defined as government-owned businesses authorized
to issue revenue bonds and receiving under 10% of annual revenue in
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grants from all Colorado state and local governments combined, are excluded
from the provisions of the Amendment.
The provisions of the Amendment are unclear and have required
judicial interpretation. Among other provisions, the Amendment requires voter
approval prior to tax increases, creation of debt, or mill levy or valuation
for assessment ratio increases. The Amendment also limits increases in
government spending and property tax revenues to specified percentages. The
Amendment requires that District property tax revenues yield no more than the
prior year's revenues adjusted for inflation, voter approved changes, and
(except with regard to school districts) local growth in property values
according to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment. Pursuant to
the Amendment, local government spending is to be limited by the same formula
as the limitation for property tax revenues. The Amendment limits increases in
expenditures from the State General Fund and program revenues (cash funds) to
the growth in inflation plus the percentage change in State population in the
prior calendar year. The bases for initial spending and revenue limits are
fiscal year 1992 spending and 1991 property taxes collected in 1992. The bases
for spending and revenue limits for fiscal year 1994 and later years will be
the prior fiscal year's spending and property taxes collected in the prior
calendar year. Debt service changes, reductions and voter-approved revenue
changes are excluded from the calculation bases. The Amendment also prohibits
new or increased real property transfer tax rates, new State real property
taxes and local District income taxes.
According to the Economic Report, inflation for 1994 was 4.4%
and population grew at the rate of 2.6% in Colorado. Accordingly, under the
Amendment, increases in State expenditures during the 1996 fiscal year will be
limited to 7.0% over expenditures during the 1995 fiscal year. The limitation
for the 1997 fiscal year is projected to be 6.8%, based on estimated inflation
of 4.6% for 1995 and estimated population growth of 2.2% during 1995. The 1995
fiscal year is the base year for calculating the limitation for the 1996 fiscal
year. For the 1995 fiscal year, General Fund revenues totalled $3,996.4
million and program revenues (cash funds) totalled $1,760.9 million, resulting
in total estimated base revenues of $5,757.3 million. Expenditures for the
1996 fiscal year, therefore, cannot exceed $6,160.3 million. However, the 1996
fiscal year General Fund and program revenues (cash funds) are projected to be
only $5,995.2 million, or $165.1 million less than expenditures allowed under
the spending limitation.
Litigation concerning several issues relating to the Amendment
has been brought in the Colorado courts. The litigation has dealt with three
principal issues: (i) whether Districts can increase mill levies to pay debt
service on general
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obligation bonds without obtaining voter approval; (ii) whether a multi-year
lease-purchase agreement subject to annual appropriations is an obligation
which requires voter approval prior to execution of the agreement; and (iii)
what constitutes an "enterprise" which is excluded from the provisions of the
Amendment. In September 1994, the Colorado Supreme Court held that Districts
can increase mill levies to pay debt service on general obligation bonds issued
after the effective date of the Amendment; in June 1995, the Colorado Supreme
Court validated mill levy increases to pay general obligation bonds issued
prior to the Amendment. In late 1994, the Colorado Court of Appeals held that
multi-year lease-purchase agreements subject to annual appropriation do not
require voter approval. The time to file an appeal in that case has expired.
Finally, in May 1995, the Colorado Supreme Court ruled that entities with the
power to levy taxes may not themselves be "enterprises" for purposes of the
Amendment; however, the Court did not address the issue of how valid
enterprises may be created. Future litigation in the "enterprise" arena may be
filed in the future to clarify these issues.
For fiscal year 1992 and thereafter, General Fund
appropriations are also limited by statute to an amount equal to the cost of
performing certain required reappraisals of taxable property plus an amount
equal to the lesser of (i) 5% of Colorado personal income or (ii) 106% of the
total General Fund appropriations for the previous fiscal year. This
restriction does not apply to any General Fund appropriations which are
required as a result of a new Federal law, a final state or Federal court order
or moneys derived from the increase in the rate or amount of any tax or fee
approved by a majority of the registered electors of the State voting at any
general election. In addition, the statutory limit on the level of General
Fund appropriations may be exceeded for a given first year upon the declaration
of a State fiscal emergency by the State General Assembly.
There is also a statutory restriction on the amount of annual
increases in taxes that the various taxing jurisdictions in Colorado can levy
without electoral approval. This restriction does not apply to taxes levied to
pay general obligation debt.
COLORADO STATE FINANCES. As the State experienced revenue shortfalls in the
mid-1980s, it adopted various measures, including impoundment of funds by the
Governor, reduction of appropriations by the General Assembly, a temporary
increase in the sales tax, deferral of certain tax reductions and inter-fund
borrowings. Under generally accepted accounting principles, the State had
unrestricted General Fund balances at June 30 of approximately $133.3 million
in fiscal year 1992, $326.8 million in fiscal year 1993, $405.1 million in
fiscal year 1994, and
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$483.5 million in fiscal year 1995. The fiscal year 1996 unrestricted General
Fund ending balance is currently projected to be $502.8 million.
For fiscal year 1995, the following tax categories generated
the following percentages of the State's $3,996.4 million gross receipts:
individual income taxes represented 52.7% of gross fiscal year 1995 receipts;
sales, use, and other excise taxes represented 32.9% of gross fiscal year 1995
receipts; and corporate income taxes represented 4.8% of gross fiscal year 1995
receipts. The final budget for fiscal year 1996 projects General Fund revenues
of approximately $4,171.5 million and appropriations of approximately $4,151.2
million. The percentages of General Fund revenue generated by type of tax for
fiscal year 1996 are not expected to be significantly different from fiscal
year 1995 percentages.
DEBT. Under its constitution, the State of Colorado is not permitted to issue
general obligation bonds secured by the full faith and credit of the State.
However, certain agencies and instrumentalities of the State are authorized to
issue bonds secured by revenues from specific projects and activities. The
State enters into certain lease transactions which are subject to annual
renewal at the option of the State. In addition, the State is authorized to
issue short-term revenue anticipation notes. Local government units in the
State are also authorized to incur indebtedness. The major source of financing
for such local government indebtedness is an ad valorem property tax. In
addition, in order to finance public projects, local governments in the State
can issue revenue bonds payable from the revenues of a utility or enterprise or
from the proceeds of an excise tax, or assessment bonds payable from special
assessments. Colorado local governments can also finance public projects
through leases which are subject to annual appropriation at the option of the
local government. Local governments in Colorado also issue tax anticipation
notes. The Amendment requires prior voter approval for the creation of any
multiple fiscal year debt or other financial obligation whatsoever, except for
refundings at a lower rate or obligations of an enterprise.
Economic conditions in the State may have continuing effects
on other governmental units within the State (including issuers of the Colorado
obligations in the Fund), which, to varying degrees, have also experienced
reduced revenues as a result of recessionary conditions and other factors.
U.S. Government Obligations (All Funds)
Each Fund may invest in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. Examples of the types
of U.S. Government obligations that may be held by a Fund include, in addition
to
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U.S. Treasury bonds, notes and bills, the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks and Maritime Administration. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as those of the Government
National Mortgage Association, are supported by the full faith and credit of
the U.S. Treasury; others, such as those of the Export-Import Bank of the
United States, are supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated
to do so by law.
Money Market Instruments (All Funds)
Each Fund may invest from time to time in "money market
instruments" such as bank obligations, commercial paper and corporate bonds
with remaining maturities of 13 months or less.
For the Equity funds, bank obligations include bankers'
acceptances and negotiable certificates of deposit issued by a U.S. bank,
savings bank or savings association that is a member of the Federal Reserve
System or insured by the Federal Deposit Insurance Corporation. For the Bond
Funds, bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks.
Although the Bond Funds will invest in obligations of foreign banks or foreign
branches of U.S. banks only where the Investment Adviser deems the instrument
to present minimal credit risks, these investments nevertheless entail risks
that are different from those of investments in domestic obligations of U.S.
banks due to differences in political, regulatory and economic systems and
conditions. Investments in bank obligations are limited to the obligations of
financial institutions having more than $1 billion in total assets at the time
of purchase. Investments by the Bond Funds in the obligations of foreign banks
and foreign branches of U.S. banks will not exceed 20% and 25%, respectively,
of the Funds' total assets at the time of purchase.
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Commercial paper is a short-term debt obligation with a
maturity ranging from 1 to 270 days issued by banks, corporations and other
borrowers. Investments by a Fund in commercial paper and similar corporate
obligations will consist of issues that are rated within the highest rating
category by one or more Rating Agencies at the time of purchase and unrated
paper determined by the Investment Adviser at the time of purchase to be of
comparable quality.
For the Colorado Tax-Exempt Fund, investments in money market
instruments, together with investments in other instruments (such as U.S.
Government obligations and repurchase agreements) that are subject to federal
income tax, will not exceed 20% of the total assets of the Fund except when
made for temporary defensive purposes. The Colorado Tax-Exempt Fund may also
hold uninvested cash reserves which do not earn income pending investment,
during temporary defensive periods or if, in the opinion of its Investment
Adviser, suitable tax-exempt obligations are unavailable. There is no
percentage limitation on the amount of assets which may be held uninvested by
the Colorado Tax-Exempt Fund.
Variable and Floating Rate Instruments (Bond Funds)
These Funds may purchase variable and floating rate
obligations as described in the Prospectus. The Investment Adviser will
consider the earning power, cash flows and other liquidity ratios of the
issuers and guarantors of such obligations and, if the obligation is subject to
a demand feature, will monitor the issuer's financial ability to meet payment
on demand.
Variable and floating rate demand instruments acquired by a
Fund may include participations in Municipal Obligations purchased from and
owned by financial institutions, primarily banks. Participation interests
provide a Fund with a specified undivided interest (up to 100%) in the
underlying obligation and the right to demand payment of the unpaid principal
balance plus accrued interest on the participation interest from the
institution upon a specified number of days' notice, not to exceed thirty days.
Each participation interest is backed by an irrevocable letter of credit or
guarantee of a bank that the Investment Adviser has determined meets the
prescribed quality standards for the Fund. The bank typically retains fees out
of the interest paid on the obligation for servicing the obligation, providing
the letter of credit and issuing the repurchase commitment.
While there may be no active secondary market with respect to
a particular variable or floating rate instrument purchased by the Funds, the
Funds may, from time to time as specified in the instrument, demand payment in
full of the
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principal or may resell the instrument to a third party. The absence of an
active secondary market, however, could make it difficult for a Fund to dispose
of an instrument if the issuer defaulted on its payment obligation or during
periods that the Fund is not entitled to exercise its demand rights, and the
Fund could, for these or other reasons, suffer a loss. Variable and floating
rate instruments with no active secondary market will be included in the
calculation of a Fund's illiquid assets. See "Restricted Securities."
Repurchase Agreements (All Funds)
A Fund will enter into repurchase agreements only with
financial institutions deemed to be creditworthy by the Investment Adviser,
pursuant to guidelines established by the Trust's Board of Trustees. During
the term of any repurchase agreement, the Investment Adviser will monitor the
creditworthiness of the seller and the seller must maintain the value of the
securities subject to the agreement and held by the Fund as collateral at 101%
of the repurchase price.
Although the securities subject to repurchase agreements may
bear maturities exceeding 13 months, each Fund does not presently intend to
enter into repurchase agreements with deemed maturities in excess of seven days
after notice by the Fund. If in the future a Fund were to enter into
repurchase agreements with deemed maturities in excess of seven days, the Fund
would do so only if such investment, together with other illiquid securities,
did not exceed 15% of the value of the Fund's net assets.
The repurchase price under repurchase agreements entered into
by a Fund generally equals the price paid by the Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities
subject to repurchase agreements are held by the Funds' custodian or in the
Federal Reserve/Treasury book-entry system.
Repurchase agreements involve the risk that the seller will
fail to repurchase the securities, as agreed. In that event, the Fund will
bear the risk of possible loss due to adverse market action or delays in
liquidating the underlying obligations.
Reverse Repurchase Agreements (All Funds)
When a Fund enters into a reverse repurchase agreement, it
maintains in a separate custodial account cash, U.S. Government obligations or
other liquid high-grade debt obligations that have a value at least equal to
the repurchase price.
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Reverse repurchase agreements involve the risk that the value
of portfolio securities a Fund sells may decline below the price it must pay
when the transaction closes.
As reverse repurchase agreements are deemed to be borrowings
by the SEC, each Fund is required to maintain continuous asset coverage of
300%. Should the value of a Fund's assets decline below 300% of borrowings, a
Fund may be required to sell portfolio securities within three days to reduce
the Fund's debt and restore 300% asset coverage.
Lower-Rated Securities (MIDCO Growth, Growth and Income and Small-Cap
Opportunity Funds)
While any investment carries some risk, certain risks
associated with lower-rated securities (commonly referred to as "junk bonds")
are different than those for investment grade securities. The risk of loss
through default is greater because lower-rated securities are usually unsecured
and are often subordinate to an issuer's other obligations. If an issuer of a
security held by a Fund defaults, the Fund may incur additional expenses to
seek recovery. Additionally, the issuers of these securities frequently have
high debt levels and are thus more sensitive to difficult economic conditions,
individual corporate developments and rising interest rates. Consequently, the
market price of these securities may be quite volatile and may result in wider
fluctuations in a Fund's net asset value per share.
In certain circumstances it may be difficult to determine a
security's fair value due to a lack of reliable objective information. This
may occur where there is no established secondary market for the security or
the security is thinly traded. As a result, a Fund's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may adversely affect the value and liquidity of
lower-rated securities held by the Funds, especially in a thinly-traded market.
Illiquid or restricted securities held by the Funds may involve special
registration responsibilities, liabilities, costs and valuation difficulties.
The ratings of Rating Agencies evaluate the safety of a
lower-rated security's principal and interest payments, but do not address
market value risk. Because the ratings of the Rating Agencies may not always
reflect current conditions and events, the Investment Adviser continuously
monitors the issuers of lower-rated securities held in a Fund's portfolio for
their ability to make required principal and interest payments. If a security
undergoes a rating revision, the Fund involved may
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continue to hold the security if the Investment Adviser decides this is
appropriate.
Securities Lending (Equity and Bond Funds)
Each of these Funds may lend its portfolio securities to
institutional investors as a means of earning additional income. Such loans
must be continuously secured by certain liquid, high-grade collateral equal at
all times to at least the market value of the securities loaned. Securities
loans will be made only to borrowers deemed by the Investment Adviser to
present minimal credit risks and when, in its judgment, the income to be earned
from the loan justifies the possible risks.
When a Fund lends its securities, it continues to receive
interest or dividends on the securities loaned and may simultaneously earn
interest on the collateral received from the borrower or from the investment of
cash collateral in readily marketable, high-quality, short-term obligations.
Although voting rights, or rights to consent, attendant to securities on loan
pass to the borrower, these loans may be called at any time and will be called
if a material event affecting the investment were to occur.
Restricted Securities (All Funds)
No Fund will knowingly invest more than 15% of the value of
its net assets in securities that are illiquid. Securities that are not
registered under the Securities Act of 1933 but that may be purchased by
institutional buyers under Rule 144A are subject to this limitation unless the
Investment Adviser under the supervision of the Board determines that a liquid
trading market exists.
Rule 144A allows for a broader institutional trading market
for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act of 1933 for resales of certain securities to
qualified institutional buyers. The Investment Adviser believes that the
market for certain restricted securities such as institutional commercial paper
may expand further as a result of this regulation and the development of
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the NASD.
The Investment Adviser monitors the liquidity of restricted
securities in each of the Funds' portfolios under the supervision of the Board
of Trustees. In reaching liquidity decisions, the Investment Adviser will
consider such factors as: (a) the frequency of trades and quotes for the
security; (b) the number of dealers wishing to purchase or sell the security
and
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the number of other potential purchasers; (c) dealer undertakings to make a
market in the security; and (d) the nature of the security and the nature of
the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer).
Rights Offerings and Warrants to Purchase (Equity and Bond Funds)
These Funds may participate in rights offerings and may
purchase warrants. These instruments are privileges enabling the owners to
subscribe to and purchase a specified number of shares of the issuing
corporation at a specified price during a specified period of time.
Subscription rights normally have a short life span to expiration. The
purchase of rights or warrants involves the risk that the Fund involved could
lose the purchase value of a right or warrant if the right to subscribe to
additional shares is not exercised prior to the expiration of the rights and
warrants. Also, the purchase of rights or warrants involves the risk that the
effective price paid for them, when added to the subscription price of the
related security, may exceed the value of the subscribed security's market
price. This could occur when there is no movement in the level of the
underlying security. A Fund will not invest more than 5% of its total assets
in rights or warrants, or more than 2% of its total assets in rights or
warrants not listed on the New York or American Stock Exchanges. Rights or
warrants acquired by a Fund in units or attached to other securities are not
subject to this restriction.
Asset-Backed Securities (Bond Funds)
These Funds may purchase asset-backed securities issued by
either governmental or non-governmental entities which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another. Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral. Payment on asset-backed
securities of private issues is typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guaranty, or
subordination. Assets generating such payments will consist of such
instruments as motor vehicle installment purchase obligations and credit card
receivables. Credit card receivables are generally unsecured and the debtors
are entitled to the protection of a number of state and federal consumer laws,
many of which have given debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the balance due. The Funds may also invest
in other types of asset-backed securities that may be available in the future.
The calculation of the average weighted maturity of
asset-backed securities is based on estimates of average life.
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Asset-backed securities are generally issued as pass-through
certificates, which represent undivided fractional ownership interests in an
underlying pool of assets, or as debt instruments, which are also known as
collateralized obligations, and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. Asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different parties. Payments
of both interest and principal on the securities are typically made monthly,
thus in effect "passing through" monthly payments made by the individual
borrowers on the assets that underlie the securities, net of any fees paid to
the issuer or guarantor of the securities.
Asset-backed securities are considered an industry for industry
concentration purposes.
In general, the collateral supporting asset-backed securities
is of shorter maturity than mortgage-related securities. Like other
fixed-income securities, when interest rates rise the value of an asset-backed
security generally will decline; however, when interest rates decline, the
value of an asset-backed security with prepayment features may not increase as
much as that of other fixed-income securities.
Mortgage-Related Securities (Bond Funds)
Mortgage Backed Securities Generally. Mortgage backed
securities held by the Bond Funds represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his lending institution are "passed-through" to an investor such as
the Funds. Most issuers or poolers provide guarantees of payments,
regardless of whether or not the mortgagor actually makes the payment. The
guarantees made by issuers or poolers are supported by various forms of credit,
collateral, guarantees or insurance, including individual loan, title, pool and
hazard insurance purchased by the issuers or poolers so that they can meet
their obligations under the policies. Mortgage backed securities issued by
private issuers or poolers, whether or not such securities are subject to
guarantees, may entail greater risk than securities directly or indirectly
guaranteed by the U.S. Government.
Interests in pools of mortgage backed securities differ from
other forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual
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borrowers on their residential mortgage loans, net of any fees paid.
Additional payments are caused by repayments resulting from the sale of the
underlying residential property, refinancing or foreclosure net of fees or
costs which may be incurred. Some mortgage backed securities are described as
"modified pass-through". These securities entitle the holders to receive all
interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make the
payments.
The Bond Funds may purchase mortgage-related securities that
are secured by entities such as Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan
Mortgage Corporation ("FHLMC"), commercial banks, trusts, financial companies,
finance subsidiaries of industrial companies, savings and loan associations,
mortgage banks and investment banks.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related
securities include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes") which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith and credit of
the United States. GNMA is a wholly-owned U.S. Government corporation within
the Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities also include
FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie
Maes") which are solely the obligations of the FNMA, are not backed by or
entitled to the full faith and credit of the United States and are supported by
the right of the issuer to borrow from the Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to timely payment of principal and interest by
FNMA. Mortgage-related securities include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed and do not constitute a debt or obligation of the United States or
of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
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Underlying Mortgages. Pools consist of whole mortgage loans
or participations in loans. The majority of these loans are made to purchasers
of one to four family homes. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Bond Funds may
purchase pools of variable rate mortgages ("VRM"), growing equity mortgages
("GEM"), graduated payment mortgages ("GPM") and other types where the
principal and interest payment procedures vary. VRM's are mortgages which
reset the mortgage's interest rate periodically with changes in open market
interest rates. To the extent that a Portfolio is actually invested in VRM's,
its interest income will vary with changes in the applicable interest rate on
pools of VRM's. GPM and GEM pools maintain constant interest rates, with
varying levels of principal repayment over the life of the mortgage. These
different interest and principal payment procedures should not impact the
Portfolios' net asset value since the prices at which these securities are
valued will reflect the payment procedures.
All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, some mortgages included in pools are insured through
private mortgage insurance companies.
Each Fund may invest in multiple class pass-through
securities, including CMOs and REMIC Certificates. These multiple class
securities may be issued or guaranteed by U.S. Government agencies or
instrumentalities, including GNMA, FNMA and FHLMC, or issued by trusts formed
by private originators of, or investors in, mortgage loans. In general, CMOs
and REMICs are debt obligations of a legal entity that are collateralized by,
and multiple class pass-through securities represent direct ownership interests
in, a pool of residential mortgage loans or mortgage pass-through securities
(the "Mortgage Assets"), the payments on which are used to make payments on the
CMOs or multiple pass-through securities. Investors may purchase beneficial
interests in REMICs, which are known as "regular" interests or "residual"
interests, which in general are junior and more volatile than regular
interests. The Funds do not intend to purchase residual interests. Pools
created by non-governmental issuers generally offer a higher rate of interest
than government and government-related pools because there are no direct or
indirect government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance purchased by the issuer. The insurance and guarantees are
issued by governmental entities, private insurers and the mortgage poolers.
There can be no assurance that the private
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insurers or mortgage poolers can meet their obligations under the policies.
Although certain mortgage-related securities are guaranteed by
a third party or are otherwise similarly secured, the market value of the
security, which may fluctuate, is not so secured. If a Fund purchases a
mortgage-related security at a premium, that amount may be lost if there is a
decline in the market value of the security whether resulting from increases in
interest rates or prepayment of the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true because mortgages underlying securities are prone to
prepayment in periods of declining interest rates. For this and other reasons,
a mortgage-related security's maturity may be shortened by unscheduled
prepayments on underlying mortgages and, therefore, it is not possible to
accurately predict the security's return to a Fund. Mortgage-related
securities provide regular payments consisting of interest and principal. No
assurance can be given as to the return a Fund will receive when these amounts
are reinvested. The compounding effect from reinvestment of monthly payments
received by the Funds will increase their respective yields to shareholders,
compared to bonds that pay interest semi-annually.
CMOs may involve additional risks other than those found in
other types of mortgage-related obligations. During periods of rising interest
rates, CMOs may lose their liquidity as CMO market makers may choose not to
repurchase, or may offer prices, based on current market conditions, which are
unacceptable to the Fund based on the Fund's analysis of the market value of
the security.
As new types of mortgage-backed securities are developed and
offered in the market, the Trust may consider making investments in such new
types of securities.
Options (Equity and Bond Funds)
Each Fund, other than the Colorado Tax-Exempt Fund, may
purchase put and call options and may write covered call and secured put
options issued by the Options Clearing Corporation which are traded
over-the-counter or are listed on a national securities exchange. Such options
may relate to particular securities or to various stock or bond indexes, except
that a Fund may not write covered call options on an index. A Fund may also
invest in index futures contracts and options on index futures contracts for
hedging purposes. A Fund may not purchase options or purchase or sell futures
contracts or options on futures contracts unless immediately after any such
transaction
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the aggregate amount of premiums paid for put options and the amount of margin
deposits on its existing futures positions do not exceed 5% of its total
assets. Purchasing options is a specialized investment technique that may
entail the risk of a complete loss of the amounts paid as premiums to the
writer of the option.
In order to close out call or put option positions, the Fund
will be required to enter into a "closing purchase transaction" -- the
purchase of a call or put option (depending upon the position being closed out)
on the same security with the same exercise price and expiration date as the
option that it previously wrote. When a portfolio security subject to a call
option is sold, a Fund will effect a closing purchase transaction to close out
any existing call option on that security. If a Fund is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
security until the option expires or a Fund delivers the underlying security
upon exercise.
By writing a covered call option, a Fund forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents a
profit. In addition, a Fund is not able to sell the underlying security until
the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. If a Fund writes a
secured put option, it assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option. The use of
covered call and secured put options will not be a primary investment technique
of a Fund. If the Investment Adviser is incorrect in its forecast for the
underlying security or other factors when writing options, a Fund would be in a
worse position than it would have been had the options not been written.
In contrast to an option on a particular security, an option
on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
When a Fund purchases a put or call option, the premium paid
by it is recorded as an asset of the Fund. When a Fund writes an option, an
amount equal to the net premium (the premium less the commission) received by
the Fund is included in the liability section of the Fund's statement of assets
and liabilities as a deferred credit. The amount of this asset or deferred
credit will be subsequently marked-to-market to reflect the current value of
the option purchased or written. The current value of the traded option is the
last sale price or, in
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the absence of a sale, the average of the closing bid and asked prices. If an
option purchased by a Fund expires unexercised, the Fund realizes a loss equal
to the premium paid. If a Fund enters into a closing sale transaction on an
option purchased by it, the Fund will realize a gain if the premium received by
the Fund on the closing transaction is more than the premium paid to purchase
the option, or a loss if it is less. If an option written by a Fund expires on
the stipulated expiration date or if a Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option
written by a Fund is exercised, the proceeds of the sale will be increased by
the net premium originally received and the Fund will realize a gain or loss.
As noted in the Prospectus, there are several risks associated
with transactions in options on securities. For example, there are significant
differences between the securities and options markets which could result in an
imperfect correlation between the markets, causing a given transaction not to
achieve its objectives. In addition, a liquid secondary market for particular
options, whether traded over-the-counter or on a national securities exchange
("National Securities Exchange") may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by a National Securities Exchange on opening
transactions, closing transactions or both; trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on a National Securities Exchange; the facilities
of a National Securities Exchange or the Options Clearing Corporation may not
at all times be adequate to handle current trading volume; or one or more
National Securities Exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that National Securities Exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that National Securities
Exchange would continue to be exercisable in accordance with their terms. A
Fund will likely be unable to control losses by closing its position where a
liquid secondary market does not exist. Moreover, regardless of how much the
market price of the underlying security increases or decreases, the option
buyer's risk is limited to the amount of the original investment for the
purchase of the option. However, options may be more volatile than their
underlying securities, and therefore, on a percentage basis, an investment in
options may be subject to
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greater fluctuation than an investment in the underlying securities.
A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior or unexpected events.
Futures and Related Options (Equity and Bond Funds)
These Funds may invest in futures contracts and related
options (including, but not limited to, interest rate futures contracts and
index futures contracts). For a detailed description of futures contracts and
related options, see Appendix B to this Statement of Additional Information.
