<PAGE>
As filed with the Securities and Exchange Commission on August 28, 1998
FILE NOs. 811-8194
33-72424
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
- -------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
POST EFFECTIVE AMENDMENT NO. 11
And
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 13
- -------------------------------------------------------------------------------
FINANCIAL INVESTORS TRUST
(Exact name of registrant as specified in its charter)
370 17th Street, Suite 3100
Denver, Colorado 80202
(Address of principal executive offices)(Zip Code)
Registrant's Telephone Number, including Area Code: 303-623-2577
James V. Hyatt, Secretary
Financial Investors Trust
370 17th Street, Suite 3100
Denver, Colorado 80202
(Name and address of agent for service)
Copy to:
Lester Woodward, Esq.
Davis, Graham & Stubbs LLP
370 17th Street, Suite 4700
Denver, CO 80202
Approximate date of proposed public offering:
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on October __, 1998 pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a) (ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate; check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment. Title of securities being
registered: Shares of Beneficial Interest, $1.00 par value.
Registrant registered an indefinite number of shares pursuant to regulation
24f-2 under the Investment Company Act of 1940 on July 30, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
FINANCIAL INVESTORS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Expense Summary
Item 3. Condensed Financial Information.................. Financial Highlights
Item 4. General Description of
Registrant..................................... Fund Operations
Item 5. Management of the Fund........................... Management of the Fund;
Item 6. Capital Stock and Other
Securities..................................... Fund Operations; Taxes; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Operations; How to Invest in
the Fund; Shareholder Services
Item 8. Redemption or Repurchase......................... How to Redeem Shares
Item 9. Pending Legal Proceedings........................ Not Applicable
</TABLE>
i
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Expense Summary
Item 3. Condensed Financial Information.................. Financial Highlights
Item 4. General Description of
Registrant..................................... Fund Operations
Item 5. Management of the Fund........................... Management of the Fund
Item 6. Capital Stock and Other
Securities..................................... Fund Operations; Taxes; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Operations; How to Invest in
the Fund; Shareholder Services
Item 8. Redemption or Repurchase......................... How to Redeem Shares
Item 9. Legal Proceedings................................ Not Applicable
</TABLE>
ii
<PAGE>
PRIME MONEY MARKET FUND - CLASS I
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Expense Summary
Item 3. Condensed Financial Information.................. Not applicable
Item 4. General Description of
Registrant..................................... Fund Operations; Suitability;
Investment Instruments, Transactions
and Risks
Item 5. Management of the Fund........................... Management of the Fund
Item 6. Capital Stock and Other
Securities..................................... Fund Operations; Taxes; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Operations; How to Invest in
the Fund; Shareholder Services
Item 8. Redemption or Repurchase......................... How to Redeem Shares; Shareholder
Services
Item 9. Legal Proceedings................................ Not Applicable
</TABLE>
iii
<PAGE>
PRIME MONEY MARKET FUND - CLASS II
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Expense Summary
Item 3. Condensed Financial Information.................. Not applicable
Item 4. General Description of
Registrant..................................... Fund Operations; Suitability;
Investment Instruments, Transactions
and Risks
Item 5. Management of the Fund........................... Management of the Fund
Item 6. Capital Stock and Other
Securities..................................... Fund Operations; Taxes; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Operations; How to Invest in
the Fund; Shareholder Services
Item 8. Redemption or Repurchase......................... How to Redeem Shares; Shareholder
Services
Item 9. Legal Proceedings................................ Not Applicable
</TABLE>
iv
<PAGE>
U.S. TREASURY MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
PRIME MONEY MARKET FUND - CLASSES I & II
<TABLE>
<CAPTION>
Part B Statement of Additional Information
Caption
- ------ -----------------------------------
<S> <C> <C>
Item 10. Cover Page....................................... Cover Page
Item 11. Table of Contents................................ Table of Contents
Item 12. General Information and
History........................................ Not Applicable
Item 13. Investment Objective and
Policies....................................... Investment Policies; Investment
Restrictions
Item 14. Management of the
Registrant..................................... Management
Item 15. Control Persons and Principal
Holders of Securities.......................... Management; Shares of Beneficial
Interest
Item 16. Investment Advisory and
Other Services................................. Management; Custodian; Experts
Item 17. Brokerage Allocation and Other Practices......... Portfolio Transactions
Item 18. Capital Stock and Other
Securities..................................... Shares of Beneficial Interest
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.................................. How to Invest in the Fund (Part A);
Redemptions; How to Redeem
Shares (Part A); Determination of
Net Asset Value; Exchange Privilege
Item 20. Tax Status....................................... Fund Operations; Federal Income
Taxes
Item 21. Underwriters..................................... Management
</TABLE>
v
<PAGE>
<TABLE>
<S> <C> <C>
Item 22. Calculation of Performance
Data........................................... Calculation of Yields and
Performance Information
Item 23. Financial Statements............................. Financial Statements
</TABLE>
vi
<PAGE>
FINANCIAL INVESTORS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
ARISTATA COLORADO QUALITY TAX EXEMPT FUND
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Highlights
Item 3. Condensed Financial Information.................. Fund Expenses
Item 4. General Description of
Registrant..................................... The Fund; The Investment Policies and
Practices of the Fund; Portfolio
Transactions; Risks of Investing in the
Fund; Appendix
Item 5. Management of the Fund........................... Management of the Fund
Item 6. Capital Stock and Other
Securities..................................... Dividend and Tax Information; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Share Valuation; Minimum Purchase
Requirements; Purchase of Fund Shares;
Exchange of Fund Shares
Item 8. Redemption or Repurchase......................... Redemption of Fund Shares; Exchange of
Fund Shares
Item 9. Pending Legal Proceedings........................ Not Applicable
</TABLE>
<PAGE>
ARISTATA QUALITY BOND FUND
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Highlights
Item 3. Condensed Financial Information.................. Fund Expenses
Item 4. General Description of
Registrant..................................... The Fund; The Investment Policies and
Practices of the Fund; Portfolio
Transactions; Risks of Investing in the
Fund; Appendix
Item 5. Management of the Fund........................... Management of the Fund
Item 6. Capital Stock and Other
Securities..................................... Dividend and Tax Information; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Share Valuation; Minimum Purchase
Requirements; Purchase of Fund Shares;
Exchange of Fund Shares
Item 8. Redemption or Repurchase......................... Redemption of Fund Shares; Exchange of
Fund Shares
Item 9. Pending Legal Proceedings........................ Not Applicable
</TABLE>
<PAGE>
ARISTATA EQUITY FUND
<TABLE>
<CAPTION>
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
Item 1. Cover Page....................................... Cover Page
Item 2. Synopsis......................................... Highlights
Item 3. Condensed Financial Information.................. Fund Expenses
Item 4. General Description of
Registrant..................................... The Fund; The Investment Policies and
Practices of the Fund; Portfolio
Transactions; Risks of Investing in the
Fund;
Item 5. Management of the Fund........................... Management of the Fund
Item 6. Capital Stock and Other
Securities..................................... Dividend and Tax Information; Other
Information
Item 7. Purchase of Securities
Being Offered.................................. Fund Share Valuation; Minimum Purchase
Requirements; Purchase of Fund Shares;
Exchange of Fund Shares
Item 8. Redemption or Repurchase......................... Redemption of Fund Shares; Exchange of
Fund Shares
Item 9. Pending Legal Proceedings........................ Not Applicable
</TABLE>
<PAGE>
ARISTATA EQUITY FUND
ARISTATA QUALITY BOND FUND
ARISTATA COLORADO QUALITY TAX EXEMPT FUND
<TABLE>
<CAPTION>
Part B Statement of Additional Information Caption
- ------ -------------------------------------------
<S> <C> <C>
Item 10. Cover Page....................................... Cover Page
Item 11. Table of Contents................................ Table of Contents
Item 12. General Information and
History........................................ Not Applicable
Item 13. Investment Objective and
Policies....................................... Investment Policies; Investment
Restrictions
Item 14. Management of the
Registrant..................................... Management
Item 15. Control Persons and Principal
Holders of Securities.......................... Management; Other Information -
Capitalization
Item 16. Investment Advisory and
Other Services................................. Management; Other Information
Item 17. Brokerage Allocation
and Other Practices............................. Portfolio Transactions
Item 18. Capital Stock and Other
Securities..................................... Other Information - Capitalization
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.................................. Determination of Net Asset Value;
Additional Purchase and Redemption
Information
Item 20. Tax Status....................................... Taxation
Item 21. Underwriters..................................... Management - Distribution of Fund Shares
Item 22. Calculation of Performance
Data........................................... Other Information - Yield and Performance
Information, Tax-Equivalent Yield
Calculations
Item 23. Financial Statements............................. Financial Statements
</TABLE>
<PAGE>
FINANCIAL INVESTORS TRUST August 28, 1998
370 Seventeenth Street
Suite 3100
Denver, Colorado 80202-5631
For additional information, call (800) 298-3442
U.S. TREASURY MONEY MARKET FUND
This Prospectus describes the U.S. Treasury Money Market Fund (the "Fund"),
a diversified no-load money market fund offered to institutional investors and
high net worth individuals by Financial Investors Trust (the "Trust"), a
Delaware business trust. Shares of the Fund are sold without the imposition of
Rule 12b-1 fees or other sales-related charges.
The Fund seeks to provide investors with as high a level of current income
as is consistent with the preservation of capital and liquidity by investing
exclusively in U.S. Treasury bills, notes and other direct obligations of the
U.S. Treasury and repurchase agreements collateralized to 102% by U.S. Treasury
obligations. The Fund is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain its net asset value
per share at $1.00 for purposes of purchases and redemptions.
Shares of the Fund are sold generally to municipal investors, including
municipalities, counties and state agencies, as well as other institutional
investors such as broker/dealers, corporations, investment advisers, credit
unions, banks, insurance companies and other financial institutions.
The Fund is sponsored and distributed by ALPS Mutual Funds Services, Inc.
("ALPS" or the "Administrator" or "Distributor") and is advised by GE Investment
Management Incorporated ("GEIM"or the "Adviser").
Shares in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the FDIC, the Federal Reserve
Board, or any other agency or insurer and they may involve investment risks
including the possible loss of principal.
This Prospectus sets forth concisely the information you should consider
before investing in the Fund. Please read this Prospectus and keep it for future
reference. Additional information about the Fund is contained in a Statement of
Additional Information (the "Statement of Additional Information") which has
been filed with the Securities and Exchange Commission and is available upon
request without charge by writing to or calling the Trust at the address and
telephone number listed above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated herein by reference.
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. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE SUMMARY 3
FINANCIAL HIGHLIGHTS 5
FUND OPERATIONS 6
SUITABILITY 8
MANAGEMENT OF THE FUND 9
HOW TO INVEST IN THE FUND 10
HOW TO REDEEM SHARES 11
SHAREHOLDER SERVICES 13
TAXES 14
OTHER INFORMATION 15
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
The summary below shows shareholder transaction expenses imposed by the
Fund and annual Fund operating expenses based on the actual operating expenses
for the fiscal year ended April 30, 1998, adjusted to reflect current fees of
the Fund. A hypothetical example based on the summary is also shown.
"Shareholder Transaction Expenses" are charges you pay when buying or selling
shares of the Fund whereas "Annual Fund Operating Expenses" are paid out of the
Fund's assets and include fees for portfolio management, Fund administration and
other services.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Load on
Purchases of Fund Shares None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)
The Management Fees described in the table below are based upon the Fund's
expenses for the fiscal year ended April 30, 1998, adjusted to reflect new fee
arrangements. Management fees may be higher to the extent the Fund's average net
assets exceed $500 million. Please read the following Annual Fund Operating
Expenses summary and accompanying footnotes carefully before investing.
Management Fees(1) 0.05%
12b-1 Fees None
All Other Expenses(2)
(Net of Fee Waivers and Reimbursements) 0.28%
Total Fund Operating Expenses
(Net of Fee Waivers and Reimbursements)(2) 0.33%
(1) The Fund is obligated to pay management fees to GEIM at the maximum
annual rate of 0.15% of the Fund's average net assets. Under its Investment
Advisory Agreement with the Fund, GEIM is entitled to receive management fees of
0.05% on the first $500 million of average net assets of the Fund, 0.075% on the
next $500 million, 0.10% on average net assets in excess of $1 billion but not
exceeding $1.5 billion, and 0.15% on average net assets in excess of $1.5
billion.
(2) The amount for "All Other Expenses" includes administration fees
payable to the Administrator calculated daily and payable monthly, at an annual
rate of the greater of $600,000 or 0.26% of average daily net assets of the Fund
up to $500 million, 0.24% of average daily net assets of the Fund in excess of
$500 million up to $1 billion and 0.22% of average daily net assets of the Fund
in excess of $1 billion. The Administrator has stated that it will voluntarily
waive a portion of the administration fees otherwise payable by the Fund, as
well as voluntarily assume a portion of Fund expenses to the extent necessary
for the Fund to maintain a total expense ratio of not more than 0.33% of the
average net assets of the Fund. Without this voluntary fee waiver and assumption
of expenses, and assuming payment of the maximum management and administration
fees, All Other Expenses and Total Fund Operating Expenses would be 0.46% and
0.61%, respectively, of the average net assets of the Fund. The Administrator
reserves the right to modify or terminate its fee waiver and assumption of
expenses at any time.
3
<PAGE>
The following example should not be considered a representation of future
expenses. The expenses set forth above and the example set forth below reflect
the non-imposition of certain fees and expenses. Actual expenses may be greater
or less than those shown.
Example:
Based upon the above summary of expenses and assuming a 5% annual return,
redemption at the end of each time period and the reinvestment of all dividends
and distributions, you would pay the following expenses on a $100,000 investment
in the Fund:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 338
3 Years $1,063
5 Years $1,857
10 Years $4,188
</TABLE>
Other Information
The Expense Summary and Example are intended to help you understand the
expenses you would bear either directly (as with the Shareholder Transaction
Expenses) or indirectly (as with the Annual Fund Operating Expenses) as a Fund
shareholder. As stated above, the Fund does not impose any sales-related charges
in connection with purchases of its shares, although certain service
institutions may charge their clients fees in connection with purchases and
sales for the accounts of their clients. These fees are in addition to the
expenses shown in the Expense Summary and Example. For a more complete
description of the Fund's operating expenses, see "Management of the Fund" in
this Prospectus and the Statement of Additional Information.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights have been derived from the Fund's financial
statements for the fiscal year ended April 30, 1998, which have been audited by
Deloitte & Touche LLP, independent auditors. Their report on the financial
statements and the financial highlights of the Fund is included in the Annual
Report. The financial statements and financial highlights are incorporated by
reference into the Fund's Statement of Additional Information. You should read
the financial highlights with the financial statements and related notes.
Further information about the performance of the Fund is available in the Annual
Report. You may obtain both the Statement of Additional Information and the
Annual Report free of charge by calling or writing to the Trust at the telephone
number or address listed on the first page.
U.S. TREASURY MONEY MARKET FUND
Selected data for a share of beneficial
interest outstanding throughout the period indicated(1):
<TABLE>
<CAPTION>
For the Year Ended April 30,
1998 1997 1996 1995 (2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value - beginning of period $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.05 0.05 0.05 0.04
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders
Dividends from net investment income (0.05) (0.05) (0.05) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value - end of period $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total return 5.30% 5.15% 5.44% 4.71%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (000) $138,169 $167,692 $316,364 $109,055
Ratio of expenses to average net assets 0.33% 0.30% 0.30% 0.50%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 5.18% 5.02% 5.36% 4.87%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
without fee waivers 0.55% 0.67% 0.71% 1.32%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets without fee waivers 4.96% 4.65% 4.95% 4.05%(3)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The financial highlights prior to March 24, 1997 reflect the operations
of the Fund while the Fund's investment adviser was FGIC Advisors, Inc. GEIM was
approved as the Fund's investment adviser at a special meeting of the
shareholders of the Fund on March 21, 1997.
(2) Operations commenced on May 25, 1994.
(3) Annualized.
5
<PAGE>
FUND OPERATIONS
Investment Objective
The Adviser will use its best efforts to achieve the investment objective
of the Fund as described below, although the achievement of the investment
objective, of course, cannot be assured. You should not consider the Fund, by
itself, to be a complete investment program. The Fund is a diversified, open-end
management investment company.
The Fund's investment objective is to seek as high a level of current
income as is consistent with preservation of capital and liquidity. The
securities held by the Fund have remaining maturities of thirteen months or
less. The average weighted maturity of the securities held by the Fund will not
exceed 90 days. The Fund's investment objective may not be changed without
approval of a majority of the Fund's outstanding shares.
In seeking to achieve its investment objective, the Fund invests
exclusively in direct obligations of the U.S. Treasury, such as Treasury bills
and notes and repurchase agreements with respect to such obligations. The Board
of Trustees shall make a determination that all portfolio securities purchased
by the Fund present minimal credit risk.
Securities issued by the U.S. Treasury have historically involved little
risk of default. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Fund. The Fund will seek to maintain a stable net asset value at $1.00 per
share. There is no assurance that the Fund will meet its investment objective.
Neither the United States, nor any agency or instrumentality thereof, has
guaranteed, sponsored or approved the Fund or its shares.
Investment Policies
Securities held by the Fund may be subject to repurchase agreements. A
repurchase agreement is a transaction in which the Fund agrees to purchase
portfolio securities from financial institutions, such as banks and
broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price. Although the securities subject to a repurchase
agreement might bear maturities exceeding thirteen months, the Fund presently
intends only to enter into repurchase agreements with maturities in excess of
seven days in cases where a liquidity feature, such as a put option, permits the
Fund to liquidate or terminate the repurchase agreement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the securities subject to the repurchase agreement at not less than 102% of the
principal value of the repurchase agreement, including any accrued interest
earned on the repurchase agreement. The Fund's custodian or subcustodian will
take possession of such collateral. The seller will collateralize the repurchase
agreement with U.S. Treasury obligations. Default by or bankruptcy of the seller
may, however, expose the Fund to possible loss because of adverse market action
or delay or transaction costs in connection with the disposition of the
underlying obligations. The Fund may enter into agreements with a single
counterparty that constitutes more than 5% of Fund assets.
The Fund may, in certain cases, calculate the maturity of a security with a
floating or variable rate or a demand feature in the manner specified in Rule
2a-7 under the Investment Company Act, with the effect that the maturity is
deemed to be shorter than its final date.
The Fund intends to purchase U.S. Treasury securities at auction from the
Federal Reserve.
6
<PAGE>
Investment Restrictions
The Fund is subject to a number of investment restrictions which reflect
self-imposed standards as well as federal regulatory limitations. These
limitations are designed to minimize certain risks associated with investing in
specified types of securities or engaging in certain transactions. The
investment restrictions may be changed only by a vote of a majority of the
Fund's outstanding shares.
The Fund may not:
1) Purchase securities other than direct obligations of the U.S. Treasury,
some of which may be subject to repurchase agreements, and repurchase agreements
collateralized to 102% by direct U.S. Treasury obligations.
2) Make loans, except that the Fund may purchase or hold debt instruments,
and enter into repurchase agreements in accordance with its investment objective
and policies.
3) Borrow money or issue senior securities, except that the Fund may borrow
from banks 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 borrowings and in amounts not in
excess of the dollar amounts borrowed or 10% of the value of the Fund's assets
at the time of borrowing. The Fund may not purchase securities while its
borrowings are outstanding.
4) With respect to more than 10% of Fund assets, enter into repurchase
agreements providing for settlement more than seven days after notice without a
liquidity feature such as a put option, permitting the Fund to liquidate or
terminate the repurchase agreement within seven days.
5) Purchase municipal bonds issued by an issuer any of whose outstanding
bonds are insured by Financial Guarantee Insurance Corporation ("FGIC").
6) Purchase collateralized mortgage obligations, inverse floaters or any
other securities commonly known as "derivatives".
7) Purchase illiquid securities, except for fully collateralized repurchase
agreements that, because of term limitations, are deemed to be illiquid.
8) Hold securities with remaining maturities exceeding thirteen months.
9) Purchase reverse repurchase agreements.
Determination of Net Asset Value
The value of the Fund's shares is referred to as "net asset value". Net
asset value per share for purposes of pricing purchases and redemptions is
calculated by adding the value of all securities and other assets belonging to
the Fund, subtracting its liabilities, and dividing the result by the number of
the Fund's outstanding shares. Net asset value is determined as of 5:00 p.m.
Eastern Time on each day the New York Federal Reserve and the New York Stock
Exchange are open for business. Currently, either the New York Federal Reserve
or the New York Stock Exchange is closed on New Years Day, Martin Luther King
Jr., Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. A
"Business Day" is any day on which the New York Federal Reserve and the New York
Stock Exchange are open for business.
The Board of Trustees has established procedures designed to maintain a
stable net asset value of $1.00 per share, to the extent reasonably possible.
The Board of Trustees has approved and adopted procedures under Rule 2a-7 under
the Investment Company Act of 1940, as amended, which was
7
<PAGE>
enacted by the SEC with the intent of stabilizing money market funds at $1.00
per share. Under the guidelines of Rule 2a-7, the Fund uses the amortized cost
method to value its portfolio securities. The amortized cost method involves
valuing a security at its cost and amortizing any discount or premium over the
period of maturity, regardless of the impact of fluctuating interest rates on
the market value of the security. Rule 2a-7 also provides that the Fund must
also do a "mark-to-market" analysis, where it is determined the degree to which
any variations may exist between the amortized pricing method and the actual
market price of the securities in the Fund. In the event the Board determines
that a deviation exists which may result in material dilution or other unfair
results to investors or existing shareholders, the Board will take such
corrective action as it regards as necessary and appropriate, including the sale
of portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity.
Rule 2a-7 also requires the Fund to maintain a dollar weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of 13 months or less and invest only in securities determined by the
Trust's Board of Trustees to be "eligible securities" and that present minimal
credit risks. The Board of Trustees or its delegate reviews the portfolio
securities monthly and at regularly scheduled quarterly Board of Trustees
meetings. There can be no assurance that at all times the $1.00 price per share
can be maintained. See the Statement of Additional Information for more details.
Dividends and Distributions
The Fund's net income is declared daily as a dividend at the close of
business on the day of declaration. Your shares begin earning dividends on the
day you purchase them, and continue to earn dividends through and including the
day before you redeem them. See "How to Invest in the Fund". The Fund pays
dividends not later than five business days after the end of each month in the
form of additional shares of the Fund, unless you elect prior to the date of
distribution to receive payment in cash. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash. If you redeem all of your
shares in the Fund, the Fund will pay your dividends in cash not later than five
business days after the redemption.
SUITABILITY
The Fund is designed as an economical and convenient professionally managed
investment vehicle for institutional investors and high net worth individuals
with cash balances or cash reserves who seek as high a level of current income
as is consistent with the preservation of capital and liquidity. The Fund is
designed to meet the specific cash management needs of institutional investors
such as Municipal Investors, broker/dealers, corporations, investment advisers,
credit unions, banks, insurance companies and other institutional investors.
"Municipal Investors" include any State, county, municipality, school district,
special district or political subdivision in the United States. The Fund may
also be suitable for institutions seeking an investment vehicle for daily cash
sweep or liquidity purposes on behalf of their clients.
Legislation in each state sets forth guidelines and limitations with
respect to investments by Municipal Investors located within the state. In
addition, Municipal Investors may be subject to local laws or have their own
guidelines and policies prescribing acceptable investments for cash management
purposes. Each Municipal Investor planning to invest in the Fund must
independently verify that the Fund meets all of the criteria of investment
policies and guidelines applicable to such Municipal Investor.
Future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations could prevent a Municipal Investor from
8
<PAGE>
continuing its investment in the Fund. Each Municipal Investor should therefore
remain aware of any changes in the applicable regulation of permitted
investments.
The Fund offers the advantages of purchasing power efficiencies and
diversification of risk. Generally, in purchasing debt instruments from dealers,
the percentage difference between the bid and asked price tends to decrease as
the size of the transaction increases. The Fund also offers investors the
opportunity to participate in a portfolio of U.S. Treasury obligations which is
more diversified in terms of issues and maturities than a portfolio a single
investor may otherwise be able to invest in.
Investment in the Fund relieves the investor of money management and
administrative burdens usually associated with the direct purchase and sale of
U.S. Treasury debt instruments. These include the selection of the portfolio
investments; surveying the market for the best terms at which to buy and sell;
scheduling and monitoring maturities and reinvestments; receipt, delivery and
safekeeping of securities; and portfolio recordkeeping.
The Fund qualifies as an eligible investment for federally chartered credit
unions pursuant to Sections 107 of the Federal Credit Union Act and Part 703 of
the National Credit Union Administration Rules and Regulations. The Fund intends
to review changes in the applicable laws, rules and regulations governing
eligible investments for federally chartered credit unions, and take such action
as may be necessary so that the investments of the Fund qualify as eligible
investments under the Federal Credit Union Act and the regulations thereunder.
Shares of the Fund, however, may or may not qualify as eligible investments for
particular state chartered credit unions. The Fund encourages each state
chartered credit union to consult qualified legal counsel concerning whether the
Fund is a permissible investment under the laws applicable to it.
MANAGEMENT OF THE FUND
Investment Adviser
At a meeting held on January 20, 1997, the Trustees approved a new
Investment Advisory Agreement with GEIM. The new Investment Advisory Agreement
was submitted to shareholders for their consideration pursuant to a Proxy
Statement dated March 3, 1997 and subsequently approved by a majority of the
shareholders at a Special Meeting held on March 21, 1997. The Adviser is a
wholly-owned subsidiary of General Electric Company ("GE"). The principal
address of the Adviser is 3003 Summer Street, Stamford, CT 06905.
Through GEIM and General Electric Investment Corporation ("GEIC"), an
affiliated company of GEIM, wholly owned by GE, and their predecessors, GE has
more than 70 years of investment management experience. GEIM and GEIC
collectively provide investment management services to various institutional
accounts with total assets as of June 30, 1998 of approximately $69 billion, of
which approximately $1.7 billion was invested in money market funds regulated
under Rule 2a-7.
Pursuant to the Investment Advisory Agreement, the Adviser has agreed to
provide a continuous investment program for the Fund, including investment
research and management with respect to the assets of the Fund. GEIM is entitled
to receive management fees of 0.05% on the first $500 million of the average net
assets of the Fund, 0.075% on the next $500 million, 0.10% in excess of $1
billion but not exceeding $1.5 billion and 0.15% on average net assets in excess
of $1.5 billion.
Administrator, Transfer Agent and, Bookkeeping and Pricing Agent
ALPS serves as the Fund's Administrator. As Administrator, ALPS has agreed
to: assist in maintaining the Fund's office; furnish the Fund with clerical and
certain other services; compile data for and prepare notices and semi-annual
reports to the Securities and Exchange Commission; prepare filings
9
<PAGE>
with state securities commissions; coordinate Federal and state tax returns;
monitor the Fund's expense accruals; monitor compliance with the Fund's
investment policies and limitations; and generally assist in the Fund's
operations. ALPS is entitled to receive a fee from the Fund for its
administrative services computed daily and payable monthly, at the annual rate
of the greater of $600,000 or 0.26% of average daily net assets of the Fund up
to $500 million, 0.24% of average daily net assets of the Fund in excess of $500
million up to $1 billion and 0.22% of average daily net assets of the Fund in
excess of $1 billion. ALPS has stated that it will voluntarily waive a portion
of the administration fees otherwise payable by the Fund, as well as voluntarily
assume a portion of the Fund expenses, to the extent necessary for the Fund to
maintain a total expense ratio of not more than 0.33% of the average net assets
of the Fund. ALPS reserves the right to modify or terminate its fee waiver and
assumption of expenses at any time. ALPS may also pay third parties from time to
time for rendering services to the Fund and/or shareholders.
ALPS also serves as the Fund's Transfer Agent and Bookkeeping and Pricing
Agentand the Transfer Agent.
Custodian
State Street Bank and Trust Company of Connecticut, N.A., located at 750
Main Street, Suite 1114, Hartford, Connecticut 06103, serves as Custodian for
the Fund.
Sub-Custodian
State Street Bank and Trust Company, located at P.O. Box 1978, Boston,
Massachusetts 02015, serves as Sub-Custodian for the Fund.
HOW TO INVEST IN THE FUND
Shares in the Fund are distributed on a continuous basis by ALPS, the
Fund's Sponsor and Distributor. ALPS has its principal office at 370 Seventeenth
Street, Suite 3100, Denver, Colorado 80202 and may be reached at (800) 298-
3442.
General Procedures
You may purchase Fund shares through ALPS, the Fund's Transfer Agent. You
may pay for your purchase of Fund shares by check, money order or by using the
Federal Reserve Wire System. The check or money order must be payable in U.S.
dollars to the Fund and be drawn on a bank located within the United States.
Shares of the Fund may be purchased at the net asset value next determined after
an order is received and accepted. The Fund does not impose any sales-related
charges in connection with purchases of shares. The Fund may discontinue
offering its shares in any state without notice to shareholders.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. The application should be forwarded to:
Financial Investors Trust
370 17th Street, Suite 3100
Denver, CO 80202
Purchases by telephone or facsimile can be made after an account has been
established by the Transfer Agent as described below. The Trust reserves
the right to reject any purchase order.
10
<PAGE>
Purchase Price
Your purchase of Fund shares will be effected at the net asset value next
determined after the Fund receives your purchase order in proper form and
payment in the form of Federal Funds. If you pay by check, Federal Funds will
generally be available to the Fund two Business Days after the Fund receives
your check. If your order is accompanied by Federal Funds, or is converted into
Federal Funds by 5:00 p.m. Eastern Time on a Business Day, it will be executed
on that day. If the Fund receives your order and payment in the form of Federal
Funds after 5:00 p.m. Eastern Time on a Business Day, your order will be
processed the next Business Day.
Telephone and Facsimile Purchases
You can purchase Fund shares by telephone or facsimile once you have
established your account with the Fund and selected facsimile and/or telephone
privileges on your Account Application. In order to qualify for dividends on the
day of purchase, telephone or facsimile orders must be placed and Federal Funds
must be in the Fund's custody account by 5:00 p.m. Eastern Time on Business
Days. If Federal Funds arrive in the Fund's custody account after the stated
deadline, the account will be credited the next Business Day.
Minimum Investment and Account Balances
The minimum initial investment in the Fund is $100,000 and additional
investments may be made in any amount. The minimum purchase requirements do not
apply to reinvested dividends. If an account balance falls below $25,000 due to
redemptions or exchanges, the account may be closed and the proceeds wired to
the bank account of record, or a check will be issued and sent to the party of
record. An investor will be given 30 days notice that the account will be closed
unless an additional investment is made to increase the account balance to the
$25,000 minimum.
Statements and Reports
The Trust will send you a statement of your account after every transaction
that affects your share balance or your account registration. A statement with
tax information and an annual statement will be mailed to you by January 31 of
each year and also will be filed with the IRS. At least twice a year, you will
receive financial statements in the form of Annual and Semi-Annual Reports of
the Fund.
HOW TO REDEEM SHARES
General Procedures
Shareholders may redeem all or any part of the value of their account(s) on
any Business Day. You may redeem by mail, check, telephone or facsimile if you
have established that capability with the Fund. Redemption orders are processed
at the net asset value per share next determined after the Fund receives your
order. If the Fund receives your redemption order before 1:00 p.m. Eastern Time
on a Business Day, the Fund will generally pay for your redeemed shares on that
day. Otherwise, the Fund will generally pay for your redeemed shares on the next
Business Day. The Fund reserves the right to pay for redeemed shares within
seven days after receiving your redemption order if, in the judgment of the
Adviser, an earlier payment could adversely affect the Fund.
11
<PAGE>
Regular Redemption
You may redeem shares by sending a written request to Financial Investors
Trust, 370 17th Street, Suite 3100, Denver CO 80202. You must sign a redemption
request. (All individuals with authority on the account must co-sign.) Your
written redemption request must:
(i) state the number of shares to be redeemed;
(ii) identify your shareholder account number; and
(iii) provide your tax identification number.
Each signature must be guaranteed by either a bank that is a member of the
FDIC, a trust company or a member firm of a national securities exchange or
other eligible guarantor institution. The Fund will not accept guarantees from
notaries public. Guarantees must be signed by an authorized person at the
guarantor institution, and the words "Signature Guaranteed" must appear with the
signature. A redemption request will not be deemed to be properly received until
the Fund receives all required documents in proper form.
When the Fund wires your redemption proceeds, the wire must be paid to the
same bank and account as designated on the Fund's Account Application or in your
written instructions to the Fund. If your bank is not a member of the Federal
Reserve System, your redemption proceeds will be wired to a correspondent bank.
Immediate notification by the correspondent bank to your bank will be necessary
to avoid a delay in crediting the funds to your bank account.
Telephone and Facsimile Redemption
You may redeem shares by telephone or facsimile. Shareholders must check
the appropriate box on the Account Application to activate facsimile and/or
telephone redemption privileges. Shares may be redeemed by telephoning the Fund
at (800) 298-3442 (or sending a facsimile transmission to the Fund at (303)
825-2575 and giving the account name, account number, Personal Identification
Number (PIN#), name of Fund and amount of redemption. Proceeds from redemptions
may be wired or mailed directly to your account at a commercial bank within the
United States or mailed to you at your address on the Fund's books.
In order to arrange for facsimile and/or telephone redemptions after you
have opened your account, or to change the bank account or address designated to
receive redemption proceeds, send a written request to the Fund at the address
listed under "Regular Redemption". The request must be signed by you and each
other shareholder of the account involved, with the signatures guaranteed as
described above. The Trust may modify or terminate procedures for redeeming
shares by telephone but will not materially change or terminate it without
giving shareholders 60 days' written notice.
During periods of substantial economic or market change, telephone or
facsimile redemptions may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may redeem your shares by mail as
described above under "Regular Redemption".
By electing the facsimile and/or telephone redemption option, you may be
giving up a measure of security which you might have had if you were to redeem
in writing. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone or facsimile are genuine, such as
recording telephone calls, providing written confirmation of transactions, or
requiring a form of personal identification prior to acting on instructions
received by telephone or facsimile. To the extent the Trust does not employ
reasonable procedures, it and/or its service contractors may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Trust nor
ALPS will be liable for following instructions communicated by telephone or
facsimile that are reasonably believed to be genuine. Accordingly, you, as a
result of this policy, may bear the risk of fraudulent telephone or facsimile
redemption transactions.
12
<PAGE>
Check Redemption
You may request on your account application or by written request to the
Fund that the Fund provide redemption checks drawn on your account. In order to
establish the checkwriting option, you must manually sign a signature card that
includes all authorized individuals. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. Checks may be made
payable to the order of any person. When a check is presented to the Transfer
Agent for payment, the Transfer Agent, as your agent, will cause the Fund to
redeem a sufficient number of your Fund shares to cover the amount of the check.
Shares earn dividends through the day the redemption is processed. There is no
charge to you for the use of the checks; however, the Transfer Agent will impose
a charge for stopping payment of a check upon your request, or if the Transfer
Agent cannot honor a check due to insufficient funds or other valid reasons. A
request to reverse a stop payment order must be received in writing.
Checks may not be written to redeem shares purchased by check until the
date that good funds are credited to the Fund's custodian by its correspondent
bank. If the amount of the check is greater than the value of the shares in your
account, the check will be returned marked "Insufficient Funds". Checks written
on amounts subject to the hold described above will be returned marked
"Uncollected". If your check does not clear, you will be responsible for any
loss the Fund, Custodian or Transfer Agent may incur.
A check may not be used to close an account. Checkwriting is not available
to holders of shares in certificate form or if you are subject to Internal
Revenue Service backup withholding. It is also inadvisable for you to write a
check for an amount close to the total value of your account. The Trust reserves
the right to terminate or alter the checkwriting service at any time.
General Redemption Information
Except for the presence of certain exceptional circumstances as described
in the Investment Company Act of 1940, the Fund will pay for redeemed shares by
mail within seven days after the Fund receives your order and supporting
documents in proper form (except as provided by the rules of the Securities and
Exchange Commission). Where payment is to be made by wire via the Federal
Reserve Wire System, the Fund will wire redemption proceeds on the same day
after receiving your redemption order, provided it is made before 1:00 p.m.
Eastern Time on Business Days . However, if any of the shares were purchased by
check, the Fund may delay the payment of redemption proceeds until the Transfer
Agent is reasonably satisfied that the check has been collected, which could
take up to 15 days from the purchase date.
There is no charge for share redemptions. The Fund may redeem an account
that has a balance of less than $25,000 if the shareholder does not increase the
amount of the account to at least $25,000 upon 30 days' notice.
Please direct questions concerning the proper form for redemption requests
to the Fund at (800) 298-3442.
SHAREHOLDER SERVICES
Exchange Privilege
You may sell your Fund shares and buy shares of the U.S. Government Money
Market Fund, another investment portfolio of the Trust, in exchange by written
request. There are no fees or commissions for exchanging Fund shares. If you
have established the privilege on your Account
13
<PAGE>
Application, you may also initiate exchanges by telephone or facsimile. Exchange
requests should be directed to the Fund at (800) 298-3442.
Exchange transactions must be for amounts of $1,000 or more. Because
exchanges may have tax consequences, you should consult your tax adviser for
further information. The U.S. Government Money Market Fund or other investment
portfolio must be registered for sale in your state and must meet the investment
criteria for your institution. See "Suitability" in the U.S. Government Money
Market Fund's prospectus. Prior to requesting an exchange of Fund shares, you
should call the Fund at (800) 298-3442. You should read the current prospectus
for the U.S. Government Money Market Fund before investing. Each Fund has its
own minimum balance requirements which must be adhered to.
During periods of significant economic or market change, telephone
exchanges may be difficult to complete. If you are unable to contact the Fund by
telephone or facsimile, you may also mail the exchange request to the Fund at
the address listed under "Regular Redemption". Neither the Trustnor ALPS will be
responsible for the authenticity of exchange instructions received by telephone
or facsimile except as set forth under "How to Redeem Shares - Telephone and
Facsimile Redemption."
The Trust can provide you with information concerning certain limitations
on the exchange privilege, including those related to frequency. The Trust may
modify or terminate the exchange privilege but will not materially change or
terminate it without giving shareholders 60 days' written notice.
TAXES
While municipal investors are generally exempt from Federal income taxes,
each investor should independently ascertain its tax status. With respect to
investors who are not exempt from Federal income taxes, dividends derived from
net investment income and short term capital gains are taxable as ordinary
income distributions and are taxable when paid, whether investors receive
distributions in cash or reinvest them in additional shares, except that
distributions declared in December and paid in January are taxable as if paid on
December 31. The Fund will send to non-exempt investors an IRS Form 1099-DIV
showing their taxable distributions for the past calendar year.
The Fund has qualified and intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). This qualification will relieve the Fund of liability for Federal
income taxes to the extent its earnings are distributed in accordance with the
Code and it meets other requirements for qualification as set forth in the Code.
The information above is only a summary of some of the federal tax
consequences generally affecting the Fund and its shareholders, and no attempt
has been made to discuss individual tax consequences. In addition to Federal
taxes, investors may be subject to state or local taxes on their investment.
Investors should consult their tax advisor to determine whether a Fund is
suitable to their particular tax situation.
When investors sign their account application, they will be asked to
certify that their social security or taxpayer identification number is correct
and that they are not subject to 31% backup withholding for failing to report
income to the IRS. If investors violate IRS regulations, the IRS can require the
Fund to withhold 31% of taxable distributions and redemptions.
The Fund declares dividends from net investment income daily and pays such
dividends monthly. The Fund intends to distribute substantially all of its net
investment income and capital gains, if any, to shareholders within each
calendar year as well as on a fiscal year basis.
14
<PAGE>
Since all of the Fund's net investment income is expected to be derived
from earned interest, it is anticipated that all dividends paid by the Fund will
be taxable as ordinary income to those shareholders who are not exempt from
Federal income taxes, and that no part of any distribution will be eligible for
the dividends received deduction for corporations.
OTHER INFORMATION
Capitalization
Financial Investors Trust was organized as a Delaware business trust on
November 30, 1993 and currently consists of six separately managed portfolios.
The Board of Trustees may establish additional portfolios in the future. The
capitalization of the Funds consists solely of an unlimited number of shares of
beneficial interest with no par value. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligations entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
Voting
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
Shareholders of the Fund may vote separately on items which affect only the
Fund.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the outstanding shares of the Fund.
Performance Information
From time to time, the Fund may quote its "yield" and "effective yield" in
advertisements or in communications to shareholders. Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" quoted in advertisements refers to the income generated
by an investment in the Fund over a specified seven-day period. This income is
then "annualized". That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the
15
<PAGE>
Fund is assumed to be reinvested. The "effective yield" will be slightly higher
than the "yield" because of the compounding effect of the assumed reinvestment.
Additionally, the yield of the Fund may be compared in advertisements or in
reports to shareholders to those of other mutual funds with similar investment
objectives and to other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the Funds' yields may be compared to
the IBC/Donoghue's Money Fund Average, which is an average compiled by
IBC/Donoghue's Money Fund Report. In addition, yields may be compared to the
average yields reported by the Bank Rate Monitor for money market deposit
accounts offered by the 50 leading banks and thrift institutions in the top five
standard metropolitan statistical areas.
Yield data as reported in national financial publications, including Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in publications of a local or regional nature, may also be used in comparing the
yields of the Fund.