Foreign Currency Exchange Transactions (MIDCO Growth, Growth and Income and
Small-Cap Opportunity Funds)
A forward foreign currency exchange contract is an obligation
by the Fund to purchase or sell a specific currency at a specified price and
future date, which may be any fixed number of days from the date of the
contract. These contracts establish an exchange rate at a future date and are
transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. These contracts
generally have no deposit requirement and are traded at a net price without
commission. Neither spot transactions nor forward foreign currency exchange
contracts eliminate fluctuations in the prices of a Fund's portfolio securities
or in foreign exchange rates or prevent loss if the prices of these securities
should decline.
Forward foreign currency exchange contracts allow a Fund to
hedge the currency risk of portfolio securities denominated in a foreign
currency. This technique permits the assessment of the merits of a security to
be considered separately from the currency risk. It is thereby possible to
focus on the opportunities presented by the security apart from the currency
risk. Although these contracts are of short duration, generally between one
and twelve months, they frequently are rolled over in a manner consistent with
a more long-term currency decision. Although foreign currency hedging
transactions tend to minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any potential gain
that might be realized should the value of the hedged currency increase. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the
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date it matures. The projection of currency market movements is extremely
difficult, and the successful execution of a hedging strategy is highly
uncertain.
When-Issued Purchases and Forward Commitments (All Funds)
When a Fund agrees to purchase securities on a when-issued
basis or enters into a forward commitment to purchase securities, its custodian
will set aside cash or certain liquid high-grade debt obligations equal to the
amount of the purchase or the commitment in a separate account. Normally, the
custodian will set aside portfolio securities to meet this requirement. The
market value of the separate account will be monitored and in the event of a
decline, the Fund will be required to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitments. In the case of a forward commitment to sell
portfolio securities, the Fund's custodian will hold the portfolio securities
themselves in a segregated account while the commitment is outstanding.
The Funds will enter into these transactions only with the
intention of completing them and actually purchasing or selling the securities
involved. However, if deemed advisable as a matter of investment strategy, a
Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When a Fund engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
the other party to do so may result in the Fund's incurring a loss or missing
an opportunity to obtain a price considered to be advantageous.
The value of the securities underlying a when-issued or
forward commitment transaction, and any subsequent fluctuations in their value,
are taken into account when determining a Fund's net asset value starting on
the day the Fund agrees to purchase the securities. The Fund does not earn
interest on the securities until they are paid for and delivered on the
settlement date. When a Fund makes a forward commitment to sell securities it
owns, the proceeds to be received upon settlement are included in the Fund's
assets, and fluctuations in the value of the underlying securities are not
reflected in the Fund's net asset value as long as the commitment remains in
effect.
Securities Issued by Other Investment Companies (All Funds)
Each Fund may invest up to 10% in securities issued by other
investment companies; however, the Colorado Tax-Exempt Fund
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may only invest in investment companies which invest in high-quality,
short-term taxable instruments or tax-exempt instruments and which determine
their net asset value per share on the amortized cost or penny-rounding method.
Securities issued by other investment companies may be acquired by the Funds
within the limits prescribed by the 1940 Act.
Investment Limitations
A Fund may not change the following investment limitations
without the approval of a majority of the holders of the Fund's outstanding
shares (as defined under "Miscellaneous" below).
No Fund may:
1. Purchase or sell real estate, except that each Fund
may purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
2. Purchase securities of companies for the purpose of
exercising control.
3. 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.
4. Act as an underwriter of securities within the
meaning of the Securities Act of 1933 except insofar as the Fund might be
deemed to be an underwriter upon disposition of portfolio securities acquired
within the limitation on purchases of restricted securities and except to the
extent that the purchase of obligations directly from the issuer thereof in
accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Write or sell put options, call options, straddles,
spreads, or any combination thereof, except for transactions in options on
securities, futures contracts and options on futures contracts. (This
exception does not apply to the Colorado Tax-Exempt Fund).
6. Borrow money or issue senior securities, except that
each Fund may borrow from banks and enter into reverse repurchase agreements
for temporary purposes in amounts up to 10% of the value of its total assets at
the time of such borrowing; or mortgage, pledge or hypothecate any assets,
except in connection with any such borrowing and in amounts not in excess of
the lesser of the dollar amounts borrowed or 10% of the value
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of a Fund's total assets at the time of such borrowing. No Fund will purchase
securities while its borrowings (including reverse repurchase agreements) in
excess of 5% of its total assets are outstanding. Securities held in escrow or
separate accounts in connection with a Fund's investment practices described in
this Statement of Additional Information or the Prospectus are not deemed to be
pledged for purposes of this limitation.
None of the Equity or Bond Funds may:
1. Purchase securities of any one issuer (other than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, immediately after such purchase, more than 5% of the
value of the Fund's total assets would be invested in the securities of such
issuer, or more than 10% of the issuer's outstanding voting securities would be
owned by the Fund or the Trust, except that up to 25% of the value of the
Fund's total assets may be invested without regard to these limitations.
2. Make loans, except that each Fund may purchase and
hold debt instruments and enter into repurchase agreements in accordance with
its investment objective and policies and may lend portfolio securities in an
amount not exceeding 30% of its total assets.
3. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this investment
limitation shall not apply to each Fund's transactions in futures contracts and
related options, and (b) each Fund may obtain short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities.
4. Purchase or sell commodity contracts, or invest in
oil, gas or mineral exploration or development programs, except that each Fund
may, to the extent appropriate to its investment objective, purchase publicly
traded securities of companies engaging in whole or in part in such activities,
and may enter into futures contracts and related options.
5. Purchase any securities that would cause 25% or more
of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (b) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents; and (c) utilities
will be divided according to their services, for example, gas, gas
transmission,
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electric and gas, electric and telephone will each be considered a separate
industry.
The Colorado Tax-Exempt Fund may not:
1. Invest less than 80% of its net assets in securities
the interest on which is exempt from federal income tax, except during periods
of unusual market conditions. For purposes of this investment limitation,
securities the interest on which is treated as a specific tax preference item
under the federal alternative minimum tax are considered taxable.
2. Make loans, except that the Fund may purchase and
hold debt instruments and enter into repurchase agreements in accordance with
its investment objective and policies.
3. Purchase securities of any one issuer if, immediately
after such purchase, more than 5% of the value of the Fund's total assets would
be invested in the securities of such issuer, except that (a) up to 50% of the
value of the Fund's total assets may be invested without regard to this 5%
limitation provided that no more than 25% of the value of the Fund's total
assets are invested in the securities of any one issuer and (b) this 5%
limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies, authorities, instrumentalities or political
subdivisions. For purposes of this limitation, a security is considered to be
issued by the governmental entity (or entities) whose assets and revenues back
the security, or, with respect to a private activity bond that is backed only
by the assets and revenues of a nongovernmental user, such nongovernmental
user. In certain circumstances, the guarantor of a guaranteed security may
also be considered to be an issuer in connection with such guarantee, except
that a guarantee of a security shall not be deemed to be a security issued by
the guarantor when the value of all securities issued and guaranteed by the
guarantor, and owned by the Fund, does not exceed 10% of the value of the
Fund's total assets.
4. Purchase any securities, except securities issued (as
defined in the preceding investment limitation) or guaranteed by the United
States, any state, territory or possession of the United States, the District
of Columbia or any of their authorities, agencies, instrumentalities or
political subdivisions, which would cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the securities of
issuers conducting their principal business activities in the same industry.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that the Fund may obtain
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities.
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6. Purchase or sell commodity contracts (including
futures contracts) or invest in oil, gas or mineral exploration or development
programs, except that the Fund may, to the extent appropriate to its investment
objective, purchase publicly traded securities of companies engaging in whole
or in part in such activities.
* * *
In order to permit the sale of shares of a Fund in certain
states, the Trust may make commitments with respect to that Fund that are more
restrictive than its investment policies listed above and in the Prospectus.
To permit the sale of shares of the Equity and Bond Funds in Ohio, Texas and
Wisconsin and the sale of shares of the Equity funds in Arkansas and Vermont,
the Trust has agreed to the following additional restrictions with respect to
those Funds:
1. None of the Equity and Bond Funds will purchase securities in
excess of 5% of its respective total assets of unseasoned
issuers, including their predecessors, which have been in
operation for less than three years, and equity securities of
issuers which are not readily marketable.
2. None of the Equity and Bond Funds will purchase securities in
excess of 10% of its respective total assets in securities of
issuers which that Fund is restricted from selling to the
public without registration under the Securities Act of 1933,
excluding restricted securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 that have been
determined to be liquid by the Trust's Board of Trustees based
upon the trading markets for the securities.
3. None of the Equity and Bond Funds will effect any brokerage
transaction in its respective portfolio securities with any
broker-dealer affiliated directly or indirectly with its
investment adviser or manager, unless the transactions,
including the frequency thereof, the receipt of commissions
payable in connection therewith, and the selection of the
affiliated broker-dealer effecting the transactions, is not
unfair or unreasonable to the shareholders of the Fund. Each
Fund will comply with SEC Rule 17e-1 under the 1940 Act
relating to transactions with affiliated broker-dealers.
4. None of the Equity and Bond Funds will invest more than 5% of
its net assets in warrants, of which not more
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than 2% may be warrants which are not listed on the New York or
American Stock Exchange.
5. None of the Equity and Bond Funds will lend portfolio
securities unless collateral values are continuously
maintained at no less than 100% by "marking to market" daily
and the practice is fair, just and equitable as determined by
a finding that adequate provision has been made for margin
calls, termination of the loan, reasonable servicing fees
(including finders' fees), voting rights, dividend rights,
shareholder approval and disclosure, and the loan is within
the limitations approved by the SEC.
6. None of the Equity and Bond Funds will invest in oil, gas or
mineral leases.
7. None of the Equity and Bond Funds will invest in real estate
limited partnership interests.
8. None of the Equity and Bond Funds will invest more than 5% of
its net assets in options, and they will only purchase put and
call options listed on a national securities exchange and
issued by the Options Clearing Corporation. Each Fund will
write only covered options.
9. The MIDCO Growth, Growth and Income and Small-Cap Opportunity
Funds will not invest more than 15% of their respective net
assets in lower-rated convertible securities.
In order to permit the sale of shares of the Equity and Bond
Funds in Ohio, the Trust has also agreed that no Equity or Bond Fund will
purchase or retain the securities of any issuer if the officers or trustees of
the Trust, the Investment Adviser, or managers owning beneficially one-half of
one percent of the securities of such issuer together own beneficially more
than 5% of the securities of that issuer.
In order to permit the sale of shares of the Equity and Bond
Funds in Wisconsin, the Trust has also agreed that no Equity or Bond Fund will
invest in restricted securities, excluding restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, that have been
determined to be liquid by the issuer's board of directors or trustees based
upon the trading markets for the securities, if by reason thereof the value of
the Fund's investment in such securities would exceed 5% of its total assets.
To permit the sale of shares of the Bond Funds in Arkansas,
the Trust has agreed that no Bond Fund will purchase
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<PAGE> 85
securities in excess of 10% of its total assets in securities of issuers which
the Fund is restricted from selling to the public without registration under
the Securities Act of 1933, excluding restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 that have been
determined to be liquid by the Trust's Board of Trustees based upon the trading
markets for the securities.
Should the Trust determine that the above commitments or any
other commitment made to permit the sale of a Fund's shares in any state are no
longer in the best interests of that Fund, the Trust will revoke the commitment
by terminating sales of that Fund's shares in the state involved.
NET ASSET VALUE
The net asset value per share of each Fund is calculated as
set forth in the Prospectus and is calculated separately from the net asset
value of the other Funds. For purposes of such calculation, "assets belonging
to" a Fund consist of the consideration received upon the issuance of shares of
the particular Fund together with all income, earnings, profits and proceeds
derived from the investment thereof, including any proceeds from the sale,
exchange, or liquidation of such investments, any funds or payments derived
from any reinvestment of such proceeds, and a portion of any general assets of
the Trust not belonging to a particular investment portfolio that are allocated
to that Fund by the Trust's Board of Trustees. The Board of Trustees may
allocate such general assets in any manner it deems fair and equitable. Each
Fund is charged with the direct liabilities and expenses of that Fund and with
a share of the general liabilities and expenses of the Trust. Allocations of
general assets and general liabilities and expenses of the Trust to a
particular Fund will be made in accordance with generally accepted accounting
principles. Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to a
particular Fund are conclusive.
Securities that are traded on a recognized stock exchange are
valued at the last sale price occurring prior to the close of regular trading
on the securities exchange on which such securities are primarily traded or at
the last sale price occurring prior to the close of regular trading on the
national securities market. Securities traded on only over-the-counter markets
are valued on the basis of closing over-the-counter bid prices. Securities for
which there were no transactions are valued at the average of the current bid
and asked prices. Restricted securities, securities for which market
quotations are not readily available, and other assets are valued at fair value
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<PAGE> 86
by the Co-Administrators under the supervision of the Board of Trustees. In
computing net asset value, the Co-Administrators will "mark to market" the
current value of a Fund's open futures contracts and options.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in the Funds are sold on a continuous basis by ALPS.
Under the 1940 Act, a Fund may suspend the right of redemption
or postpone the date of payment for shares during any period when (a) trading
on the New York Stock Exchange (the "Exchange") is restricted by applicable
rules and regulations of the SEC; (b) the Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC. (The Funds
may also suspend or postpone the recordation of the transfer of their shares
upon the occurrence of any of the foregoing conditions.)
Each Fund may redeem shares involuntarily if it appears
appropriate to do so in light of its responsibilities under the 1940 Act or to
reimburse the Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the Prospectus
from time to time.
The Trust has filed an election pursuant to Rule 18f-1 under
the 1940 Act which provides that each portfolio of the Trust is obligated to
redeem shares solely in cash up to $250,000 or 1% of such portfolio's net asset
value, whichever is less, for any one shareholder within a 90-day period. Any
redemption beyond this amount may be made in proceeds other than cash.
A Fund may make payment for redemption in securities or other
property if it appears appropriate to do so in light of the Fund's
responsibilities under the 1940 Act. Shareholders who receive a redemption in
kind may incur additional costs when they convert the securities or property
received to cash and may receive less than the redemption value of their
shares, particularly where the securities are sold prior to maturity.
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<PAGE> 87
Retirement Plans -- Equity Funds and Bond Funds
Profit-Sharing Plan. The Trust has available a profit-sharing
plan (including a 401(k) option) (the "Profit-Sharing/401(k) Plan") for use by
both self-employed individuals (sole proprietorships and partnerships) and
corporations who wish to use shares of the Funds as a funding medium for a
retirement plan qualified under the Internal Revenue Code ("Code").
The Code provides certain tax benefits for contributions by a
self-employed individual or corporation to the Profit-Sharing/401(k) Plan.
For example, contributions to the Plan are deductible (subject to certain
limits) and the contributions and earnings thereon are not taxed until
distributed. However, distribution of amounts from the Profit-Sharing/401(k)
Plan to a participant before the participant attains age 59 1/2 will (with
certain exceptions) result in an additional 10% tax on the amount included in
the participant's gross income.
Individual Retirement Account. The Trust has available a plan
(the "IRA") for use by individuals with compensation for services rendered
(including earned income from self-employment) who wish to use shares of the
Funds as a funding medium for individual retirement saving. However, except
for rollover contributions, an individual who has attained, or will attain, age
70 1/2 before the end of the taxable year may only contribute to an IRA for his
or her nonworking spouse under age 70 1/2.
The individual's IRA assets (and earnings thereon) may
generally not be withdrawn (without the individual's incurring an additional
10% tax on the amount included in the individual's gross income) until age 59
1/2. Earnings on amounts contributed to the IRA are not taxed until
distributed.
The Funds also permit certain employers (including
self-employed individuals) to make contributions to employees' IRAs if the
employer establishes a Simplified Employee Pension ("SEP") plan and/or a Salary
Reduction SEP ("SARSEP"). A SEP permits an employer to make discretionary
contributions to all of its employees' IRAs (employees who have not met certain
eligibility criteria may be excluded) equal to a uniform percentage of each
employees' compensation (subject to certain limits). If an employer (including
a self-employed individual) establishes a SARSEP, employees may defer a
percentage of their compensation -- pre-tax -- to IRAs (subject to certain
limits). The Code provides certain tax benefits for contributions by an
employer, pursuant to a SEP and/or SARSEP, to an employee's IRA. For example,
contributions to an employee's IRA pursuant to a SEP and/or SARSEP are
deductible (subject to certain limits) and the contributions and earnings
thereon are not taxed until distributed.
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In both the Profit-Sharing/401(k) Plan and the IRA,
distributions of net investment income and capital gains will be automatically
reinvested.
The foregoing brief descriptions are not complete or
definitive explanations of the Profit-Sharing/401(k) Plan or IRA available for
investment in the Funds. Any person who wishes to establish a retirement plan
account may do so by contacting ALPS directly. The complete Plan documents and
applications will be provided to existing or prospective shareholders upon
request, without obligation. The Trust recommends that investors consult their
attorneys or tax advisors to determine if the retirement programs described
herein are appropriate for their needs.
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust. Under the
Trust's Declaration of Trust, the beneficial interest in the Trust may be
divided into an unlimited number of full and fractional transferable shares.
The Amended and Restated Declaration of Trust authorizes the Board of Trustees
to classify or reclassify any unissued shares of the Trust into one or more
additional classes by setting or changing in any one or more respects, their
respective designations, preferences, conversion or other rights, voting
powers, restrictions, limitations, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Board of Trustees has authorized
the issuance of twenty-four classes of shares, each class representing
interests in a separate investment portfolio. The Trustees may similarly
classify or reclassify any particular class of shares into one or more series.
Each share of the Trust has no par value, represents an equal
proportionate interest in a Fund, and is entitled to such dividends and
distributions of the income earned on the Fund's assets as are declared at the
discretion of the Trustees. Shares of the Funds have no preemptive rights and
only such conversion or exchange rights as the Board of Trustees may grant in
its discretion. When issued for payment as described in the Prospectus, a
Fund's shares will be fully paid and nonassessable by the Trust. In the event
of a liquidation or dissolution of the Trust or an individual Fund,
shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to the Fund, and a proportionate
distribution, based upon the relative net asset values of the Trust's
respective investment portfolios, of any general assets not belonging to any
particular portfolio which are available for distribution. Shareholders of a
Fund are entitled to participate in the net distributable assets of the Fund on
liquidation, based on the number of shares of the Fund they hold.
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<PAGE> 89
Shareholders of the Funds will vote together in the aggregate
and not separately on a Fund-by-Fund basis, except as otherwise required by law
or when the Board of Trustees determines that the matter to be voted upon
affects only the interests of the shareholders of a particular Fund. Rule
18f-2 under the 1940 Act provides that any matter required to be submitted to
the holders of the outstanding voting securities of an investment company such
as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each Fund
affected by the matter. A Fund is affected by a matter unless it is clear that
the interests of each Fund in the matter are substantially identical or that
the matter does not affect any interest of the Fund. Under the Rule, the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a Fund only
if approved by a majority of the outstanding shares of such Fund. However, the
Rule also provides that the ratification of the appointment of independent
public accountants, the approval of principal underwriting contracts and the
election of trustees may be effectively acted upon by shareholders of the Trust
voting without regard to particular Funds.
There will normally be no meetings of shareholders for the
purpose of electing trustees unless and until such time as less than a majority
of the trustees holding office have been elected by shareholders, at which time
the trustees then in office will call a shareholders meeting for the election
of trustees. Shares of the Trust have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Trust's outstanding shares
(irrespective of class) may elect all of the trustees. The Amended and
Restated Declaration of Trust provides that meetings of the shareholders of the
Trust shall be called by the Trustees upon the written request of shareholders
owning at least 10% of the outstanding shares entitled to vote. Except as set
forth above, the Trustees shall continue to hold office and may appoint
successor trustees.
The Amended and Restated Declaration of Trust authorizes the
Board of Trustees, without shareholder approval (unless otherwise required by
applicable law), to: (a) sell and convey the assets belonging to a class of
shares to another management investment company for consideration which may
include securities issued by the purchaser and, in connection therewith, to
cause all outstanding shares of such class to be redeemed at a price which is
equal to their net asset value and which may be paid in cash or by distribution
of the securities or other consideration received from the sale and conveyance;
(b) sell and convert the assets belonging to a class of shares into money and,
in connection therewith, to cause all outstanding shares of such class to be
redeemed at their net asset value; or (c) combine the assets belonging to a
class of shares with the assets belonging
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<PAGE> 90
to one or more other classes of shares if the Board of Trustees reasonably
determines that such combination will not have a material adverse effect on the
shareholders of any class participating in such combination and, in connection
therewith, to cause all outstanding shares of any such class to be redeemed or
converted into shares of another class of shares at their net asset value.
However, the exercise of such authority may be subject to certain restrictions
under the 1940 Act. The Board of Trustees may authorize the termination of any
class of shares after the assets belonging to such class have been distributed
to its shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Funds' Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Funds or their shareholders, and the discussion here
and in the Funds' Prospectus are not intended as a substitute for careful tax
planning and is based on tax laws and regulations which are in effect on the
date hereof; such laws and regulations may be changed by legislative or
administrative action. Investors should consult their tax advisors with
reference to their own situation.
Federal - All Funds
Each Fund is treated as a separate corporate entity under the
Code and intends to qualify as a regulated investment company for each of its
taxable years. Qualification as a regulated investment company requires, among
other things, that a Fund distribute to its shareholders an amount equal to at
least the sum of 90% of its investment company taxable income (if any) and 90%
of its tax-exempt interest income (if any) net of certain deductions for a
taxable year. In general, a Fund's investment company taxable income will be
its taxable income (including interest and short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year. Each Fund intends to distribute substantially all of its investment
company taxable income and net tax-exempt income each taxable year. Such
distributions by the Equity and Bond Funds will be taxable as ordinary income
to their shareholders who are not currently exempt from federal income taxes,
whether such income is received in cash or reinvested in additional shares.
(Federal income taxes for distributions to an IRA or to a qualified retirement
plan are deferred under the Code.)
In addition, in order to qualify as a regulated investment
company, each Fund must satisfy certain requirements
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with respect to the source of its income for a taxable year. At least 90% of
the gross income of each Fund must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stocks, securities or foreign currencies, and other income
(including, but not limited to, gains from options, futures, or forward
contracts) derived with respect to the Fund's business of investing in such
stock, securities or currencies. The Treasury Department may by regulation
exclude from qualifying income foreign currency gains which are not directly
related to the Fund's principal business of investing in stock or securities,
or options and futures with respect to stock or securities. Any income derived
by a Fund from a partnership or trust is treated for this purpose as derived
with respect to the Fund's business of investing in stock, securities or
currencies only to the extent that such income is attributable to items of
income which would have been qualifying income if realized by the Fund in the
same manner as by the partnership or trust.
Another requirement for qualification as a regulated
investment company under the Code is that less than 30% of a Fund's gross
income for a taxable year must be derived from gains realized on the sale or
other disposition of the following investments held for less than three months:
(1) stock and securities (as defined in Section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to a Fund's principal
business of investing in stock and securities (and options and futures with
respect to stocks and securities). Interest (including original issue discount
and accrued market discount) received by a Fund upon maturity or disposition of
a security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of this requirement. However, any other income which is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose. See Appendix B --
"Accounting and Tax Treatment" for a general discussion of the federal tax
treatment of futures contracts, related options thereon and other financial
instruments, including their treatment under the 30% test.
Substantially all of each Fund's net realized long-term
capital gains, if any, will be distributed at least annually to Fund
shareholders. A Fund will generally have no tax liability with respect to such
gains and the distributions will be taxable to Fund shareholders who are not
currently exempt from federal income taxes as long-term capital gains,
regardless of how long the shareholders have held Fund shares and whether such
gains are received in cash or reinvested in additional shares.
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Each Fund will designate any distribution of long-term capital
gains as a capital gain dividend in a written notice mailed to shareholders
within 60 days after the close of its taxable year. Shareholders should note
that, upon the sale or exchange of Fund shares, if the shareholder has not held
such shares for more than six months, any loss on the sale or exchange of those
shares will be treated as long term capital loss to the extent of the capital
gain dividends received with respect to the shares.
Ordinary income of individuals is taxable at a maximum nominal
rate of 39.6%, but because of limitations on itemized deductions otherwise
allowable and the phase-out of personal exemptions, the maximum effective
marginal rate of tax for some taxpayers may be higher. An individual's long
term capital gains are taxable at a maximum nominal rate of 28%. For
corporations, long term capital gains and ordinary income are both taxable at a
maximum average rate of 35% (a maximum effective marginal rate of 39% applies
in the case of corporations having taxable income between $100,000 and
$335,000).
A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year
to avoid liability for this excise tax.
If for any taxable year a Fund does not qualify for tax
treatment as a regulated investment company, all of the taxable income of the
Fund will be subject to tax at regular corporate rates, without any deduction
for distributions to shareholders, and the Fund's distributions to shareholders
(whether or not derived from interest on Municipal Obligations) will be taxable
as ordinary dividends to the extent of the current and accumulated earnings and
profits of the particular Fund. Such distributions will be eligible for the
dividends received deduction in the case of corporate shareholders.
State - All Funds
Depending upon the extent of each Fund's activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located or in which they are otherwise deemed to be
conducting business, a Fund may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of the Funds and their shareholders under such laws may
differ from their treatment under federal income tax laws.
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Additional Federal Tax Considerations for the Colorado Tax-Exempt Fund
As described above and in the Prospectus, the Colorado
Tax-Exempt Fund is designed to provide investors with income exempt from
regular federal income tax and Colorado personal income tax. See above for
general federal income tax considerations. The Fund is not intended to
constitute a balanced investment program and is not designed for investors
seeking capital appreciation or maximum tax-exempt income irrespective of
fluctuations in principal. Shares of the Fund would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Code, H.R. 10 plans and IRAs, because such plans and
accounts are generally tax-exempt and, therefore, not only would not gain any
additional benefit from the Fund's dividends being tax-exempt, but those
dividends would be ultimately taxable to the beneficiaries when distributed to
them. In addition, the Fund may not be an appropriate investment for entities
which are "substantial users" of facilities financed by private activity bonds
or "related persons" thereof. "Substantial user" is defined under Treasury
Regulations to include a non-exempt person who regularly uses a part of such
facilities in his trade or business and whose gross revenues derived with
respect to the facilities financed by the issuance of bonds are more than 5% of
the total revenues derived by all users of such facilities, or who occupies
more than 5% of the usable area of such facilities or for whom such facilities
or a part thereof were specifically constructed, reconstructed or acquired.
"Related persons" include certain related natural persons, affiliated
corporations, a partnership and its partners and an S Corporation and its
shareholders.