Since yields fluctuate, you cannot necessarily use yield data to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Yield is generally a function of the kind and
quality of the instruments held in a portfolio, portfolio maturity, operating
expenses and market conditions. Any fees charged by service institutions
directly to their customer accounts in connection with investments in shares of
the Fund will not be included in the Fund's calculations of yield.
Inquiries
Please write or call the Trust at the address or telephone number listed on
the cover of this Prospectus with any inquiries you may have regarding the Fund
or any other investment portfolios of the Trust that are not offered by this
Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE
FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
16
<PAGE>
FINANCIAL INVESTORS TRUST August 28, 1998
370 Seventeenth Street
Suite 3100
Denver, Colorado 80202-5631
For additional information, call (800) 298-3442
U.S. GOVERNMENT MONEY MARKET FUND
This Prospectus describes the U.S. Government Money Market Fund (the
"Fund"), a diversified no-load money market fund offered to institutional
investors and high net worth individuals by Financial Investors Trust ( the
"Trust"), a Delaware business trust. Shares of the Fund are sold without the
imposition of Rule 12b-1 fees or other sales-related charges.
The Fund seeks to provide investors with as high a level of current income
as is consistent with the preservation of capital and liquidity by investing
exclusively in obligations issued or guaranteed as to principal and interest by
the U.S. Government or by any of its agencies or instrumentalities and
repurchase agreements collateralized to 102% by U.S. Treasury obligations and
other direct obligations of the U.S. Government or its agencies or
instrumentalities. The Fund is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain its net asset value
per share at $1.00 for purposes of purchases and redemptions.
Shares of the Fund are sold generally to municipal investors, including
municipalities, counties and state agencies, as well as other institutional
investors such as broker/dealers, corporations, investment advisers, credit
unions, banks, insurance companies and other financial institutions.
The Fund is sponsored and distributed by ALPS Mutual Funds Services, Inc.
("ALPS" or the "Administrator" or "Distributor") and is advised by GE Investment
Management Incorporated ("GEIM" or the "Adviser").
Shares in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the FDIC, the Federal Reserve
Board, or any other agency or insurer and they may involve investment risks
including the possible loss of principal.
This Prospectus sets forth concisely the information you should consider
before investing in the Fund. Please read this Prospectus and keep it for future
reference. Additional information about the Fund is contained in a Statement of
Additional Information (the "Statement of Additional Information") which has
been filed with the Securities and Exchange Commission and is available upon
request without charge by writing to or calling the Trust at the address and
telephone number listed above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated herein by reference.
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. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE SUMMARY 3
FINANCIAL HIGHLIGHTS 5
FUND OPERATIONS 6
SUITABILITY 9
MANAGEMENT OF THE FUND 10
HOW TO INVEST IN THE FUND 11
HOW TO REDEEM SHARES 12
SHAREHOLDER SERVICES 13
TAXES 14
OTHER INFORMATION 15
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
The summary below shows shareholder transaction expenses imposed by the
Fund and annual Fund operating expenses based on the actual operating expenses
for the fiscal year ended April 30, 1998, adjusted to reflect current fees of
the Fund. A hypothetical example based on the summary is also shown.
"Shareholder Transaction Expenses" are charges you pay when buying or selling
shares of the Fund whereas "Annual Fund Operating Expenses" are paid out of the
Fund's assets and include fees for portfolio management, Fund administration and
other services.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Load on Purchases
of Fund Shares None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)
The Management Fees described in the table below are based upon the
Fund's expenses for the fiscal year ended April 30, 1998, adjusted to reflect
new fee arrangements. Management Fees may be higher to the extent the Fund's
average net assets exceed $500 million. Please read the following Annual Fund
Operating Expenses summary and accompanying footnotes carefully before
investing.
<TABLE>
<CAPTION>
<S> <C>
Management Fees (1) 0.04%
12b-1 Fees None
All Other Expenses(2)
(Net of Fee Waivers and Reimbursements) 0.16%
Total Fund Operating Expenses
(Net of Fee Waivers and Reimbursements)(2) 0.20%
</TABLE>
(1) The Fund is obligated to pay management fees to GEIM at the maximum
annual rate of 0.08% of the Fund's average net assets. Under its Investment
Advisory Agreement with the Fund, GEIM is entitled to receive management fees of
0.04% on the first $500 million of average net assets of the Fund, 0.06% on the
next $500 million and 0.08% on average net assets in excess of $1 billion.
(2) The amount for "All Other Expenses" includes administration fees
payable to the Administrator calculated daily and payable monthly, at an annual
rate of the greater of $360,000 or 0.16% of average daily net assets of the Fund
up to $500 million, 0.14% of average daily net assets of the Fund in excess of
$500 million up to $1 billion and 0.12% of average daily net assets of the Fund
in excess of $1 billion. The Administrator has stated that it will voluntarily
waive a portion of the administration fees otherwise payable by the Fund, as
well as voluntarily assume a portion of the Fund expenses, to the extent
necessary for the Fund to maintain a total expense ratio of not more than 0.20%
of the average net assets of the Fund. Without this voluntary fee waiver and
assumption of expenses, and assuming payment of the maximum management and
administration fees, All Other Expenses and Total Fund Operating Expenses would
be 0.32% and 0.40%, respectively, of the average net assets of the Fund. The
Administrator reserves the right to modify or terminate the fee waiver and
assumption of expenses at any time.
3
<PAGE>
The following example should not be considered a representation of
future expenses. The expenses set forth above and the example set forth below
reflect the non-imposition of certain fees and expenses. Actual expenses may be
greater or less than those shown.
Example:
Based upon the above summary of expenses and assuming a 5% annual
return, redemption at the end of each time period and the reinvestment of all
dividends and distributions, you would pay the following expenses on a
$1,000,000 investment in the Fund:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 2,050
3 Years $ 6,450
5 Years $ 11,281
10 Years $ 25,539
</TABLE>
Other Information:
The Expense Summary and Example are intended to help you understand the
expenses you would bear either directly (as with the Shareholder Transaction
Expenses) or indirectly (as with the Annual Fund Operating Expenses) as a Fund
shareholder. As stated above, the Fund does not impose any sales-related charges
in connection with purchases of its shares, although certain service
institutions may charge their clients fees in connection with purchases and
sales for the accounts of their clients. These fees are in addition to the
expenses shown in the Expense Summary and Example. For a more complete
description of the Fund's operating expenses, see "Management of the Fund" in
this Prospectus and the Statement of Additional Information.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights have been derived from the Fund's financial
statements for the fiscal year ended April 30, 1998, which have been audited by
Deloitte & Touche LLP, independent auditors. Their report on the financial
statements and the financial highlights of the Fund is included in the Annual
Report. The financial statements and financial highlights are incorporated by
reference into the Fund's Statement of Additional Information. You should read
the financial highlights with the financial statements and related notes.
Further information about the performance of the Fund is available in the Annual
Report. You may obtain both the Statement of Additional Information and the
Annual Report free of charge by calling or writing to the Trust at the telephone
number or address listed on the first page.
U.S. GOVERNMENT MONEY MARKET FUND
Selected data for a share of beneficial interest
outstanding throughout the period indicated(1):
<TABLE>
<CAPTION>
For the Year Ended April 30,
1998 1997 1996 1995 (2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value - beginning of period $ 1.00 $ 9.97 $ 9.97 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.05 0.14 0.55 0.44
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.00 0.00 0.00 (0.03)
- -----------------------------------------------------------------------------------------------------------------
Total income from investment operations 0.05 (0.14) 0.55 0.41
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders
Dividends from net investment income (0.05) (0.14) (0.55) (0.44)
- -----------------------------------------------------------------------------------------------------------------
Stock Split 0.00 (8.97) 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (0.05) (9.11) (0.55) (0.44)
- -----------------------------------------------------------------------------------------------------------------
Net asset value - end of period $ 1.00 $ 1.00 $ 9.97 $ 9.97
- -----------------------------------------------------------------------------------------------------------------
Total return 5.48% 5.23% 5.65% 4.73%(3)
- -----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (000) $ 150,222 $ 87,416 $ 31,082 $ 41,893
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.20% 0.23% 0.60% 0.45%(3)
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 5.35% 5.13% 5.38% 5.23%(3)
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets
without fee waivers 0.31% 0.39% 0.85% 0.65%(3)
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets without fee waivers 5.24% 4.97% 5.12% 5.03%(3)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The financial highlights prior to July 10, 1996 reflect the operations of
the Fund as the Short-Term U.S. Government Income Fund when it was not a money
market fund and had different investment policies and expenses, and a
fluctuating net asset value not maintained at $1.00 per share. The Fund changed
to a money market fund on July 10, 1996 following a Special Meeting of the
Fund's shareholders on June 27, 1996. The financial highlights prior to March
24, 1997 also reflect the operations of the Fund while the Fund's investment
adviser was FGIC Advisors, Inc. GEIM was
5
<PAGE>
approved as the Fund's investment adviser at a Special Meeting of the
shareholders of the Fund on March 21, 1997.
(2) Operations commenced on June 7, 1994.
(3) Annualized.
FUND OPERATIONS
Investment Objective
The Adviser will use its best efforts to achieve the investment
objective of the Fund as described below, although the achievement of the
investment objective, of course, cannot be assured. You should not consider the
Fund, by itself, to be a complete investment program. The Fund is a diversified,
open-end management investment company.
The Fund's investment objective is to seek as high a level of current
income as is consistent with preservation of capital and liquidity. The
securities held by the Fund have remaining maturities of thirteen months or
less. The average weighted maturity of the securities held by the Fund will not
exceed 90 days. The Fund's investment objective may not be changed without
approval of a majority of the Fund's outstanding shares.
In seeking to achieve its investment objective, the Fund will invest
exclusively in obligations issued or guaranteed as to principal and interest by
the U.S. Government or by any of its agencies or instrumentalities, and may
engage in repurchase agreement transactions with respect to such obligations.
The Board of Trustees shall make a determination that all portfolio securities
purchased by the Fund present minimal credit risk.
U.S. Government securities are high quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
Government. Not all U.S. Government securities are backed by the full faith and
credit of the United States. Some U.S. Government securities, such as those
issued by the Federal National Mortgage Association, are supported by an
instrumentality's or agency's right to borrow money from the U.S. Treasury under
certain circumstances. Other U.S. Government securities may be supported only by
the credit of the entity that issues them. Due to fluctuations in interest
rates, the market value of such securities may vary during the period a
shareholder owns shares of the Fund. Neither the United States, nor any agency
or instrumentality thereof, has guaranteed, sponsored or approved the Fund or
its shares. The Fund will seek to maintain a stable net asset value at $1.00 per
share. There is no assurance that the Fund's investment objectives will be
achieved.
The Fund, may, consistent with its respective investment objective and
policies, invest in mortgage-related securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
Mortgage-related securities represent pools of mortgage loans assembled
for sale to investors by various governmental agencies such as the Government
National Mortgage Association and government-related organizations such as the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation, as well as by nongovernmental issuers such as commercial banks,
savings and loan institutions, mortgage bankers, and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If the Fund purchases a mortgage-related
security at a premium, that portion may be lost if there is a decline in the
market value of the security whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. To an even greater extent
than other interest-bearing securities, the prices of such securities may be
extremely sensitive to, and inversely affected by, changes in interest rates.
However, though the
6
<PAGE>
value of a mortgage-related security may decline when interest rates rise, the
converse is not necessarily true since in periods of declining interest rates
the mortgages underlying the securities are prone to prepayment. For this and
other reasons, a mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages and, therefore, it is not
possible to predict accurately the security's return to the Fund. Lower than
estimated prepayments from an increase in interest rates might alter the
expected average life of such securities and increase volatility. In addition,
regular payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return that the Fund
will receive when these amounts are reinvested.
Investment Policies
Securities held by the Fund may be subject to repurchase agreements. A
repurchase agreement is a transaction in which the Fund agrees to purchase
portfolio securities from financial institutions, such as banks and
broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price. Although the securities subject to a repurchase
agreement might bear maturities exceeding thirteen months, the Fund presently
intends only to enter into repurchase agreements with maturities in excess of
seven days in cases where a liquidity feature, such as a put option, permits the
Fund to liquidate or terminate the repurchase agreement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the securities subject to the repurchase agreement at not less than 102% of the
principal value of the repurchase agreement, including any accrued interest
earned on the repurchase agreement. The Fund's custodian or subcustodian will
take possession of such collateral. The seller will collateralize the repurchase
agreement with U.S. Treasury obligations and other direct obligations of the
U.S. Government or its agencies or instrumentalities. Default by or bankruptcy
of the seller may, however, expose the Fund to possible loss because of adverse
market action or delay or transaction costs in connection with the disposition
of the underlying obligations. The Fund may enter into agreements with a single
counterparty that constitutes more than 5% of Fund assets.
The Fund may, in certain cases, calculate the maturity of a security
with a floating or variable rate or a demand feature in the manner specified in
Rule 2a-7 under the Investment Company Act, with the effect that the maturity is
deemed to be shorter than its final date.
The Fund intends to purchase U.S. Treasury securities at auction from
the Federal Reserve.
Investment Restrictions
The Fund is subject to a number of investment restrictions which
reflect self-imposed standards as well as federal regulatory limitations. These
limitations are designed to minimize certain risks associated with investing in
specified types of securities or engaging in certain transactions. The
investment restrictions may be changed only by a vote of a majority of the
Fund's outstanding shares.
The Fund may not:
1) Purchase securities other than direct obligations of the U.S.
Government or its agencies or instrumentalities, some of which may be subject to
repurchase agreements, and repurchase agreements collateralized to 102% by
direct obligations of the U.S. Government or its agencies or instrumentalities.
2) Make loans, except that the Fund may purchase or hold debt
instruments, and enter into repurchase agreements in accordance with its
investment objective and policies.
3) Borrow money or issue senior securities, except that the Fund may
borrow from banks 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 borrowings and in
amounts not in excess of the dollar amounts borrowed or 10% of the value of the
Fund's assets at the time of borrowing. The Fund may not purchase securities
while its borrowings are outstanding.
7
<PAGE>
4) With respect to more than 10% of Fund assets, enter into repurchase
agreements providing for settlement more than seven days after notice without a
liquidity feature such as a put option, permitting the Fund to liquidate or
terminate the repurchase agreement within seven days.
5) Purchase municipal bonds issued by an issuer any of whose
outstanding bonds are insured by Financial Guarantee Insurance Corporation
("FGIC").
6) Purchase collateralized mortgage obligations, inverse floaters or
any other securities commonly known as "derivatives".
7) Purchase illiquid securities, except for fully collateralized
repurchase agreements that, because of term limitations, are deemed to be
illiquid.
8) Hold securities with remaining maturities exceeding thirteen months.
9) Purchase reverse repurchase agreements.
Determination of Net Asset Value
The value of the Fund's shares is referred to as "net asset value". Net
asset value per share for purposes of pricing purchases and redemptions is
calculated by adding the value of all securities and other assets belonging to
the Fund, subtracting its liabilities, and dividing the result by the number of
the Fund's outstanding shares. Net asset value is determined as of 5:00 p.m.
Eastern Time on each day the New York Federal Reserve and the New York Stock
Exchange are open for business. Currently, either the New York Federal Reserve
or the New York Stock Exchange is closed on New Years Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. A
"Business Day" is any day on which the New York Federal Reserve and the New York
Stock Exchange are open for business.
The Board of Trustees has established procedures designed to maintain a
stable net asset value of $1.00 per share, to the extent reasonably possible.
The Board of Trustees has approved and adopted procedures under Rule 2a-7 under
the Investment Company Act of 1940, as amended, which was enacted by the SEC
with the intent of stabilizing money market funds at $1.00 per share. Under the
guidelines of Rule 2a-7, the Fund uses the amortized cost method to value its
portfolio securities. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period of maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. Rule 2a-7 also provides that the Fund must also do a
"mark-to-market" analysis, where it is determined the degree to which any
variations may exist between the amortized pricing method and the actual market
price of the securities in the Fund. In the event the Board determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, the Board will take such corrective
action as it regards as necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity.
Rule 2a-7 also requires the Fund to maintain a dollar weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of 13 months or less and invest only in securities determined by the
Trust's Board of Trustees to be "eligible securities" and that present minimal
credit risks. The Board of Trustees or its delegate reviews the portfolio
securities monthly and at regularly scheduled quarterly Board of Trustees
meetings. There can be no assurance that at all times the $1.00 price per share
can be maintained. See the Statement of Additional Information for more details.
8
<PAGE>
Dividends and Distributions
The Fund's net income is declared daily as a dividend at the close of
business on the day of declaration. Your shares begin earning dividends on the
day you purchase them, and continue to earn dividends through and including the
day before you redeem them. See "How to Invest in the Fund". The Fund pays
dividends not later than five business days after the end of each month in the
form of additional shares of the Fund, unless you elect prior to the date of
distribution to receive payment in cash. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash. If you redeem all of your
shares in the Fund, the Fund will pay your dividends in cash not later than five
business days after the redemption.
SUITABILITY
The Fund is designed as an economical and convenient professionally
managed investment vehicle for institutional investors and high net worth
individuals with cash balances or cash reserves who seek as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Fund is designed to meet the specific cash management needs of institutional
investors such as Municipal Investors, broker/dealers, corporations, investments
advisers, credit unions, banks, insurance companies and other institutional
investors. "Municipal Investors" include any State, county, municipality, school
district, special district or political subdivision in the United States. The
Fund may also be suitable for institutions seeking an investment vehicle for
daily cash sweep or liquidity purposes on behalf of their clients.
Legislation in each state sets forth guidelines and limitations with
respect to investments by Municipal Investors located within the state. In
addition, Municipal Investors may be subject to local laws or have their own
guidelines and policies prescribing acceptable investments for cash management
purposes. Each Municipal Investor planning to invest in the Fund must
independently verify that the Fund meets all of the criteria of investment
policies and guidelines applicable to such Municipal Investor.
Future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations could prevent a Municipal Investor from continuing its investment in
the Fund. Each Municipal Investor should therefore remain aware of any changes
in the applicable regulation of permitted investments.
The Fund offers the advantages of purchasing power efficiencies and
diversification of risk. Generally, in purchasing debt instruments from dealers,
the percentage difference between the bid and asked price tends to decrease as
the size of the transaction increases. The Fund also offers investors the
opportunity to participate in a portfolio of U.S. government obligations which
is more diversified in terms of issues and maturities than a portfolio a single
investor may otherwise be able to invest in.
Investment in the Fund relieves the investor of money management and
administrative burdens usually associated with the direct purchase and sale of
U.S. Government debt instruments. These include the selection of the portfolio
investments; surveying the market for the best terms at which to buy and sell;
scheduling and monitoring maturities and reinvestments; receipt, delivery and
safekeeping of securities; and portfolio recordkeeping.
The Fund qualifies as an eligible investment for federally chartered
credit unions pursuant to Sections 107 of the Federal Credit Union Act and Part
703 of the National Credit Union Administration Rules and Regulations. The Fund
intends to review changes in the applicable laws, rules and regulations
governing eligible investments for federally chartered credit unions, and take
such action as may be necessary so that the investments of the Fund qualify as
eligible investments under the Federal Credit Union Act and the regulations
thereunder. Shares of the Fund, however, may or may not qualify as
9
<PAGE>
eligible investments for particular state chartered credit unions. The Fund
encourages each state chartered credit union to consult qualified legal
counsel concerning whether the Fund is a permissible investment under the
laws applicable to it.
MANAGEMENT OF THE FUND
Investment Adviser
At a meeting held on January 20, 1997, the Trustees approved a new
Investment Advisory Agreement with GEIM. The new Investment Advisory Agreement
was submitted to shareholders for their consideration pursuant to a Proxy
Statement dated March 3, 1997 and subsequently approved by a majority of the
shareholders at a Special Meeting held on March 21, 1997. The Adviser is a
wholly-owned subsidiary of General Electric Company ("GE"). The principal
address of the Adviser is 3003 Summer Street, Stamford, CT 06905.
Through GEIM and General Electric Investment Corporation ("GEIC"), an
affiliated company of GEIM, wholly owned by GE, and their predecessors, GE has
more than 70 years of investment management experience. GEIM and GEIC
collectively provide investment management services to various institutional
accounts with total assets as of June 30, 1998 of approximately $69 billion, of
which approximately $1.7 billion was invested in money market funds regulated
under Rule 2a-7.
Pursuant to the Investment Advisory Agreement, the Adviser has agreed
to provide a continuous investment program for the Fund, including investment
research and management with respect to the assets of the Fund. GEIM is entitled
to receive management fees of 0.04% on the first $500 million of average net
assets of the Fund, 0.06% on the next $500 million and 0.08% on average net
assets in excess of $1 billion.