In accordance with the Code, the Fund intends to distribute
substantially all of its net tax-exempt income (such distributions are known as
"exempt-interest dividends") and investment company taxable income (if any)
each taxable year. Exempt-interest dividends may be treated by shareholders as
items of interest excludable from their gross income under Section 103(a) of
the Code. The percentage of total dividends paid by the Fund with respect to
any taxable year which qualify as exempt-interest dividends will be the same
for all shareholders receiving dividends during the year. In order for the
Fund to pay exempt-interest dividends with respect to any taxable year, among
other things, at least 50% of the aggregate value of the Fund's portfolio at
the close of each quarter of its taxable year must consist of exempt-interest
obligations. After the close of its taxable year, each Fund will notify each
shareholder of the portion of the dividends paid by the Fund to the shareholder
with respect to such year which constitutes an exempt-interest dividend.
However, the aggregate amount of dividends so designated cannot exceed the
excess of the amount of interest
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exempt from tax under Section 103 of the Code received by the Fund during the
taxable year over any amounts disallowed as deductions under Sections 265 and
171(a)(2) of the Code.
If a shareholder holds Fund shares for six months or less, any
loss on the sale or exchange of those shares will be disallowed to the extent
of the amount of exempt-interest dividends received with respect to the shares.
The Treasury Department, however, is authorized to issue regulations reducing
the period to not less than the greater of 31 days or the period between
regular distributions where the investment company regularly distributes at
least 90% of its net tax-exempt interest. No such regulations had been issued
as of the date of this Statement of Additional Information.
If the Fund should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable to interest on
such bonds in their federal alternative minimum taxable income for purposes of
determining liability (if any) for the alternative minimum tax applicable to
individuals and corporations and the environmental tax applicable to
corporations. Corporate shareholders must also take all exempt-interest
dividends into account in determining certain adjustments for federal
alternative minimum and environmental tax purposes. Shareholders receiving
Social Security benefits should note that all exempt-interest dividends will be
taken into account in determining the taxability of such benefits.
MANAGEMENT OF THE FUNDS
Trustees and Officers
The names of the trustees and officers of the Trust, their ages,
addresses, principal occupations during the past five years and other
affiliations are set forth below:
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name, Age and Address the Trust Other Affiliations
--------------------- ------------- -----------------------
<S> <C> <C>
JACK D. HENDERSON, 68(1) Chairman Attorney, Jack D. Henderson, Attorney-
1600 Broadway at-Law; prior thereto partner of the
Suite 1410 law firm of Clanahan, Tanner, Downing &
Denver, Colorado 80202 Knowlton, P.C., Denver, Colorado from
July 1990 through October 1995; Trustee
of Pacifica Funds Trust; Trustee,
Pacific American Fund through September
1994.
</TABLE>
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<PAGE> 95
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name, Age and Address the Trust Other Affiliations
--------------------- ------------- -----------------------
<S> <C> <C>
McNEIL S. FISKE, 61 Trustee Chairman of the Board, MacCourt
7901 No. Tuscany Drive Products; Chairman of the Board and
Tucson, Arizona 85741 Vice President, Sierra Pacific Airlines
Inc. through September 1991; Director,
Principal Occupations Scientific
Software Corporation.
JAMES B. O'BOYLE, 67 Trustee Business Consultant; Trustee of Pacific
6115 West Mansfield Avenue American Fund through September 1994.
Denver, Colorado 80235
ROBERT L. STAMP, 63 Trustee Retired since April, 1995; prior
P.O. Box 5887 thereto Vice President of Finance,
Denver, Colorado 80217 Treasurer and Assistant Secretary, The
Gates Corporation; Vice President, The
Gates Rubber Company; member of U.S.
Chambers Economic Policy Committee;
Director of Gates Credit Union; Trustee
of Pacific American Fund through
September 1994.
LYMAN E. SEELY, 77 Trustee Retired since 1983; prior thereto Vice
14795 Northeast Chairman of the Board and Director,
Lawnview Circle First Interstate Bank of Oregon, N.A.;
Aurora, Oregon 97002 Director, OECO Corporation (an
electronics manufacturing company);
Director, McCall Oil and Chemical
Company.
KENNETH V. PENLAND, 53 President Chairman and Chief Executive Officer,
Denver Investment Advisors LLC Denver Investment Advisors LLC (and its
1225 17th Street- 26th Fl. predecessor) since March 1985;
Denver, CO 80202 Chairman, Blue Chip Value Fund.
MARK POUGNET, 34 Treasurer Chief Financial Officer for ALPS Mutual
ALPS Mutual Funds Services, Inc. Funds Services, Inc.; Treasurer,
370 17th Street Mariner Funds; Treasurer, Duff & Phelps
Suite 2700 Funds; Treasurer, First Funds;
Denver, Colorado 80217 Executive Director of Syndication
Accounting for Paramount Pictures-
Television Group, 1989-1991.
</TABLE>
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<PAGE> 96
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name, Age and Address the Trust Other Affiliations
--------------------- ------------- -----------------------
<S> <C> <C>
W. BRUCE McCONNEL, III, 52 Secretary Partner of the law firm of Drinker
Drinker Biddle & Reath Biddle & Reath, Philadelphia,
1345 Chestnut Street Pennsylvania.
Philadelphia, Pennsylvania
19107-3496
</TABLE>
_____________________
1 Mr. Henderson is considered to be an "interested person" of the Trust as
defined in the 1940 Act.
_______________________________
The trustees are responsible for major decisions relating to
each Fund's objective, policies and techniques. The trustees also supervise
the operation of the Funds by their officers and review the investment
decisions of the officers although they do not actively participate on a
regular basis in making such decisions.
Each trustee receives an annual fee of $12,000 plus $500 for
each Board meeting attended and reimbursement of expenses incurred in attending
meetings. The Chairman of the Board is entitled to receive an additional
$4,000 per annum for services in such capacity. The following chart provides
certain information about the trustee fees paid by the Trust for the fiscal
year ended May 31, 1995:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT ESTIMATED
AGGREGATE BENEFITS ACCRUED ANNUAL AGGREGATE
COMPENSATION FROM AS PART OF FUND BENEFITS UPON COMPENSATION FROM
NAME OF PERSON/ POSITION THE TRUST EXPENSES RETIREMENT THE FUND COMPLEX*
------------------------ ----------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
JACK D. HENDERSON, Chairman $22,500 $0 $0 $33,416**
McNEIL S. FISKE, Trustee $17,500*** $0 $0 $17,500
JAMES B. O'BOYLE, Trustee $18,000 $0 $0 $23,000****
ROBERT L. STAMP, Trustee $18,000 $0 $0 $23,000****
LYMAN E. SEELY, Trustee $18,000 $0 $0 $18,000
</TABLE>
* Fund Complex includes funds with a common investment adviser or an
adviser which is an affiliated person.
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<PAGE> 97
** Includes amounts received for services as a member of the Boards of
Trustees of Pacifica Funds Trust and Pacific American Fund.
*** A portion of this amount has been deferred at the election of Mr.
Fiske. The total amount of deferred compensation (including interest)
payable to him as of May 31, 1995 was $4,573.
**** Includes amounts received for services as a member of the Board of
Trustees of Pacifica American Fund.
Denver Investment Advisors, of which Mr. Penland, President of
the Trust, is a member, receives compensation as Adviser and co-administrator.
ALPS, of which Mr. Pougnet, Treasurer of the Trust, is employed as Chief
Financial Officer, receives compensation from the Trust as Distributor and
co-administrator.
Drinker Biddle & Reath, of which Mr. McConnel, Secretary of
the Trust, is a partner, receives legal fees as counsel to the Trust. The
trustees and officers of the Trust, as a group, owned less than 1% of the
outstanding shares of each Fund as of June 30, 1995.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders of a business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Amended and Restated Declaration of
Trust provides that shareholders shall not be subject to any personal liability
in connection with the assets of the Trust for the acts or obligations of the
Trust, and that every note, bond, contract, order or other undertaking made by
the Trust shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Amended and Restated Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or some other
reason. The Amended and Restated Declaration of Trust also provides that the
Trust shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust, and shall satisfy any
judgment thereon. Thus, the risk of a shareholder's incurring financial loss
on account of shareholder liability is limited to circumstances in which the
Trust itself would be unable to meets its obligations.
The Amended and Restated Declaration of Trust further provides
that all persons having any claim against the trustees or the Trust shall look
solely to the Trust property for payment; that no trustee, officer or agent of
the Trust shall be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment or decree arising out of or connected
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<PAGE> 98
with the administration or preservation of the Trust property or the conduct of
any business of the Trust; and that no trustee shall be personally liable to
any person for any action or failure to act except by reason of his or her own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duties as trustee. With the exception stated, the Amended and Restated
Declaration of Trust provides that a trustee is entitled to be indemnified
against all liabilities and expense reasonably incurred by him in connection
with the defense or disposition of any proceeding in which he may be involved
or with which he may be threatened by reason of his being or having been
trustee, and that the trustees will indemnify representatives and employees of
the Trust to the same extent that trustees are entitled to indemnification.
Investment Adviser
Denver Investment Advisors serves as investment adviser to the
Funds pursuant to an Advisory Agreement. In the Advisory Agreement, the
Investment Adviser has agreed to provide a continuous investment program for
each Fund and to pay all expenses incurred by it in connection with its
advisory activities, other than the cost of securities and other investments,
including brokerage commissions and other transaction charges, if any,
purchased or sold for the Funds.
Prior to March 31, 1995, First Interstate of Denver, N.A.
served as investment adviser, and Denver Investment Advisors served as
sub-adviser, to the MIDCO Growth, Blue Chip, Growth and Income, Long-Term Bond,
Intermediate-Term Bond and Colorado Tax-Exempt Funds. Prior to March 31, 1995,
First Interstate Capital Management, Inc. ("FICM") served as investment adviser
and Denver Investment Advisors served as sub-adviser to the Growth and Income
and Intermediate-Term Bond Funds.
The following table summarizes the advisory fees paid by the
Funds and any advisory fee waivers for the last three fiscal years of each
Fund.
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<PAGE> 99
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
May 31, 1995 May 31, 1994 May 31, 1993
-------------------------- ------------------------ -----------------------
Advisory Advisory Advisory
Fund Name Fees Waiver Fees Waiver Fees Waiver
--------- -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
MIDCO Growth Fund $2,529,123 $0 $1,963,711 $0 $1,291,451 $0
Blue Chip Fund 271,890 0 210,009 0 200,144 0
Growth and Income 271,513 0 277,664 0 203,685 0
Fund
Small-Cap 0 73,894 0(1) 7,275(1) N/A(1) N/A(1)
Opportunity Fund
Long-Term Bond 124,337 0 133,451 0 163,844 0
Fund
Intermediate-Term 407,813 0 499,968 0 429,329 0
Bond Fund
Colorado Tax- 0 51,298 0 45,269 0 29,215
Exempt Fund
</TABLE>
(1) The Fund commenced investment operations on December 28, 1993.
For the fiscal years ended May 31, 1995, 1994 and 1993, the investment
advisers reimbursed additional expenses for the Funds as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund Name May 31, 1995 May 31, 1994 May 31, 1993
--------- ------------ ------------ ------------
<S> <C> <C> <C>
Small-Cap
Opportunity Fund $20,200 $22,115(1) N/A(1)
Colorado Tax-Exempt
Fund 65,533 68,401 $62,778
- ---------------
</TABLE>
(1) The Fund commenced investment operations on December 28, 1993.
First Interstate Bank of Denver, N.A. and FICM each paid 90%
of the advisory fees received by them for the Growth and Income Fund and
Intermediate-Term Bond Fund to Denver Investment Advisors pursuant to the
Sub-Advisory Agreements each formerly had in effect with respect to such Funds.
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<PAGE> 100
The Investment Adviser has agreed that if, in any fiscal year,
the expenses borne by a Fund exceed the applicable expense limitations imposed
by the securities regulations of any state in which shares of the Fund are
registered or qualified for sale to the public, it will reimburse the Fund for
any excess to the extent required by such regulations. To the Trust's
knowledge, as of the date of this Statement of Additional Information the most
restrictive expense limitations for any fiscal year imposed by state securities
regulations which were applicable to the Funds were as follows: two and
one-half percent of the first $30 million of average net assets, two percent of
the next $70 million of average net assets, and one and one-half percent of the
remaining average net assets. During the fiscal year ended May 31, 1995, no
expense reimbursement was required.
Denver Investment Advisors also performs investment advisory
services for the Blue Chip Value Fund, Inc. and the Paine Webber Managed Assets
Trust-Paine Webber Capital Appreciation Fund, two other investment company
portfolios. Investment decisions for each account managed by Denver Investment
Advisors, including the Funds, are made independently from those for any other
account that is or may in the future become managed by Denver Investment
Advisors or its affiliates. If, however, a number of accounts managed by
Denver Investment Advisors are contemporaneously engaged in the purchase or
sale of the same security, the available securities or investments may be
allocated in a manner believed by Denver Investment Advisors to be equitable to
each account. In some cases, this procedure may adversely affect the price
paid or received by a Fund or the size of the position obtainable for or
disposed of by a Fund.
Each account managed by Denver Investment Advisors has its own
investment objective and policies and is managed accordingly by a particular
portfolio manager or team of portfolio managers. As a result, from time to
time two or more different managed accounts may pursue divergent investment
strategies with respect to investments or categories of investments.
The current Advisory Agreement for the MIDCO Growth, Blue
Chip, Growth and Income, Small-Cap Opportunity and Long-Term Bond Funds became
effective on March 31, 1995, and the current Advisory Agreement for the
Colorado Tax-Exempt Fund became effective on October 1, 1995. Each Advisory
Agreement will continue in effect until September 30, 1996 and thereafter from
year to year so long as such continuance is approved annually by a majority of
the Funds' Trustees who are not parties to the Advisory Agreements or
interested persons of any such party, and by either a majority of the
outstanding voting shares or the trustees of the Funds. Each Advisory
Agreement i) may be terminated without the payment of any penalty by the Fund
or
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<PAGE> 101
Denver Investment Advisors on 60 days' written notice; ii) terminates
automatically in the event of its assignment; and iii) generally, may not be
amended without the approval by vote of a majority of the outstanding voting
securities of such Fund.
The Agreements provide that the Investment Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with its performance of services pursuant to the
Advisory 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 its reckless
disregard of its duties and obligations under the Advisory Agreement.
Denver Investment Advisors, as co-administrator, also provides
administrative services to the Funds pursuant to an Administration Agreement
and has agreed to pay all expenses incurred by it in connection with its
administrative activities.
Distributor
ALPS acts as the distributor of the Funds' shares pursuant to
a Distribution Agreement with the Trust (the "Distributor"). Shares are sold
on a continuous basis by ALPS as agent of the Funds, and ALPS has agreed to use
its best efforts to solicit orders for the sale of Fund shares, although it is
not obliged to sell any particular amount of shares. As Distributor, ALPS pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Funds (excluding preparation and printing expenses
necessary for the continued registration of the Funds' shares) and of printing
and distributing all sales literature. ALPS is not entitled to any
compensation for its services as Distributor. For the fiscal years ended May
31, 1995, 1994 and 1993, ALPS received $108,459, $296,811.77 and $325,076.57,
respectively, in underwriting commissions with respect to all the investment
portfolios offered by the Trust.
Administrators, Bookkeeping and Pricing Agent
ALPS and Denver Investment Advisors, as co-administrators (the
"Administrators"), provide administrative services to the Funds as described in
the Prospectus pursuant to an Administration Agreement, and have agreed to pay
all expenses they incur in connection with their administrative activities.
Under the Administration Agreement, the Administrators are not liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of the agreement, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the
Administrators
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<PAGE> 102
in the performance of their duties or from their reckless disregard of their
duties and obligations under the agreement. Prior to the current
Administration Agreement, which became effective on October 1, 1995, ALPS
served as sole Administrator to the Funds.
In addition to the services it provides as co-administrator,
ALPS has agreed, pursuant to a separate Bookkeeping and Pricing Agreement, to
maintain the financial accounts and records of the Funds and to compute the net
asset value and certain other financial information of the Funds. ALPS
subcontracts certain of its bookkeeping and pricing duties to American Data
Services, Inc., a provider of accounting services to investment companies.
Under the Bookkeeping and Pricing Agreement, ALPS is not liable for any error
of judgment or mistake of law or for any loss suffered by the Funds, except for
a loss resulting from willful misfeasance, bad faith or negligence on the part
of ALPS in the performance of its duties under the Agreement.
The following table summarizes the administration fees paid by
the Funds and any administration fee waivers for the last three fiscal years.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
May 31, 1995 May 31, 1994 May 31, 1993
----------------------------- --------------------------- ----------------------------
Administration Waiver Administration Waiver Administration Waiver
Fund Name Fees of Fees Fees of Fees Fees of Fees
--------- -------------- ------- -------------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
MIDCO Growth Fund $194,548 $0 $151,055 $0 $99,640 $0
Blue Chip Fund 20,914 0 16,155 0 15,396 0
Growth and Income 20,885 0 21,359 0 15,668 0
Fund
Small-Cap 2,787 908 0(1) 364(1) N/A(1) N/A(1)
Opportunity Fund
Long-Term Bond 13,815 0 14,828 0 18,205 0
Fund
Intermediate-Term 45,313 0 55,552 0 47,703 0
Bond Fund
Colorado Tax- 3,624 1,506 744 3,890 0 2,913
Exempt Fund
</TABLE>
(1) The Fund commenced operations on December 28, 1993.
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<PAGE> 103
CUSTODIAN AND TRANSFER AGENT
First Interstate of Denver (the "Custodian") serves as custodian of the
assets of each of the Funds pursuant to a custody agreement (the "Custody
Agreement"). Under the Custody Agreement, the Custodian has agreed to hold the
Funds' assets in safekeeping and collect and remit the income thereon, subject
to the instructions of each Fund. The Custodian may, at its own expense, open
and maintain a custody account or accounts on behalf of any Fund with other
banks or trust companies, provided that the Custodian shall remain liable for
the performance of all of its duties under the Custody Agreement
notwithstanding any delegation.
For its services as custodian, the Custodian is entitled to receive
compensation based on the aggregate market value of the portfolio securities of
the Funds that are held by First Interstate of Denver as custodian: .02% on the
first $50 million of average net assets; .018% on the next $50 million; .013%
on the next $100 million; .01% on the next $300 million; and .005% on assets in
excess of $500 million. The minimum annual custody fee payable by each Fund is
$500. In addition, the Custodian, as custodian, is entitled to certain
transaction charges at the rate of $20 for each transaction involving a
domestic security, $25 for each transaction involving a foreign security, $45
per option (including issuance of an escrow receipt), and to reimbursement for
its out-of-pocket expenses in connection with the above services. For the
fiscal years ended May 31, 1995, 1994 and 1993 the Custodian waived all of its
custodial fees in the following amounts:
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<PAGE> 104
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund Name May 31, 1995 May 31, 1994 May 31, 1993
--------- ------------ ------------ ------------
<S> <C> <C> <C>
MIDCO Growth Fund $87,850 $85,151 $36,722
Blue Chip Fund 20,142 9,302 10,087
Growth and Income Fund 24,014 12,174 12,624
Small Cap 16,558 6,045 N/A
Opportunity Fund
Long-Term Bond
Fund 13,006 9,091 10,198
Intermediate-Term Bond 28,132 25,119 23,021
Fund
Colorado Tax-Exempt Fund 5,552 2,511 1,688
</TABLE>
State Street Bank and Trust Company ("State Street") serves as Transfer
Agent for each Fund. As Transfer Agent, State Street has, among other things,
agreed to: (a) issue and redeem shares of the Funds; (b) make dividend and other
distributions to shareholders of the Funds; (c) effect transfers of shares; (d)
mail communications to shareholders of the Funds, including reports to
shareholders, dividend and distribution notices, and proxy materials for
meetings of shareholders; and (e) maintain shareholder accounts. Under the
Transfer Agency Agreement, State Street receives from the Trust a fee based upon
each shareholder account and is reimbursed for out-of-pocket expenses.
EXPENSES
Operating expenses borne by the Funds include taxes, interest, fees and
expenses of its trustees and officers, SEC fees, state securities qualification
fees, advisory fees, administrative fees, charges of the Funds' custodian,
shareholder services agent and accounting services agent, certain insurance
premiums, outside auditing and legal expenses, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders, costs of shareholder reports and meetings and any extraordinary
expenses. The Funds also pay for brokerage fees, commissions and other
transaction charges (if any) in connection with the purchase and sale of
portfolio securities.
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<PAGE> 105
AUDITORS
Deloitte & Touche LLP, 755 Seventeenth Street, Suite 3600, Denver,
Colorado 80202, serves as independent auditors for the Funds. The financial
statements contained herein are so included in reliance upon the report of
Deloitte & Touche LLP given upon their authority as experts in accounting and
auditing.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the Trust,
is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496,
serves as counsel to the Trust and will pass upon certain legal matters relating
to the Funds.
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS
From time to time, the yields, tax-equivalent yields, effective yields
and the total return of a Fund may be quoted in advertisements, shareholder
reports or other communications to shareholders. Performance information is
generally available by calling ALPS at 1-800-392-CORE (2673).
Yield Calculations - Bond Funds
Each yield is calculated by dividing the net investment income per share
(as described below) earned by a Fund during a 30-day (or one month) period by
the net asset value per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. A Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
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<PAGE> 106
a-b 6
Yield = 2 [(----- + 1) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = net asset value per share on the last day of the
period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Interest earned on any debt
obligations held by a Fund is calculated by computing the yield to maturity of
each obligation held by the Fund based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest), and dividing the
result by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by the Fund. For purposes of this calculation, it is assumed that each month
contains 30 days. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market values of such debt obligations.
Interest earned on tax-exempt obligations that are issued without
original issue discount and have a current market discount is calculated by
using the coupon rate of interest instead of the yield to maturity. In the case
of tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the
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<PAGE> 107
original issue discount calculation. On the other hand, in the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that are less than the
then-remaining portion of the original issue discount (market premium), the
yield to maturity is based on the market value.
With respect to mortgage or other receivables-backed obligations which
are expected to be subject to monthly payments of principal and interest ("pay
downs"), (a) gain or loss attributable to actual monthly pay downs are accounted
for as an increase or decrease to interest income during the period; and (b) a
Fund may elect either (i) to amortize the discount and premium or the remaining
security, based on the cost of the security, to the weighted average maturity
date, if such information is available, or to the remaining term of the
security, if any, if the weighted average date is not available, or (ii) not to
amortize discount or premium on the remaining security.
Undeclared earned income will be subtracted from the net asset value per
share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the base period, has not been declared as
a dividend, but is reasonably expected to be and is declared as a dividend
shortly thereafter.
Based on the foregoing calculations, the yields of the Funds for the
30-day period ended May 31, 1995 (after fee waivers) were as follows:
<TABLE>
<CAPTION>
Fund 30-Day Yield
---- ------------
<S> <C>
Long-Term Bond Fund 6.15%
Intermediate-Term Bond Fund 5.79%
Colorado Tax-Exempt Fund 4.38%
</TABLE>
"Tax-Equivalent" Yield Calculations - Colorado Tax-Exempt Fund
The Fund's "tax-equivalent" yield is computed by: (a) dividing the
portion of the Fund's yield that is exempt from both federal and Colorado state
income taxes by one minus a stated combined federal and state income tax rate;
(b) dividing the portion of the Fund's yield that is exempt from federal income
tax only by one minus a stated federal income tax rate, and (c) adding the
figures resulting from (a) and (b) above to that
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<PAGE> 108
portion, if any, of the Fund's yield that is not exempt from federal income
tax.
Based on the foregoing calculations, the yield and tax-equivalent yield
of the Fund for the 30-day period ended May 31, 1995 (after fee waivers) were
4.38% and 6.54%, respectively.
Tax-Equivalent Yield is based upon the combined state and federal tax
rate assumptions of 33% (assuming a 28% federal tax rate and a 5% Colorado tax
rate) for the Colorado Tax-Exempt Fund.
Total Return Calculations
Each Fund computes its average annual total returns by determining the
average annual compounded rates of return during specified periods that equate
the initial amount invested to the ending redeemable value of such investment.
This is done by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation can be
expressed as follows:
ERV 1/n
T = [(-------) - 1]
P
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed
in terms of years.
The Funds compute their aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
ERV
T = [(----- - 1)]
P
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<PAGE> 109
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period and includes all recurring fees
charged by the Trust to all shareholder accounts. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations.
Based on the foregoing calculations, the average annual total return
(after fee waivers) for the year ended May 31, 1995, for the five year period
ended May 31, 1995 and for the periods since commencement of the Funds'
respective operations were as follows:
<TABLE>
<CAPTION>
Since
Five Inception
Year Ended Years Ended to
Fund 5/31/95 5/31/95 5/31/95
---- ------- ------- -------
<S> <C> <C> <C>
MIDCO Growth Fund (1) 10.05% 15.94% 14.44%
Blue Chip
Fund(2) 19.03% 11.25% 11.77%
Equity Income 3.73% 7.51% 9.68%
Fund(2)(5)
Small-Cap 8.15% N/A 5.65%
Opportunity Fund(3)
Long-Term Bond 14.37% 11.30% 10.94%
Fund(2)
Intermediate-Term 8.93% 8.28% 8.25%
Bond Fund(2)
Colorado Tax-Exempt 7.16% N/A 7.22%
Fund(4)
</TABLE>
______________________________
(1) Commenced Operations on August 1, 1986.
(2) Commenced Operations on June 1, 1988.
(3) Commenced Operations on January 3, 1994.
(4) Commenced Operations on June 1, 1991.
(5) The Equity Income Fund is the former name for the Growth and Income
Fund. The Fund's name was changed on January 1, 1996 to reflect
a different objective, policies and portfolio manager. Prior to
January 1, 1996, the Fund's objective was
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<PAGE> 110
to seek reasonable income through investments in income-producing
securities. On January 1, 1996, the Fund's objective was revised
to seek long-term total return through capital appreciation
and current income through investments in equity securities. Past
performance is not intended to be indicative or representative of
future performance.
The Funds may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials (collectively,
"Materials") a total return figure that more accurately compares a Fund's
performance with other measures of investment return. For example, in comparing
a Fund's total return with data published by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc. or Weisenberger Investment Company Service, or
with the performance of an index, a Fund may calculate its aggregate total
return for the period of time specified in the Materials by assuming the
investment of $10,000 in shares of a Fund and assuming the reinvestment of all
dividends and distributions. Percentage increases are determined by subtracting
the initial value of the investment from the ending value and by dividing the
remainder by the beginning value.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on an investment in a
Fund are paid in the form of additional shares of the Fund, any future income
or capital appreciation of the Fund would increase the value, not only of the
original investment, but also of the additional shares received through
reinvestment. As a result, the value of the investment in the Fund would
increase more quickly than if dividends or other distributions had been paid in
cash.