Administrator, Transfer Agent and Bookkeeping and Pricing Agent
ALPS serves as the Fund's Administrator. As Administrator, ALPS has
agreed to: assist in maintaining the Fund's office; furnish the Fund with
clerical and certain other services; compile data for and prepare notices and
semi-annual reports to the Securities and Exchange Commission; prepare filings
with state securities commissions; coordinate Federal and state tax returns;
monitor the Fund's expense accruals; monitor compliance with the Fund's
investment policies and limitations; and generally assist in the Fund's
operations. ALPS is entitled to receive a fee from the Fund for its
administrative services computed daily and payable monthly, at the annual rate
of the greater of $360,000 or 0.16% of average daily net assets of the Fund up
to $500 million, 0.14% of average daily net assets of the Fund in excess of $500
million up to $1 billion and 0.12% of average daily net assets of the Fund in
excess of $1 billion. ALPS has stated that it will voluntarily waive a portion
of the administration fees otherwise payable by the Fund, as well as voluntarily
assume a portion of the Fund expenses, to the extent necessary for the Fund to
maintain a total expense ratio of not more than 0.20% of the average net assets
of the Fund. ALPS reserves the right to modify or terminate the fee waiver and
assumption of expenses at any time. ALPS may also pay third parties from time to
time for rendering services to the Fund and/or shareholders.
ALPS also serves as the Fund's Transfer Agent and Bookkeeping and
Pricing Agent.
Custodian
State Street Bank and Trust Company of Connecticut, N.A., located at
750 Main Street, Suite 1114, Hartford, Connecticut 06103, serves as Custodian
for the Fund.
10
<PAGE>
Sub-Custodian
State Street Bank and Trust Company, located at P.O. Box 1978, Boston,
Massachusetts 02015, serves as Sub-Custodian for the Fund.
HOW TO INVEST IN THE FUND
Shares in the Fund are distributed on a continuous basis by ALPS, the
Fund's Sponsor and Distributor. ALPS has its principal office at 370 Seventeenth
Street, Suite 3100, Denver, Colorado 80202 and may be reached at (800) 298-3442.
General Procedures
You may purchase Fund shares through ALPS, the Fund's Transfer Agent.
Investors shall pay for their purchase of Fund shares by using the Federal
Reserve Wire System. Shares of the Fund may be purchased at the net asset value
next determined after an order is received and accepted. The Fund does not
impose any sales-related charges in connection with purchases of shares. The
Fund may discontinue offering its shares in any state without notice to
shareholders.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. The application should be forwarded to:
Financial Investors Trust
370 17th Street, Suite 3100
Denver, CO 80202
Purchases by telephone or facsimile can be made after an account has
been established by the Transfer Agent as described below. The Trust reserves
the right to reject any purchase order.
Purchase Price
Your purchase of Fund shares will be effected at the net asset value
next determined after the Fund receives your purchase order in proper form and
payment in the form of Federal Funds. If your order is accompanied by Federal
Funds, or is converted into Federal Funds by 5:00 p.m. Eastern Time on a
Business Day, it will be executed on that day. If the Fund receives your order
and payment in the form of Federal Funds after 5:00 p.m. Eastern Time on a
Business Day, your order will be processed the next Business Day.
Telephone and Facsimile Purchases
You can purchase Fund shares by telephone or facsimile once you have
established your account with the Fund and selected facsimile and/or telephone
privileges on your Account Application. In order to qualify for dividends on the
day of purchase, telephone or facsimile orders must be placed and Federal Funds
must be in the Fund's custody account by 5:00 p.m. Eastern Time on Business
Days. If Federal Funds arrive in the Fund's custody account after the stated
deadline, the account will be credited the next Business Day.
Minimum Investment and Account Balances
The minimum initial investment in the Fund is $1,000,000 and
additional investments may be made in any amount. The minimum purchase
requirements do not apply to reinvested dividends. If an account balance
falls below $200,000 due to redemptions or exchanges, the account may be
closed and the proceeds wired to the bank account of record, or a check will
be issued and sent to the party of
11
<PAGE>
record. An investor will be given 30 days notice that the account will be
closed unless an additional investment is made to increase the account
balance to the $200,000 minimum.
Statements and Reports
The Trust will send you a statement of your account after every
transaction that affects your share balance or your account registration. A
statement with tax information and an annual statement will be mailed to you by
January 31 of each year, and also will be filed with the IRS. At least twice a
year, you will receive financial statements in the form of Annual and
Semi-Annual Reports of the Fund.
HOW TO REDEEM SHARES
General Procedures
Shareholders may redeem all or any part of the value of their
account(s) on any Business Day. You may redeem by mail, telephone or facsimile
if you have established that capability with the Fund. Redemption orders are
processed at the net asset value per share next determined after the Fund
receives your order. If the Fund receives your redemption order before 1:00 p.m.
Eastern Time on a Business Day, the Fund will generally pay for your redeemed
shares on that day. Otherwise, the Fund will generally pay for your redeemed
shares on the next Business Day. The Fund reserves the right to pay for redeemed
shares within seven days after receiving your redemption order if, in the
judgment of the Adviser, an earlier payment could adversely affect the Fund.
Regular Redemption
You may redeem shares by sending a written request to Financial
Investors Trust, 370 17th Street, Suite 3100, Denver, CO 80202. You must sign a
redemption request. (All individuals with authority on the account must
co-sign.) Your written redemption request must:
(i) state the number of shares to be redeemed;
(ii) identify your shareholder account number; and
(iii) provide your tax identification number.
Each signature must be guaranteed by either a bank that is a member of
the FDIC, a trust company or a member firm of a national securities exchange or
other eligible guarantor institution. The Fund will not accept guarantees from
notaries public. Guarantees must be signed by an authorized person at the
guarantor institution, and the words "Signature Guaranteed" must appear with the
signature. A redemption request will not be deemed to be properly received until
the Fund receives all required documents in proper form.
When the Fund wires your redemption proceeds, the wire must be paid to
the same bank and account as designated on the Fund's Account Application or in
your written instructions to the Fund. If your bank is not a member of the
Federal Reserve System, your redemption proceeds will be wired to a
correspondent bank. Immediate notification by the correspondent bank to your
bank will be necessary to avoid a delay in crediting the funds to your bank
account.
Telephone and Facsimile Redemption
You may redeem shares by telephone or facsimile. Shareholders must
check the appropriate box on the Account Application to activate facsimile
and/or telephone redemption privileges. Shares may be redeemed by telephoning
the Fund at (800) 298-3442 (or sending a facsimile transmission to the Fund at
(303) 825-2575 and giving the account name, account number, Personal
Identification Number (PIN#),
12
<PAGE>
name of Fund and amount of redemption. Proceeds from redemptions will be wired
directly to your account at a commercial bank within the United States.
In order to arrange for facsimile and/or telephone redemptions after
you have opened your account, or to change the bank account or address
designated to receive redemption proceeds, send a written request to the Fund at
the address listed under "Regular Redemption". The request must be signed by you
and each other shareholder of the account involved, with the signatures
guaranteed as described above. The Trust may modify or terminate procedures for
redeeming shares by telephone but will not materially change or terminate it
without giving shareholders 60 days' written notice.
During periods of substantial economic or market change, telephone or
facsimile redemptions may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may redeem your shares by mail as
described above under "Regular Redemption".
By electing the facsimile and/or telephone redemption option, you may
be giving up a measure of security which you might have had if you were to
redeem in writing. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone or facsimile are genuine, such as
recording telephone calls, providing written confirmation of transactions, or
requiring a form of personal identification prior to acting on instructions
received by telephone or facsimile. To the extent the Trust does not employ
reasonable procedures, it and/or its service contractors may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Trust nor
ALPS will be liable for following instructions communicated by telephone or
facsimile that are reasonably believed to be genuine. Accordingly, you, as a
result of this policy, may bear the risk of fraudulent telephone or facsimile
redemption transactions.
General Redemption Information
Except for the presence of certain exceptional circumstances as
described in the Investment Company Act of 1940, the Fund will pay for redeemed
shares by mail within seven days after the Fund receives your order and
supporting documents in proper form (except as provided by the rules of the
Securities and Exchange Commission). Where payment is to be made by wire via the
Federal Reserve Wire System, the Fund will wire redemption proceeds on the same
day after receiving your redemption order, provided it is made before 1:00 p.m.
Eastern Time on Business Days.
There is no charge for share redemptions. The Fund may redeem an account that
has a balance of less than $200,000 if the shareholder does not increase the
amount of the account to at least $200,000 upon 30 days' notice.
Please direct questions concerning the proper form for redemption
requests to the Fund at (800) 298-3442.
SHAREHOLDER SERVICES
Exchange Privilege
You may sell your Fund shares and buy shares of the U.S. Treasury
Money Market Fund, another investment portfolio of the Trust, in exchange by
written request. There are no fees or commissions for exchanging Fund shares.
If you have established the privilege on your Account Application, you may
also initiate exchanges by telephone or facsimile. Exchange requests should
be directed to the Fund at (800) 298-3442.
Exchange transactions must be for amounts of $1,000 or more. Exchanges
may have tax consequences, so you should consult your tax adviser for further
information. The U.S. Treasury Money Market Fund or other investment portfolio
must be registered for sale in your state and must meet the
13
<PAGE>
investment criteria for your institution. See "Suitability" in the U.S. Treasury
Money Market Fund's prospectus. Prior to requesting an exchange of Fund shares
you should call the Fund at (800) 298-3442. You should read the current
prospectus for the U.S. Treasury Money Market Fund before investing. Each Fund
has its own minimum balance requirements which must be adhered to.
During periods of significant economic or market change, telephone or
facsimile exchanges may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may also mail the exchange request to
the Fund at the address listed under "Regular Redemption". Neither the Trust nor
ALPS will be responsible for the authenticity of exchange instructions received
by telephone or facsimile except as set forth under "How to Redeem Shares -
Telephone and Facsimile Redemption".
The Trust can provide you with information concerning certain
limitations on the exchange privilege, including those related to frequency. The
Trust may modify or terminate the exchange privilege but will not materially
change or terminate it without giving shareholders 60 days' written notice.
TAXES
While municipal investors are generally exempt from Federal income
taxes, each investor should independently ascertain its tax status. With respect
to investors who are not exempt from Federal income taxes, dividends derived
from net investment income and short term capital gains are taxable as ordinary
income distributions and are taxable when paid, whether investors receive
distributions in cash or reinvest them in additional shares, except that
distributions declared in December and paid in January are taxable as if paid on
December 31. The Fund will send to non-exempt investors an IRS Form 1099-DIV
showing their taxable distributions for the past calendar year.
The Fund has qualified and intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). This qualification will relieve the Fund of liability for
Federal income taxes to the extent its earnings are distributed in accordance
with the Code and it meets other requirements for qualification as set forth in
the Code.
The information above is only a summary of some of the federal tax
consequences generally affecting the Fund and its shareholders, and no attempt
has been made to discuss individual tax consequences. In addition to Federal
taxes, investors may be subject to state or local taxes on their investment.
Investors should consult their tax advisor to determine whether the Fund is
suitable to their particular tax situation.
When investors sign their account application, they will be asked to
certify that their social security or taxpayer identification number is correct
and that they are not subject to 31% backup withholding for failing to report
income to the IRS. If investors violate IRS regulations, the IRS can require the
Fund to withhold 31% of taxable distributions and redemptions.
The Fund declares dividends from net investment income daily and pays
such dividends monthly. The Fund intends to distribute substantially all of its
net investment income and capital gains, if any, to shareholders within each
calendar year as well as on a fiscal year basis.
Since all of the Fund's net investment income is expected to be derived
from earned interest, it is anticipated that all dividends paid by the Fund will
be taxable as ordinary income to those shareholders who are not exempt from
Federal income taxes, and that no part of any distribution will be eligible for
the dividends received deduction for corporations.
14
<PAGE>
OTHER INFORMATION
Capitalization
Financial Investors Trust was organized as a Delaware business trust
on November 30, 1993 and currently consists of six separately managed
portfolios. The Board of Trustees may establish additional portfolios in the
future. The capitalization of the Funds consists solely of an unlimited
number of shares of beneficial interest with no par value. When issued,
shares of the Funds are fully paid, non-assessable and freely transferable.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or Officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligations entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
Voting
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
Shareholders of the Fund may vote separately on items which affect only the
Fund.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting of shareholders for the
purpose of considering the removal of a person serving as Trustee if requested
in writing to do so by the holders of not less than 10% of the outstanding
shares of the Trust or the Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy: or (2) more than 50% of the outstanding shares of the Fund.
Performance Information
From time to time, the Fund may quote its "yield" and "effective yield"
in advertisements or in communications to shareholders. Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" quoted in advertisements refers to the income generated
by an investment in the Fund over a specified seven-day period. This income is
then "annualized". That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of the assumed reinvestment.
Additionally, the yield of the Fund may be compared in advertisements
or in reports to shareholders to those of other mutual funds with similar
investment objectives and to other relevant indices or to rankings prepared by
independent services or other financial or industry publications that
15
<PAGE>
monitor the performance of mutual funds. For example, the Funds' yields may be
compared to the IBC/Donoghue's Money Fund Average, which is an average compiled
by IBC/Donoghue's Money Fund Report. In addition, yields may be compared to the
average yields reported by the Bank Rate Monitor for money market deposit
accounts offered by the 50 leading banks and thrift institutions in the top five
standard metropolitan statistical areas.
Yield data as reported in national financial publications, including
Money Magazine, Forbes, Barron's, The Wall Street Journal and The New York
Times, or in publications of a local or regional nature, may also be used in
comparing the yields of the Fund.
Since yields fluctuate, you cannot necessarily use yield data to
compare an investment in the Funds' 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. Yield is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions. Any fees charged by service
institutions directly to their customer accounts in connection with investments
in shares of the Fund will not be included in the Fund's calculations of yield.
Inquiries
Please write or call the Trust at the address or telephone number
listed on the cover of this Prospectus with any inquiries you may have regarding
the Fund or any other investment portfolios of the Trust that are not offered by
this Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
16
<PAGE>
FINANCIAL INVESTORS TRUST August 28, 1998
370 Seventeenth Street
Suite 3100
Denver, Colorado 80202-5631
For additional information, call (800) 298-3442
PRIME MONEY MARKET FUND - CLASS I
This Prospectus describes the Prime Money Market Fund (the "Fund"), a
diversified money market fund. The Fund seeks to provide investors with as high
a level of current income as is consistent with the preservation of capital and
liquidity by investing in a defined group of short-term, U.S. dollar denominated
money market instruments. The Fund is required to maintain a dollar-weighted
average portfolio maturity of 90 days or less and seeks to maintain its net
asset value per share at $1.00 for purposes of purchases and redemptions.
This Prospectus offers exclusively Class I shares of the Fund. Class I
shares of the Fund are sold generally to municipal investors, including
municipalities, counties and state agencies, as well as other institutional
investors such as broker/dealers, corporations, investment advisers, credit
unions, banks, insurance companies and other financial institutions and high net
worth individuals that meet the $1,000,000 minimum investment threshold for this
class of shares. The Fund also offers Class II shares - see "Other Information -
Capitalization."
The Fund is sponsored and distributed by ALPS Mutual Funds Services, Inc.
("ALPS" or the "Administrator" or "Distributor") and is advised by GE Investment
Management Incorporated ("GEIM" or the "Adviser").
Shares in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the FDIC, the Federal Reserve
Board, or any other agency or insurer and they may involve investment risks
including the possible loss of principal.
This Prospectus sets forth concisely the information you should consider
before investing in the Fund. Please read this Prospectus and keep it for future
reference. Additional information about the Fund is contained in a Statement of
Additional Information (the "Statement of Additional Information") which has
been filed with the Securities and Exchange Commission ("SEC") and is available
upon request without charge by writing to or calling the Trust at the address
and telephone number listed above. The Statement of Additional Information bears
the same date as this Prospectus and is incorporated herein by reference.
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. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE SUMMARY 3
FUND OPERATIONS 4
SUITABILITY 8
MANAGEMENT OF THE FUND 9
HOW TO INVEST IN THE FUND 10
HOW TO REDEEM SHARES 11
SHAREHOLDER SERVICES 13
TAXES 14
INVESTMENT INSTRUMENTS, TRANSACTIONS AND RISKS 14
OTHER INFORMATION 17
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
The summary below shows shareholder transaction expenses imposed by the
Fund and annual Fund operating expenses based on anticipated operating expenses
of the Fund. A hypothetical example based on the summary is also shown.
"Shareholder Transaction Expenses" are charges you pay when buying or selling
shares of the Fund whereas "Annual Fund Operating Expenses" are paid out of the
Fund's assets and include fees for portfolio management, fund administration and
other services.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Load on Purchases
of Fund Shares None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)
The Management Fees described in the table below are based upon the
anticipated operating expenses of the Fund. Management Fees may be higher to the
extent the Fund's average net assets exceed $500 million. Please read the
following Annual Fund Operating Expenses summary and accompanying footnotes
carefully before investing.
<TABLE>
<CAPTION>
<S> <C>
Management Fees (1) 0.04%
12b-1 Fees None
All Other Expenses(2)
(Net of Fee Waivers and Reimbursements) 0.16%
Total Fund Operating Expenses
(Net of Fee Waivers and Reimbursements)(2) 0.20%
</TABLE>
(1) The Fund is obligated to pay management fees to GEIM at the maximum
annual rate of 0.08% of the Fund's average net assets. Under its Investment
Advisory Agreement with the Fund, GEIM is entitled to receive management fees of
0.04% on the first $500 million of average net assets of the Fund, 0.06% on the
next $500 million and 0.08% on average net assets in excess of $1 billion.
(2) The amount for "All Other Expenses" includes administration fees
payable to the Administrator calculated daily and payable monthly, at an annual
rate of the greater of $360,000 or 0.16% of average daily net assets of the Fund
up to $500 million, 0.14% of average daily net assets of the Fund in excess of
$500 million up to $1 billion and 0.12% of average daily net assets of the Fund
in excess of $1 billion. The Administrator has stated that it will voluntarily
waive a portion of the administration fees otherwise payable by the Fund, as
well as voluntarily assume a portion of the Fund expenses, to the extent
necessary for Class I of the Fund to maintain a total expense ratio of not more
than 0.20% of average net assets. Without this voluntary fee waiver and
assumption of expenses, and assuming payment of the maximum management and
administration fees, All Other Expenses and Total Fund Operating Expenses would
be 0.81% and 0.85%, respectively, of the average net assets of Class I
3
<PAGE>
of the Fund. The Administrator reserves the right to modify or terminate the fee
waiver and assumption of expenses at any time.
The following example should not be considered a representation of future
expenses. The expenses set forth above and the example set forth below reflect
the non-imposition of certain fees and expenses. Actual expenses may be greater
or less than those shown.
Example:
Based upon the above summary of expenses and assuming a 5% annual return,
redemption at the end of each time period and the reinvestment of all dividends
and distributions, you would pay the following expenses on a $1,000,000
investment in Class I of the Fund:
<TABLE>
<CAPTION>
<S> <C>
1 Year $2,050
3 Years $6,450
</TABLE>
Other Information:
The Expense Summary and Example are intended to help you understand the
expenses you would bear either directly (as with the Shareholder Transaction
Expenses) or indirectly (as with the Annual Fund Operating Expenses) as a Fund
shareholder. As stated above, the Fund does not impose any sales-related charges
in connection with purchases of its shares, although certain service
institutions may charge their clients fees in connection with purchases and
sales for the accounts of their clients. These fees are in addition to the
expenses shown in the Expense Summary and Example. For a more complete
description of the Fund's operating expenses, see "Management of the Fund" in
this Prospectus and the Statement of Additional Information.
FUND OPERATIONS
Investment Objective
The Adviser will use its best efforts to achieve the investment objective
of the Fund as described below, although the achievement of the investment
objective, of course, cannot be assured. You should not consider the Fund, by
itself, to be a complete investment program. The Fund is a diversified, open-end
management investment company.
The investment objective of the Fund is to seek as high a level of current
income as is consistent with the preservation of capital and liquidity. In
seeking its objective, the Fund's investments include, but are not limited to,
the following U.S. dollar denominated, short-term money market instruments: (1)
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities ("Government Securities"); (2) debt obligations of
corporations, banks, savings and loan institutions, insurance companies and
mortgage bankers; (3) commercial paper and notes, including those with floating
or variable rates of interest; (4) debt obligations of U.S. branches of foreign
banks; (5) repurchase agreements; (6) asset-backed or mortgage-related
securities; (7) stripped Government Securities; and (8) zero coupon bonds.