In addition, the Funds may also include in Materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of a Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic conditions, the relationship
between sectors of the economy and the economy as a whole, various securities
markets, the effects of inflation and historical performance of various asset
classes, including but not limited to, stocks, bonds and Treasury securities.
From time to time, Materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views of the adviser as to current market, economic,
trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. The Funds may also include in
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<PAGE> 111
Materials charts, graphs or drawings which compare the investment objective,
return potential, relative stability and/or growth possibilities of the Funds
and/or other mutual funds, or illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to,
stocks, bonds, Treasury securities and shares of a Fund and/or other mutual
funds. Materials may include a discussion of certain attributes or benefits to
be derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
MISCELLANEOUS
As used in this Statement of Additional Information and the Funds'
Prospectus, a "majority of the outstanding shares" of a Fund or a class of
shares means, with respect to the approval of an investment advisory agreement,
a distribution plan or as a change in a fundamental investment policy, the
lesser of (1) 67% of the shares of the particular Fund or class represented at a
meeting at which the holders of more than 50% of the outstanding shares of such
Fund or class are present in person or by proxy, or (2) more than 50% of the
outstanding shares of such Fund or class.
As of October 26, 1995 the following shareholders owned more than 5% of
the outstanding shares of the Funds listed below:
<TABLE>
<CAPTION>
FUND PERCENTAGE INTEREST
---- -------------------
<S> <C>
MIDCO GROWTH FUND
Div & Co. 33.72%
Reinvest Account
c/o First Interstate Bk Arizona
Attn: Mutual Fund Group
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
First Interstate Bank TTEE 6.58%
FBO FI Managed Invest
P.O. Box 9800
Calabasas, CA 91372-0800
</TABLE>
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<PAGE> 112
<TABLE>
<S> <C>
BLUE CHIP FUND
Div & Co. - Reinvest Account 72.67%
c/o First Interstate Bk Arizona
Attn: Shirley Williams
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
GROWTH AND INCOME FUND
Div. & Co. 31.25%
Reinvest Account
c/o First Interstate Bk Arizona
Attn: Shirley Williams
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
Dake & Co. 9.44%
Cash Account
c/o First Interstate Bank of Denver
Attn: Shirley Williams
P.O. Box 5825
Denver, CO 80217-5825
First Interstate Bank TTEE 5.80%
ChoiceMaster 401K Plan
Omnibus Account
P.O. Box 9800
Calabasas, CA 91872-0800
SMALL-CAP OPPORTUNITY FUND
Firnap & Co. 11.16%
c/o First Interstate Bk Oregon
Trust Reorg.
P.O. Box 2971
Portland, OR 97208-2971
Div & Co. - Reinvest Account 9.41%
c/o First Interstate Bk Arizona
Attn: Shirley Williams
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
Trussas & Co. 19.32%
FBO Sinai Hospital
Pension Plan
P.O. Box 771072
Detroit, MI 48277-1072
</TABLE>
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<PAGE> 113
<TABLE>
<S> <C>
LONG-TERM BOND FUND
Div. & Co. 79.11%
Reinvest Account
c/o First Interstate Bk Arizona
Attn: Shirley Williams
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
INTERMEDIATE-TERM BOND FUND
Texas Commerce Bank National Assoc. 5.22%
FBO Ennis Business Forms Inc.
Employees Retirement Plan
Attn: Tom R. Garcia
2208 Ross Ave., 5th Floor
P.O. Box 660197
Dallas, TX 75266-0197
Tanfir & Co. 7.14%
Attn: Mutual Fund Desk
P.O. Box 53433 Dept 959
Phoenix, AZ 85072-3433
Div. & Co. 59.72%
Reinvest Account
c/o First Interstate Bk Arizona
Attn: Shirley Williams
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
COLORADO TAX-EXEMPT FUND
Dennis E. Larkin 5.13%
Constance M. Larkin
633 17th Street, Suite 1800
P.O. Box 17487
Denver, CO 80217-0487
Div. & Co. 29.27%
Reinvest Account
c/o First Interstate Bk Arizona
Attn: Shirley Williams
P.O. Box 53433, Dept. 959
Phoenix, AZ 85072-3433
Dake & Co. 21.32%
Cash Account
c/o First Interstate Bank Denver
Attn: Shirley Williams
P.O. Box 5825
Denver, CO 80217-5825
</TABLE>
-61-
<PAGE> 114
<TABLE>
<S> <C>
John E. Fuller 8.49%
c/o Fuller & Co.
1515 Arapahoe St., Suite 1630
Denver, CO 80202-2116
</TABLE>
__________________________
* All above-listed shares of the MIDCO Growth Fund, Blue Chip Fund,
Growth and Income Fund, Small-Cap Opportunity Fund, Long-Term Bond
Fund, Intermediate-Term Bond Fund and Colorado Tax-Exempt Fund were
beneficially owned by the record owners named above, except that the
shares owned of record by Tanfir & Co. and Div & Co. were beneficially
owned by First Interstate Bank of Arizona, N.A., the shares owned of
record by Firnap & Co. were beneficially owned by First Interstate
Bank of Oregon, N.A., and the shares owned of record by Dake & Co.
were beneficially owned by First Interstate Bank of Denver, N.A.
-62-
<PAGE> 115
WESTCORE ANNUAL REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders, Westcore Trust:
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Equity Income Fund, Modern
Value Equity Fund, MIDCO Growth Fund, Small-Cap Opportunity Fund,
Intermediate-Term Bond Fund, Long-Term Bond Fund and Colorado Tax-Exempt Fund
(seven of the twenty-two funds constituting the Westcore Trust) as of May 31,
1995, the related statements of operations for the year then ended and the
statements of changes in net assets and financial highlights for each of the
periods indicated. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit also includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at May 31, 1995 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the Equity
Income Fund, Modern Value Equity Fund, MIDCO Growth Fund, Small-Cap Opportunity
Fund, Intermediate-Term Bond Fund, Long-Term Bond Fund and Colorado Tax-Exempt
Fund of the Westcore Trust as of May 31, 1995 and the results of their
operations, the changes in their net assets and financial highlights for each
of the periods indicated in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
June 29, 1995
1
FS-1
<PAGE> 116
WESTCORE ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<TABLE>
<CAPTION>
EQUITY MODERN MIDCO SMALL-CAP
INCOME VALUE GROWTH OPPORTUNITY
FUND EQUITY FUND FUND FUND
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost-see below)
-see accompanying statements $30,464,715 $53,315,891 $423,062,656 $10,531,749
Receivable for investments sold 343,239 696,981 10,627,303 0
Dividends and interest receivable 138,490 133,558 259,985 15,558
Receivable for shares of beneficial
interest sold 7,000 48,840 353,504 227
Organizational costs, net of
accumulated amortization 0 0 0 62,609
Prepaid expenses and other assets 17,141 11,416 41,388 25,552
Due from investment advisor 0 0 0 15,170
----------- ----------- ------------ -----------
TOTAL ASSETS 30,970,585 54,206,686 434,344,836 10,650,865
=========== =========== ============ ===========
LIABILITIES
Payable for investments purchased 0 1,075,462 5,607,089 0
Payable for accrued investment advisory fee 34,045 28,777 233,255 0
Bank overdraft 6,133 0 0 0
Payable for shares of beneficial interest
redeemed 7,587 541,097 896,593 0
Other payables 22,875 16,069 171,685 13,972
----------- ----------- ------------ -----------
TOTAL LIABILITIES 70,640 1,661,405 6,908,622 13,972
----------- ----------- ------------ -----------
NET ASSETS $30,899,945 $52,545,281 $427,436,214 $10,636,893
=========== =========== ============ ===========
COMPOSITION OF NET ASSETS
Paid-in capital $29,277,263 $41,393,666 $329,668,442 $10,045,394
Undistributed net investment income 26,424 226,846 (866,631) 8,769
Accumulated net realized gain (loss)
from investment transactions (844,740) 801,188 666,396 (111,130)
Net unrealized appreciation
of investments 2,440,998 10,123,581 97,968,007 693,860
----------- ----------- ------------ -----------
NET ASSETS $30,899,945 $52,545,281 $427,436,214 $10,636,893
=========== =========== ============ ===========
NET ASSET VALUE PER SHARE
Institutional Shares
Net Assets $27,029,298 $52,545,281 $401,759,639 $9,702,749
----------- ----------- ------------ -----------
Shares of beneficial interest outstanding 2,573,324 3,573,736 23,461,708 608,507
----------- ----------- ------------ -----------
Net asset value and redemption price
per share $10.50 $14.70 $17.12 $15.95
=========== =========== ============ ===========
Maximum offering price per share (net asset
value plus sales charge of 0%, 4.5%, 0%,
0%, 0%, 4.5% and 3.5% of offering price,
respectively) $10.50 $15.39 $17.12 $15.95
=========== =========== ============ ===========
Retail Shares
Net Assets $3,870,647 NA $25,676,575 $934,144
----------- ----------- ------------ -----------
Shares of beneficial interest outstanding 368,311 NA 1,501,785 58,570
----------- ----------- ------------ -----------
Net asset value and redemption price
per share $10.51 NA $17.10 $15.95
=========== =========== ============ ===========
Maximum offering price per share
(net asset value plus sales charge of 4.5%) $11.01 NA $17.91 $16.70
=========== =========== ============ ===========
COST OF INVESTMENTS $28,023,717 $43,192,310 $325,094,649 $9,837,889
=========== =========== ============ ===========
<CAPTION>
INTERMEDIATE- LONG-TERM COLORADO
TERM BOND TAX-EXEMPT
BOND FUND FUND FUND
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost-see below)
-see accompanying statements $102,378,691 $33,208,256 $10,566,724
Receivable for investments sold 1,993,631 599,659 0
Dividends and interest receivable 1,463,751 537,601 212,934
Receivable for shares of beneficial
interest sold 181,120 6,256 0
Organizational costs, net of
accumulated amortization 0 0 10,720
Prepaid expenses and other assets 22,732 9,653 4,285
Due from investment advisor 0 0 25,111
------------ ----------- -----------
TOTAL ASSETS 106,039,925 34,361,425 10,819,774
------------ ----------- -----------
LIABILITIES
Payable for investments purchased 2,009,321 603,262 0
Payable for accrued investment advisory 74,460 12,570 0
Bank overdraft 3,007,031 0 0
Payable for shares of beneficial interest
redeemed 706,050 282,439 0
Other payables 53,478 22,942 28,078
------------ ----------- -----------
TOTAL LIABILITIES 5,850,340 921,213 28,078
------------ ----------- -----------
NET ASSETS $100,189,585 $33,440,212 $10,791,696
============ =========== ===========
COMPOSITION OF NET ASSETS
Paid-in capital $101,577,680 $32,338,310 $10,500,575
Undistributed net investment income 102,456 56,418 (1,653)
Accumulated net realized gain (loss)
from investment transactions (2,651,382) (474,259) (2,659)
Net unrealized appreciation
of investments 1,160,831 1,519,743 295,433
------------ ----------- -----------
NET ASSETS $100,189,585 $33,440,212 $10,791,696
=========== =========== ===========
NET ASSET VALUE PER SHARE
Institutional Shares
NET ASSETS $97,619,075 $33,440,212 $10,791,696
------------ ----------- -----------
Shares of beneficial interest outstanding 9,506,627 3,389,146 1,008,474
------------ ----------- -----------
Net asset value and redemption price
per share $10.27 $9.87 $10.70
============ =========== ===========
Maximum offering price per share (net as
value plus sales charge of 0%, 4.5%, 0%,
0%, 0%, 4.5% and 3.5% of offering price
respectively) $10.27 $10.34 $11.09
============ =========== ===========
Retail Shares
Net Assets $2,570,510 NA NA
------------ ----------- -----------
Shares of beneficial interest outstanding 250,176 NA NA
------------ ----------- -----------
Net asset value and redemption price
per share $10.27 NA NA
============ =========== ===========
Maximum offering price per share
(net asset value plus sales charge of 4.5%) $10.75 NA NA
============ =========== ===========
COST OF INVESTMENTS $101,217,860 $31,688,513 $10,271,291
============ =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
FS-2
<PAGE> 117
WESTCORE ANNUAL REPORT
EQUITY INCOME FUND
STATEMENT OF INVESTMENTS
May 31, 1995
<TABLE>
<CAPTION>
Shares Market Value*
- ------ -------------
<S> <C>
COMMON STOCKS 93.76%
CAPITAL GOODS 7.82%
AEROSPACE/DEFENSE 3.24%
20,200 Goodrich B F & Co $ 1,002,425
------------
AUTOMOTIVE 2.26%
10,700 Ford Motor Co Del 312,975
9,500 General Motors Corp Class H 387,125
------------
700,100
------------
CONSTRUCTION 0.98%
9,200 Foster Wheeler Corp 302,450
------------
OTHER-CAPITAL GOODS 1.34%
13,600 OEA Inc*** 413,100
------------
TOTAL CAPITAL GOODS 2,418,075
------------
(Cost $ 2,299,567)
CONSUMER CYCLICAL 21.83%
CONSUMER PRODUCTS 6.22%
26,600 Duracell International Inc 1,150,450
12,800 Eastman Kodak Co 772,800
------------
1,923,250
------------
RETAIL 2.15%
16,000 Nordstrom Inc 664,000
------------
TELECOMMUNICATIONS 7.15%
50,100 Frontier Corp 1,139,775
31,500 Hong Kong Telecommunications ADR 673,313
11,800 Vodafone Group PLC ADR 396,775
------------
2,209,863
------------
OTHER CONSUMER CYCLICAL 6.31%
60,000 Newell Co 1,492,500
20,300 Shaw Industries Inc 322,262
5,500 Unifi Inc 134,062
------------
1,948,824
------------
TOTAL CONSUMER CYCLICAL
(Cost $ 5,821,744) 6,745,937
------------
CREDIT SENSITIVE 38.07%
BANKS 8.82%
34,200 Cullen Frost Bankers Inc 1,350,900
48,400 Norwest Corp 1,373,350
------------
2,724,250
------------
FINANCIAL SERVICES 2.49%
41,900 Mercury Finance Co $ 769,912
------------
INSURANCE 3.57%
17,400 AFLAC Inc 730,800
15,000 Frontier Insurance Group Inc 373,125
------------
1,103,925
------------
REAL ESTATE INVESTMENT TRUST 3.88%
61,100 Healthcare Realty Trust 1,199,088
------------
UTILITIES-ELECTRIC 7.22%
46,496 AES Corp 813,680
57,300 Illinova Corp 1,418,175
------------
2,231,855
------------
UTILITIES-GAS 4.60%
38,900 Enron Corp 1,419,850
------------
UTILITIES-TELEPHONE 7.49%
55,600 Cincinnati Bell Inc 1,383,050
27,900 GTE Corp 931,163
------------
2,314,213
------------
TOTAL CREDIT SENSITIVE
(Cost $ 10,630,672) 11,763,093
------------
INTERMEDIATE GOODS &
SERVICES 26.04%
CHEMICALS 6.53%
13,900 Geon Co 344,025
14,300 PPG Industries Inc 595,237
36,900 Union Carbide Corp 1,079,325
------------
2,018,587
------------
ENERGY PRODUCERS 4.37%
51,900 KN Energy Inc 1,349,400
------------
PAPER PRODUCTS 6.66%
34,600 Federal Paper Board Inc 1,124,500
18,000 Union Camp Corp 933,750
------------
2,058,250
------------
PETROLEUM-DOMESTIC 8.48%
18,200 Amoco Corp 1,244,425
13,700 Mobil Corp 1,375,138
------------
2,619,563
------------
TOTAL INTERMEDIATE GOODS & SERVICES
(Cost $ 7,427,771) 8,045,800
------------
</TABLE>
3
FS-3
<PAGE> 118
WESTCORE ANNUAL REPORT
EQUITY INCOME FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ------ -------------
<S> <C>
TOTAL COMMON STOCKS
(Cost $ 26,179,754) $ 28,972,905
-------------
PREFERRED STOCKS 0.45%
COMPUTER HARDWARE 0.45%
2,700 Storage Technology Corp
Cv Pfd $3.50** 140,062
(Cost $198,690) -------------
<CAPTION>
Face Amount
- -----------
BONDS 4.12%
$330,000 Integrated Health, 5.75%, 01/01/01 376,200
810,000 Michaels Stores Cnvts, 4.75%,
Stepups 6.75%, 01/15/96 741,150
150,000 Prime Hospitality, 7.00%, 4/15/02 155,250
-------------
TOTAL BONDS
(Cost $1,566,125) 1,272,600
-------------
<CAPTION>
Shares
- ------
MUTUAL FUNDS 0.26%
77,088 Provident Institutional Temp Fund
(Cost $ 79,148) 79,148
-------------
TOTAL INVESTMENTS
(Cost $ 28,023,717) 98.59% $30,464,715
Assets in Excess of Other Liabilities 1.41% 435,230
------------------------------------
NET ASSETS 100.00% $30,899,945
====================================
*See note 1 to financial statements.
**Convertible to common stock.
***Denotes non-income producing security.
<CAPTION>
MODERN VALUE EQUITY FUND
STATEMENT OF INVESTMENTS
May 31, 1995
Shares Market Value*
- ------ -------------
<S> <C>
COMMON STOCKS 94.11%
CAPITAL GOODS 15.63%
AEROSPACE & DEFENSE 4.17%
20,270 General Dynamics Corp $ 886,812
18,050 McDonnell Douglas Corp 1,304,113
-------------
2,190,925
-------------
COMPUTER - HARDWARE 1.95%
11,010 International Business Machines 1,026,682
-------------
COMPUTER - SOFTWARE & SERVICES 2.16%
17,290 Computer Associates International Inc 1,132,495
-------------
ELECTRICAL EQUIPMENT 1.89%
17,120 General Electric Co 992,960
-------------
HEAVY DUTY TRUCKS & PARTS 1.84%
21,300 Cummins Engine Inc 969,150
-------------
MACHINERY - DIVERSIFIED 1.86%
11,300 Deere & Co 977,450
-------------
OFFICE PRODUCTS 1.76%
8,160 Xerox Corp 925,140
-------------
TOTAL CAPITAL GOODS
(Cost $5,788,733) 8,214,802
-------------
CONSUMER CYCLICAL 12.70%
AUTOMOTIVE 1.51%
27,200 Ford Motor Co 795,600
-------------
HARDWARE & TOOLS 2.53%
40,300 Black & Decker Corp 1,329,900
-------------
HOUSEWARES 1.88%
19,800 Premark International Inc 987,525
-------------
PUBLISHING 1.59%
20,100 Readers Digest Association Inc Cl A 834,150
-------------
RETAIL STORES - ELECTRONIC 2.02%
38,580 Circuit City Stores Inc 1,060,950
-------------
RETAIL STORES - GENERAL MERCHANDISE 3.17%
10,040 Dayton Hudson Corp 711,585
16,950 Sears Roebuck & Co 955,556
-------------
1,667,141
-------------
TOTAL CONSUMER CYCLICAL
(Cost $5,609,951) 6,675,266
-------------
</TABLE>
4
FS-4
<PAGE> 119
WESTCORE ANNUAL REPORT
MODERN VALUE EQUITY FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ------ -------------
<S> <C> <C>
CONSUMER STAPLES 20.13%
COSMETICS 1.87%
12,750 Colgate Palmolive Co $ 981,750
------------
DRUGS & HEALTHCARE PRODUCTS 7.83%
14,590 Bristol Myers Squibb Co 968,411
15,900 Medtronic Inc 1,196,475
11,200 Pfizer Inc 987,000
12,200 Schering Plough Corp 960,750
------------
4,112,636
------------
FOOD, BEVERAGE & TOBACCO 5.83%
28,600 IBP Inc 1,072,500
14,040 Philip Morris Cos Inc 1,023,165
32,340 UST Inc 966,157
------------
3,061,822
------------
HEALTHCARE (HMO) 1.15%
19,500 US Healthcare Inc 605,719
------------
RETAIL STORES - FOOD 1.58%
29,700 Albertsons Inc 831,600
------------
RETAIL STORES - DRUG 1.87%
41,300 Rite Aid Corp 980,875
------------
TOTAL CONSUMER STAPLES
(Cost $8,262,259) 10,574,402
------------
CREDIT SENSITIVE 19.96%
MAJOR REGIONAL BANKS 6.28%
30,200 Bank of Boston Corp 1,102,300
29,350 Bank New York Inc 1,196,012
23,900 First Bank System Inc 1,003,800
------------
3,302,112
------------
FINANCIAL-MISCELLANEOUS 1.87%
28,550 American General Corp 984,975
------------
MONEY CENTER BANKS 2.00%
22,750 Chemical Banking Corp 1,049,344
------------
PROPERTY - CASUALTY INSURANCE 1.94%
59,100 USF&G Corp 1,019,475
------------
UTILITIES-ELECTRIC 7.87%
38,000 Central & South West Corp 978,500
33,330 General Public Utilities Corp 999,900
52,020 Ohio Edison Co 1,137,938
58,450 SCE Corp 1,015,569
------------
4,131,907
------------
TOTAL CREDIT SENSITIVE
(Cost $8,873,813) $ 10,487,813
------------
INTERMEDIATE GOODS &
SERVICES 25.69%
CHEMICALS 8.00%
17,350 Eastman Chemical Co 1,041,000
23,550 Hercules Inc 1,236,375
24,360 PPG Industries Inc 1,013,985
31,150 Union Carbide Corp 911,138
------------
4,202,498
------------
CONGLOMERATES 2.02%
9,500 ITT Corp 1,062,813
------------
ALUMINUM 1.84%
20,820 Aluminum Co of America 968,130
------------
METALS-MISCELLANEOUS 1.81%
17,250 Phelps Dodge Corp 950,906
------------
MISCELLANEOUS 3.78%
15,500 Eastman Kodak Co 935,813
19,790 Harris Corp 1,051,344
------------
1,987,157
------------
OIL - INTEGRATED DOMESTIC 1.83%
26,570 Phillips Petroleum Co 963,162
------------
OIL - INTEGRATED INTERNATIONAL 1.89%
9,900 Mobil Corp 993,712
------------
PAPER AND FOREST PRODUCTS 1.90%
30,160 Boise Cascade Corp 995,280
------------
TRANSPORTATION 2.62%
39,800 Ryder Systems Inc 1,009,925
14,889 Santa Fe Pacific Corp 364,781
------------
1,374,706
------------
TOTAL INTERMEDIATE GOODS & SERVICES
(Cost $10,792,310) 13,498,364
------------
TOTAL COMMON STOCKS
(Cost $39,327,066) 49,450,647
------------
<CAPTION>
FACE AMOUNT
- -----------
<S> <C> <C>
U.S. GOVERNMENT TREASURIES 4.74%
U.S. Treasury Bills:
$1,000,000 5.62%, 06/22/95 996,722
500,000 5.70%, 06/22/95 498,337
1,000,000 5.705%, 06/22/95 996,672
------------
</TABLE>
5
FS-5
<PAGE> 120
WESTCORE ANNUAL REPORT
MODERN VALUE EQUITY FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ------ ------------
<S> <C>
TOTAL U.S. GOVERNMENT TREASURIES
(Cost $2,491,731) $ 2,491,731
-----------
MUTUAL FUNDS 2.61%
1,366,577 Provident Institutional Temp Fund
(Cost $1,373,513) 1,373,513
-----------
TOTAL INVESTMENTS
(Cost $43,192,310) 101.46% $53,315,891
Liabilities in Excess of Other Assets (1.46%) (770,610)
--------------------
NET ASSETS 100.00% $52,545,281
====================
*See note 1 to financial statements.
<CAPTION>
MIDCO GROWTH FUND
STATEMENT OF INVESTMENTS
May 31, 1995
Shares Market Value*
- ------ ------------
<S> <C> <C>
COMMON STOCKS 91.22%
CAPITAL GOODS 23.34%
AEROSPACE & DEFENSE 0.51%
53,300 General Motors Corp Cl H $ 2,171,975
-----------
COMPUTER HARDWARE 2.86%
213,600 Silicon Graphics Inc ** 8,303,700
182,500 Storage Technology Corp ** 3,900,938
-----------
12,204,638
===========
COMPUTER SERVICES & SOFTWARE 8.26%
69,200 Adobe Systems Inc 3,598,400
43,550 BMC Software Inc ** 2,798,088
85,600 Broderbund Software Inc ** 3,852,000
132,862 First Financial Management Corp 9,433,202
4,200 Intuit ** 265,650
29,100 Lotus Dev Corp ** 887,550
346,850 Oracle Systems Corp ** 12,053,037
59,400 Sybase Inc ** 1,247,400
21,900 Synopsys Inc ** 1,188,075
-----------
35,323,402
===========
ELECTRONICS 6.61%
130,650 Analog Devices Inc ** 4,066,481
54,100 Arrow Electronics Inc ** 2,488,600
48,500 Atmel Corp ** 2,134,000
28,200 Credence Systems Corp 976,425
42,100 KLA Instruments Corp ** 2,936,475
63,100 Linear Technology Corp 3,864,875
29,800 LSI Logic Corp ** 2,004,050
80,000 Microchip Technology Inc ** 2,380,000
7,300 Millipore Corp 479,063
17,800 PictureTel Corp 774,300
41,400 Ultratech Stepper Inc ** 1,242,000
58,400 Xilinx Inc ** 4,920,200
-----------
28,266,469
===========
ELECTRICAL EQUIPMENT 0.63%
76,425 Molex Inc Cl A 2,674,875
===========
ENGINEERING & CONSTRUCTION 0.47%
27,400 Foster Wheeler Corp 900,775
40,000 Ionics Inc 1,100,000
-----------
2,000,775
===========
NETWORKING 2.69%
91,200 3 Com Corp ** 5,836,800
192,400 American Power Conversion Corp ** 3,511,300
59,100 Bay Network Inc ** 2,157,150
-----------
11,505,250
===========
</TABLE>
6
FS-6
<PAGE> 121
WESTCORE ANNUAL REPORT
MIDCO GROWTH FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ----- ------------
<S> <C>
OFFICE PRODUCTS 0.16%
23,400 Corporate Express Inc ** $ 675,675
----------
OTHER-CAPITAL GOODS 1.15%
49,800 Greenfield Industries Inc Del 1,444,200
39,600 OEA Inc ** 1,202,850
75,750 Wabash National Corp 2,291,437
----------
4,938,487
TOTAL CAPITAL GOODS
(Cost $64,051,201) 99,761,546
----------
CONSUMER CYCLICAL 34.88%
AUTOMOTIVE 0.39%
10,200 APS Holdings Corp ** 265,200
26,200 Exide Corp 943,200
25,400 Gentex Corp ** 463,550
----------
1,671,950
----------
BUILDING RELATED 2.20%
276,600 Newell Co 6,880,425
160,000 Shaw Industries Inc 2,540,000
----------
9,420,425
----------
CONSUMER PRODUCTS 1.44%
57,200 Callaway Golf Co 822,250
105,800 Duracell International Inc 4,575,850
41,000 Sunbeam-Oster Inc 743,125
----------
6,141,225
----------
CONSUMER SERVICES 4.82%
295,871 CUC International Inc ** 10,873,241
293,200 Loewen Group Inc 9,712,250
----------
20,585,491
----------
CONSUMER SOFT GOODS 0.22%
13,800 Kenneth Cole Productions Inc ** 426,075
14,600 Nine West Group Inc ** 509,175
----------
935,250
----------
HOTELS/LEISURE 5.79%
288,100 Hospitality Franchise Systems Inc 8,679,013
204,700 La Quinta Inns Inc 5,808,362
69,000 Mirage Resorts Inc ** 2,061,375
63,100 Morrison Restaurants Inc 1,356,650
35,100 National Gaming Corp ** 293,962
248,300 Prime Hospitality Corp ** 2,420,925
99,000 Promus Companies Inc ** 4,145,625
----------
24,765,912
----------
MEDIA-PUBLISHING 4.22%
77,600 Capital Cities ABC Inc $ 7,488,400
81,872 Cox Communications Inc Cl A ** 1,330,420
81,700 Home Shopping Network ** 571,900
129,750 Infinity Broadcasting Co Cl A ** 3,649,219
185,000 Tele Communications Inc Cl A ** 3,908,125
85,100 Westwood One Inc ** 1,106,300
----------
18,054,364
----------
RETAIL 6.56%
89,400 AutoZone Inc ** 2,078,550
190,300 Consolidated Stores Corp ** 3,568,125
66,100 Department 56 Inc ** 2,420,912
197,587 Dollar General Corp 5,606,531
48,100 Gymboree Corp ** 1,172,438
42,400 Heilig Meyers Co 1,012,300
64,600 Kohls Corp ** 2,802,025
52,600 Lowes Companies Inc 1,433,350
48,200 Nordstrom Inc 2,000,300
149,075 Office Depot Inc ** 3,577,800
33,600 Talbots Inc 1,066,800
66,700 The Sports Authority Inc ** 1,283,975
----------
28,023,106
----------
TELECOMMUNICATIONS 8.55%
54,900 ADC Telecomm Inc ** 1,701,900
74,900 Amphenol Corp 2,069,113
78,700 DSC Communications Corp 2,911,900
127,100 MFS Communications Co ** 3,749,450
88,200 Mobile Tele Communications Technology ** 1,984,500
107,800 Paging Network Inc ** 2,991,450
61,400 Stratacom Inc ** 2,348,550
57,800 Summa Four Inc ** 1,408,875
24,500 U.S. Robotics ** 2,045,750
51,500 Viacom Inc Cl B ** 2,401,188
110,700 Vodafone Group PLC ADR 3,722,287
354,280 WorldCom Inc ** 9,211,280
----------
36,546,243
----------
OTHER-CONSUMER CYCLICAL 0.69%
121,550 Unifi Inc 2,962,781
----------
TOTAL CONSUMER CYCLICAL
(Cost $117,712,516) 149,106,747
-----------
CONSUMER STAPLES 14.94%
DRUGS & HEALTHCARE 4.09%
17,400 Amgen Inc ** 1,261,500
30,700 Arrow International Inc 1,185,788
152,200 Centocor Inc ** 2,064,212
45,100 Circa Pharmaceutical Inc ** 1,336,088
41,700 Medtronic Inc 3,137,925
102,000 North American Vaccine Inc ** 816,000
</TABLE>
7
FS-7
<PAGE> 122
WESTCORE ANNUAL REPORT
MIDCO GROWTH FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ------ ------------
<S> <C>
DRUGS & HEALTHCARE (CONTINUED)
73,400 Sybron Corp Del ** $ 2,862,600
45,500 R P Scherer Corp Del ** 2,030,437
75,300 Watson Pharmaceuticals Inc ** 2,767,275
------------
17,461,825
------------
HEALTHCARE SERVICES 10.85%
61,500 Abbey Healthcare Group Inc ** 2,206,313
192,600 Coventry Corp ** 3,972,375
102,100 HBO & Co 4,951,850
142,300 Health Management Association Inc
Cl A ** 3,895,462
101,800 Humana Inc ** 2,150,525
107,700 Integrated Health Inc 3,594,487
370,800 Oxford Health Plans Inc ** 18,725,400
45,200 Pacificare Health Systems Inc
Cl B ** 2,994,500
21,100 Phycor Inc ** 635,638
87,400 United Healthcare Corp 3,255,650
------------
46,382,200
------------
TOTAL CONSUMER STAPLES
(Cost $49,456,900) 63,844,025
------------
CREDIT SENSITIVE 8.77%
BANKS 0.75%
24,700 Cullen Frost Bankers Inc 975,650
78,800 Norwest Corp 2,235,950
------------
3,211,600
------------
FINANCIAL SERVICES 4.64%
84,650 Advanta Corp Cl B 3,047,400
350,409 Mercury Financial Co 6,438,765
72,700 MGIC Investment Corp Wisconsin 3,416,900
62,050 Schwab Charles Corp 2,171,750
83,400 United Asset Management Corp 3,064,950
55,300 World Acceptance Corp ** 1,686,650
------------
19,826,415
------------
INSURANCE 2.78%
108,125 AFLAC Inc 4,541,250
79,505 Frontier Insurance Group Inc 1,977,687
138,000 Life Partners Group Inc 2,587,500
83,350 Mutual Risk Management Ltd 2,792,225
------------
11,898,662
------------
OTHER-ELECTRIC POWER 0.60%
63,300 AES China Generating Co Cl A ** 506,400
117,297 AES Corp 2,052,698
------------
2,559,098
------------
<CAPTION>
Shares Market Value*
- ------ ------------
<S> <C>
TOTAL CREDIT SENSITIVE
(Cost $26,835,244) $ 37,495,775
------------
INTERMEDIATE GOODS &
SERVICES 9.29%
BUSINESS SERVICES 2.12%
57,900 Insurance Auto Auctions ** 1,642,913
64,300 Medaphis Corp ** 3,874,075
120,850 Sensormatic Electronics Corp 3,549,969
------------
9,066,957
------------
CHEMICAL 2.49%
72,700 Airgas Inc ** 1,890,200
129,300 Geon Co 3,200,175
72,000 Georgia Gulf Corp 2,187,000
115,200 Union Carbide Corp 3,369,600
------------
10,646,975
------------
ENERGY EQUIPMENT & SERVICES
1.01%
104,100 Input/Output Inc ** 3,539,400
25,100 Production Operators Corp 759,275
------------
4,298,675
------------
ENERGY PRODUCERS 1.04%
153,100 Apache Corp 4,439,900
------------
FOREST PRODUCTS 1.53%
134,700 Federal Paper Board Inc 4,377,750
41,800 Union Camp Corp 2,168,375
------------
6,546,125
------------
METALS 0.62%
105,600 Barrick Gold Corp 2,666,400
------------
TRANSPORTATION 0.48%
91,750 Southwest Airlines Co 2,029,969
------------
TOTAL INTERMEDIATE GOODS &
SERVICES
(Cost $33,879,226) 39,695,001
------------
TOTAL COMMON STOCKS
(Cost $291,935,087) 389,903,094
------------
WARRANTS
71 Westwood One Inc Warrants
(Cost $0) 0
------------
</TABLE>
8
FS-8
<PAGE> 123
WESTCORE ANNUAL REPORT
MIDCO GROWTH FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Face Amount Market Value*
- ----------- -------------
<S> <C>
SHORT-TERM U.S. GOVERNMENT
TREASURIES 3.49%
U.S. Treasury Bills:
$4,000,000 5.53%, 06/22/95 $ 3,987,097
2,000,000 5.735%, 06/29/95 1,991,079
9,000,000 5.835%, 07/13/95 8,938,732
------------
SHORT-TERM U.S. GOVERNMENT TREASURIES
(Cost $14,916,908) 14,916,908
------------
Shares
- ------
MUTUAL FUNDS 4.27%
18,163,150 Provident Institutional Temp Fund
(Cost $18,242,654) 18,242,654
------------
TOTAL INVESTMENTS
(Cost $325,094,649) 98.98% $423,062,656
Other Assets in Excess of Liabilities 1.02% 4,373,558
---------------------
NET ASSETS 100.00% $427,436,214
=====================
</TABLE>
* See note 1 to financial statements.
** Denotes non-income producing security.
SMALL-CAP OPPORTUNITY FUND
STATEMENT OF INVESTMENTS
May 31, 1995
<TABLE>
<CAPTION>
Shares Market Value*
- ------ -------------
<S> <C>
COMMON STOCKS 95.80%
BASIC INDUSTRIES 7.42%
CHEMICALS 1.20%
5,520 First Mississippi Corp $ 127,650
------------
COMMERCIAL CONSTRUCTION 1.64%
8,130 Granite Construction Inc 174,795
------------
NONFERROUS METALS 1.20%
8,850 Magma Copper Co 127,219
------------
RUBBER & PLASTICS 1.83%
8,120 AEP Industries Inc 194,880
------------
STEEL 1.55%
4,390 Texas Industries Inc 165,174
------------
TOTAL BASIC INDUSTRIES
(Cost $732,453) 789,718
------------
CAPITAL GOODS 10.82%
CONSTRUCTION EQUIPMENT 4.98%
3,930 AGCO Corp 148,849
12,990 Indresco Inc** 176,989
8,060 JLG Industries Inc 203,515
------------
529,353
------------
MISCELLANEOUS PRODUCTION GOODS 5.84%
6,336 Commercial Metals Co 173,448
3,960 Park Electrochemical Corp 137,610
3,230 Pittway Corp, Cl A 144,543
6,880 Smith A O Corp 165,120
------------
620,721
------------
TOTAL CAPITAL GOODS
(Cost $1,072,270) 1,150,074
------------
CONSUMER CYCLICAL 7.94%
Apparel 3.52%
4,980 Fieldcrest Cannon Inc 113,295
4,950 Haggar Corp 92,813
4,260 Springs Industries 167,738
------------
373,846
------------
MISCELLANEOUS 2.94%
10,350 Oneida Ltd 155,250
5,700 Toro Co 157,463
------------
312,713
------------
RESIDENTIAL CONSTRUCTION 1.48%
25,760 M D C Holdings Inc 157,780
</TABLE>
9
FS-9
<PAGE> 124
WESTCORE ANNUAL REPORT
SMALL-CAP OPPORTUNITY FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
<S> <C>
TOTAL CONSUMER CYCLICAL
(Cost $871,697) $ 844,339
------------
CONSUMER STAPLES 8.69%
DRUGS & MEDICAL PRODUCTS 2.80%
5,330 Bio Radiology Labs Inc, Cl A** 159,900
8,520 Datascope Corp** 138,450
------------
298,350
------------
FOOD/AGRICULTURE 5.89%
10,300 Goodmark Foods Inc 160,938
8,122 Hudson Foods Inc 111,678
10,355 J&J Snack Foods Corp** 125,554
5,230 Smithfield Foods Inc** 109,830
8,460 WLR Foods Inc 118,440
------------
626,440
------------
TOTAL CONSUMER STAPLES
(Cost $960,305) 924,790
------------
ENERGY 4.26%
OIL & NATURAL GAS 4.26%
5,880 Diamond Shamrock Inc 159,495
20,400 Pride Petroleum Services** 163,200
9,960 Total Petroleum North America Ltd 130,725
----------
TOTAL ENERGY
(Cost $453,930) 453,420
----------
FINANCIALS 9.47%
BANKS/SAVINGS & LOANS 7.56%
2,460 Baybanks Inc 178,350
4,230 Deposit Guaranty Corp 155,453
16,520 Dime Bancorp Inc** 156,940
8,460 North Fork Bancorporation Inc 150,165
4,940 Standard Federal Bank Troy Michigan 163,638
----------
804,546
----------
MISCELLANEOUS 1.91%
6,580 Money Store Inc 203,158
----------
TOTAL FINANCIALS
(Cost $800,035) 1,007,704
----------
INTERMEDIATE GOODS &
SERVICES 26.21%
BUSINESS SERVICES 7.89%
7,808 Bell Industries Inc** 149,324
6,440 Comdisco Inc 193,200
8,186 Foxmeyer Health Corp ** 148,371
9,300 Standard Register Co 183,675
----------
<CAPTION>
Shares Market Value*
<S> <C>
BUSINESS SERVICES (CONTINUED)
4,530 Wallace Computer Services Inc $ 164,213
------------
838,783
------------
MEDICAL & DENTAL 3.01%
9,300 Bindley Western Industries Inc 144,150
6,380 Universal Health Services Inc** 176,248
------------
320,398
------------
RETAIL 8.56%
11,800 Big B Inc 162,250
17,280 Brunos Inc 199,800
6,250 Caldor Corp** 117,187
24,460 General Host Corp 168,162
12,530 Shopko Stores Inc 134,697
6,600 Smiths Food & Drug Ctrs Inc Cl B 127,875
------------
909,971
------------
SANITATION 1.81%
10,020 Western Waste Industries Inc** 192,885
------------
TRAVEL/RECREATION 4.94%
19,940 AZTAR Corp** 186,937
8,040 Carmike Cinemas** 191,955
15,070 Prime Hospitality Corp** 146,932
------------
525,824
------------
TOTAL INTERMEDIATE GOODS & SERVICES
(Cost $2,604,912) 2,787,861
------------
TECHNOLOGY 11.05%
AEROSPACE 4.77%
6,140 Tech System Corp** 158,105
5,560 Thiokol Corp 174,445
3,910 Watkins Johnson Co 174,972
------------
507,522
------------
COMPUTER & OFFICE 6.28%
6,030 Marshall Industries** 162,810
6,170 Safeguard Scientifics Inc** 209,780
6,190 Standard Microsystem Co** 107,551
10,680 Western Digital Corp** 188,235
------------
668,376
------------
TOTAL TECHNOLOGY
(Cost $965,876) 1,175,898
------------
</TABLE>
10
FS-10
<PAGE> 125
WESTCORE ANNUAL REPORT
SMALL-CAP OPPORTUNITY FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ------ -------------
<S> <C> <C>
TRANSPORTATION 4.24%
AIR TRANSPORTATION 2.92%
8,740 Alaska Air Group Inc** $ 145,302
9,100 Harper Group Inc 164,937
-------------
310,239
-------------
GROUND TRANSPORTATION 1.32%
5,930 Consolidated Freightways Inc 140,837
-------------
TOTAL TRANSPORTATION
(Cost $435,900) 451,076
-------------
UTILITIES 5.70%
ELECTRIC & GAS 5.70%
6,000 Central Hudson Gas & Electric Corp 162,750
4,370 Cilcorp Inc 162,236
11,180 Destec Energy Inc** 134,160
10,290 Southwest Gas Corp CA 146,632
-------------
TOTAL UTILITIES
(Cost $599,420) 605,778
-------------
TOTAL COMMON STOCKS
(Cost $9,496,798) 10,190,658
-------------
MUTUAL FUNDS 3.21%
339,736 Provident Institutional Temp Fund
(Cost $341,091) 341,091
-------------
<CAPTION>
TOTAL INVESTMENTS
<S> <C> <C>
(Cost $9,837,889) 99.01% $ 10,531,749
Other Assets in Excess of Liabilities 0.99% 105,144
----------------------
TOTAL NET ASSETS 100.00% $ 10,636,893
----------------------
</TABLE>
* See note 1 to financial statements.
** Denotes non-income producing security.
11
FS-11
<PAGE> 126
WESTCORE ANNUAL REPORT
INTERMEDIATE-TERM BOND FUND
STATEMENT OF INVESTMENTS
May 31, 1995
<TABLE>
<CAPTION>
Face Amount Market Value*
<S> <C> <C>
CORPORATE BONDS 37.49%
ASSET BACKED 8.82%
$ 451,237 Aircraft Lease Portfolio
Securitization Trust Pass
Through Certificates Ser 94-1A,
7.150%, 09/15/04 $ 455,018
2,000,000 American Express Corp,
Master Trust Ser 92-2,
6.60%, 07/15/99 2,017,318
750,000 Banc One Credit Card Master
Trust Ser 94-B,
7.55%, 12/15/99 773,939
750,000 Conti Mortgage Home Equity
Loan Trust,
7.95%, 04/15/10 768,000
1,047,936 Equicredit Corp Home Equity
Loan Trust Ser 1994-1,
5.80%, 03/15/09 1,022,429
732,658 Nissan Auto Receivable Grantor
Ser 94-A,
6.45%, 09/15/99 735,852
2,000,000 Premier Auto Trust Ser 95-1-A3,
7.70%, 01/04/98 2,041,178
1,000,000 World Omni Auto Series 94-B
7.95%, 01/25/01 1,025,239
------------
8,838,973
------------
AUTOMOTIVE 1.02%
1,000,000 General Motors Acceptance
Corp MTN,
7.375%, 04/25/00 1,025,117
------------
BANKS 4.32%
1,000,000 Capital One Bank,
8.22%, 2/07/97 1,023,302
1,150,000 Chemical Bank NY NY,
7.00%, 6/01/05 1,141,759
1,500,000 Golden West Financial Corp,
8.375%, 04/15/02 1,617,478
500,000 World Savings and Loan,
10.25%, 10/01/97 541,083
------------
4,323,622
------------
BASIC INDUSTRY 1.10%
1,125,000 CSR America Inc,
6.875%, 03/01/04(2) 1,106,719
------------
CHEMICAL 0.77%
750,000 ISP Chemicals Inc,
9.00%, 03/01/99 769,575
------------
<CAPTION>
Face Amount Market Value*
<S> <C> <C>
CONSUMER CYCLICAL 0.81%
$1,000,000 Western Publishing Group Inc,
7.65%, 09/15/02 $ 807,500
------------
CONSUMER NON CYCLICAL 1.00%
1,000,000 Upjohn Co MTN Ser-A,
6.25%, 02/02/98 998,300
------------
DEFENSE 1.03%
1,000,000 Rockwell International Corp,
7.625%, 02/17/98 1,034,700
------------
ENERGY 0.97%
1,000,000 Defeasance Portfolio Management
Trust Ser 1,
5.635%, 07/15/98(2) 970,000
------------
ENTERTAINMENT 6.13%
1,500,000 News America Holdings,
8.625%, 02/01/03 1,609,353
Time Warner Entertainment Co:
1,000,000 9.625%, 05/01/02 1,125,995
1,000,000 7.25%, 09/01/08 948,491
1,500,000 TKR Cable I Cable Notes,
10.50%, 10/30/07 1,665,000
750,000 The New York Times Co,
7.625%, 03/15/05 794,698
------------
6,143,537
------------
FINANCIAL 3.06%
1,000,000 Farmers Insurance Exchange,
8.50%, 08/01/04(2) 1,023,750
2,000,000 Merrill Lynch & Co Inc MTN,
8.23%, 04/30/02 2,040,000
------------
3,063,750
------------
REAL ESTATE 2.74%
700,000 Developers Diversified Realty Corp,
7.625%, 05/15/00 703,500
1,000,000 New Plan Realty Trust,
7.75%, 04/06/05 1,041,781
1,000,000 Weingarten Realty Investors
Trust MTN,
7.22%, 06/01/05 1,000,000
------------
2,745,281
------------
TRANSPORTATION 3.10%
1,866,204 American Airlines,
9.71%, 01/02/07 2,066,821
1,000,000 United Airlines Pass Through
Certificates 95-A1,
9.02%, 04/19/12 1,043,750
------------
3,110,571
------------
</TABLE>
12
FS-12
<PAGE> 127
WESTCORE ANNUAL REPORT
INTERMEDIATE-TERM BOND FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Face Amount Market Value*
- ----------- -------------
<S> <C> <C>
UTILITIES 2.62%
$1,250,000 Central Maine Power Co,
6.25%, 11/01/98 $ 1,196,497
946,000 Del Norte Funding for El Paso,
9.05%, 01/02/93 (1) 543,950
1,000,000 Long Island Lighting Co,
7.125%, 06/01/05 881,962
------------
2,622,409
------------
TOTAL CORPORATE BONDS
(Cost $37,523,144) 37,560,054
------------
MORTGAGE-BACKED
SECURITIES 3.51%
726,082 Collateralized Mortgage
Securities Corp,
8.75%, 04/20/19 762,102
2,787,919 Federal National Mortgage
Association,
6.00%, 01/01/01 2,758,058
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $3,550,104) 3,520,160
------------
U.S. GOVERNMENT
TREASURIES 56.76%
U.S. Treasury Notes:
1,500,000 7.375%, 05/15/96 1,521,092
4,000,000 8.00%, 01/15/97 4,132,500
2,000,000 6.75%, 02/28/97 2,029,372
3,000,000 6.125%, 05/31/97 3,015,933
4,500,000 8.50%, 07/15/97 4,733,437
5,000,000 6.00%, 12/31/97 5,010,930
3,000,000 6.125%, 05/15/98 3,015,933
3,000,000 6.375%, 01/15/99 3,037,500
2,000,000 6.00%, 10/15/99 1,997,500
2,500,000 7.875%, 11/15/99 2,676,562
3,500,000 7.75%, 11/30/99 3,730,776
3,200,000 6.375%, 01/15/00 3,242,000
3,300,000 6.875%, 03/31/00 3,410,339
1,000,000 6.25%, 05/31/00 1,008,125
3,000,000 7.75%, 02/15/01 3,237,183
2,500,000 6.375%, 08/15/02 2,522,653
3,000,000 6.25%, 02/15/03 2,997,183
2,500,000 7.25%, 08/15/04 2,657,027
1,000,000 U.S. Treasury Zero Coupon Strip,
11/15/96 919,849
2,000,000 U.S. Treasury Bill,
08/24/95 1,973,958
------------
TOTAL U.S. GOVERNMENT TREASURIES
(Cost $55,715,987) 56,869,852
------------
<CAPTION>
Shares Market Value*
- ------ -------------
<S> <C> <C>
MUTUAL FUNDS 4.42%
4,417,859 Provident Institutional Temp
Fund
(Cost $4,428,625) $ 4,428,625
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS 102.18% $102,378,691
(Cost $101,217,860)
Liabilities in Excess of Other Assets (2.18%) (2,189,106)
---------------------
NET ASSETS 100.00% $100,189,585
=====================
</TABLE>
*See note 1 to financial statements.
(1) Security is in default.
(2) Restricted securities - See Note 7 of Notes to Financial Statements.