4
<PAGE>
The Fund limits its portfolio investments to securities that the Trust's
Board of Trustees determines present minimal credit risk and that are "Eligible
Securities" at the time of acquisition by the Fund. "Eligible Securities" as
used in this Prospectus means securities rated by the requisite "nationally
recognized statistical rating organization" ("NRSRO") in one of the two highest
short-term rating categories, consisting of issuers that have received these
ratings with respect to other short-term debt securities and comparable unrated
securities. "Requisite NRSROs" means (1) any two NRSROs that have issued ratings
with respect to a security or class of debt obligations of an issuer or (2) one
NRSRO, if only one NRSRO has issued such a rating at the time that the Fund
acquires the security. Currently, six organizations are NRSROs: S&P, Moody's,
Fitch Investors Service, Inc., Duff and Phelps, Inc., IBCA Limited and its
affiliate, IBCA, Inc., and Thomson BankWatch, Inc. A discussion of the ratings
categories is contained in the Appendix to the Statement of Additional
Information. By limiting its investments to Eligible Securities, the Fund may
not achieve as high a level of current income as a fund investing in lower-rated
securities.
The Fund may not invest more than 5% of its total assets in the securities
of any one issuer, except for Government Securities and except to the extent
permitted under rules adopted by the SEC under the Investment Company Act of
1940, as amended ("1940 Act"). In addition, the Fund may not invest more than 5%
of its total assets in Eligible Securities that have not received the highest
rating from the Requisite NRSROs and comparable unrated securities ("Second Tier
Securities"), and may not invest more than the greater of $1,000,000 or 1% of
its total assets in the Second Tier Securities of any one issuer. The Fund may
invest more than 5% (but not more than 25%) of the then-current value of the
Fund's total assets in the securities of a single issuer for a period of up to
three business days, so long as (1) the securities either are rated by the
Requisite NRSROs in the highest short-term rating category or are securities of
issuers that have received such ratings with respect to other short-term debt
securities or are comparable unrated securities and (2) the Fund does not make
more than one such investment at any one time. Determinations of comparable
quality for purchases of unrated securities are made by GEIM in accordance with
procedures established by the Board of Trustees. The Fund invests only in
instruments that have (or, pursuant to regulations adopted by the SEC, are
deemed to have) remaining maturities of 13 months or less at the date of
purchase (except securities subject to repurchase agreements), determined in
accordance with a rule promulgated by the SEC. The Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less. The assets of the
Fund are valued on the basis of amortized cost, as described below under
"Determination of Net Asset Value."
The Fund, in addition to investing as described above, may hold Rule 144A
Securities. In addition, the Fund may engage in the following types of
investment techniques and strategies: entering into reverse repurchase
agreements, entering into securities transactions on a when-issued or
delayed-delivery basis and lending portfolio securities. These other
instruments, investment techniques and strategies have risks and special
considerations associated with them that are described below under "Investment
Instruments, Transactions, Strategies and Risks."
Investment Restrictions
The Fund is subject to a number of investment restrictions which reflect
self-imposed standards as well as federal regulatory limitations. These
limitations are designed to minimize certain risks associated with investing in
specified types of securities or engaging in certain transactions. These
5
<PAGE>
investment restrictions and those identified as fundamental in the Statement of
Additional Information may be changed only by a vote of a majority of the Fund's
outstanding shares.
The Fund may not:
1) Borrow money, except that the Fund may enter into reverse repurchase
agreements, and except that the Fund may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions that might otherwise
require the untimely disposition of securities, in an amount not to exceed
33-1/3% of the value of the Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed) at the
time the borrowing is made. Whenever borrowings, including reverse repurchase
agreements, of 5% or more of the Fund's total assets are outstanding, the Fund
will not make any additional investments.
2) Lend its assets or money to other persons, except through (a) purchasing
debt obligations, (b) lending portfolio securities in an amount not to exceed
30% of the Fund's assets taken at market value, (c) entering into repurchase
agreements, and (d) entering into variable rate demand notes.
3) Purchase securities (other than Government Securities) of any issuer if,
as a result of the purchase, more than 5% of the Fund's total assets would be
invested in the securities of the issuer. All securities of a foreign government
and its agencies will be treated as a single issuer for purposes of this
restriction.
4) Purchase more than 10% of the voting securities of any one issuer, or
more than 10% of the outstanding securities of any class of issuer, except that
this limitation is not applicable to the Fund's investments in Government
Securities. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction.
5) Invest more than 25% of the value of its total assets in securities of
issuers in any one industry, except that the Fund may invest more than 25% of
the value of its total assets in securities issued by domestic banks. For
purposes of this restriction, the term "industry" will be deemed to include (a)
the government of any country other than the U.S., but not the U.S. Government
and (b) all supranational organizations.
If a percentage limitation on investments by the Fund stated above or in
the Statement of Additional Information is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from changes in
asset values will not be deemed to violate the limitation except in the case of
the limitations on borrowing and illiquid investments. The Fund is not required
to sell a security if its rating is reduced or discontinued after purchase, but
the Fund may consider doing so.
It is the intention of the Fund, unless otherwise indicated, that with
respect to the Fund's policies that are the result of the application of law,
the Fund will take advantage of the flexibility provided by rules or
interpretations of the SEC currently in existence or promulgated in the future
or changes to such laws.
6
<PAGE>
Determination of Net Asset Value
The value of the Fund's shares is referred to as "net asset value". Net
asset value per share of each Class for purposes of pricing purchases and
redemptions is calculated by adding the value of each Class' proportionate share
of all securities and other assets , subtracting its proportionate share of
liabilities, and dividing the result by the number of outstanding shares of each
Class. Within each Class, the expenses are allocated proportionately based on
the net assets of each Class, except class-specific expenses which are allocated
directly to the respective Class. Net asset value is determined as of 5:00 p.m.
Eastern Time on each day the New York Federal Reserve and the New York Stock
Exchange are open for business. Currently, either the New York Federal Reserve
or the New York Stock Exchange is closed on New Years Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. A
"Business Day" is any day on which the New York Federal Reserve and the New York
Stock Exchange are open for business.
The Board of Trustees has established procedures designed to maintain a
stable net asset value of $1.00 per share, to the extent reasonably possible.
The Board of Trustees has approved and adopted procedures under Rule 2a-7 under
the Investment Company Act of 1940, as amended, which was enacted by the SEC
with the intent of stabilizing money market funds at $1.00 per share. Under the
guidelines of Rule 2a-7, the Fund uses the amortized cost method to value its
portfolio securities. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period of maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. Rule 2a-7 also provides that the Fund must also do a
"mark-to-market" analysis, where it is determined the degree to which any
variations may exist between the amortized pricing method and the actual market
price of the securities in the Fund. In the event the Board determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, the Board will take such corrective
action as it regards as necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity.
Rule 2a-7 also requires the Fund to maintain a dollar weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of 13 months or less and invest only in securities determined by the
Trust's Board of Trustees to be "eligible securities" and that present minimal
credit risks. The Board of Trustees or its delegate reviews the portfolio
securities monthly and at regularly scheduled quarterly Board of Trustees
meetings. There can be no assurance that at all times the $1.00 price per share
can be maintained. See the Statement of Additional Information for more details.
7
<PAGE>
Dividends and Distributions
The Fund's net income is declared daily as a dividend at the close of
business on the day of declaration. Your shares begin earning dividends on the
day you purchase them, and continue to earn dividends through and including the
day before you redeem them. See "How to Invest in the Fund". The Fund pays
dividends not later than five business days after the end of each month in the
form of additional shares of the Fund, unless you elect prior to the date of
distribution to receive payment in cash. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash. If you redeem all of your
shares in the Fund, the Fund will pay your dividends in cash not later than five
business days after the redemption.
SUITABILITY
The Fund is designed as an economical and convenient professionally managed
investment vehicle for institutional investors and high net worth individuals
with cash balances or cash reserves who seek as high a level of current income
as is consistent with the preservation of capital and liquidity. The Fund is
designed to meet the specific cash management needs of institutional investors
such as Municipal Investors, broker/dealers, corporations, investments advisers,
credit unions, banks, insurance companies and other institutional investors.
"Municipal Investors" include any State, county, municipality, school district,
special district or political subdivision in the United States. The Fund may
also be suitable for institutions seeking an investment vehicle for daily cash
sweep or liquidity purposes on behalf of their clients.
Legislation in each state sets forth guidelines and limitations with
respect to investments by Municipal Investors located within the state. In
addition, Municipal Investors may be subject to local laws or have their own
guidelines and policies prescribing acceptable investments for cash management
purposes. Each Municipal Investor planning to invest in the Fund must
independently verify that the Fund meets all of the criteria of investment
policies and guidelines applicable to such Municipal Investor.
Future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations could prevent a Municipal Investor from continuing its investment in
the Fund. Each Municipal Investor should therefore remain aware of any changes
in the applicable regulation of permitted investments.
The Fund offers the advantages of purchasing power efficiencies and
diversification of risk. Generally, in purchasing debt instruments from dealers,
the percentage difference between the bid and asked price tends to decrease as
the size of the transaction increases. The Fund also offers investors the
opportunity to participate in a portfolio of money market instruments which is
more diversified in terms of issues and maturities than a portfolio a single
investor may otherwise be able to invest in.
Investment in the Fund relieves the investor of money management and
administrative burdens usually associated with the direct purchase and sale of
money market instruments. These include the selection of the portfolio
investments; surveying the market for the best terms at which to buy and sell;
scheduling and monitoring maturities and reinvestments; receipt, delivery and
safekeeping of securities; and portfolio recordkeeping.
8
<PAGE>
MANAGEMENT OF THE FUND
Investment Adviser
The Adviser, GEIM, is a wholly-owned subsidiary of General Electric Company
("GE"). The principal address of the Adviser is 3003 Summer Street, Stamford, CT
06905.
Through GEIM and General Electric Investment Corporation ("GEIC"), an
affiliated company of GEIM, wholly owned by GE, and their predecessors, GE has
more than 70 years of investment management experience. GEIM and GEIC
collectively provide investment management services to various institutional
accounts with total assets as of June 30, 1998 of approximately $69 billion, of
which approximately $1.7 billion was invested in money market funds regulated
under Rule 2a-7.
Pursuant to the Investment Advisory Agreement, the Adviser has agreed to
provide a continuous investment program for the Fund, including investment
research and management with respect to the assets of the Fund. GEIM is entitled
to receive management fees of 0.04% on the first $500 million of average net
assets of the Fund, 0.06% on the next $500 million and 0.08% on average net
assets in excess of $1 billion.
Administrator, Transfer Agent, Bookkeeping and Pricing Agent
ALPS serves as the Fund's Administrator. As Administrator, ALPS has agreed
to: assist in maintaining the Fund's office; furnish the Fund with clerical and
certain other services; compile data for and prepare notices and semi-annual
reports to the Securities and Exchange Commission; prepare filings with state
securities commissions; coordinate Federal and state tax returns; monitor the
Fund's expense accruals; monitor compliance with the Fund's investment policies
and limitations; and generally assist in the Fund's operations. ALPS is entitled
to receive a fee from the Fund for its administrative services computed daily
and payable monthly, at the annual rate of the greater of $360,000 or 0.16% of
average daily net assets of the Fund up to $500 million, 0.14% of average daily
net assets of the Fund in excess of $500 million up to $1 billion and 0.12% of
average daily net assets of the Fund in excess of $1 billion. ALPS has stated
that it will voluntarily waive a portion of the administration fees otherwise
payable by the Fund, as well as voluntarily assume a portion of the Fund
expenses, to the extent necessary for Class I of the Fund to maintain a total
expense ratio of not more than 0.20% of the average net assets of the Fund. ALPS
reserves the right to modify or terminate the fee waiver and assumption of
expenses at any time. ALPS and GEIM may also pay third parties from time to time
for rendering services to the Fund and/or shareholders.
In addition to its role as Administrator, ALPS serves as the Fund's
Transfer Agent. ALPS also serves as the Fund's Bookkeeping and Pricing Agent. In
this capacity, ALPS has agreed to maintain the financial accounts and records of
the Fund and to compute the net asset value and certain other financial
information relating to the Fund.
Custodian
State Street Bank and Trust Company of Connecticut, N.A., located at 750
Main Street, Suite 1114, Hartford, Connecticut 06103, serves as Custodian for
the Fund.
9
<PAGE>
Sub-Custodian
State Street Bank and Trust Company, located at P.O. Box 1978, Boston,
Massachusetts 02015, serves as Sub-Custodian for the Fund.
HOW TO INVEST IN THE FUND
Shares in the Fund are distributed on a continuous basis by ALPS, the
Fund's Sponsor and Distributor. ALPS has its principal office at 370 Seventeenth
Street, Suite 3100, Denver, Colorado 80202 and may be reached at (800) 298-3442.
General Procedures
You may purchase Fund shares through ALPS, the Fund's Transfer Agent.
Investors shall pay for their purchase of Fund shares by using the Federal
Reserve Wire System. Shares of the Fund may be purchased at the net asset value
next determined after an order is received and accepted. The Fund does not
impose any sales-related charges in connection with purchases of shares. The
Fund may discontinue offering its shares in any state without notice to
shareholders.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. The application should be forwarded to:
Financial Investors Trust
370 17th Street, Suite 3100
Denver, Colorado 80202
Purchases by telephone or facsimile can be made after an account has been
established by the Transfer Agent as described below. The Trust reserves the
right to reject any purchase order. Third-party checks will not be accepted.
Check payments must be in U.S. dollars. Please include Fund name and account
number on all checks.
Purchase Price
Your purchase of Fund shares will be effected at the net asset value next
determined after the Fund receives your purchase order in proper form and
payment in the form of Federal Funds. If your order is accompanied by Federal
Funds, or is converted into Federal Funds by 5:00 p.m. Eastern Time on a
Business Day, it will be executed on that day. If the Fund receives your order
and payment in the form of Federal Funds after 5:00 p.m. Eastern Time on a
Business Day, your order will be processed the next Business Day.
Telephone and Facsimile Purchases
You can purchase Fund shares by telephone or facsimile once you have
established your account with the Fund and selected facsimile and/or telephone
privileges on your Account Application. In order to qualify for dividends on the
day of purchase, telephone or facsimile orders must be placed and Federal Funds
must be in the Fund's custody account by 5:00 p.m. Eastern Time on Business
Days. If
10
<PAGE>
Federal Funds arrive in the Fund's custody account after the stated
deadline the account will be credited the next Business Day.
Minimum Investment and Account Balances
The minimum initial investment for Class I is $1,000,000 and additional
investments may be made in any amount. The minimum purchase requirements do not
apply to reinvested dividends. If an account balance in Class I falls below
$200,000 due to redemptions or exchanges, the account may be closed and the
proceeds wired to the bank account of record, or a check will be issued and sent
to the party of record. An investor will be given 30 days notice that the
account will be closed unless an additional investment is made to increase the
account balance to the $200,000 minimum.
Statements and Reports
The Trust will send you a statement of your account after every transaction
that affects your share balance or your account registration. A statement with
tax information and an annual statement will be mailed to you by January 31 of
each year, and also will be filed with the IRS. At least twice a year, you will
receive financial statements in the form of Annual and Semi-Annual Reports of
the Fund.
HOW TO REDEEM SHARES
General Procedures
Shareholders may redeem all or any part of the value of their account(s) on
any Business Day. You may redeem by mail, telephone or facsimile if you have
established that capability with the Fund. Redemption orders are processed at
the net asset value per share next determined after the Fund receives your
order. If the Fund receives your redemption order before 1:00 p.m. Eastern Time
on a Business Day, the Fund will generally pay for your redeemed shares on that
day. Otherwise, the Fund will generally pay for your redeemed shares on the next
Business Day. The Fund reserves the right to pay for redeemed shares within
seven days after receiving your redemption order if, in the judgment of the
Adviser, an earlier payment could adversely affect the Fund.
Regular Redemption
You may redeem shares by sending a written request to Financial Investors
Trust, 370 17th Street, Suite 3100, Denver, CO 80202. You must sign a redemption
request. (All individuals with authority on the account must co-sign.) Your
written redemption request must:
(i) state the number of shares to be redeemed;
(ii) identify your shareholder account number; and
(iii) provide your tax identification number.
Each signature must be guaranteed by either a bank that is a member of the
FDIC, a trust company or a member firm of a national securities exchange or
other eligible guarantor institution. The Fund will not accept guarantees from
notaries public. Guarantees must be signed by an authorized person at the
guarantor institution, and the words "Signature Guaranteed" must appear with the
11
<PAGE>
signature. A redemption request will not be deemed to be properly received until
the Fund receives all required documents in proper form.
When the Fund wires your redemption proceeds, the wire must be paid to the
same bank and account as designated on the Fund's Account Application or in your
written instructions to the Fund. If your bank is not a member of the Federal
Reserve System, your redemption proceeds will be wired to a correspondent bank.
Immediate notification by the correspondent bank to your bank will be necessary
to avoid a delay in crediting the funds to your bank account.
Telephone and Facsimile Redemption
You may redeem shares by telephone or facsimile. Shareholders must check
the appropriate box on the Account Application to activate facsimile and/or
telephone redemption privileges. Shares may be redeemed by telephoning the Fund
at (800) 298-3442 (or sending a facsimile transmission to the Fund at (303)
825-2575 and giving the account name, account number, Personal Identification
Number (PIN#), name of Fund and amount of redemption. Proceeds from redemptions
will be wired directly to your account at a commercial bank within the United
States.
In order to arrange for facsimile and/or telephone redemptions after you
have opened your account, or to change the bank account or address designated to
receive redemption proceeds, send a written request to the Fund at the address
listed under "Regular Redemption". The request must be signed by you and each
other shareholder of the account involved, with the signatures guaranteed as
described above. The Trust may modify or terminate procedures for redeeming
shares by telephone but will not materially change or terminate it without
giving shareholders 60 days' written notice.
During periods of substantial economic or market change, telephone or
facsimile redemptions may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may redeem your shares by mail as
described above under "Regular Redemption".
By electing the facsimile and/or telephone redemption option, you may be
giving up a measure of security which you might have had if you were to redeem
in writing. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone or facsimile are genuine, such as
recording telephone calls, providing written confirmation of transactions, or
requiring a form of personal identification prior to acting on instructions
received by telephone or facsimile. To the extent the Trust does not employ
reasonable procedures, it and/or its service contractors may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Trust nor
ALPS will be liable for following instructions communicated by telephone or
facsimile that are reasonably believed to be genuine. Accordingly, you, as a
result of this policy, may bear the risk of fraudulent telephone or facsimile
redemption transactions.
12
<PAGE>
General Redemption Information
Except for the presence of certain exceptional circumstances as described
in the Investment Company Act of 1940, the Fund will pay for redeemed shares by
mail within seven days after the Fund receives your order and supporting
documents in proper form (except as provided by the rules of the Securities and
Exchange Commission). Where payment is to be made by wire via the Federal
Reserve Wire System, the Fund will wire redemption proceeds on the same day
after receiving your redemption order, provided it is made before 1:00 p.m.
Eastern Time on Business Days.
There is no charge for share redemptions. The Fund may redeem an account
that has a balance of less than the minimum account balance (see "Minimum
Investment and Account Balances" above) if the shareholder does not increase the
amount of the account to at least the minimum account balance upon 30 days'
notice.
Please direct questions concerning the proper form for redemption requests
to the Fund at (800) 298-3442.
SHAREHOLDER SERVICES
Exchange Privilege
You may sell your Fund shares and buy shares of the U.S. Treasury Money
Market Fund or the U.S. Government Money Market Fund, additional investment
portfolios of the Trust, in exchange by written request. There are no fees or
commissions for exchanging Fund shares. If you have established the privilege on
your Account Application, you may also initiate exchanges by telephone or
facsimile. Exchange requests should be directed to the Fund at (800) 298-3442.
Exchange transactions must be for amounts of $1,000 or more. Exchanges may
have tax consequences, so you should consult your tax adviser for further
information. The investment portfolio must be registered for sale in your state
and must meet the investment criteria for your institution and the investor must
meet the minimum investment requirements. See "Suitability" in that Fund's
prospectus. Prior to requesting an exchange of Fund shares you should call the
Fund at (800) 298-3442. You should read the current prospectus before investing.
Each Fund has its own minimum balance requirements which must be adhered to.
During periods of significant economic or market change, telephone or
facsimile exchanges may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may also mail the exchange request to
the Fund at the address listed under "Regular Redemption". Neither the Trust nor
ALPS will be responsible for the authenticity of exchange instructions received
by telephone or facsimile except as set forth under "How to Redeem Shares -
Telephone and Facsimile Redemption".
The Trust can provide you with information concerning certain limitations
on the exchange privilege, including those related to frequency. The Trust may
modify or terminate the exchange privilege but will not materially change or
terminate it without giving shareholders 60 days' written notice.