13
FS-13
<PAGE> 128
WESTCORE ANNUAL REPORT
LONG-TERM BOND FUND
STATEMENT OF INVESTMENTS
May 31, 1995
<TABLE>
<CAPTION>
Face Amount Market Value*
- ----------- ------------
<S> <C> <C>
CORPORATE BONDS 27.92%
Automotive 0.77%
$ 250,000 General Motors Acceptance
Corp MTN,
7.375%, 04/25/00 $ 256,279
-----------
Banks 1.61%
500,000 Golden West Financial Corp,
8.375%, 04/15/02 539,160
-----------
Chemicals 1.53%
500,000 ISP Chemicals Inc,
9.00%, 03/01/99 513,050
-----------
Consumer Cyclical 0.60%
250,000 Western Publishing Group Inc,
7.65%, 09/15/02 201,875
-----------
Consumer Non Cyclical 2.12%
250,000 A&P Great Atlantic &
Pactea Co,
7.70%, 01/15/04 235,411
500,000 Borden Inc,
7.875%, 02/15/23 471,798
-----------
707,209
-----------
Energy 3.72%
250,000 Coastal Corp,
10.75%, 10/01/10 323,789
1,000,000 Oxy Oil & Gas USA,
7.00%, 04/15/11 919,157
-----------
1,242,946
-----------
Entertainment 4.01%
500,000 News America Holdings,
9.25%, 02/01/13 563,132
750,000 Time Warner Inc,
9.125%, 01/15/13 776,596
-----------
1,339,728
-----------
Financial 5.93%
400,000 Farmers Insurance Exchange,
8.625%, 05/01/24 (1) 383,500
250,000 Leucadia National Corp,
7.75%, 08/15/13 241,883
500,000 Lincoln National Insurance,
9.125%, 10/01/24 557,384
250,000 Principal Mutual Life Insurance,
7.875%, 03/01/24 (1) 240,000
600,000 Zurich Reinsurance Center
Holdings,
7.125%, 10/15/23 558,424
-----------
1,981,191
-----------
<CAPTION>
Face Amount Market Value*
- ----------- ------------
<S> <C> <C>
Real Estate 3.69%
$ 250,000 New Plan Realty Trust,
7.75%, 04/06/05 $ 260,445
500,000 Property Trust of America,
6.875%, 02/15/08 474,238
250,000 Rouse Co,
8.50%, 01/15/03 250,391
250,000 Weingarten Realty Investors
Trust MTN,
7.22%, 06/01/05 250,000
-----------
1,235,074
-----------
Transportation 2.49%
500,000 AMR Corp,
10.00%, 04/15/21 572,881
250,000 United Airlines Pass-Through
Certificates, 95-A1,
9.02%, 04/19/12 260,937
-----------
833,818
-----------
Utility 1.45%
550,000 Long Island Lighting Co Inc,
7.125%, 06/01/05 485,079
-----------
TOTAL CORPORATE BONDS
(Cost $9,080,295) 9,335,409
===========
U.S. GOVERNMENT
TREASURIES 67.52%
U.S Treasury Bonds/Notes/Bills 59.08%
U.S. Treasury Bonds:
1,500,000 9.375%, 02/15/06 1,846,404
1,000,000 9.25%, 02/15/16 1,275,625
1,750,000 7.50%, 11/15/16 1,893,825
1,000,000 8.875%, 02/15/19 1,242,811
500,000 8.125%, 08/15/19 578,125
2,000,000 8.50%, 02/15/20 2,404,372
1,500,000 7.875%, 02/15/21 1,695,000
1,500,000 8.125%, 08/15/21 1,743,750
U.S. Treasury Notes:
500,000 6.00%, 10/15/99 499,375
1,500,000 6.375%, 01/15/00 1,519,687
350,000 6.25%, 05/31/00 352,844
1,000,000 8.75%, 08/15/00 1,117,812
1,000,000 7.875%, 08/15/01 1,089,061
2,500,000 6.25%, 02/15/03 2,497,653
-----------
19,756,344
===========
U.S. Government Zero
Coupon Strips 8.44%
2,000,000 02/15/04 1,154,624
5,000,000 08/15/11 1,667,915
-----------
2,822,539
===========
</TABLE>
FS-14
<PAGE> 129
WESTCORE ANNUAL REPORT
LONG-TERM BOND FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Shares Market Value*
- ------ ------------
<S> <C> <C>
TOTAL U.S. GOVERNMENT TREASURIES
(Cost $21,314,254) $22,578,883
-----------
MUTUAL FUNDS 3.87%
1,288,858 Provident Institutional Temp
Fund
(Cost $1,293,964) 1,293,964
-----------
TOTAL INVESTMENTS
(Cost $31,688,513) 99.31% $33,208,256
Other Assets in Excess of Liabilities 0.69% 231,956
---------------------
NET ASSETS 100.00% $33,440,212
=====================
</TABLE>
* See note 1 to financial statements
(2) Restricted security - See Note 7 of Notes to Financial
Statements
FS-15
<PAGE> 130
WESTCORE ANNUAL REPORT
COLORADO TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
May 31, 1995
<TABLE>
<CAPTION>
Face Bond Rating Market
Amount Moodys/S&P Value*
- ------ ----------- ------
<S> <C> <C>
CERTIFICATES OF
PARTICIPATION 1.91%
$ 100,000 State of Colorado Certificate
of Participation Master Lease
Purchase Agreement,
5.25%, 11/01/99, AMBAC Aaa/AAA $ 102,889
100,000 Lakewood, Jefferson County,
Certificate of Participation,
Lease Purchase Agreement,
5.625%, 12/01/99, MBIA Aaa/AAA 102,774
-------
TOTAL CERTIFICATES
OF PARTICIPATION
(Cost $201,182) 205,663
-------
GENERAL OBLIGATION
BONDS 55.83%
COUNTY/CITY/SPECIAL DISTRICT/
SCHOOL DISTRICT 55.83%
100,000 Adams County School District
#12, 7.25%, 12/15/09, Pre-
refunded 12/15/99 @ 100.00 NR/A+ 111,000
125,000 Arapahoe County School
District #2, 6.75%, 12/01/04,
Optional 12/01/99 @ 101.00 A/NR 133,781
150,000 Boulder Library, 7.30%,
10/01/08, Prerefunded
10/01/98 @ 100.00 Aaa/AA 163,337
Boulder, Larimer & Weld
Counties, School District 1J:
100,000 5.50%, 12/15/04, Optional
12/15/02 @ 101.00, MBIA Aaa/AAA 103,600
175,000 5.80%, 12/15/07, Optional
12/15/02 @ 101.00, MBIA Aaa/AAA 182,551
100,000 6.00%, 12/15/10, Optional
12/15/02 @ 101.00, MBIA Aaa/AAA 105,039
100,000 City & County of Denver
Library, 7.75%, 08/01/95 Aa/AA 100,621
100,000 City & County of Denver
School District #1, 4.70%,
06/01/04 A/A+ 95,611
125,000 Colorado Springs Various
Purpose, 6.60%, 09/01/00,
Prerefunded 09/01/99 @
100.00 NR/AAA 135,140
250,000 Douglas & Elbert Counties
School District Re-1, 5.75%,
12/15/05, Optional 12/15/02
@ 100.00, FGIC Aaa/AAA 261,650
125,000 Eagle, Garfield & Routt
Counties School District 50-J:
6.60%, 12/01/99, Pre-
refunded 12/01/98 @
100.00 Aaa/AAA 133,914
85,000 5.60%, 12/01/01, FGIC Aaa/AAA 89,376
200,000 5.75%, 12/01/03, Optional
12/01/02 @ 100.00, FGIC Aaa/AAA 211,590
<CAPTION>
Face Bond Rating Market
Amount Moodys/S&P Value*
- ------ ---------- ------
<S> <C> <C>
COUNTY/CITY/SPECIAL DISTRICT/
SCHOOL DISTRICT (CONTINUED)
$ 125,000 El Paso County School
District #3, 6.20%, 12/15/00,
Optional 12/15/98 @ 101.00,
MBIA Aaa/AAA $ 132,314
125,000 El Paso County School
District #49, 6.75%, 12/01/04,
Optional 12/01/00 @ 100.00,
MBIA Aaa/AAA 135,156
125,000 Fruita, Mesa County, 6.40%,
10/01/00, Optional 10/01/97
@ 100.00, AMBAC Aaa/AAA 129,774
250,000 Garfield, Eagle & Pitkin
Counties School District Re-1,
6.60%, 12/15/14, Optional
6/15/04 @ 101.00 Aaa/AAA 273,525
150,000 Golden, Jefferson County
Water, 4.80%, 11/15/05 A1/NR 145,086
625,000 Goldsmith Metropolitan
District Arapahoe & Denver
Counties, 6.50%, 12/01/03,
Optional 12/01/99 @ 101.00,
MBIA Aaa/AAA 668,925
200,000 Greeley, Weld County Water,
4.50%, 08/01/00 A1/AA- 196,912
Jefferson County School
District R-1:
100,000 5.10%, 12/15/99, AMBAC Aaa/AAA 102,808
100,000 5.75%, 12/15/03, Optional
12/15/02 @ 101.00, AMBAC Aaa/AAA 106,444
500,000 5.90%, 12/15/04, Optional
12/15/02 @ 101.00, AMBAC Aaa/AAA 529,260
125,000 Larimer County School District
#1, 7.00%, 12/15/08, Pre-
refunded 12/15/01 @ 101.00 NR/NR 141,566
100,000 Longmont, Boulder County,
5.15%, 09/01/99, MBIA Aaa/AAA 102,016
105,000 Morgan County School District
#3, 6.45%, 12/01/98 A/NR 111,387
Northglenn, Adams County:
150,000 6.70%, 11/01/01, Optional
11/01/96 @ 101.00, MBIA Aaa/AAA 155,377
250,000 5.50%, 12/01/06, Optional
12/01/04 @ 101.00, FSA Aaa/AAA 258,618
100,000 Pitkin County School District
Re-1, 5.50%, 11/15/00,
AMBAC Aaa/AAA 103,954
125,000 Poudre Valley Hospital District,
6.80%, 11/15/02, Prerefunded
11/15/98 @ 101.00 NR/AAA 135,675
125,000 Thornton, Adams County,
5.75%, 12/01/04, Optional
12/01/02 @ 101.00, FGIC Aaa/AAA 132,309
</TABLE>
16
FS-16
<PAGE> 131
WESTCORE ANNUAL REPORT
COLORADO TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Face Bond Rating Market
Amount Moodys/S&P Value*
- ------ ----------- ------
<S> <C> <C> <C>
COUNTY/CITY/SPECIAL DISTRICT/
SCHOOL DISTRICT (CONTINUED)
Thornton, Adams County
Water:
$ 25,000 7.40%, 12/01/98, FGIC Aaa/AAA $ 27,338
125,000 7.40%, 12/01/98, Prerefunded
12/01/96 @ 102.00, FGIC Aaa/AAA 133,425
100,000 5.20%, 12/01/99, Optional
06/01/97 @101.00, FGIC Aaa/AAA 103,192
135,000 Three Lakes Water & Sanitation
District Grand County Limited
Tax, 6.00%, 06/01/00 Optional
06/01/97 @ 101.00, MBIA Aaa/AAA 139,386
100,000 Woodland Park, Teller
County, 6.30%, 07/01/08,
Optional 07/01/00 @ 101.00,
FGIC Aaa/AAA 105,350
125,000 Woodmoor Water & Sanitation
District 1 El Paso County,
6.20%, 12/01/00, Optional
12/01/95 @ 101.00, MBIA Aaa/AAA 128,309
---------
TOTAL GENERAL OBLIGATION BONDS
(Cost $5,808,014) 6,025,316
---------
REVENUE BONDS 38.06%
EDUCATION 5.91%
250,000 Auraria Higher Education
Center Parking, 5.15%,
04/01/08, Optional 04/01/03
@ 101.00, FSA Aaa/AAA 249,512
Colorado State Board of
Agriculture CSU, Research
Foundation Master Lease
Purchase Agreement:
100,000 6.45%, 11/01/01, Optional
05/01/99 @ 101.00, MBIA Aaa/AAA 106,432
70,000 7.70%, 09/01/06, Optional
09/01/96 @ 101.00, MBIA Aaa/AAA 73,300
100,000 State of Colorado Department
of Higher Education, State
Board for Community Colleges
& Occupational Education,
5.20%, 11/01/03, Optional
11/01/02 @ 100.00, AMBAC Aaa/AAA 101,718
100,000 University of Colorado
Auxiliary Facilities, 6.50%,
06/01/01, Optional 06/01/00
@ 101.00 A1/NR 107,345
---------
638,307
---------
<CAPTION>
Face Bond Rating Market
Amount Moodys/S&P Value*
- ------ ----------- ------
<S> <C> <C> <C>
HOSPITALS 3.20%
$100,000 Poudre Valley Hospital
District, ETM, 5.80%,
12/01/98, AMBAC Aaa/AAA $ 104,726
250,000 Poudre Valley Hospital
District, 4.75%, 12/01/05,
AMBAC Aaa/AAA 240,398
---------
345,124
---------
PUBLIC FACILITES 4.39%
250,000 Colorado Health Facility
Authority, Rose Medical Center
Project, 4.90%, 08/15/07,
Optional 08/15/03 @ 101.50,
MBIA Aaa/AAA 254,542
200,000 Denver Metropolitan
Stadium District Sales Tax,
6.25%, 10/01/02, Pre-
refunded 10/01/01 @ 101.00,
FGIC Aaa/AAA 218,860
---------
473,402
---------
SPECIAL TAX 14.09%
250,000 Boulder Urban Renewal
Authority Tax Increment,
6.00%, 03/01/02, Optional
03/01/00 @ 101.00, MBIA Aaa/AAA 264,145
250,000 Breckenridge Excise Tax Rev,
5.20%, 12/01/01, Optional
12/01/00 @ 100.00, MBIA Aaa/AAA 258,202
250,000 Denver City and County
Excise Tax, 4.00%, 11/01/99,
FSA Aaa/AAA 243,570
150,000 Lafayette, Boulder County,
Sales & Use Tax, 6.40%,
11/15/04, Prerefunded
11/15/01 @ 100.00, AMBAC Aaa/AAA 164,490
250,000 Louisville, Boulder County
Sales Tax, 4.85%, 12/01/04,
Optional 12/01/03 @ 101.00,
FSA Aaa/AAA 247,935
200,000 Pitkin County Sales Tax,
4.85%, 12/01/07, Optional
12/01/98 @ 100.00, MBIA Aaa/AAA 192,552
Thornton, Adams County,
Sales and Use Tax:
100,000 4.95%, 09/01/04, Optional
09/01/02 @ 101.00, FGIC Aaa/AAA 100,193
50,000 5.15%, 09/01/06, Optional
09/01/03 @ 100.00, FGIC Aaa/AAA 49,979
---------
1,521,066
---------
</TABLE>
17
FS-17
<PAGE> 132
WESTCORE ANNUAL REPORT
COLORADO TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
May 31, 1995 (continued)
<TABLE>
<CAPTION>
Face Bond Rating Market
Amount Moodys/S&P Value*
- ------ ----------------------
<S> <C> <C> <C>
Transportation 3.34%
Regional Transport District
Colorado Sales Tax:
$100,000 7.00%, 11/01/98, FGIC Aaa/AAA $108,357
250,000 4.75%, 11/01/00, FGIC Aaa/AAA 252,128
---------
360,485
---------
Utility 7.13%
75,000 Boulder Water & Sewer,
5.75%, 12/01/06, Optional
12/01/02 @ 100.00 Aa/AA 77,263
250,000 Central Weld County Water
District, 5.25%, 12/01/05,
Optional 12/01/03 @ 100.00,
MBIA Aaa/AAA 254,110
100,000 Colorado Springs Utilities
Systems, 6.40%, 11/15/02,
Optional 11/15/01 @ 102.00 Aa/AA 110,057
125,000 Glenwood Springs Water &
Sewer, 4.70%, 12/01/05,
Optional 12/01/01 @ 100.00,
AMBAC Aaa/AAA 120,481
Metropolitan Denver Sewer
Disposal District #1:
100,000 6.10%, 04/01/99, Optional
10/01/96 @ 101.00 A1/AA 102,799
50,000 6.10%, 04/01/99, Pre-
refunded 10/01/96 @ 101.00 A1/AA 51,708
50,000 Ute Water Conservancy
District, Mesa County, 7.60%,
06/15/01, Optional 06/15/97
@ 100.00, AMBAC Aaa/AAA 52,840
---------
769,258
---------
TOTAL REVENUE BONDS
(Cost $4,033,992) 4,107,642
---------
<CAPTION>
Shares
- ------
<S> <C> <C>
MUTUAL FUNDS 2.12%
227,282 Provident Institutional Short-Term
MuniFund,
(Cost $228,103) 228,103
---------
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $10,271,291) 97.92% $10,566,724
Other Assets in Excess of Liabilities 2.08% 224,972
---------------------
NET ASSETS 100.00% $10,791,696
---------------------
</TABLE>
*See note 1 to financial statements.
18
FS-18
<PAGE> 133
WESTCORE ANNUAL REPORT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1995
<TABLE>
<CAPTION>
Equity Modern MIDCO Small-Cap Intermediate- Long- Colorado
Income Value Growth Opportunity Term Term Tax-Exempt
Fund Equity Fund Fund Fund Bond Fund Bond Fund Fund
------ ----------- ------ ----------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $1,287,522 $1,048,944 $2,150,999 $96,719 $0 $0 $0
Interest 25,156 63,160 1,177,147 30,110 5,897,454 2,032,109 559,213
Interest from affiliates 46,045 56,427 199,656 12,589 110,019 37,071 0
---------- ---------- ---------- ------- ---------- ---------- --------
Total Income 1,358,723 1,168,531 3,527,802 139,418 6,007,473 2,069,180 559,213
---------- ---------- ---------- ------- ---------- ---------- --------
EXPENSES - NOTE 5
Investment advisory fee 271,513 271,890 2,529,123 73,894 407,813 124,337 51,298
Administrative fee 20,885 20,914 194,548 3,695 45,313 13,815 5,130
Fund accounting 30,535 26,762 153,533 22,480 49,166 21,833 41,251
Legal 17,348 17,476 136,254 2,551 35,028 12,846 6,465
Audit 10,874 10,457 21,982 9,765 16,040 8,367 6,444
Custodian 24,014 20,142 87,850 16,558 28,132 13,006 5,552
Amortization of organization costs 0 0 0 11,877 0 0 6,570
Transfer agency 75,718 40,518 361,820 38,974 65,230 35,439 24,236
Printing 28,682 16,861 145,286 17,492 40,541 24,380 15,145
Distribution/administration
assistance - retail shares 8,741 0 51,887 1,964 5,276 0 0
Insurance 1,544 1,188 12,452 85 3,235 965 323
Registration 20,503 15,577 35,508 7,360 23,926 7,524 2,190
Trustee fee 2,003 1,692 19,878 371 4,041 1,330 361
Other 7,284 1,401 34,638 562 3,852 9,725 1,549
---------- ---------- ---------- ------- ---------- ---------- --------
Total Expenses 519,644 444,878 3,784,759 207,628 727,593 273,567 166,514
Expenses waived by:
Investment advisor 0 0 0 (73,894) 0 0 (51,298)
Custodian (24,014) (20,142) (87,850) (16,558) (28,132) (13,006) (5,552)
Administrator 0 0 (908) 0 0 (1,506)
Expenses reimbursed by
Investment advisor 0 0 0 (20,200) 0 0 (65,533)
---------- ---------- ---------- ------- ---------- ---------- --------
Net Expenses 495,630 424,736 3,696,909 96,068 699,461 260,561 42,625
---------- ---------- ---------- ------- ---------- ---------- --------
NET INVESTMENT INCOME
(LOSS) 863,093 743,795 (169,107) 43,350 5,308,012 1,808,619 516,588
---------- ---------- ---------- ------- ---------- ---------- --------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investment transactions (1,036,420) 1,045,955 1,443,760 (111,091) (1,790,451) (307,479) (12)
---------- ---------- ---------- ------- ---------- ---------- --------
Unrealized appreciation
(depreciation) of investments:
Beginning of period 1,661,017 4,028,309 60,370,988 13,020 (3,408,714) (1,064,787) 82,279
End of period 2,440,998 10,123,581 97,968,007 693,860 1,160,831 1,519,743 295,433
---------- ---------- ---------- ------- ---------- ---------- --------
Net change in unrealized
appreciation 779,981 6,095,272 37,597,019 680,840 4,569,545 2,584,530 213,154
---------- ---------- ---------- ------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (256,439) 7,141,227 39,040,779 569,749 2,779,094 2,277,051 213,142
---------- ---------- ---------- ------- ---------- ---------- --------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $606,654 $7,885,022 $38,871,672 $613,099 $8,087,106 $4,085,670 $729,730
========== ========== =========== ======== ========== ========== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
FS-19
<PAGE> 134
WESTCORE ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Equity Income Fund
---------------------------------------
For the Year Ended May 31,
---------------------------------------
FROM INVESTMENT ACTIVITIES 1995 1994
--------------- ---------------
<S> <C> <C>
Net investment income $ 863,093 $1,815,889
Net realized gain (loss) on investments (1,036,420) 1,098,005
Net unrealized appreciation (depreciation) 779,981 (2,498,724)
------------ ------------
Net increase in net assets resulting from operations 606,654 415,170
------------ ------------
Dividends to shareholders from net investment income
Institutional class (834,009) (1,810,570)
Retail class (70,652) (116,182)
Distributions to shareholders from net realized gain on
investments
Institutional class (1,003,450) (2,011,385)
Retail class (94,567) (129,069)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets derived from institutional
class beneficial interest transactions - Note 2 (14,255,191) 11,148,662
------------ ------------
Net increase (decrease) in net assets derived from retail
class beneficial interest transactions - Note 2 (118,398) 3,381,860
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (15,769,613) 10,878,486
NET ASSETS:
Beginning of period 46,669,558 35,791,072
------------ ------------
End of period (including undistributed net investment income
of $26,424 and $67,992, respectively) $30,899,945 $46,669,558
============ ============
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
Modern Value Equity Fund
---------------------------------------
For the Year Ended May 31,
---------------------------------------
FROM INVESTMENT ACTIVITIES 1995 1994
--------------- ---------------
<S> <C> <C>
Net investment income $743,795 $744,111
Net realized gain (loss) on investments 1,045,955 790,992
Net unrealized appreciation (depreciation) 6,095,272 (687,116)
------------ ------------
Net increase in net assets resulting from operations 7,885,022 847,987
------------ ------------
Dividends to shareholders from net investment income (498,807) (962,104)
Distributions to shareholders from net realized gain on investments (622,592) (2,758,433)
------------ ------------
Change in net assets derived from investment activities 6,763,623 (2,872,550)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS
Shares sold 21,451,091 12,315,036
Shares issued in reinvestment of dividends 1,004,437 3,611,250
------------ ------------
22,455,528 15,926,286
Shares redeemed (13,348,260) (4,555,265)
------------ ------------
Change in net assets derived from beneficial interest transactions 9,107,268 11,371,021
------------ ------------
NET INCREASE IN NET ASSETS 15,870,891 8,498,471
NET ASSETS:
Beginning of period 36,674,390 28,175,919
------------ ------------
End of period (including undistributed net
investment income of $226,846 and ($18,142), respectively) $52,545,281 $36,674,390
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
FS-20
<PAGE> 135
WESTCORE ANNUAL REPORT
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS MIDCO Growth Fund
--------------------------------------
For the Year Ended May 31,
--------------------------------------
FROM INVESTMENT ACTIVITIES 1995 1994
--------- ---------
<S> <C> <C>
Net investment loss $(169,107) $(294,965)
Net realized gain on investments 1,443,760 21,568,925
Net unrealized appreciation (depreciation) 37,597,019 (1,433,219)
---------- ----------
Net increase in net assets resulting from operations 38,871,672 19,840,741
---------- ----------
Dividends to shareholders from net investment income
Institutional class 0 (13,415)
Retail class 0 (465)
Return of capital distribution to shareholders
Institutional class 0 (281,432)
Retail class 0 (9,785)
Distributions to shareholders from net realized gain on investments
Institutional class (11,450,951) (17,285,280)
Retail class (685,566) (600,978)
---------- ----------
FROM BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets derived from institutional
class beneficial interest transactions - Note 2 41,013,312 112,875,322
---------- -----------
Net increase in net assets derived from retail class
beneficial interest transactions - Note 2 7,925,300 5,642,805
---------- -----------
NET INCREASE IN NET ASSETS 75,673,767 120,167,513
NET ASSETS:
Beginning of period 351,762,447 231,594,934
----------- -----------
End of period (including undistributed net investment
income of ($866,631) and ($697,524), respectively) $427,436,214 $351,762,447
----------- -----------
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS Small-Cap
Opportunity Fund
--------------------------------------
For the Period Ended May 31,
--------------------------------------
FROM INVESTMENT ACTIVITIES 1995 1994(1)
--------- ---------
<S> <C> <C>
Net investment income $43,350 $6,679
Net realized gain (loss) on investments (111,091) 72,910
Net unrealized appreciation 680,840 13,020
---------- ----------
Net increase in net assets resulting from operations 613,099 92,609
---------- ----------
Dividends to shareholders from net investment income
Institutional class (35,513) (2,609)
Retail class (2,821) (315)
Distributions to shareholders from net realized gain on investments
Institutional class (66,448) 0
Retail class (6,502) 0
---------- ----------
FROM BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets derived from institutional
class beneficial interest transactions - Note 2 7,089,788 2,055,405
---------- -----------
Net increase in net assets derived from retail class
beneficial interest transactions - Note 2 389,185 511,000
---------- -----------
NET INCREASE IN NET ASSETS 7,980,788 2,656,090
---------- -----------
NET ASSETS:
Beginning of period 2,656,105 15*
----------- -----------
End of period (including undistributed net investment
income of $8,769 and $3,753, respectively) $10,636,893 $2,656,105
----------- -----------
</TABLE>
*Initial capitalization
(1) Fund commenced operations on December 28, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
21
FS-21
<PAGE> 136
WESTCORE ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
-------------------------------------------
For the Year Ended May 31,
-------------------------------------------
1995 1994
------------------- -------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net investment income $ 5,308,012 $ 5,577,009
Net realized gain (loss) on investments (1,790,451) 20,689
Net unrealized appreciation (depreciation) 4,569,545 (5,873,892)
------------------- -------------------
Net increase (decrease) in net assets resulting from operations 8,087,106 (276,194)
------------------- -------------------
Dividends to shareholders from net investment income
Institutional class (5,349,712) (5,449,388)
Retail class (140,002) (98,192)
Distribution to shareholders from net realized gain on investments
Institutional class 0 (1,905,350)
Retail class 0 (34,925)
------------------- -------------------
FROM BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets derived from institutional class
beneficial interest transactions - Note 2 6,124,220 (2,700,262)
------------------- -------------------
Net increase in net assets derived from retail class beneficial
interest transactions - Note 2 562,082 1,901,161
------------------- -------------------
NET INCREASE (DECREASE) IN NET ASSETS 9,283,694 (8,563,150)
NET ASSETS:
Beginning of period 90,905,891 99,469,041
------------------- -------------------
End of period (including undistributed net investment income
of $102,456 and $284,158, respectively) $100,189,585 $90,905,891
=================== ===================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Long-Term Bond Fund
-------------------------------------------
For the Year Ended May 31,
-------------------------------------------
1995 1994
------------------- -------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net investment income $ 1,808,619 $ 1,702,823
Net realized gain (loss) on investments (307,479) 899,368
Net unrealized appreciation (depreciation) 2,584,530 (3,019,626)
------------------- -------------------
Net increase (decrease) in net assets resulting from operations 4,085,670 (417,435)
------------------- -------------------
Dividends to shareholders from net investment income (1,816,108) (1,683,968)
Distributions to shareholders from net realized gain on
investments 0 (3,951,682)
------------------- -------------------
Change in net assets derived from investment activities 2,269,562 (6,053,085)
------------------- -------------------
FROM BENEFICIAL INTEREST TRANSACTIONS
Shares sold 10,155,539 9,076,048
Shares issued in reinvestment of dividends 1,662,861 5,464,378
------------------- -------------------
11,818,400 14,540,426
Shares redeemed (7,609,598) (7,806,101)
------------------- -------------------
Change in net assets derived from beneficial interest transactions 4,208,802 6,734,325
------------------- -------------------
NET INCREASE IN NET ASSETS 6,478,364 681,240
NET ASSETS:
Beginning of period 26,961,848 26,280,608
------------------- -------------------
End of period (including undistributed net investment income
of $56,418 and $63,907 respectively) $ 33,440,212 $26,961,848
=================== ===================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
FS-22
<PAGE> 137
WESTCORE ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Colorado Tax-Exempt Fund
------------------------------------
For the Year Ended May 31,
------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net investment income $516,588 $451,057
Net realized gain (loss) on investments (12) 1,996
Net unrealized appreciation (depreciation) 213,154 (233,645)
----------- -----------
Net increase in net assets resulting from operations 729,730 219,408
----------- -----------
Dividends to shareholders from net investment income (535,461) (445,781)
Distributions to shareholders from net realized gain on investment 0 (3,970)
----------- -----------
Change in net assets derived from investment activities 194,269 (230,343)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS
Shares sold 1,234,996 4,989,722
Shares issued in reinvestment of dividends 324,646 284,886
----------- -----------
1,559,642 5,274,608
Shares redeemed (1,515,481) (1,816,654)
----------- -----------
Change in net assets derived from beneficial interest transactions 44,161 3,457,954
----------- -----------
NET INCREASE IN NET ASSETS 238,430 3,227,611
NET ASSETS:
Beginning of period 10,553,266 7,325,655
----------- -----------
End of period (including undistributed net investment income
of ($1,653) and $17,220, respectively) $10,791,696 $10,553,266
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
FS-23
<PAGE> 138
<TABLE>
<CAPTION>
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED: Equity Income Fund
------------------------------------------------------------------------
Institutional Shares Retail Shares
------------------------------------------ ---------------------
For the
Period Ended
For the Year Ended May 31, May 31,
------------------------------------------- ----------------------
1995 1994 1993 1992 1991 1995 1994*
------ ----- ------ ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period: $10.62 $11.51 $10.99 $10.10 $9.94 $10.63 $11.65
------- ------- ------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.20 0.51 0.32 0.32 0.32 0.19 0.15
Net realized and unrealized gain (loss) on
investments 0.15 (0.30) 0.68 1.05 0.48 0.14 (0.45)
------- ------- ------- ------- ------- ------ ------
Total income (loss) from investment operations 0.35 0.21 1.00 1.37 0.80 0.33 (0.30)
------- ------- ------- ------- ------- ------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.21) (0.54) (0.20) (0.43) (0.33) (0.19) (0.16)
Distributions from net realized gain on
investments (0.26) (0.56) (0.28) (0.05) (0.31) (0.26) (0.56)
------- ------- ------- ------- ------- ------ ------
Total dividends and distributions to
shareholders (0.47) (1.10) (0.48) (0.48) (0.64) (0.45) (0.72)
------- ------- ------- ------- ------- ------ ------
Net asset value - end of period $10.50 $10.62 $11.51 $10.99 $10.10 $10.51 $10.63
------- ------- ------- ------- ------- ------ ------
Total return (2) 3.73% 1.71% 9.41% 14.12% 9.07% 3.48% (4.20%)(3)
======= ======= ======= ======= ======= ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $27,029 $42,644 $35,791 $25,128 $19,932 $3,871 $4,026
======= ======= ======= ======= ======= ====== ======
Ratio of expenses to average
net assets 1.17% 1.03% 0.99% 0.95% 0.90% 1.41% 1.25% (3)
======= ======= ======= ======= ======= ====== ======
Ratio of net investment income to average
net assets 2.09% 4.45% 2.75% 3.03% 3.51% 1.86% 2.12% (3)
======= ======= ======= ======= ======= ====== ======
Ratio of expenses to average net assets
without fee waivers 1.22% 1.06% 1.03% 1.02% 1.00% 1.47% 1.27% (3)
======= ======= ======= ======= ======= ====== ======
Ratio of net investment income to average net
assets without fee waivers 2.04% 4.42% 2.71% 2.96% 3.41% 1.80% 2.09% (3)
======= ======= ======= ======= ======= ====== ======
Portfolio turnover rate (1) 81.14% 53.86% 61.24% 68.56% 64.94% 81.14% 53.86%
</TABLE>
(1) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less
at the time of acquisition) for a period and dividing it by the
monthly average of the market value of such securities during the
period. Purchases and sales of investment securities (excluding
short-term securities) for the period ended May 31, 1995 were
$32,459,150 and $46,680,289, respectively.