13
<PAGE>
TAXES
While municipal investors are generally exempt from Federal income taxes,
each investor should independently ascertain its tax status. With respect to
investors who are not exempt from Federal income taxes, dividends derived from
net investment income and short term capital gains are taxable as ordinary
income distributions and are taxable when paid, whether investors receive
distributions in cash or reinvest them in additional shares, except that
distributions declared in December and paid in January are taxable as if paid on
December 31. The Fund will send to non-exempt investors an IRS Form 1099-DIV
showing their taxable distributions for the past calendar year.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). This qualification will
relieve the Fund of liability for Federal income taxes to the extent its
earnings are distributed in accordance with the Code and it meets other
requirements for qualification as set forth in the Code.
The information above is only a summary of some of the federal tax
consequences generally affecting the Fund and its shareholders, and no attempt
has been made to discuss individual tax consequences. In addition to Federal
taxes, investors may be subject to state or local taxes on their investment.
Investors should consult their tax advisor to determine whether the Fund is
suitable to their particular tax situation.
When investors sign their account application, they will be asked to
certify that their social security or taxpayer identification number is correct
and that they are not subject to 31% backup withholding for failing to report
income to the IRS. If investors violate IRS regulations, the IRS can require the
Fund to withhold 31% of taxable distributions and redemptions.
The Fund declares dividends from net investment income daily and pays such
dividends monthly. The Fund intends to distribute substantially all of its net
investment income and capital gains, if any, to shareholders within each
calendar year as well as on a fiscal year basis.
Since all of the Fund's net investment income is expected to be derived
from earned interest, it is anticipated that all dividends paid by the Fund will
be taxable as ordinary income to those shareholders who are not exempt from
Federal income taxes, and that no part of any distribution will be eligible for
the dividends received deduction for corporations.
INVESTMENT INSTRUMENTS, TRANSACTIONS AND RISKS
The following paragraphs provide a brief description of the securities in
which the Fund may invest and the transactions the Fund may make. The Fund is
not limited by this discussion, however, and may purchase other types of
securities and may enter into other types of transactions if they are consistent
with the Fund's investment objective and policies.
Bankers' Acceptances purchased by the Fund are negotiable obligations of a
bank to pay a draft which has been drawn on it by a customer. These obligations
are backed by large banks and also usually are backed by goods in international
trade.
14
<PAGE>
Certificates of Deposit purchased by the Fund are negotiable certificates
that represent a commercial bank's obligations to repay funds deposited with it
and earn rates of interest over given periods.
Commercial Paper purchased by the Fund are short-term obligations issued by
banks, broker-dealers, corporations and other entities for purposes such as
financing their current operations.
Corporate Obligations purchased by the Fund are bonds and notes issued by
corporations and other business organizations to finance their credit needs.
Delayed-Delivery Transactions. The Fund may buy and sell obligations on a
when-issued or delayed-delivery basis, with payment and delivery taking place at
a future date. The market value of obligations purchased in this way may change
before the delivery date, which could affect the market value of the Fund's
assets. Ordinarily, the Fund will not earn interest on obligations until they
are delivered.
Foreign Bank Obligations. The Fund limits its investments in foreign bank
obligations to United States dollar denominated obligations of United States
branches of foreign banks which at the time of investment (i) have more than $10
Billion, or the equivalent in other currencies, in total assets; and (ii) in the
opinion of the Fund's investment adviser, are of an investment quality
comparable to obligations of United States banks which may be purchased by the
Fund and present minimal credit risk.
Illiquid Investments. It is the policy of the Fund that illiquid securities
(including repurchase agreements of more than seven days' duration and variable
and floating rate demand and master demand notes not requiring receipt of the
principal note amount within seven days' notice) may not constitute, at the time
of purchase or at any time, more than 10% of the value of the total net assets
of the Fund. Illiquid securities include (a) securities that are illiquid by
virtue of legal or contractual restrictions on resale or the absence of a
readily available market, (b) participation interests in loans that are not
subject to puts and (c) repurchase agreements not terminable within seven days.
See "Repurchase and Reverse Repurchase Agreements" below.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid for purposes of this
limitation. Consequently, investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Fund's Board of Trustees based upon the trading
markets for the securities will not be included for purposes of this limitation.
Rule 144A permits certain qualified institutional buyers, such as the Funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser, under the supervision of the Board
of Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to each Fund's restriction of investing no more than
10% of its assets in illiquid securities. A determination of whether a Rule 144A
security is liquid or not is a question of fact. In making this determination
the Adviser will consider the trading markets for the specific security taking
into account the unregistered nature of a Rule 144A security. In addition, the
Adviser could consider the (1) frequency of trades and quotes, (2) number of
dealers and potential purchasers, (3) dealer undertakings to make a market, and
(4) the nature of the security and of marketplace trades(e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A securities would be monitored and, if as a
result
15
<PAGE>
of changed conditions, it is determined that a Rule 144A security is no
longer liquid, a Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Fund does not
invest more than 10% of its assets in illiquid securities. Investing in 144A
securities could have the effect of increasing the amount of a Fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities.
Money Market refers to the marketplace where short-term, high grade debt
obligations are traded, including U.S. government obligations, commercial paper,
certificates of deposit, bankers' acceptances, time deposits and short-term
corporate obligations. Money market instruments may carry fixed rates of return
or have variable or floating interest rates.
Repurchase and Reverse Repurchase Agreements. Under the terms of a typical
repurchase agreement, which is deemed a loan for purposes of the 1940 Act, the
Fund would acquire an underlying obligation for a relatively short period
(usually from one to seven days) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period.
The Fund may also engage in reverse repurchase agreements, subject to its
investment restrictions. A reverse repurchase agreement, which is considered a
borrowing by the Fund, involves a sale by the Fund of securities that it holds
concurrently with an agreement by the Fund to repurchase the same securities at
an agreed upon price and date. The Fund will use the proceeds of reverse
repurchase agreements to provide liquidity to meet redemption requests and cash
payments of dividends and distributions when the sale of the Fund's securities
is considered to be disadvantageous. Cash, Government Securities or other liquid
assets equal in value to the Fund's obligations with respect to reverse
repurchase agreements are segregated and maintained with the Fund's custodian or
designated sub-custodian.
Securities Lending. The Fund is authorized to lend its portfolio securities
to well-known and recognized U.S. and foreign brokers, dealers and banks. These
loans, if and when made, may not exceed 30% of the Fund's total assets
(including the market value of the collateral received). The Fund's loans of
securities will be at least 100% collateralized by cash, letters of credit or
Government Securities. The Fund will retain the right to all interest and
dividends payable with respect to the loaned securities. When the Fund lends
portfolio securities it charges interest at reasonable rates and retains the
ability to terminate the loan at any time. Cash or instruments collateralizing
the Fund's loans of securities are segregated and maintained at all times with
the Fund's custodian or designated sub-custodian in an amount at least equal to
the current market value of the loaned securities. In lending securities, the
Fund is subject to risks, which, like those associated with other extensions of
credit, include possible loss of rights in the collateral should the borrower
fail financially.
Time Deposits purchased by the Fund are non-negotiable deposits in a
banking institution earning a specified interest rate over a given period of
time. Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation.
U.S. Government Obligations are debt obligations issued or guaranteed by
the U.S. Treasury of by an agency or instrumentality of the U.S. government. Not
all U.S. government obligations are backed
16
<PAGE>
by the full faith and credit of the United States. For example, obligations
issued by the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the agency's right to borrow money from the U.S.
Treasury under certain circumstances. Obligations issued by the Federal Home
Loan Bank are supported only by the credit of the agency. There is no guarantee
that the government will support these types of obligations, and therefore they
involve more risk than other government obligations.
U.S. Treasury Obligations are obligations issued by the United States and
backed by its full faith and credit.
Variable and Floating Rate Instruments that the Fund will invest in include
notes purchased directly from issuers, bear variable or floating interest rates
and may carry rights that permit holders to demand full payment from the issuers
or certain financial intermediaries. Floating rate securities have interest
rates that change whenever there is a change in a designated market-based
interest rate, while variable rate instruments provide for a specified periodic
adjustment in the interest rate. These formulas are designed to result in a
market value for the instrument that approximate its par value. When determining
the maturity of a variable or floating rate instrument, the Fund may look to the
date the demand feature can be exercised, or to the date the interest rate is
readjusted, rather than to the final maturity of the instrument.
OTHER INFORMATION
Capitalization
Financial Investors Trust was organized as a Delaware business trust on
November 30, 1993 and currently consists of six separately managed portfolios.
The Board of Trustees may establish additional portfolios in the future. The
capitalization of the Funds consists solely of an unlimited number of shares of
beneficial interest with no par value. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
This Prospectus offers exclusively Class I shares of the Fund. Class I
shares of the Fund are sold generally to municipal investors, including
municipalities, counties and state agencies, as well as other institutional
investors such as broker/dealers, corporations, investment advisers, credit
unions, banks, insurance companies and other financial institutions and high net
worth individuals that meet the $1,000,000 minimum investment threshold for this
class of shares. When issued, shares of the Trust are fully paid and
non-assessable.
Class II shares are designed for individuals and other investors who seek
mutual fund investment convenience plus a lower investment minimum. Class I and
Class II are identical in all respects with the exception that Class I shares
have a higher investment minimum and do not impose any 12b-1 fees.
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or Officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligations entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable
17
<PAGE>
to meet its obligations and should be considered remote and is limited to the
amount of the shareholder's investment in the Fund.
Voting
Shareholders have the right to vote in the election of Trustees and on any
and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. All shares of the Trust have equal
voting rights and will be voted in the aggregate and not by class or series,
except where voting by class or series is required by law or where the matter
involved affects only one class or series. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
Shareholders of the Fund may vote separately on items which affect only the
Fund.
The Trust Instrument provides that the holders of not less than two-thirds
of the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting of shareholders for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust or the Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy: or (2) more than 50% of the outstanding shares of the Fund.
Performance Information
From time to time, each class of the Fund may quote its "yield" and "total
return" in advertisements or in communications to shareholders. Both performance
figures are based on historical earnings and are not intended to indicate future
performance. The "yield" quoted in advertisements refers to the income generated
by an investment in the Fund over a specified seven-day period. This income is
then "annualized". That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of the assumed reinvestment.
Quotations of average annual total return for each class of the Fund, if
and when quoted, will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in the Fund over periods of 1, 5 and
10 years (up to the life of that Fund), reflect the deduction of a proportional
share of Fund expenses (on an annual basis), and assume that all dividends and
distributions are reinvested when paid.
The yield and total return of each class of the Fund are calculated
separately due to separate expense structures as indicated in the "Expense
Summary"; the yield and total return of Class II will be lower than that of
Class I because of the additional 12b-1 fees to which Class II shareholders are
subject.
Additionally, the performance of each class of the Fund may be compared in
advertisements or in reports to shareholders to those of other mutual funds with
similar investment objectives and to other relevant indices or to rankings
prepared by independent services or other financial or industry
18
<PAGE>
publications that monitor the performance of mutual funds. For example, the
Funds' yields may be compared to the IBC/Donoghue's Money Fund Average, which is
an average compiled by IBC/Donoghue's Money Fund Report. In addition, yields may
be compared to the average yields reported by the Bank Rate Monitor for money
market deposit accounts offered by the 50 leading banks and thrift institutions
in the top five standard metropolitan statistical areas.
Yield data as reported in national financial publications, including Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in publications of a local or regional nature, may also be used in comparing the
yields of the Fund.
Since yields fluctuate, you cannot necessarily use yield data to compare an
investment in the Funds' 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. Yield is generally a function of the kind and
quality of the instruments held in a portfolio, portfolio maturity, operating
expenses and market conditions. Any fees charged by service institutions
directly to their customer accounts in connection with investments in shares of
the Fund will not be included in the Fund's calculations of yield or total
return.
Inquiries
Please write or call the Trust at the address or telephone number listed on
the cover of this Prospectus with any inquiries you may have regarding the Fund
or any other investment portfolios of the Trust that are not offered by this
Prospectus.
19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS PAGE
INTENTIONALLY
LEFT BLANK
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
20
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
21
<PAGE>
FINANCIAL INVESTORS TRUST August 28, 1998
370 Seventeenth Street
Suite 3100
Denver, Colorado 80202-5631
For additional information, call (800) 298-3442
PRIME MONEY MARKET FUND - CLASS II
This Prospectus describes the Prime Money Market Fund (the "Fund"), a
diversified money market fund. The Fund seeks to provide investors with as high
a level of current income as is consistent with the preservation of capital and
liquidity by investing in a defined group of short-term, U.S. dollar denominated
money market instruments. The Fund is required to maintain a dollar-weighted
average portfolio maturity of 90 days or less and seeks to maintain its net
asset value per share at $1.00 for purposes of purchases and redemptions.
This Prospectus offers exclusively Class II shares of the Fund. Class II
shares are designed for individuals and other investors who seek mutual fund
investment convenience. The Fund also offers Class I shares - see "Other
Information - Capitalization."
The Fund is sponsored and distributed by ALPS Mutual Funds Services, Inc.
("ALPS" or the "Administrator" or "Distributor") and is advised by GE Investment
Management Incorporated ("GEIM" or the "Adviser").
Shares in the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the FDIC, the Federal Reserve
Board, or any other agency or insurer and they may involve investment risks
including the possible loss of principal.
This Prospectus sets forth concisely the information you should consider
before investing in the Fund. Please read this Prospectus and keep it for future
reference. Additional information about the Fund is contained in a Statement of
Additional Information (the "Statement of Additional Information") which has
been filed with the Securities and Exchange Commission ("SEC") and is available
upon request without charge by writing to or calling the Trust at the address
and telephone number listed above. The Statement of Additional Information bears
the same date as this Prospectus and is incorporated herein by reference.
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. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE SUMMARY 3
FUND OPERATIONS 4
SUITABILITY 7
MANAGEMENT OF THE FUND 8
HOW TO INVEST IN THE FUND 9
HOW TO REDEEM SHARES 10
SHAREHOLDER SERVICES 11
TAXES 12
INVESTMENT INSTRUMENTS, TRANSACTIONS AND RISKS 13
OTHER INFORMATION 15
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
The summary below shows shareholder transaction expenses imposed by the
Fund and annual Fund operating expenses based on anticipated operating expenses
of the Fund. A hypothetical example based on the summary is also shown.
"Shareholder Transaction Expenses" are charges you pay when buying or selling
shares of the Fund whereas "Annual Fund Operating Expenses" are paid out of the
Fund's assets and include fees for portfolio management, fund administration and
other services.
Shareholder Transaction Expenses
Maximum Sales Load on Purchases
of Fund Shares None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
The Management Fees described in the table below are based upon the
anticipated operating expenses of the Fund. Management Fees may be higher to the
extent the Fund's average net assets exceed $500 million. Please read the
following Annual Fund Operating Expenses summary and accompanying footnotes
carefully before investing.
<TABLE>
<S> <C>
Management Fees (1) 0.04%
12b-1 Fees (2) 0.30%
All Other Expenses(3)
(Net of Fee Waivers and Reimbursements) 0.16%
Total Fund Operating Expenses
(Net of Fee Waivers and Reimbursements)(2) 0.50%
</TABLE>
(1) The Fund is obligated to pay management fees to GEIM at the maximum
annual rate of 0.08% of the Fund's average net assets. Under its Investment
Advisory Agreement with the Fund, GEIM is entitled to receive management fees of
0.04% on the first $500 million of average net assets of the Fund, 0.06% on the
next $500 million and 0.08% on average net assets in excess of $1 billion.
(2) 12b-1 fees are paid by Class II of the Fund to ALPS for services
and expenses in connection with distribution. Long-term shareholders of Class II
may pay more than the economic equivalent of the maximum 8.50% front-end charge
permitted by the National Association of Securities Dealers, Inc. ("NASD") due
to 12b-1 fees applicable to Class II shares.
(3) The amount for "All Other Expenses" includes administration fees
payable to the Administrator calculated daily and payable monthly, at an annual
rate of the greater of $360,000 or 0.16% of average daily net assets of the Fund
up to $500 million, 0.14% of average daily net assets of the Fund in excess of
$500 million up to $1 billion and 0.12% of average daily net assets of the Fund
in excess of $1 billion. The Administrator has stated that it will voluntarily
waive a portion of the administration fees otherwise payable by the Fund, as
well as voluntarily assume a portion of the Fund expenses, to the extent
necessary for Class II of the Fund to maintain a total expense ratio of not more
than 0.50% of average net assets. Without this voluntary fee waiver and
assumption of expenses, and assuming payment of the maximum management and
administration fees, All Other Expenses and Total Fund Operating Expenses would
be 0.81% and 1.15%, respectively, of the average net assets of Class II of the
Fund. The Administrator reserves the right to modify or terminate the fee waiver
and assumption of expenses at any time.
3
<PAGE>
The following example should not be considered a representation of
future expenses. The expenses set forth above and the example set forth below
reflect the non-imposition of certain fees and expenses. Actual expenses may be
greater or less than those shown.
Example:
Based upon the above summary of expenses and assuming a 5% annual
return, redemption at the end of each time period and the reinvestment of all
dividends and distributions, you would pay the following expenses on a $25,000
investment in Class II of the Fund:
<TABLE>
<S> <C>
1 Year $128
3 Years $402
</TABLE>
Other Information:
The Expense Summary and Example are intended to help you understand the
expenses you would bear either directly (as with the Shareholder Transaction
Expenses) or indirectly (as with the Annual Fund Operating Expenses) as a Fund
shareholder. As stated above, the Fund does not impose any sales-related charges
in connection with purchases of its shares, although certain service
institutions may charge their clients fees in connection with purchases and
sales for the accounts of their clients. These fees are in addition to the
expenses shown in the Expense Summary and Example. For a more complete
description of the Fund's operating expenses, see "Management of the Fund" in
this Prospectus and the Statement of Additional Information.
FUND OPERATIONS
Investment Objective
The Adviser will use its best efforts to achieve the investment
objective of the Fund as described below, although the achievement of the
investment objective, of course, cannot be assured. You should not consider the
Fund, by itself, to be a complete investment program. The Fund is a diversified,
open-end management investment company.
The investment objective of the Fund is to seek as high a level of
current income as is consistent with the preservation of capital and liquidity.
In seeking its objective, the Fund's investments include, but are not limited
to, the following U.S. dollar denominated, short-term money market instruments:
(1) securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities ("Government Securities"); (2) debt obligations of
corporations, banks, savings and loan institutions, insurance companies and
mortgage bankers; (3) commercial paper and notes, including those with floating
or variable rates of interest; (4) debt obligations of U.S. branches of foreign
banks; (5) repurchase agreements; (6) asset-backed or mortgage-related
securities; (7) stripped Government Securities; and (8) zero coupon bonds.
The Fund limits its portfolio investments to securities that the
Trust's Board of Trustees determines present minimal credit risk and that are
"Eligible Securities" at the time of acquisition by the Fund. "Eligible
Securities" as used in this Prospectus means securities rated by the requisite
"nationally recognized statistical rating organization" ("NRSRO") in one of the
two highest short-term rating categories, consisting of issuers that have
received these ratings with respect to other short-term debt securities and
comparable unrated securities. "Requisite NRSROs" means (1) any two NRSROs that
have issued ratings with respect to a security or class of debt obligations of
an issuer or (2) one NRSRO, if only one NRSRO has issued such a rating at the
time that the Fund acquires the security. Currently, six organizations are
NRSROs: S&P, Moody's, Fitch Investors Service, Inc., Duff and Phelps, Inc., IBCA
Limited and its affiliate, IBCA, Inc., and Thomson Bank Watch, Inc. A discussion
of the ratings
4
<PAGE>
categories is contained in the Appendix to the Statement of Additional
Information. By limiting its investments to Eligible Securities, the Fund may
not achieve as high a level of current income as a fund investing in lower-rated
securities.
The Fund may not invest more than 5% of its total assets in the
securities of any one issuer, except for Government Securities and except to the
extent permitted under rules adopted by the SEC under the Investment Company Act
of 1940, as amended ("1940 Act"). In addition, the Fund may not invest more than
5% of its total assets in Eligible Securities that have not received the highest
rating from the Requisite NRSROs and comparable unrated securities ("Second Tier
Securities"), and may not invest more than the greater of $1,000,000 or 1% of
its total assets in the Second Tier Securities of any one issuer. The Fund may
invest more than 5% (but not more than 25%) of the then-current value of the
Fund's total assets in the securities of a single issuer for a period of up to
three business days, so long as (1) the securities either are rated by the
Requisite NRSROs in the highest short-term rating category or are securities of
issuers that have received such ratings with respect to other short-term debt
securities or are comparable unrated securities and (2) the Fund does not make
more than one such investment at any one time. Determinations of comparable
quality for purchases of unrated securities are made by GEIM in accordance with
procedures established by the Board of Trustees. The Fund invests only in
instruments that have (or, pursuant to regulations adopted by the SEC, are
deemed to have) remaining maturities of 13 months or less at the date of
purchase (except securities subject to repurchase agreements), determined in
accordance with a rule promulgated by the SEC. The Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less. The assets of the
Fund are valued on the basis of amortized cost, as described below under
"Determination of Net Asset Value."