(2) Sales charges are not reflected in total return.
(3) Annualized.
* For the period October 11, 1993(inception of offering) to May 31, 1994.
SEE NOTES TO FINANCIAL STATEMENTS
24
FS-24
<PAGE> 139
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the periods indicated:
<TABLE>
<CAPTION>
Modern Value Equity Fund
--------------------------------------------------
For the Year Ended May 31,
--------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD $12.70 $13.87 $13.35 $12.68 $11.74
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.40 0.34 0.28 0.29
Net realized and unrealized gain on
investments 2.12 0.04 1.13 0.95 1.15
------ ------ ------ ------ ------
Total income from investment operations 2.35 0.44 1.47 1.23 1.44
------ ------ ------ ------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.16) (0.43) (0.21) (0.35) (0.30)
Distributions from net realized gain on
investments (0.19) (1.18) (0.74) (0.21) (0.20)
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (0.35) (1.61) (0.95) (0.56) (0.50)
------ ------ ------ ------ ------
Net asset value - end of period $14.70 $12.70 $13.87 $13.35 $12.68
====== ====== ====== ====== ======
Total return (2) 19.03% 3.12% 11.62% 10.02% 13.08%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $52,545 $36,674 $28,176 $30,572 $27,208
====== ====== ====== ====== ======
Ratio of expenses to average
net assets 1.01% 1.06% 0.99% 0.91% 0.84%
====== ====== ====== ====== ======
Ratio of net investment income to average
net assets 1.78% 2.30% 2.37% 2.17% 2.65%
====== ====== ====== ====== ======
Ratio of expenses to average net assets
without fee waivers 1.06% 1.09% 1.02% 0.97% 0.94%
====== ====== ====== ====== ======
Ratio of net investment income to average
net assets without fee waivers 1.73% 2.27% 2.34% 2.11% 2.55%
====== ====== ====== ====== ======
Portfolio turnover rate (1) 61.72% 41.32% 85.53% 123.91% 142.01%
====== ====== ====== ======= =======
</TABLE>
(1) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less
at the time of acquisition) for a period and dividing it by the
monthly average of the market value of such securities during the
period. Purchases and sales of investment securities (excluding
short-term securities) for the period ended May 31, 1995 were
$32,109,649 and $24,376,105, respectively.
(2) Sales charges are not reflected in total return.
SEE NOTES TO FINANCIAL STATEMENTS
25
FS-25
<PAGE> 140
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the periods indicated:
<TABLE>
<CAPTION>
MIDCO Growth Fund
-------------------------------------------------------------------------
Institutional Shares Retail Shares
----------------------------------------------- ------------------------
For the
Period Ended
For the Year Ended May 31, May 31,
----------------------------------------------- ------------------------
1995 1994 1993 1992 1991 1995 1994*
------- ------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.09 $15.79 $14.38 $14.00 $11.57 $16.10 $17.33
------- ------- ------- ------- ------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.00 0.00 0.04 0.06 0.07 (0.03) (0.01)
Net realized and unrealized gain (loss) on
investments 1.56 1.34 2.48 1.84 3.16 1.56 (0.19)
------- ------- ------- ------- ------- ---------- -----------
Total income (loss) from investment operations 1.56 1.34 2.52 1.90 3.23 1.53 (0.20)
------- ------- ------- ------- ------- ---------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income 0.00 0.00 0.00 (0.32) (0.08) (0.00) 0.00
Distributions from net realized gain on
investments (0.53) (1.03) (1.11) (1.20) (0.72) (0.53) (1.02)
Return of Capital (0.00) (0.01) (0.00) (0.00) (0.00) (0.00) (0.01)
------- ------- ------- ------- ------- ---------- -----------
Total dividends, distributions, and
return of capital to shareholders (0.53) (1.04) (1.11) (1.52) (0.80) (0.53) (1.03)
------- ------- ------- ------- ------- ---------- -----------
Net asset value - end of period $17.12 $16.09 $15.79 $14.38 $14.00 $17.10 $16.10
======= ======= ======= ======= ======= ========== ===========
Total return (2) 10.05% 8.37% 18.04% 14.09% 30.44% 9.78% (1.88%)(3)
======= ======= ======= ======= ======= ========== ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $401,760 $335,453 $231,595 $180,681 $131,420 $25,677 $16,309
======= ======= ======= ======= ======= ========== ===========
Ratio of expenses to average
net assets 0.94% 0.84% 0.83% 0.80% 0.78% 1.19% 1.10% (3)
======= ======= ======= ======= ======= ========== ===========
Ratio of net investment income (loss) to average
net assets (0.03%) (0.09%) 0.04% 0.12% 0.58% (0.28%) (0.37%)(3)
======= ======= ======= ======= ======= ========== ===========
Ratio of expenses to average net assets
without fee waivers 0.96% 0.87% 0.85% 0.85% 0.88% 1.21% 1.13% (3)
======= ======= ======= ======= ======= ========== ===========
Ratio of net investment income (loss) to average
net assets without fee waivers (0.05%) (0.12%) 0.02% 0.07% 0.48% (0.30%) (0.40%)(3)
======= ======= ======= ======= ======= ========== ===========
Portfolio turnover rate (1) 50.19% 52.05% 56.23% 48.17% 75.43% 50.19% 52.05%
======= ======= ======= ======= ======= ========== ===========
</TABLE>
(1) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less
at the time of acquisition) for a period and dividing it by the
monthly average of the market value of such securities during the
period. Purchases and sales of investment securities (excluding
short-term securities) for the period ended May 31, 1995 were
$207,617,530 and $182,126,502, respectively.
(2) Sales charges are not reflected in total return.
(3) Annualized.
* For the period October 11, 1993 (inception of offering) to May 31, 1994.
SEE NOTES TO FINANCIAL STATEMENTS
26
FS-26
<PAGE> 141
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the periods indicated:
<TABLE>
<CAPTION>
Small-Cap Opportunity Fund
-----------------------------------------------------------------
Institutional Shares Retail Shares
----------------------------- -------------------------------
For the For the
Period Ended Period Ended
May 31 May 31
----------------------------- -------------------------------
1995 1994(1) 1995 1994(1)
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net asset value -- beginning of period $ 14.97 $ 15.00 $ 14.96 $ 15.00
------------- ------------- -------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.05 0.06 0.03
Net realized and unrealized gain (loss) on investments 1.11 (0.05) 1.11 (0.04)
------------- ------------- -------------- -------------
Total income from investment operations 1.20 0.00 1.17 (0.01)
------------- ------------- -------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.10) (0.03) (0.06) (0.03)
Distributions from net realized gain on investments (0.12) 0.00 (0.12) 0.00
------------- ------------- -------------- -------------
Total dividends and distributions to shareholders (0.22) (0.03) (0.18) (0.03)
------------- ------------- -------------- -------------
Net asset value -- end of period $ 15.95 $ 14.97 $ 15.95 $ 14.96
============= ============= ============== =============
Total return(3) 8.15% (0.07%)(4) 7.96% (0.22%)(4)
============= ============= ============== =============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $9.703 $2.159 $934 $497
============= ============= ============== =============
Ratio of expenses to average net assets 1.27% 1.38%(4) 1.51% 1.63%(4)
============= ============= ============== =============
Ratio of net investment income to average net assets 0.61% 1.00%(4) 0.37% 0.64%(4)
============= ============= ============== =============
Ratio of expenses to average net assets without
fee waivers 2.77% 6.56%(4) 3.10% 6.81%(4)
============= ============= ============== =============
Ratio of net investment income to average net assets
without fee waivers (0.89%) (4.18%)(4) (1.22%) (4.54%)(4)
============= ============= ============== =============
Portfolio turnover rate(2) 59.17% 64.31%(4) 59.17% 64.31%(4)
============= ============= ============== =============
</TABLE>
(1) The Fund commenced operations on December 28, 1993.
(2) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
May 31, 1995 were $11,293,160 and $3,877,975, respectively.
(3) Sales charges are not reflected in total return.
(4) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
27
FS-27
<PAGE> 142
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
-------------------------------------------------------------------------
INSTITUTIONAL SHARES RETAIL SHARES
--------------------------------------------- ------------------------
FOR THE
PERIOD ENDED
FOR THE YEAR ENDED MAY 31, MAY 31,
--------------------------------------------- ------------------------
1995 1994 1993 1992 1991 1995 1994*
------- ------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $10.02 $10.70 $10.14 $9.80 $9.91 $10.03 $10.97
----- ----- ----- ----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.55 0.67 0.78 0.87 0.56 0.34
Net realized and unrealized gain (loss) on
investments 0.27 (0.52) 0.53 0.39 (0.10) 0.26 (0.77)
----- ----- ----- ----- ----- ----- ------
Total income from investment operations 0.85 0.03 1.20 1.17 0.77 0.82 (0.43)
----- ----- ----- ----- ----- ----- ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.60) (0.53) (0.64) (0.83) (0.88) (0.58) (0.33)
Distributions from net realized gain on
investments 0.00 (0.18) 0.00 0.00 0.00 0.00 (0.18)
----- ----- ----- ----- ----- ----- ------
Total dividends and distributions to
shareholders (0.60) (0.71) (0.64) (0.83) (0.88) (0.58) (0.51)
----- ----- ----- ----- ----- ----- ------
Net asset value - end of period $10.27 $10.02 $10.70 $10.14 $9.80 $10.27 $10.03
===== ===== ===== ===== ===== ===== ======
Total return (2) 8.93% 0.10% 12.16% 12.42% 8.30% 8.53% (6.33%)(3)
===== ===== ===== ===== ===== ===== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $97,619 $88,965 $99,469 $87,712 $68,958 $2,571 $1,941
====== ===== ===== ===== ====== ===== ======
Ratio of expenses to average
net assets 0.77% 0.68% 0.65% 0.61% 0.59% 0.99% 0.95%(3)
====== ===== ===== ===== ====== ===== ======
Ratio of net investment income to average
net assets 5.86% 5.03% 6.37% 7.73% 9.01% 5.64% 4.65%(3)
====== ===== ===== ===== ====== ===== ======
Ratio of expenses to average net assets
without fee waivers 0.80% 0.70% 0.67% 0.65% 0.65% 1.02% 0.97%(3)
====== ===== ===== ===== ====== ===== ======
Ratio of net investment income to average net assets
without fee waivers 5.83% 5.00% 6.35% 7.69% 8.95% 5.61% 4.63%(3)
====== ===== ===== ===== ====== ===== ======
Portfolio turnover rate (1) 60.86% 65.04% 87.17% 53.92% 80.20% 60.86% 65.04%
====== ===== ===== ===== ====== ===== ======
</TABLE>
(1) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less
at the time of acquisition) for a period and dividing it by the
monthly average of the market value of such securities during the
period. Purchases and sales of investment securities (excluding
short-term securities) for the year ended May 31, 1995 were
$59,523,270 and $52,479,535, respectively.
(2) Sales charges are not reflected in total return.
(3) Annualized.
* For the period October 11, 1993 (inception of offering) to May 31, 1994.
SEE NOTES TO FINANCIAL STATEMENTS
28
FS-28
<PAGE> 143
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the periods indicated:
<TABLE>
<CAPTION>
Long-Term Bond Fund
------------------------------------------------------------------
For the Year Ended May 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $9.22 $11.25 $10.60 $10.01 $10.11
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.59 0.62 0.77 0.80 1.08
Net realized and unrealized gain (loss) on
investments 0.66 (0.51) 0.99 0.56 0.04
------- ------- ------- ------- -------
Total income from investment operations 1.25 0.11 1.76 1.36 1.12
------- ------- ------- ------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.60) (0.62) (0.78) (0.77) (1.11)
Distributions from net realized gain on
investments 0.00 (1.52) (0.33) 0.00 (0.11)
------- ------- ------- ------- -------
Total dividends and distributions to
shareholders (0.60) (2.14) (1.11) (0.77) (1.22)
------- ------- ------- ------- -------
Net asset value - end of period $9.87 $9.22 $11.25 $10.60 $10.01
======= ======= ======= ======= =======
Total return (2) 14.37% (.25%) 17.40% 14.04% 11.87%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $33,440 $26,962 $26,281 $30,800 $27,448
======= ======= ======= ======= =======
Ratio of expenses to average
net assets 0.94% 0.89% 0.77% 0.70% 0.65%
======= ======= ======= ======= =======
Ratio of net investment income to average
net assets 6.54% 5.74% 6.63% 7.59% 8.29%
======= ======= ======= ======= =======
Ratio of expenses to average net assets
without fee waivers 0.99% 0.92% 0.80% 0.74% 0.73%
======= ======= ======= ======= =======
Ratio of net investment income to average net assets
without fee waivers 6.49% 5.71% 6.60% 7.55% 8.21%
======= ======= ======= ======= =======
Portfolio turnover rate (1) 25.09% 52.82% 79.16% 51.79% 81.13%
======= ======= ======= ======= =======
</TABLE>
(1) A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year ended
May 31, 1995 were $10,569,427 and $6,451,507, respectively.
(2) Sales charges are not reflected in total return.
SEE NOTES TO FINANCIAL STATMENTS
29
FS-29
<PAGE> 144
WESTCORE ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout the periods indicated:
<TABLE>
<CAPTION>
Colorado Tax-Exempt Fund
-------------------------------------------------------
For the Year Ended May 31,
-------------------------------------------------------
1995 1994 1993 1992(1)
---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $10.52 $10.71 $10.25 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.52 0.53 0.57 0.58
Net realized and unrealized gain (loss) on
investments 0.20 (0.19) 0.46 0.23
------ ------ ------ ------
Total income from investment operations 0.72 0.34 1.03 0.81
------ ------ ------ ------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.54) (0.53) (0.57) (0.56)
Distributions from net realized gain on
investments 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total dividends and distributions to
shareholders (0.54) (0.53) (0.57) (0.56)
------ ------ ------ ------
NET ASSET VALUE -- END OF PERIOD $10.70 $10.52 $10.71 $10.25
====== ====== ====== ======
TOTAL RETURN(3) 7.16% 3.22% 10.27% 8.36%
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000) $10,792 $10,553 $7,326 $4,511
====== ====== ====== ======
Ratio of expenses to average
net assets 0.42% 0.27% 0.22% 0.11%
====== ====== ====== ======
Ratio of net investment income to average
net assets 5.03% 4.98% 5.45% 5.84%
====== ====== ====== ======
Ratio of expenses to average net assets
without fee waivers 1.62% 1.59% 1.88% 1.65%
====== ====== ====== ======
Ratio of net investment income to average net assets
without fee waivers 3.83% 3.65% 3.79% 4.30%
====== ====== ====== ======
Portfolio turnover rate(2) 3.15% 9.76% 1.82% 12.95%
====== ====== ====== ======
</TABLE>
(1) Commencement of operations was June 1, 1991.
(2) A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities (excluding
securities with a maturity date of one year or less at the time of
acquisition) for a period and dividing it by the monthly average of the
market value of such securities during the period. Purchases and sales of
investment securities (excluding short-term securities) for the year
ended May 31, 1995 were $836,808 and $309,894, respectively.
(3) Sales charges are not reflected in total return.
SEE NOTES TO FINANCIAL STATEMENTS
30
FS-30
<PAGE> 145
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Westcore Trust ("the Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company.
Interests in the Equity Income, Modern Value Equity, MIDCO Growth, Small-Cap
Opportunity, Intermediate-Term Bond, Long-Term Bond and Colorado Tax-Exempt
Funds (the "Funds") are represented by separate classes of beneficial interest
of the Trust, which is organized as a Massachusetts business trust. The Modern
Value Equity, Long-Term Bond and Colorado Tax-Exempt Funds are sold with a
front-end sales charge unless the shareholder qualifies as an institution as
defined in the prospectus or unless the load is otherwise waived as provided in
the prospectus. Since October 11, 1993, the Equity Income, MIDCO Growth,
Small-Cap Opportunity and Intermediate-Term Bond Funds offer both Institutional
and Retail classes of shares. Institutional shares are sold without a sales
charge. Retail shares are generally sold with a front-end sales charge. Shares
sold to retail investors have their own distribution/administrative service
plan and certain expenses are directly allocated to that class.
The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of their financial
statements. The policies are in conformity with generally accepted accounting
principals.
INVESTMENT VALUATION - Securities of the Funds are valued at 4:00 p.m.
(Eastern time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sales price of
the day or, in the absence of sales, at values based on the average closing bid
and asked price. Securities for which market quotations are not readily
available are valued under procedures established by the Board of Trustees to
determine fair value in good faith.
REPURCHASE AGREEMENTS - The Funds' custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least 101% of the repurchase price. In the
event of default on the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
FEDERAL INCOME TAXES - It is the Funds' policy to continue to comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of their taxable income to
shareholders. Therefore, no federal income tax provision is required. At May
31, 1995 the Equity Income, Small-Cap Opportunity, Intermediate-Term Bond,
Long-Term Bond and Colorado Tax-Exempt Funds had available for federal income
tax purposes unused capital loss carryovers of approximately $1,036,420,
$66,646, $1,443,406, $307,437, and $2,319, respectively, which will expire in
2003.
ORGANIZATION COSTS - Costs incurred in connection with the
organization, initial registration and public offering of shares have been paid
by the Funds. These costs are being amortized over the period of the benefit,
but not to exceed sixty (60) months, from the Funds' commencements of
operations.
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES - The Equity
Income, MIDCO Growth, Small-Cap Opportunity and Intermediate-Term Bond Funds
allocate income, expenses (other than the class specific expenses) and gains
and losses daily to each class of shares based upon the relative proportion of
net assets represented by each class. Operating expenses directly attributable
to a specific class are charged against the operations of that class.
OTHER - Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Distributions of net realized gains, if any, are declared at least once each
year. Realized gains and losses from investment transactions and unrealized
appreciation and depreciation of investments are reported on an identified cost
basis which is the same basis the Funds use for federal income tax purposes.
31
FS-31
<PAGE> 146
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
On May 31, 1995, there was an unlimited number of no par value shares of
beneficial interest authorized for each class of shares. Transactions in shares
of beneficial interest were as follows:
<TABLE>
<CAPTION>
Equity Income Fund
-----------------------------------------------------------
For the Year For the Period
Ended May 31, 1995 Ended May 31, 1994*
---------------------------- --------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS:
Shares sold 947,656 $ 9,727,032 1,480,455 $17,327,929
Shares issued in reinvestment of dividends 160,970 1,558,375 296,909 3,271,893
---------- ------------ --------- -----------
Total 1,108,626 11,285,407 1,777,364 20,599,822
Shares redeemed (2,549,105) (25,540,598) (873,666) (9,451,160)
---------- ------------ --------- -----------
Net increase (decrease) (1,440,479) $(14,255,191) 903,698 $11,148,662
========== ============ ========= ===========
RETAIL CLASS:
Shares sold 137,072 $ 1,414,084 404,999 $ 4,462,429
Shares issued in reinvestment of dividends 16,645 161,116 37,741 411,157
---------- ------------ --------- -----------
Total 153,717 1,575,200 442,740 4,873,586
Shares redeemed (164,093) (1,693,598) (64,052) (1,491,726)
---------- ------------ --------- -----------
Net increase (decrease) (10,376) $ (118,398) 378,688 $ 3,381,860
========== ============ ========= ===========
<CAPTION>
Modern Value Equity Fund
----------------------------
For the Year
Ended May 31
----------------------------
1995 1994
------ ------
<S> <C> <C>
Shares sold 1,616,124 927,720
Shares issued in reinvestment of dividends 78,963 278,984
---------- ---------
Total 1,695,087 1,206,704
Shares redeemed (1,007,962) (351,784)
---------- ---------
Net increase in shares 687,125 854,920
========== =========
</TABLE>
(1) For the period December 28, 1993 (commencement of operations) to May 31,
1994 for Institutional shares and Retail shares.
32
FS-32
<PAGE> 147
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST (Continued)
<TABLE>
<CAPTION>
MIDCO Growth Fund
------------------------------------------------------
For the Year For the Period
Ended May 31, 1995 Ended May 31, 1994*
------------------ -------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS:
Shares sold 7,023,125 $114,412,350 6,930,060 $125,089,532
Shares issued in reinvestment of dividends 698,545 10,911,274 942,049 15,327,133
--------- ------------ --------- ------------
Total 7,721,670 125,323,624 7,872,109 140,416,665
Shares redeemed (5,109,370) (84,310,312) (1,694,370) (27,541,343)
--------- ------------ --------- ------------
Net increase 2,612,300 $41,013,312 6,177,739 $112,875,322
========= ============ ========= ============
RETAIL CLASS:
Shares sold 807,820 $13,203,520 1,070,402 $18,083,571
Shares issued in reinvestment of dividends 43,618 681,314 137,838 2,242,627
--------- ------------ --------- -----------
Total 851,438 13,884,834 1,208,240 20,326,198
Shares redeemed (362,309) (5,959,534) (195,584) (14,683,393)
--------- ------------ --------- -----------
Net increase 489,129 $7,925,300 1,012,656 $5,642,805
========= ============ ========= ===========
</TABLE>
* For the year ended May 31, 1994, for Institutional shares and for the
period October 11, 1993 (inception of offering) to May 31, 1994 for
Retail shares.
<TABLE>
<CAPTION>
Small-Cap
Opportunity Fund
------------------------------------------------------
For the Year For the Period
Ended May 31, 1995 Ended May 31, 1994(1)
------------------ ----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS:
Shares sold 486,557 $7,428,629 78,774 $1,074,195
Issuance of shares in exchange for investment
securities (Note 5) 0 0 65,683 985,250
Shares issued in reinvestment of dividends 6,861 99,590 140 2,262
-------- ---------- ------- ----------
Total 493,418 7,528,219 144,597 2,061,707
Shares redeemed (29,115) (438,431) (393) (6,302)
-------- ---------- ------- ----------
Net increase 464,303 $7,089,788 144,204 $2,055,405
======== ========== ======= ==========
RETAIL CLASS:
Shares sold 40,377 $610,631 33,650 $516,991
Shares issued in reinvestment of dividends 641 9,286 20 315
-------- ---------- ------- ----------
Total 41,018 619,917 33,670 517,306
Shares redeemed (15,699) (230,732) (419) (6,306)
-------- ---------- ------- ----------
Net increase 25,319 $389,185 33,251 $511,000
======== ========== ======= ==========
</TABLE>
(1) For the period December 28, 1993 (commencement of operations) to
May 31, 1994 for Institutional and Retail shares.
33
FS-33
<PAGE> 148
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUTED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
-----------------------------------------------------------
For the Year For the Period
Ended May 31, 1995 Ended May 31, 1994*
--------------------------- ---------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
INSTITUTIONAL CLASS:
Shares sold 2,870,047 $28,408,983 2,738,480 $29,562,543
Shares issued in reinvestment of dividends 429,337 4,247,744 594,696 6,289,815
--------- ----------- --------- -----------
Total 3,299,384 32,656,727 3,333,176 35,852,358
Shares redeemed (2,669,887) (26,532,507) (3,753,851) (38,552,620)
--------- ----------- --------- -----------
Net increase (decrease) 629,497 $ 6,124,220 (420,675) ($ 2,700,262)
========= =========== ========= ===========
RETAIL CLASS:
Shares sold 133,381 $ 1,326,611 531,163 $11,379,275
Shares issued in reinvestment of dividends 12,418 122,850 29,979 317,293
--------- ----------- --------- -----------
Total 145,799 1,449,461 561,142 11,696,568
Shares redeemed (89,216) (887,379) (367,549) (9,795,407)
--------- ----------- --------- -----------
Net increase 56,583 $ 562,082 193,593 $ 1,901,161
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Long-Term Bond Fund
--------------------------
For the Year
Ended May 31,
--------------------------
1995 1994
--------- ----------
<S> <C> <C>
Shares sold 1,114,253 824,191
Shares issued in reinvestment of dividends 183,017 531,261
--------- ----------
Total 1,297,270 1,355,452
Shares redeemed (833,904) (765,269)
--------- ----------
Net increase in shares 463,366 590,183
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Colorado Tax-Exempt Fund
---------------------------
For the Year
Ended May 31,
--------------------------
1995 1994
--------- ----------
<S> <C> <C>
Shares sold 120,163 462,768
Shares issued in reinvestment of dividends 31,410 26,410
--------- ----------
Total 151,573 489,178
Shares redeemed (146,459) (170,053)
--------- ----------
Net increase in shares 5,114 319,125
========= ==========
</TABLE>
* For the year ended May 31, 1994 for Institutional shares and for the period
October 11, 1993 (inception of offering) to May 31, 1994 for Retail shares.