The Fund, in addition to investing as described above, may hold Rule
144A Securities. In addition, the Fund may engage in the following types of
investment techniques and strategies: entering into reverse repurchase
agreements, entering into securities transactions on a when-issued or
delayed-delivery basis and lending portfolio securities. These other
instruments, investment techniques and strategies have risks and special
considerations associated with them that are described below under "Investment
Instruments, Transactions, Strategies and Risks."
Investment Restrictions
The Fund is subject to a number of investment restrictions which
reflect self-imposed standards as well as federal regulatory limitations. These
limitations are designed to minimize certain risks associated with investing in
specified types of securities or engaging in certain transactions. These
investment restrictions and those identified as fundamental in the Statement of
Additional Information may be changed only by a vote of a majority of the Fund's
outstanding shares.
The Fund may not:
1) Borrow money, except that the Fund may enter into reverse repurchase
agreements, and except that the Fund may borrow from banks for temporary or
emergency (not leveraging) purposes, including the meeting of redemption
requests and cash payments of dividends and distributions that might otherwise
require the untimely disposition of securities, in an amount not to exceed
33-1/3% of the value of the Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed) at the
time the borrowing is made. Whenever borrowings, including reverse repurchase
agreements, of 5% or more of the Fund's total assets are outstanding, the Fund
will not make any additional investments.
2) Lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending portfolio securities in an amount not
to exceed 30% of the Fund's assets taken at market value, (c) entering into
repurchase agreements, and (d) entering into variable rate demand notes.
5
<PAGE>
3) Purchase securities (other than Government Securities) of any issuer
if, as a result of the purchase, more than 5% of the Fund's total assets would
be invested in the securities of the issuer. All securities of a foreign
government and its agencies will be treated as a single issuer for purposes of
this restriction.
4) Purchase more than 10% of the voting securities of any one issuer,
or more than 10% of the outstanding securities of any class of issuer, except
that this limitation is not applicable to the Fund's investments in Government
Securities. All securities of a foreign government and its agencies will be
treated as a single issuer for purposes of this restriction.
5) Invest more than 25% of the value of its total assets in securities
of issuers in any one industry, except that the Fund may invest more than 25% of
the value of its total assets in securities issued by domestic banks. For
purposes of this restriction, the term "industry" will be deemed to include (a)
the government of any country other than the U.S., but not the U.S. Government
and (b) all supranational organizations.
If a percentage limitation on investments by the Fund stated above or
in the Statement of Additional Information is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from changes in
asset values will not be deemed to violate the limitation except in the case of
the limitations on borrowing and illiquid investments. The Fund is not required
to sell a security if its rating is reduced or discontinued after purchase, but
the Fund may consider doing so.
It is the intention of the Fund, unless otherwise indicated, that with
respect to the Fund's policies that are the result of the application of law,
the Fund will take advantage of the flexibility provided by rules or
interpretations of the SEC currently in existence or promulgated in the future
or changes to such laws.
Determination of Net Asset Value
The value of the Fund's shares is referred to as "net asset value". Net
asset value per share of each Class for purposes of pricing purchases and
redemptions is calculated by adding the value of each Class' proportionate share
of all securities and other assets , subtracting its proportionate share of
liabilities, and dividing the result by the number of outstanding shares of each
Class. Within each Class, the expenses are allocated proportionately based on
the net assets of each Class, except class-specific expenses which are allocated
directly to the respective Class. Net asset value is determined as of 5:00 p.m.
Eastern Time on each day the New York Federal Reserve and the New York Stock
Exchange are open for business. Currently, either the New York Federal Reserve
or the New York Stock Exchange is closed on New Years Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. A
"Business Day" is any day on which the New York Federal Reserve and the New York
Stock Exchange are open for business.
The Board of Trustees has established procedures designed to maintain a
stable net asset value of $1.00 per share, to the extent reasonably possible.
The Board of Trustees has approved and adopted procedures under Rule 2a-7 under
the Investment Company Act of 1940, as amended, which was enacted by the SEC
with the intent of stabilizing money market funds at $1.00 per share. Under the
guidelines of Rule 2a-7, the Fund uses the amortized cost method to value its
portfolio securities. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period of maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. Rule 2a-7 also provides that the Fund must also do a
"mark-to-market" analysis, where it is determined the degree to which any
variations may exist between the amortized pricing method and the actual market
price of the securities in the Fund. In the event the Board determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, the Board will take such corrective
action as it regards as necessary and appropriate, including the sale of
6
<PAGE>
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity.
Rule 2a-7 also requires the Fund to maintain a dollar weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of 13 months or less and invest only in securities determined by the
Trust's Board of Trustees to be "eligible securities" and that present minimal
credit risks. The Board of Trustees or its delegate reviews the portfolio
securities monthly and at regularly scheduled quarterly Board of Trustees
meetings. There can be no assurance that at all times the $1.00 price per share
can be maintained. See the Statement of Additional Information for more details.
Dividends and Distributions
The Fund's net income is declared daily as a dividend at the close of
business on the day of declaration. Your shares begin earning dividends on the
day you purchase them, and continue to earn dividends through and including the
day before you redeem them. See "How to Invest in the Fund". The Fund pays
dividends not later than five business days after the end of each month in the
form of additional shares of the Fund, unless you elect prior to the date of
distribution to receive payment in cash. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash. If you redeem all of your
shares in the Fund, the Fund will pay your dividends in cash not later than five
business days after the redemption.
SUITABILITY
The Fund is designed as an economical and convenient professionally
managed investment vehicle for institutional investors and individuals with cash
balances or cash reserves who seek as high a level of current income as is
consistent with the preservation of capital and liquidity. The Fund is designed
to meet the specific cash management needs of individual investors and
institutional investors such as Municipal Investors, broker/dealers,
corporations, investments advisers, credit unions, banks, insurance companies
and other institutional investors. "Municipal Investors" include any State,
county, municipality, school district, special district or political subdivision
in the United States. The Fund may also be suitable for institutions seeking an
investment vehicle for daily cash sweep or liquidity purposes on behalf of their
clients.
Legislation in each state sets forth guidelines and limitations with
respect to investments by Municipal Investors located within the state. In
addition, Municipal Investors may be subject to local laws or have their own
guidelines and policies prescribing acceptable investments for cash management
purposes. Each Municipal Investor planning to invest in the Fund must
independently verify that the Fund meets all of the criteria of investment
policies and guidelines applicable to such Municipal Investor.
Future statutory or regulatory changes, as well as future judicial or
administrative decisions and interpretations of present and future statutes and
regulations could prevent a Municipal Investor from continuing its investment in
the Fund. Each Municipal Investor should therefore remain aware of any changes
in the applicable regulation of permitted investments.
The Fund offers the advantages of purchasing power efficiencies and
diversification of risk. Generally, in purchasing debt instruments from dealers,
the percentage difference between the bid and asked price tends to decrease as
the size of the transaction increases. The Fund also offers investors the
opportunity to participate in a portfolio of money market instruments which is
more diversified in terms of issues and maturities than a portfolio a single
investor may otherwise be able to invest in.
Investment in the Fund relieves the investor of money management and
administrative burdens usually associated with the direct purchase and sale of
money market instruments. These include the
7
<PAGE>
selection of the portfolio investments; surveying the market for the best terms
at which to buy and sell; scheduling and monitoring maturities and
reinvestments; receipt, delivery and safekeeping of securities; and portfolio
recordkeeping.
MANAGEMENT OF THE FUND
Investment Adviser
The Adviser, GEIM, is a wholly-owned subsidiary of General Electric
Company ("GE"). The principal address of the Adviser is 3003 Summer Street,
Stamford, CT 06905.
Through GEIM and General Electric Investment Corporation ("GEIC"), an
affiliated company of GEIM, wholly owned by GE, and their predecessors, GE has
more than 70 years of investment management experience. GEIM and GEIC
collectively provide investment management services to various institutional
accounts with total assets as of June 30, 1998 of approximately $69 billion, of
which approximately $1.7 billion was invested in money market funds regulated
under Rule 2a-7.
Pursuant to the Investment Advisory Agreement, the Adviser has agreed
to provide a continuous investment program for the Fund, including investment
research and management with respect to the assets of the Fund. GEIM is entitled
to receive management fees of 0.04% on the first $500 million of average net
assets of the Fund, 0.06% on the next $500 million and 0.08% on average net
assets in excess of $1 billion.
Administrator, Transfer Agent, Bookkeeping and Pricing Agent
ALPS serves as the Fund's Administrator. As Administrator, ALPS has
agreed to: assist in maintaining the Fund's office; furnish the Fund with
clerical and certain other services; compile data for and prepare notices and
semi-annual reports to the Securities and Exchange Commission; prepare filings
with state securities commissions; coordinate Federal and state tax returns;
monitor the Fund's expense accruals; monitor compliance with the Fund's
investment policies and limitations; and generally assist in the Fund's
operations. ALPS is entitled to receive a fee from the Fund for its
administrative services computed daily and payable monthly, at the annual rate
of the greater of $360,000 or 0.16% of average daily net assets of the Fund up
to $500 million, 0.14% of average daily net assets of the Fund in excess of $500
million up to $1 billion and 0.12% of average daily net assets of the Fund in
excess of $1 billion. ALPS has stated that it will voluntarily waive a portion
of the administration fees otherwise payable by the Fund, as well as voluntarily
assume a portion of the Fund expenses, to the extent necessary for Class II of
the Fund to maintain a total expense ratio of not more than 0.50% of the average
net assets of the Fund. ALPS reserves the right to modify or terminate the fee
waiver and assumption of expenses at any time. ALPS and GEIM may also pay third
parties from time to time for rendering services to the Fund and/or
shareholders.
In addition to its role as Administrator, ALPS serves as the Fund's
Transfer Agent. ALPS also serves as the Fund's Bookkeeping and Pricing Agent. In
this capacity, ALPS has agreed to maintain the financial accounts and records of
the Fund and to compute the net asset value and certain other financial
information relating to the Fund.
Custodian
State Street Bank and Trust Company of Connecticut, N.A., located at
750 Main Street, Suite 1114, Hartford, Connecticut 06103, serves as Custodian
for the Fund.
8
<PAGE>
Sub-Custodian
State Street Bank and Trust Company, located at P.O. Box 1978, Boston,
Massachusetts 02015, serves as Sub-Custodian for the Fund.
HOW TO INVEST IN THE FUND
Shares in the Fund are distributed on a continuous basis by ALPS, the
Fund's Sponsor and Distributor. ALPS has its principal office at 370 Seventeenth
Street, Suite 3100, Denver, Colorado 80202 and may be reached at (800) 298-3442.
General Procedures
You may purchase Fund shares through ALPS, the Fund's Transfer Agent.
Investors shall pay for their purchase of Fund shares by using the Federal
Reserve Wire System. Shares of the Fund may be purchased at the net asset value
next determined after an order is received and accepted. The Fund does not
impose any sales-related charges in connection with purchases of shares. The
Fund may discontinue offering its shares in any state without notice to
shareholders.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. The application should be forwarded to:
Financial Investors Trust
370 17th Street, Suite 3100
Denver, Colorado 80202
Purchases by telephone or facsimile can be made after an account has
been established by the Transfer Agent as described below. The Trust reserves
the right to reject any purchase order. Third-party checks will not be accepted.
Check payments must be in U.S. dollars. Please include Fund name and account
number on all checks.
Purchase Price
Your purchase of Fund shares will be effected at the net asset value
next determined after the Fund receives your purchase order in proper form and
payment in the form of Federal Funds. If your order is accompanied by Federal
Funds, or is converted into Federal Funds by 5:00 p.m. Eastern Time on a
Business Day, it will be executed on that day. If the Fund receives your order
and payment in the form of Federal Funds after 5:00 p.m. Eastern Time on a
Business Day, your order will be processed the next Business Day.
Telephone and Facsimile Purchases
You can purchase Fund shares by telephone or facsimile once you have
established your account with the Fund and selected facsimile and/or telephone
privileges on your Account Application. In order to qualify for dividends on the
day of purchase, telephone or facsimile orders must be placed and Federal Funds
must be in the Fund's custody account by 5:00 p.m. Eastern Time on Business
Days. If Federal Funds arrive in the Fund's custody account after the stated
deadline, the account will be credited the next Business Day.
Minimum Investment and Account Balances
The minimum initial investment for Class II is $25,000 and additional
investments may be made in any amount. The minimum purchase requirements do not
apply to reinvested dividends. If an account balance in Class II falls below
$5,000 due to redemptions or exchanges, the account may be
9
<PAGE>
closed and the proceeds wired to the bank account of record, or a check will be
issued and sent to the party of record. An investor will be given 30 days notice
that the account will be closed unless an additional investment is made to
increase the account balance to the $5,000 minimum.
Statements and Reports
The Trust will send you a statement of your account after every
transaction that affects your share balance or your account registration. A
statement with tax information and an annual statement will be mailed to you by
January 31 of each year, and also will be filed with the IRS. At least twice a
year, you will receive financial statements in the form of Annual and
Semi-Annual Reports of the Fund.
HOW TO REDEEM SHARES
General Procedures
Shareholders may redeem all or any part of the value of their
account(s) on any Business Day. You may redeem by mail, telephone or facsimile
if you have established that capability with the Fund. Redemption orders are
processed at the net asset value per share next determined after the Fund
receives your order. If the Fund receives your redemption order before 1:00 p.m.
Eastern Time on a Business Day, the Fund will generally pay for your redeemed
shares on that day. Otherwise, the Fund will generally pay for your redeemed
shares on the next Business Day. The Fund reserves the right to pay for redeemed
shares within seven days after receiving your redemption order if, in the
judgment of the Adviser, an earlier payment could adversely affect the Fund.
Regular Redemption
You may redeem shares by sending a written request to Financial
Investors Trust, 370 17th Street, Suite 3100, Denver, CO 80202. You must sign a
redemption request. (All individuals with authority on the account must
co-sign.)
Your written redemption request must:
(i) state the number of shares to be redeemed;
(ii) identify your shareholder account number; and
(iii) provide your tax identification number.
Each signature must be guaranteed by either a bank that is a member of
the FDIC, a trust company or a member firm of a national securities exchange or
other eligible guarantor institution. The Fund will not accept guarantees from
notaries public. Guarantees must be signed by an authorized person at the
guarantor institution, and the words "Signature Guaranteed" must appear with the
signature. A redemption request will not be deemed to be properly received until
the Fund receives all required documents in proper form.
When the Fund wires your redemption proceeds, the wire must be paid to
the same bank and account as designated on the Fund's Account Application or in
your written instructions to the Fund. If your bank is not a member of the
Federal Reserve System, your redemption proceeds will be wired to a
correspondent bank. Immediate notification by the correspondent bank to your
bank will be necessary to avoid a delay in crediting the funds to your bank
account.
Telephone and Facsimile Redemption
You may redeem shares by telephone or facsimile. Shareholders must
check the appropriate box on the Account Application to activate facsimile
and/or telephone redemption privileges. Shares may be redeemed by telephoning
the Fund at
10
<PAGE>
(800) 298-3442 (or sending a facsimile transmission to the Fund at (303)
825-2575 and giving the account name, account number, Personal Identification
Number (PIN#), name of Fund and amount of redemption. Proceeds from redemptions
will be wired directly to your account at a commercial bank within the United
States.
In order to arrange for facsimile and/or telephone redemptions after
you have opened your account, or to change the bank account or address
designated to receive redemption proceeds, send a written request to the Fund at
the address listed under "Regular Redemption". The request must be signed by you
and each other shareholder of the account involved, with the signatures
guaranteed as described above. The Trust may modify or terminate procedures for
redeeming shares by telephone but will not materially change or terminate it
without giving shareholders 60 days' written notice.
During periods of substantial economic or market change, telephone or
facsimile redemptions may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may redeem your shares by mail as
described above under "Regular Redemption".
By electing the facsimile and/or telephone redemption option, you may
be giving up a measure of security which you might have had if you were to
redeem in writing. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone or facsimile are genuine, such as
recording telephone calls, providing written confirmation of transactions, or
requiring a form of personal identification prior to acting on instructions
received by telephone or facsimile. To the extent the Trust does not employ
reasonable procedures, it and/or its service contractors may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Trust nor
ALPS will be liable for following instructions communicated by telephone or
facsimile that are reasonably believed to be genuine. Accordingly, you, as a
result of this policy, may bear the risk of fraudulent telephone or facsimile
redemption transactions.
General Redemption Information
Except for the presence of certain exceptional circumstances as
described in the Investment Company Act of 1940, the Fund will pay for redeemed
shares by mail within seven days after the Fund receives your order and
supporting documents in proper form (except as provided by the rules of the
Securities and Exchange Commission). Where payment is to be made by wire via the
Federal Reserve Wire System, the Fund will wire redemption proceeds on the same
day after receiving your redemption order, provided it is made before 1:00 p.m.
Eastern Time on Business Days.
There is no charge for share redemptions. The Fund may redeem an
account that has a balance of less than the minimum account balance (see
"Minimum Investment and Account Balances" above) if the shareholder does not
increase the amount of the account to at least the minimum account balance upon
30 days' notice.
Please direct questions concerning the proper form for redemption
requests to the Fund at (800) 298-3442.
SHAREHOLDER SERVICES
Exchange Privilege
You may sell your Fund shares and buy shares of the U.S. Treasury Money
Market Fund or the U.S. Government Money Market Fund, additional investment
portfolios of the Trust, in exchange by written request. There are no fees or
commissions for exchanging Fund shares. If you have established the privilege on
your Account Application, you may also initiate exchanges by telephone or
facsimile. Exchange requests should be directed to the Fund at (800) 298-3442.
11
<PAGE>
Exchange transactions must be for amounts of $1,000 or more. Exchanges
may have tax consequences, so you should consult your tax adviser for further
information. The investment portfolio must be registered for sale in your state
and must meet the investment criteria for your institution and the investor must
meet the minimum investment requirements. See "Suitability" in that Fund's
prospectus. Prior to requesting an exchange of Fund shares you should call the
Fund at (800) 298-3442. You should read the current prospectus before investing.
Each Fund has its own minimum balance requirements which must be adhered to.
During periods of significant economic or market change, telephone or
facsimile exchanges may be difficult to complete. If you are unable to contact
the Fund by telephone or facsimile, you may also mail the exchange request to
the Fund at the address listed under "Regular Redemption". Neither the Trust nor
ALPS will be responsible for the authenticity of exchange instructions received
by telephone or facsimile except as set forth under "How to Redeem Shares -
Telephone and Facsimile Redemption".
The Trust can provide you with information concerning certain
limitations on the exchange privilege, including those related to frequency. The
Trust may modify or terminate the exchange privilege but will not materially
change or terminate it without giving shareholders 60 days' written notice.
TAXES
While municipal investors are generally exempt from Federal income
taxes, each investor should independently ascertain its tax status. With respect
to investors who are not exempt from Federal income taxes, dividends derived
from net investment income and short term capital gains are taxable as ordinary
income distributions and are taxable when paid, whether investors receive
distributions in cash or reinvest them in additional shares, except that
distributions declared in December and paid in January are taxable as if paid on
December 31. The Fund will send to non-exempt investors an IRS Form 1099-DIV
showing their taxable distributions for the past calendar year.
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). This qualification
will relieve the Fund of liability for Federal income taxes to the extent its
earnings are distributed in accordance with the Code and it meets other
requirements for qualification as set forth in the Code.
The information above is only a summary of some of the federal tax
consequences generally affecting the Fund and its shareholders, and no attempt
has been made to discuss individual tax consequences. In addition to Federal
taxes, investors may be subject to state or local taxes on their investment.
Investors should consult their tax advisor to determine whether the Fund is
suitable to their particular tax situation.
When investors sign their account application, they will be asked to
certify that their social security or taxpayer identification number is correct
and that they are not subject to 31% backup withholding for failing to report
income to the IRS. If investors violate IRS regulations, the IRS can require the
Fund to withhold 31% of taxable distributions and redemptions.
The Fund declares dividends from net investment income daily and pays
such dividends monthly. The Fund intends to distribute substantially all of its
net investment income and capital gains, if any, to shareholders within each
calendar year as well as on a fiscal year basis.
Since all of the Fund's net investment income is expected to be derived
from earned interest, it is anticipated that all dividends paid by the Fund will
be taxable as ordinary income to those shareholders who are not exempt from
Federal income taxes, and that no part of any distribution will be eligible for
the dividends received deduction for corporations.
12
<PAGE>
INVESTMENT INSTRUMENTS, TRANSACTIONS AND RISKS
The following paragraphs provide a brief description of the securities
in which the Fund may invest and the transactions the Fund may make. The Fund is
not limited by this discussion, however, and may purchase other types of
securities and may enter into other types of transactions if they are consistent
with the Fund's investment objective and policies.