34
FS-34
<PAGE> 149
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
<TABLE>
<CAPTION>
Equity Modern MIDCO Small-Cap
Income Value Equity Growth Opportunity
Fund Fund Fund Fund
------ ------------ ------- -----------
<S> <C> <C> <C> <C>
As of May 31, 1995
Gross appreciation (excess of
value over cost) $3,098,528 $10,330,429 $108,519,774 $1,017,069
Gross depreciation (excess of
cost over value) (657,530) (206,848) (10,551,767) (323,209)
---------- ----------- ------------ ----------
Net unrealized appreciation $2,440,998 $10,123,581 $ 97,968,007 $ 693,860
---------- ----------- ------------ ----------
</TABLE>
<TABLE>
<CAPTION>
Intermediate- Long-Term Colorado
Term Bond Bond Tax-Exempt
Fund Fund Fund
------------- ------------ -----------
<S> <C> <C> <C>
As of May 31, 1995
Gross appreciation (excess of
value over cost) $2,353,909 $1,933,980 $340,978
Gross depreciation (excess of
cost over value) (1,193,078) (414,237) (45,545)
---------- ---------- --------
Net unrealized appreciation $1,160,831 $1,519,743 $295,433
---------- ---------- --------
</TABLE>
4. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND OTHER RELATED
PARTY TRANSACTIONS
On March 31, 1995, the Westcore Trust (the "Trust") entered into new
investment advisory agreements for the Modern Value Equity, MIDCO Growth,
Small-Cap Opportunity, and Long-Term Bond Funds ("Funds") with Denver
Investment Advisors LLC, ("DIA"). DIA is a new company owned by the principal
officers of the Funds' investment sub-adviser, Denver Investment Advisors,
Inc., which acquired its investment advisory business from its indirect parent,
First Interstate Bancorp and has replaced First Interstate Bank of Denver, N.A.
as the Funds' investment adviser. The investment advisory agreements have been
approved by the Trust's Board of Trustees and shareholders and contain terms
and conditions similar to those which were in the Funds' agreements with the
former investment adviser.
On March 31, 1995, the Trust entered into new advisory and sub-advisory
agreements for the Equity Income and Intermediate-Term Bond Funds ("Funds").
First Interstate Capital Management, Inc. ("FICM"), an indirect subsidiary of
First Interstate Bancorp, has succeeded First Interstate Bank of Denver, N.A.,
a direct subsidiary of First Interstate Bancorp, as investment adviser to the
Funds. DIA became the Funds' investment sub-adviser. Each of these agreements
has been approved by the Trust's Board of Trustees and shareholders and
contains terms and conditions similar to those which were in the Funds' former
advisory and sub-advisory agreements.
On March 31, 1995, the Trust entered into a new advisory agreement for
the Colorado Tax-Exempt Fund ("Fund"). FICM has succeeded First Interstate Bank
of Denver, N.A., as investment adviser to the Fund. In addition, DIA has ceased
serving as investment sub-adviser. The investment advisory agreement has been
approved by the Trust's Board of Trustees and shareholders and contains terms
and conditions similar to those which were in the Fund's former advisory
agreement.
Pursuant to its advisory agreements with the Trust, DIA is entitled to
an investment advisory fee, computed daily and payable monthly of .65%, .65%,
1.00%, and .45% of the average net assets for the Modern Value, MIDCO Growth,
Small-Cap Opportunity and Long-Term Bond Funds, respectively.
35
FS-35
<PAGE> 150
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND OTHER RELATED PARTY
TRANSACTIONS (CONTINUED)
FICM is entitled to receive .65%, .45% and .50% of the average net
assets of the Equity Income, Intermediate-Term Bond and Colorado Tax-Exempt
Funds, respectively. From its fee, FICM has agreed to pay DIA, as sub-adviser,
an amount equal to 90% of the amount FICM received on Equity Income and
Intermediate-Term Bond Funds. The sub-advisory fee paid to DIA has no effect on
the advisory fee payable by the specified Funds. As of May 31, 1995, FICM and
their affiliated banks possessed on behalf of their underlying customer
accounts 50% of Equity Income-Institutional, 72% of Modern Value Equity, 45% of
MIDCO Growth-Institutional, 76% of Intermediate-Term Bond-Institutional, 80% of
Long-Term Bond, and 50% of Colorado Tax-Exempt shares outstanding.
First Interstate Bank of Denver, N.A. ("Denver") is the custodian of
the Funds. All custodial fees were waived by Denver for the year ended May 31,
1995. In addition, DIA and FICM, waived all of their advisory fees and
voluntarily assumed some of the expenses of the Small-Cap Opportunity and
Colorado Tax-Exempt Funds, respectively.
ALPS Mutual Funds Services, Inc. ("ALPS"), serves as the Funds'
administrator. ALPS is entitled to receive a fee from each Fund for its
administrative services, computed daily and payable monthly, at the annual rate
of .05% of the Funds' average net assets. For the year ended May 31, 1995, ALPS
waived a portion of its administrative fee payable by certain Funds.
Expenses for the Funds include legal fees paid to Drinker, Biddle &
Reath. A partner of that firm is secretary of the Trust.
The Equity Income, MIDCO Growth, Small-Cap Opportunity, and
Intermediate-Term Bond Funds have an approved plan of
distribution/administrative services for the Retail class allowing for up to
.35%, .35%, .35%, and .30%, respectively of net assets annually to reimburse
for costs incurred in distributing Retail shares of the Funds, including
amounts paid to brokers, dealers, banks, and other institutions. During the
period ended May 31, 1995, the Funds accrued to participants under the plan of
distribution .25% on an annual basis of the average net asset value of the
Retail shares.
5. ACQUISITION OF ASSETS
On December 27, 1993, the Small-Cap Opportunity Fund acquired all of
the assets of a collective investment fund managed by DIA at fair market value
in exchange for shares of the Fund as stipulated in the Agreement approved by
the Trust's Board of Trustees.
6. ALLOCATION OF CLASS EXPENSES FOR THE YEAR ENDED MAY 31, 1995
<TABLE>
<CAPTION>
Institutional Retail
Equity Income Fund Shares Shares Total
------------- ------ -----
<S> <C> <C> <C>
EXPENSES
Investment advisory fee $246,274 $25,239 $271,513
Administrative fee 18,944 1,941 20,885
Fund accounting 27,495 3,040 30,535
Legal 15,643 1,705 17,348
Audit 9,926 948 10,874
Custodian 21,625 2,389 24,014
Transfer agency 68,280 7,438 75,718
Printing 25,894 2,788 28,682
Distribution/administration assistance -- retail shares 0 8,741 8,741
Insurance 1,397 147 1,544
Registration 18,705 1,798 20,503
Trustee fee 1,814 189 2,003
Other 6,623 661 7,284
-------- ------- --------
Total Expenses 462,620 57,024 519,644
Expenses waived by custodian (21,625) (2,389) (24,014)
-------- ------- --------
Net Expenses $440,995 $54,635 $495,630
======== ======= ========
</TABLE>
36
FS-36
<PAGE> 151
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. ALLOCATION OF CLASS EXPENSES FOR THE YEAR ENDED
MAY 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
Institutional Retail
Shares Shares Total
------------- --------- ---------
<S> <C> <C> <C>
MIDCO Growth Fund
EXPENSES
Investment advisory fee $2,390,982 $138,141 $2,529,123
Administrative fee 183,922 10,626 194,548
Fund accounting 144,740 8,793 153,533
Legal 128,263 7,991 136,254
Audit 20,735 1,247 21,982
Custodian 83,026 4,824 87,850
Transfer agency 341,324 20,496 361,820
Printing 136,840 8,446 145,286
Distribution/administration assistance
-- retail shares 0 51,887 51,887
Insurance 11,759 693 12,452
Registration 33,560 1,948 35,508
Trustee fee 18,756 1,122 19,878
Other 32,932 1,706 34,638
---------- -------- ----------
Total Expenses 3,526,839 257,920 3,784,759
Expenses waived by custodian (83,026) (4,824) (87,850)
---------- -------- ----------
Net Expenses $3,443,813 $253,096 $3,696,909
========== ======== ==========
<CAPTION>
Institutional Retail
Shares Shares Total
------------- --------- ---------
<S> <C> <C> <C>
Small-Cap Opportunity Fund
EXPENSES
Investment advisory fee $ 65,983 $ 7,911 $ 73,894
Administrative fee 3,299 396 3,695
Fund accounting 20,335 2,145 22,480
Legal 2,306 245 2,551
Audit 8,585 1,180 9,765
Custodian 14,357 2,201 16,558
Amortization of organization costs 10,610 1,267 11,877
Transfer agency 34,163 4,811 38,974
Printing 15,773 1,719 17,492
Distribution/administration assistance
-- retail shares 0 1,964 1,964
Insurance 78 7 85
Registration 6,709 651 7,360
Trustee fee 323 48 371
Other 501 61 562
-------- ------- --------
Total Expenses 183,022 24,606 207,628
Expenses waived by:
Investment advisor (65,983) (7,911) (73,894)
Custodian (14,357) (2,201) (16,558)
Administrator (756) (152) (908)
Expenses reimbursed by
investment advisor (17,862) (2,338) (20,200)
-------- ------- --------
Net Expenses $ 84,064 $12,004 $ 96,068
======== ======= ========
</TABLE>
37
FS-37
<PAGE> 152
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. ALLOCATION OF CLASS EXPENSES FOR THE YEAR ENDED
MAY 31, 1995 (Continued)
<TABLE>
<CAPTION>
Institutional Retail
Intermediate-Term Bond Fund Shares Shares Total
------ ------ -----
<S> <C> <C> <C>
EXPENSES
Investment advisory fee $396,993 $10,820 $407,813
Administrative fee 44,111 1,202 45,313
Fund Accounting 47,830 1,336 49,166
Legal 34,095 933 35,028
Audit 15,609 431 16,040
Custodian 27,374 758 28,132
Transfer agency 63,456 1,774 65,230
Printing 39,439 1,102 40,541
Distribution/administration assistance - retail shares 0 5,276 5,276
Insurance 3,150 85 3,235
Registration 23,285 641 23,926
Trustee fee 3,933 108 4,041
Other 3,756 96 3,852
-------- -------- --------
Total Expenses 703,031 24,562 727,593
Expenses waived by
custodian (27,374) (758) (28,132)
-------- -------- --------
Net Expenses $675,657 $23,804 $699,461
======== ======== ========
</TABLE>
7. RESTRICTED SECURITIES
The Intermediate-Term Bond and Long-Term Bond Funds own restricted securities
purchased pursuant to Rule 144A of the Securities Act of 1933 (the Act). Rule
144A securities amount to 3.09% and 1.86% of the Intermediate-Term Bond and
Long-Term Bond Funds net assets, respectively, at May 31, 1995 and are listed
below.
<TABLE>
<CAPTION>
Security
-------- Acquisition Cost Valuation per Unit Fair Value
Intermediate-Term Bond Fund Date per Unit as of May 31, 1995 as of May 31, 1995
- --------------------------- ---- -------- ------------------ ------------------
<S> <C> <C> <C> <C>
CSR America, Inc., 6,875%, 03/01/04 02/24/94 $99.30 $98.38 $1,106,719
Defeasance Portfolio Management Trust,
Series 1, 5.635%, 07/15/98 09/01/93 $101.94 $97.00 970,000
Farmers Insurance Exchange, 8.50%, 08/01/04 07/25/94 $99.53 $102.38 1,023,750
----------
Total $3,100,469
==========
Long-Term Bond Fund
- -------------------
Farmers Insurance Exchange, 8.5625%,
05/01/24 05/04/94 $98.97 $95.88 $383,500
Principal Mutual Life Insurance, 7.875%,
03/01/24 03/03/94 $99.30 $96.00 240,000
----------
Total $623,500
==========
</TABLE>
38
FS - 38
<PAGE> 153
WESTCORE ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. PLAN OF REORGANIZATION
At a special meeting of the Westcore Board of Trustees on June 14,
1995, the Trustees unanimously approved a proposed plan of reorganization
between the Trust and Pacifica Funds Trust, another family of mutual funds
advised by affiliates of First Interstate Bancorp. The plan would involve
the conveyance of the assets and liabilities of Westcore's Money Market,
Prime Money Market, Treasury Money Market, Government Money Market, Cash
Reserve, Short-Term Government Bond, Bonds Plus, GNMA, Oregon Tax-Exempt,
Arizona Intermediate Tax-Free, Quality Tax-Exempt Income, California
Intermediate Tax-Free, Basic Value, Growth, and Balanced Investment Funds to
corresponding new or existing portfolios of Pacifica Funds Trust.
Consummation of the plan is subject to approval by the shareholders of the
Trust at meetings expected to be held September 1995, to approval by the
Board of Trustees of Pacifica Funds Trust, and to the satisfaction of normal
closing conditions. Subject to shareholder approval, the Westcore Trustees
also approved the appointment of DIA as investment advisor to the Colorado
Tax-Exempt, Equity Income, and Intermediate-Term Bond Funds.
These funds are not part of the plan of reorganization and, together
with the Modern Value Equity, MIDCO Growth, Small-Cap Opportunity and
Long-Term Bond Funds, would remain with the Trust and be advised by DIA.
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
During the fiscal year ended May 31, 1995, the Westcore funds paid the
following distributions:
<TABLE>
<CAPTION>
Ordinary Capital Total Corporate Dividend
Income Dividends Gains Distributions Distributions Received Deduction
---------------- ------------------- ------------- ------------------
<S> <C> <C> <C> <C>
Equity Income Fund
Institutional class $0.21 0.26 0.47 94.58%
Retail class $0.19 0.26 0.45 94.58%
Modern Value Equity Fund
Institutional class $0.16 0.19 0.35 89.77%
MIDCO Growth Fund
Institutional class $0.00 0.53 0.53 60.54%
Retail class $0.00 0.53 0.53 60.54%
Small-Cap Opportunity Fund $0.13 0.09 0.22 69.32%
Institutional class $0.09 0.09 0.18 69.32%
Retail class
</TABLE>
During the fiscal year ended May 31, 1995, 100 percent of the dividends paid by
the Colorado Tax-Exempt Fund from net investment income should be treated as
tax exempt dividends.
SEE NOTES TO FINANCIAL STATEMENTS
39
FS-39
<PAGE> 154
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-
A-1
<PAGE> 155
term promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
A-2
<PAGE> 156
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which is issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-
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dealers. The following summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for timely
repayment.
"A1" - Obligations are supported by a strong capacity for timely
repayment.
"A2" - Obligations are supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment. Such capacity is more susceptible to adverse changes in business,
economic or financial conditions than for obligations in higher categories.
"B" - Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial conditions.
"C" - Obligations for which there is an inadequate capacity to ensure
timely repayment.
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"D" - Obligations which have a high risk of default or which are
currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also
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used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no interest is
being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes such payments
will be made during such grace period. "D" rating is also used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are
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likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating
category.
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The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk- free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these ratings
is considered to be below investment grade. Although below investment grade,
debt rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal, interest or preferred dividends. Debt rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+."
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"A" - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that possess
one of these ratings are considered by Fitch to be speculative investments.
The ratings "BB" to "C" represent Fitch's assessment of the likelihood of
timely payment of principal and interest in accordance with the terms of
obligation for bond issues not in default. For defaulted bonds, the rating
"DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business,
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economic or financial conditions may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation
and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
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"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include
a plus or minus sign designation which indicates where within the respective
category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
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"MIG-3"/"VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
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APPENDIX B
As stated in the Prospectus, the Equity and Bond Funds may enter into
futures contracts and options for hedging purposes. Such transactions are
described in this Appendix.
I. Interest Rate Futures Contracts.
Use of Interest Rate Futures Contracts. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Funds may use interest rate
futures as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Funds presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with
long maturities and investing in bonds with short maturities when interest
rates are expected to increase, or conversely, selling short-term bonds and
investing in long-term bonds when interest rates are expected to decline.
However, because of the liquidity that is often available in the futures market
the protection is more likely to be achieved, perhaps at a lower cost and
without changing the rate of interest being earned by the Funds, through using
futures contracts.
Description of Interest Rate Futures Contracts. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase
would create an obligation by a Fund, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date
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without the making or taking of delivery of securities. Closing out a futures
contract sale is effected by a Fund entering into a futures contract purchase
for the same aggregate amount of the specific type of financial instrument and
the same delivery date. If the price of the sale exceeds the price of the
offsetting purchase, a Fund is immediately paid the difference and thus
realizes a gain. If the offsetting purchase price exceeds the sale price, a
Fund pays the difference and realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by the Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price, a Fund
realizes a gain, and if the purchase price exceeds the offsetting sale price, a
Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges - principally, the Chicago Board of Trade and
the Chicago Mercantile Exchange and the New York Futures Exchange. The Fund
would deal only in standardized contract's on recognized exchanges. Each
exchange guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term Treasury Bonds and Notes; Government
National Mortgage Association (GNMA) modified pass-through mortgage-backed
securities; three-month Treasury Bills; and ninety-day commercial paper. A
Fund may trade in any futures contract for which there exists a public market,
including, without limitation, the foregoing instruments.
II. Stock Index Futures Contracts.
General. A stock index assigns relative values to the stocks included
in the index and the index fluctuates with changes in the market values of the
stocks included. Some stock index futures contracts are based on broad market
indexes, such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index. In contrast, certain exchanges offer futures contracts on
narrower market indexes, such as the Standard & Poor's 100 or indexes based on
an industry or market segment, such as oil and gas stocks. Futures contracts
are traded on organized exchanges regulated by the Commodity Futures Trading
Commission. Transactions on such exchanges are cleared through a clearing
corporation, which guarantees the performance of the parties to each contract.
A Fund will sell index futures contracts in order to offset a decrease
in market value of its securities that might otherwise result from a market
decline. A Fund may do so either to hedge the value of its portfolio as a
whole, or to protect
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against declines, occurring prior to sales of securities, in the value of the
securities to be sold. Conversely, a Fund will purchase index futures
contracts in anticipation of purchases of securities. In a substantial
majority of these transactions, a Fund will purchase such securities upon
termination of the long futures position, but a long futures position may be
terminated without a corresponding purchase of securities.
In addition, a Fund may utilize stock index futures contracts in
anticipation of changes in the composition of its holdings. For example, in
the event that a Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. A
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of its portfolio will decline prior to the time of
sale.
III. Futures Contracts on Foreign Currencies.
A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of a foreign currency, for an amount fixed in
U.S. dollars. Foreign currency futures may be used by a Fund to hedge against
exposure to fluctuations in exchange rates between the U.S. dollar and other
currencies arising from multinational transactions.
IV. Margin Payments.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
a Fund will be required to deposit with the broker or in a segregated account
with a Fund's custodian an amount of cash or cash equivalents, the value of
which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin
is in the nature of a performance bond or good faith deposit on the contract
which is returned to a Fund upon termination of the futures contract assuming
all contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying instrument fluctuates making the long and short
positions in the futures contract more or less valuable, a
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process known as "marking-to-market." For example, when a Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and a
Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where a Fund has purchased a
futures contract and the price of the futures contract has declined in response
to a decrease in the underlying instruments, the position would be less
valuable and a Fund would be required to make a variation margin payment to the
broker. At any time prior to expiration of the futures contract, Denver
Investment Advisors may elect to close the position by taking an opposite
position, subject to the availability of a secondary market, which will operate
to terminate a Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to a Fund, and a Fund realizes a loss or gain.
V. Risks of Transactions in Futures Contracts.
There are several risks in connection with the use of futures by a Fund
as a hedging device. One risk arises because of the imperfect correlation
between movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may
move more than or less than the price of the securities being hedged. If the
price of the future moves less than the price of the securities which are the
subject of the hedge, the hedge will not be fully effective but, if the price
of the securities being hedged has moved in an unfavorable direction, a Fund
would be in a better position than if it had not hedged at all. If the price
of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the future. If the price of
the future moves more than the price of the hedged securities, a Fund involved
will experience either a loss or gain on the future which will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of securities being hedged and movements in the price of futures
contracts, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the future, or if otherwise deemed to
be appropriate by Denver Investment Advisors. Conversely, a Fund may buy or
sell fewer futures contracts if the volatility over a particular time period of
the prices of the securities being hedged is less than the volatility over such
time period of the futures contract being used, or if otherwise deemed to be
appropriate by Denver Investment Advisors. It is also possible that, where a
Fund has sold futures to hedge its portfolio against a decline in the market,
the market may advance
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and the value of securities held by a Fund may decline. If this occurred, a
Fund would lose money on the future and also experience a decline in value in
its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities or a currency before a Fund is able to invest its cash (or
cash equivalents) in securities (or options) in an orderly fashion, it is
possible that the market may decline instead; if a Fund then concludes not to
invest in securities or options at that time because of concern as to possible
further market decline or for other reasons, a Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
securities being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced thus producing distortions.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures
market may also cause temporary price distortions. Due to the possibility of
price distortion in the futures market, and because of the imperfect
correlation between the movements in the cash market and movements in the price
of futures, a correct forecast of general market trends or interest rate
movements by Denver Investment Advisors may still not result in a successful
hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Funds would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such
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circumstances, an increase in the price of the securities, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the securities will in
fact correlate with the price movements in the futures contract and thus
provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in
a futures contract may be adversely affected by "daily price fluctuation
limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at
a price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Successful use of futures by the Funds is also subject to Denver
Investment Advisor's ability to predict correctly movements in the direction of
the market. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting securities held in its portfolio and
securities prices increase instead, a Fund will lose part or all of the benefit
to the increased value of its securities which it has hedged because it will
have offsetting losses in its futures positions. In addition, in such
situations, if a Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market.
A Fund may have to sell securities at a time when it may be disadvantageous to
do so.
VI. Options on Futures Contracts.
The Funds may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option.
Upon exercise, the writer of the option is obligated to pay the difference
between the cash value of the futures contract and the exercise price. Like
the buyer or seller of a futures contract, the holder, or writer, of an option
has the right to terminate its position prior to the scheduled expiration of
the option by selling, or purchasing, an option of the same series, at which
time the person entering into the closing transaction will realize a gain or
loss.
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Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the
purchase or sale of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value of
the option purchased. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts
may frequently involve less potential risk to the Funds because the maximum
amount at risk is the premium paid for the options (plus transaction costs).
The writing of an option on a futures contract involves risks similar to those
risks relating to the sale of futures contracts. Although permitted by their
fundamental investment policies, the Funds do not currently intend to write
futures options during the current fiscal year, and will not do so in the
future absent any necessary regulatory approvals.
VII. Accounting and Tax Treatment.
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
Generally, futures contracts held by the Funds at the close of the
Funds' taxable year will be treated for federal income tax purposes as sold for
their fair market value on the last business day of such year, a process known
as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time a Fund holds the futures contract ("the 40-60
rule"). The amount of any capital gain or loss actually realized by a Fund in
a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by a Fund in a
prior year as a result of the constructive sale of the contracts. With respect
to futures contracts to sell, which will be regarded as parts of a "mixed
straddle" because their values fluctuate inversely to the values of specific
securities held by a Fund, losses as to such contracts to sell will be subject
to certain loss deferral rules which limit the amount of loss currently
deductible on either part of the straddle to the amount thereof which exceeds
the unrecognized gain (if any) with respect to the other part of the straddle,
and to certain wash sales regulations. Under short sales rules, which will
also be applicable, the holding period of the securities forming part of
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the straddle will (if they have not been held for the long-term holding period)
be deemed not to begin prior to termination of the straddle. With respect to
certain futures contracts, deductions for interest and carrying charges will
not be allowed. Notwithstanding the rules described above, with respect to
futures contracts to sell which are properly identified as such, a Fund may
make an election which will exempt (in whole or in part) those identified
futures contracts from being treated for federal income tax purposes as sold on
the last business day of a Fund's taxable year, but gains and losses will be
subject to such short sales, wash sales, loss deferral rules and the
requirement to capitalize interest and carrying charges. Under temporary
regulations, a Fund would be allowed (in lieu of the foregoing) to elect either
(1) to offset gains or losses from portions which are part of a mixed straddle
by separately identifying each mixed straddle to which such treatment applies,
or (2) to establish a mixed straddle account for which gains and losses would
be recognized and offset on a periodic basis during the taxable year. Under
either election, the 40-60 rule will apply to the net gain or loss attributable
to the futures contracts, but in the case of a mixed straddle account election,
no more than 50% of any net gain may be treated as long-term and no more than
40% of any net loss may be treated as short-term. Options on futures contracts
generally receive federal tax treatment similar to that described above.
Certain foreign currency contracts entered into by the Funds may be
subject to the "mark-to-market" process, but gain or loss will be treated as
100% ordinary income or loss. To receive such federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated
futures contracts are traded or upon which the settlement value of the contract
depends; (2) the contract must be entered into at arm's length at a price
determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under the provisions respecting foreign
currency contracts. As of the date of this Statement of Additional
Information, the Treasury has not issued any such regulations. Foreign
currency contracts entered into by a Fund may result in the creation of one or
more straddles for federal income tax purposes, in which case certain loss
deferral, short sales, and wash sales rules and the requirement to capitalize
interest and carrying charges may apply.
Some investments may be subject to special rules which govern the
federal income tax treatment of certain transactions denominated in terms of a
currency other than the U.S. dollar or determined by reference to the value of
one or more currencies other than the U.S. dollar. The types of transactions
covered by
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the special rules include the following: (i) the acquisition of, or becoming
the obligor under, a bond or other debt instrument (including, to the extent
provided in Treasury regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option and similar
financial instrument. However, regulated futures contracts and non-equity
options are generally not subject to the special currency rules if they are or
would be treated as sold for their fair market value at year-end under the
"mark-to-market" rules, unless an election is made to have such currency rules
apply. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer is also treated as a transaction subject to the special currency
rules. With respect to transactions covered by the special rules, foreign
currency gain or loss is calculated separately from any gain or loss on the
underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. In accordance with Treasury regulations, certain
transactions subject to the special currency rules that are part of a "section
988 hedging transaction" (as defined in the Code and the Treasury regulations)
will be integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. "Section 988 hedging transactions" are
not subject to the mark-to-market or loss deferral rules under the Code. It
is anticipated that some of the non-U.S. dollar denominated investments and
foreign currency contracts that a Fund may make or may enter into will be
subject to the special currency rules described above. Gain or loss
attributable to the foreign currency component of transactions engaged in by
the Funds which are not subject to special currency rules (such as foreign
equity investments other than certain preferred stocks) will be treated as
capital gain or loss and will not be segregated from the gain or loss on the
underlying transaction.
Under the federal income tax provisions applicable to regulated
investment companies, less than 30% of a company's gross income must be derived
from gains realized on the sale or other disposition of securities held for
less than three months. With respect to futures contracts and other financial
instruments subject to the "mark-to-market" rules, the Internal Revenue Service
has ruled in private letter rulings that a gain realized from such a futures
contract or financial instrument will be treated as being derived from a
security held for three months or more (regardless of the actual period for
which the contract or instrument is held) if the gain arises as a result of a
constructive sale under the "mark-to-market" rules, and will be treated as
being derived from a security held for less than three months only if the
contract or instrument is terminated (or
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transferred) during the taxable year (other than by reason of
marking-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. In determining
whether the 30% test is met for a taxable year, increases and decreases in the
value of the Funds' futures contracts and other investments that qualify as
part of a "designated hedge," as defined in the Code, may be netted.
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