Bankers' Acceptances purchased by the Fund are negotiable obligations
of a bank to pay a draft which has been drawn on it by a customer. These
obligations are backed by large banks and also usually are backed by goods in
international trade.
Certificates of Deposit purchased by the Fund are negotiable
certificates that represent a commercial bank's obligations to repay funds
deposited with it and earn rates of interest over given periods.
Commercial Paper purchased by the Fund are short-term obligations
issued by banks, broker-dealers, corporations and other entities for purposes
such as financing their current operations.
Corporate Obligations purchased by the Fund are bonds and notes issued
by corporations and other business organizations to finance their credit needs.
Delayed-Delivery Transactions. The Fund may buy and sell obligations on
a when-issued or delayed-delivery basis, with payment and delivery taking place
at a future date. The market value of obligations purchased in this way may
change before the delivery date, which could affect the market value of the
Fund's assets. Ordinarily, the Fund will not earn interest on obligations until
they are delivered.
Foreign Bank Obligations. The Fund limits its investments in foreign
bank obligations to United States dollar denominated obligations of United
States branches of foreign banks which at the time of investment (i) have more
than $10 Billion, or the equivalent in other currencies, in total assets; and
(ii) in the opinion of the Fund's investment adviser, are of an investment
quality comparable to obligations of United States banks which may be purchased
by the Fund and present minimal credit risk.
Illiquid Investments. It is the policy of the Fund that illiquid
securities (including repurchase agreements of more than seven days' duration
and variable and floating rate demand and master demand notes not requiring
receipt of the principal note amount within seven days' notice) may not
constitute, at the time of purchase or at any time, more than 10% of the value
of the total net assets of the Fund. Illiquid securities include (a) securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market, (b) participation interests in loans
that are not subject to puts and (c) repurchase agreements not terminable within
seven days. See "Repurchase and Reverse Repurchase Agreements" below.
Securities that have legal or contractual restrictions on resale but
have a readily available market are not deemed illiquid for purposes of this
limitation. Consequently, investments in restricted securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Fund's Board of Trustees based upon the trading
markets for the securities will not be included for purposes of this limitation.
Rule 144A permits certain qualified institutional buyers, such as the Funds, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser, under the supervision of the Board
of Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to each Fund's restriction of investing no more than
10% of its assets in illiquid securities. A determination of whether a Rule 144A
security is liquid or not is a question of fact. In making this determination
the Adviser will consider the trading
13
<PAGE>
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, the Adviser could consider the (1) frequency
of trades and quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) the nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, a Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than 10% of its assets in
illiquid securities. Investing in 144A securities could have the effect of
increasing the amount of a Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
Money Market refers to the marketplace where short-term, high grade
debt obligations are traded, including U.S. government obligations, commercial
paper, certificates of deposit, bankers' acceptances, time deposits and
short-term corporate obligations. Money market instruments may carry fixed rates
of return or have variable or floating interest rates.
Repurchase and Reverse Repurchase Agreements. Under the terms of a
typical repurchase agreement, which is deemed a loan for purposes of the 1940
Act, the Fund would acquire an underlying obligation for a relatively short
period (usually from one to seven days) subject to an obligation of the seller
to repurchase, and the Fund to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period.
The Fund may also engage in reverse repurchase agreements, subject to
its investment restrictions. A reverse repurchase agreement, which is considered
a borrowing by the Fund, involves a sale by the Fund of securities that it holds
concurrently with an agreement by the Fund to repurchase the same securities at
an agreed upon price and date. The Fund will use the proceeds of reverse
repurchase agreements to provide liquidity to meet redemption requests and cash
payments of dividends and distributions when the sale of the Fund's securities
is considered to be disadvantageous. Cash, Government Securities or other liquid
assets equal in value to the Fund's obligations with respect to reverse
repurchase agreements are segregated and maintained with the Fund's custodian or
designated sub-custodian.
Securities Lending. The Fund is authorized to lend its portfolio
securities to well-known and recognized U.S. and foreign brokers, dealers and
banks. These loans, if and when made, may not exceed 30% of the Fund's total
assets (including the market value of the collateral received). The Fund's loans
of securities will be at least 100% collateralized by cash, letters of credit or
Government Securities. The Fund will retain the right to all interest and
dividends payable with respect to the loaned securities. When the Fund lends
portfolio securities it charges interest at reasonable rates and retains the
ability to terminate the loan at any time. Cash or instruments collateralizing
the Fund's loans of securities are segregated and maintained at all times with
the Fund's custodian or designated sub-custodian in an amount at least equal to
the current market value of the loaned securities. In lending securities, the
Fund is subject to risks, which, like those associated with other extensions of
credit, include possible loss of rights in the collateral should the borrower
fail financially.
Time Deposits purchased by the Fund are non-negotiable deposits in a
banking institution earning a specified interest rate over a given period of
time. Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation.
U.S. Government Obligations are debt obligations issued or guaranteed
by the U.S. Treasury of by an agency or instrumentality of the U.S. government.
Not all U.S. government obligations are backed by the full faith and credit of
the United States. For example, obligations issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
agency's right
14
<PAGE>
to borrow money from the U.S. Treasury under certain circumstances. Obligations
issued by the Federal Home Loan Bank are supported only by the credit of the
agency. There is no guarantee that the government will support these types of
obligations, and therefore they involve more risk than other government
obligations.
U.S. Treasury Obligations are obligations issued by the United States
and backed by its full faith and credit.
Variable and Floating Rate Instruments that the Fund will invest in
include notes purchased directly from issuers, bear variable or floating
interest rates and may carry rights that permit holders to demand full payment
from the issuers or certain financial intermediaries. Floating rate securities
have interest rates that change whenever there is a change in a designated
market-based interest rate, while variable rate instruments provide for a
specified periodic adjustment in the interest rate. These formulas are designed
to result in a market value for the instrument that approximate its par value.
When determining the maturity of a variable or floating rate instrument, the
Fund may look to the date the demand feature can be exercised, or to the date
the interest rate is readjusted, rather than to the final maturity of the
instrument.
OTHER INFORMATION
Distribution Plan
The Trustees have adopted a Distribution Plan on behalf of Class II of
the Fund pursuant to Rule 12b-1 (the "Rule") under the 1940 Act. The
Distribution Plan provides for payment of a fee to ALPS at the annual rate of up
to .30% of the average net assets of Class II for distribution-related services.
These services include, but are not limited to the following: formulation and
implementation of marketing and promotional activities, such as mail promotions
and television, radio, newspaper, magazine and other mass media advertising;
preparation, printing and distribution of sales literature; preparation,
printing and distribution of prospectuses of the Prime Fund and reports to
recipients other than existing shareholders of the Prime Fund; obtaining such
information, analyses and reports with respect to marketing and promotional
activities as ALPS may, from time to time, deem advisable; making payments to
securities dealers and others engaged in the sales of Class II Shares of the
Prime Fund; and providing training, marketing and support to such dealers and
others with respect to the sale of Class II Shares of the Prime Fund. The
Distribution Fee is an expense of Class II in addition to the Management Fee,
and Administration Fee, and will reduce the net income and total return of that
Class.
Capitalization
Financial Investors Trust was organized as a Delaware business trust
on November 30, 1993 and currently consists of six separately managed
portfolios. The Board of Trustees may establish additional portfolios in the
future. The capitalization of the Funds consists solely of an unlimited number
of shares of beneficial interest with no par value. When issued, shares of the
Funds are fully paid, non-assessable and freely transferable.
This Prospectus offers exclusively Class II shares of the Fund. Class
II shares are designed for individuals and other investors who seek mutual fund
investment convenience. When issued, shares of the Trust are fully paid and
non-assessable.
Class I shares of the Fund are sold generally to municipal investors,
including municipalities, counties and state agencies, as well as other
institutional investors such as broker/dealers, corporations, investment
advisers, credit unions, banks, insurance companies and other financial
institutions and high net worth individuals that meet the $1,000,000 minimum
investment threshold for this class of shares. Class I and Class II are
identical in all respects with the exception that Class I shares have a higher
investment minimum and do not impose any 12b-1 fees.
15
<PAGE>
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a series of the Trust but only to
the extent of the shareholder's investment in such series. However, the Trust
Instrument disclaims liability of the shareholders, Trustees or Officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of each series of the Trust and requires that notice of the
disclaimer be given in each contract or obligations entered into or executed by
the Trust or the Trustees. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote
and is limited to the amount of the shareholder's investment in the Fund.
Voting
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which, by law or under the provisions of the Trust
Instrument, they may be entitled to vote. All shares of the Trust have equal
voting rights and will be voted in the aggregate and not by class or series,
except where voting by class or series is required by law or where the matter
involved affects only one class or series. The Trust is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
Shareholders of the Fund may vote separately on items which affect only the
Fund.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting of shareholders for the
purpose of considering the removal of a person serving as Trustee if requested
in writing to do so by the holders of not less than 10% of the outstanding
shares of the Trust or the Fund.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting if the holders of more than 50% of the outstanding shares are present in
person or by proxy: or (2) more than 50% of the outstanding shares of the Fund.
Performance Information
From time to time, each class of the Fund may quote its "yield" and
"total return" in advertisements or in communications to shareholders. Both
performance figures are based on historical earnings and are not intended to
indicate future performance. The "yield" quoted in advertisements refers to the
income generated by an investment in the Fund over a specified seven-day period.
This income is then "annualized". That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of the assumed
reinvestment.
Quotations of average annual total return for each class of the Fund,
if and when quoted, will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in the Fund over periods of 1, 5 and
10 years (up to the life of that Fund), reflect the deduction of a proportional
share of Fund expenses (on an annual basis), and assume that all dividends and
distributions are reinvested when paid.
The yield and total return of each class of the Fund are calculated
separately due to separate expense structures as indicated in the "Expense
Summary"; the yield and total return of Class II will be lower than that of
Class I because of 12b-1 fees to which Class II shareholders are subject.
16
<PAGE>
Additionally, the performance of each class of the Fund may be compared
in advertisements or in reports to shareholders to those of other mutual funds
with similar investment objectives and to other relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the Funds' yields may
be compared to the IBC/Donoghue's Money Fund Average, which is an average
compiled by IBC/Donoghue's Money Fund Report. In addition, yields may be
compared to the average yields reported by the Bank Rate Monitor for money
market deposit accounts offered by the 50 leading banks and thrift institutions
in the top five standard metropolitan statistical areas.
Yield data as reported in national financial publications, including
Money Magazine, Forbes, Barron's, The Wall Street Journal and The New York
Times, or in publications of a local or regional nature, may also be used in
comparing the yields of the Fund.
Since yields fluctuate, you cannot necessarily use yield data to
compare an investment in the Funds' 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. Yield is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions. Any fees charged by service
institutions directly to their customer accounts in connection with investments
in shares of the Fund will not be included in the Fund's calculations of yield
or total return.
Inquiries
Please write or call the Trust at the address or telephone number
listed on the cover of this Prospectus with any inquiries you may have regarding
the Fund or any other investment portfolios of the Trust that are not offered by
this Prospectus.
17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS PAGE
INTENTIONALLY
LEFT BLANK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
18
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
19
<PAGE>
FINANCIAL INVESTORS TRUST
U.S. Treasury Money Market Fund
U.S. Government Money Market Fund
Prime Money Market Fund (Classes I and II)
370 Seventeenth Street, Suite 3100
Denver, Colorado 80202
August 28, 1998
General Information: (800) 298-3442
STATEMENT OF ADDITIONAL INFORMATION
Financial Investors Trust (the "Trust") is an open-end, diversified
management investment company with multiple investment portfolios, including the
U.S. Treasury Money Market Fund (the "Treasury Fund"), the U.S. Government Money
Market Fund (the "Government Fund") , the Prime Money Market Fund (the "Prime
Fund"), the Aristata Equity Fund, the Aristata Quality Bond Fund, and the
Aristata Colorado Quality Tax-Exempt Fund (collectively, the "Funds"). This
Statement of Additional Information ("SAI") describes the shares of three Funds
managed by GE Investment Management Incorporated:
The Treasury Fund seeks to provide investors with as high a level of
current income as is consistent with preservation of capital and liquidity by
investing exclusively in U.S. Treasury bills, notes and other direct obligations
of the U.S. Treasury and repurchase agreements fully collateralized by direct
U.S. Treasury obligations. The Fund is required to maintain a dollar-weighted
average portfolio maturity of 90 days or less and seeks to maintain its net
asset value per share at $1.00 for purposes of purchases and redemptions.
The Government Fund seeks to provide investors with as high a level of
current income as is consistent with the preservation of capital and liquidity
by investing exclusively in obligations of the U.S. Government, its agencies and
instrumentalities and repurchase agreements fully collateralized by such
obligations. The Fund is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain its net asset value
per share at $1.00 for purposes of purchases and redemptions.
The Prime Fund seeks to provide investors with as high a level of
current income as is consistent with the preservation of capital and liquidity
by investing in a defined group of short-term, U.S. dollar denominated money
market instruments. The Fund is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain its net asset value
per share at $1.00 for purposes of purchases and redemptions.
Shares of the Funds are offered for sale by ALPS Mutual Funds Services,
Inc., the Sponsor and Distributor, as an investment vehicle for institutional
and high net worth investors.
This Statement of Additional Information is not a prospectus and is
only authorized for distribution when preceded or accompanied by the Funds'
Prospectuses dated August 28, 1998. This Statement of Additional Information
contains additional and more detailed information than that set forth in each
Prospectus and should be read in conjunction with the Prospectuses, additional
copies of which may be obtained without charge from the Trust.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
Investment Restrictions .............................................3
Investment Instruments ..............................................4
Management ..........................................................9
Calculation of Yields and Performance Information ..................14
Determination of Net Asset Value ...................................16
Portfolio Transactions .............................................17
Exchange Privilege .................................................18
Redemptions ........................................................18
Federal Income Taxes ...............................................19
Shares of Beneficial Interest ......................................20
Distribution Plan ..................................................22
Other Information ..................................................23
Custodian and Sub-Custodian ........................................23
Experts ............................................................23
Financial Statements ...............................................23
</TABLE>
2
<PAGE>
INVESTMENT RESTRICTIONS
The Funds observe the following fundamental investment restrictions
which can be changed only when permitted by law and approved by a majority of a
Fund's outstanding voting securities. A "majority of a Fund's outstanding voting
securities" means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented in person or by
proxies or (ii) more than 50% of the outstanding shares.
The Funds may not:
(1) purchase securities on margin or purchase real estate or interests
therein, commodities or commodity contracts, or make loans, and except that the
Funds may purchase or hold short-term debt securities and enter into repurchase
agreements with respect to its portfolio securities as described in the
Prospectus. For this purpose, repurchase agreements are considered loans;
(2) invest more than 5% of the current value of the total assets of a
Fund in the securities of any one issuer, other than obligations of the
United States Government or its agencies or instrumentalities, and repurchase
agreements fully collateralized by direct obligations of the U.S. Government;
(3) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after the purchase and as
a result thereof, the value of the investments of a Fund in that industry would
exceed 25% of the current value of the total assets of the Fund, except that
there is no limitation with respect to investments in obligations of the United
States Government, its agencies or instrumentalities and that the Prime Fund may
invest more than 25% of the value of its total assets in securities issued by
domestic banks;
(4) engage in the underwriting of securities of other issuers, except
to the extent that a Fund may be deemed to be an underwriter in selling, as part
of an offering registered under the Securities Act of 1933, as amended,
securities which it has acquired; or participate on a joint or joint-and-several
basis in any securities trading account. The "bunching" of orders with other
accounts under the management of the Adviser to save commissions or to average
prices among them is not deemed to result in a securities trading account;
(5) effect a short sale of any security, or issue senior securities
except as permitted in paragraph (6). For purpose of this restriction, the
purchase and sale of financial futures contracts and related options does not
constitute the issuance of a senior security;
(6) issue senior securities or otherwise borrow money, except that each
Fund may borrow from banks as a temporary measure for emergency purposes where
such borrowings would not exceed 10% (33 1/3% for the Prime Fund) of a Fund's
total assets (including the amount borrowed) taken at market value; or pledge,
mortgage or hypothecate its assets, except to secure indebtedness permitted by
this paragraph and then only if such pledging, mortgaging or hypothecating does
not exceed 10% (33 1/3% for the Prime Fund) of the Fund's total assets taken at
market value;
(7) invest more than 10% of the total assets of a Fund in the
securities of other investment companies, subject to the limitations of Section
12(d)(1) of the 1940 Act;
(8) invest in any security, including repurchase agreements maturing in
over seven days without a liquidation feature or other illiquid investments
which are subject to legal or contractual delays on resale or which are not
readily marketable, if as a result more than 10% of the market value of a Fund's
assets would be so invested;
3
<PAGE>
(9) purchase interests in oil, gas, or other mineral exploration
programs of real estate and real estate mortgage loans except as provided in the
Prospectus;
(10) have dealings on behalf of a Fund with Officers and Trustees of
the Fund, except for the purchase or sale of securities on an agency or
commission basis, or make loans to any officers, directors or employees of the
Fund; and
(11) purchase equity securities or other securities convertible into
equity securities.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in the market value of an investment, in the net
or total assets of a Fund, in the securities rating of the investment, or any
other later change.
INVESTMENT INSTRUMENTS
The following information supplements the discussion of the investment
objectives and policies of the Funds in each Fund's Prospectus.
U.S. Treasury Obligations. Each Fund may invest, and the Treasury Fund
invests exclusively, in direct obligations of the United States Treasury which
have remaining maturities of 13 months or less and related repurchase
agreements. The United States Treasury issues various types of marketable
securities consisting of bills, notes, bonds and other debt securities. They are
direct obligations of the United States Government and differ primarily in the
length of their maturity. Treasury bills, the most frequently issued marketable
United States Government security, have a maturity of up to one year and are
issued on a discount basis.
U.S. Government Agencies. The Government Fund and the Prime Fund may
invest in obligations issued or guaranteed by the United States Government or
its agencies or instrumentalities which have remaining maturities not exceeding
thirteen months. Agencies and instrumentalities which issue or guarantee debt
securities and which have been established or sponsored by the United States
Government include the Banks for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association and the Student Loan Marketing
Association. United States Government agency and instrumentality obligations
include master notes issued by these entities but do not include obligations of
the World Bank, The Inter-American Development Bank or the Asian Development
Bank.
Asset-Backed Securities (Prime Fund). Asset-backed securities purchased
by the Fund may include pools of mortgages, loans, receivables or other assets.
Payment of principal and interest may be largely dependent upon the cash flows
generated by the assets backing the securities. Asset-backed securities involve
certain risks that are not posed by mortgage-related securities, resulting
mainly from the fact that asset-backed securities do not usually contain the
complete benefit of a security interest in the related collateral. For example,
credit card receivables generally are unsecured and the debtors are entitled to
the protection of a number of state and Federal consumer credit laws, some of
which may reduce the ability to obtain full payment. In the case of automobile
receivables, due to various legal and economic factors, proceeds from
repossessed collateral may not always be sufficient to support payments on these
securities. The risks associated with asset-backed securities are often reduced
by the addition of credit enhancements such as a letter of credit from a bank,
excess collateral or a third-party guarantee. However, the extent of the credit
enhancement may differ amongst securities and generally only applies to a
fraction of the securities' value. With respect to asset-backed securities
arising from
4
<PAGE>
secured debt (such as automobile receivables), there is a risk that
parties other than the originator and servicer of the loan may acquire a
security interest superior to that of the securities holders.
Bank Obligations (Prime Fund). These obligations include negotiable
certificates of deposit, bankers' acceptances and fixed time deposits and other
obligations issued or supported by banks. The Funds' policy on concentration in
bank obligations and a description of the banks the obligations of which the
Fund may purchase are set forth in the Fund's prospectus. A certificate of
deposit is a short-term, interest-bearing negotiable certificate issued by a
commercial bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. The borrower is liable for payment
as is the bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Fixed time deposits are obligations of foreign
branches of United States banks or foreign banks which are payable on a stated
maturity date and bear a fixed rate of interest. Although fixed time deposits do
not have a market, there are no contractual restrictions on the right to
transfer a beneficial interest in the deposit to a third party.
Commercial Paper (Prime Fund). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by domestic and foreign bank holding companies,
corporations, financial institutions and government agencies and
instrumentalities (but only in the case of taxable securities). All commercial
paper purchased by the Fund is, at the time of investment, required to be rated
(or issued by an issuer with a similar security rated) in the highest short-term
rating category by two or more Nationally Recognized Statistical Ratings
Organizations ("NRSROs"), or the only NRSRO rating the security, or if unrated,
determined to be of comparable credit quality by the Adviser. Because variable
rate master demand notes are direct lending arrangements between the lender and
the borrower, it is not generally contemplated that they will be traded. There
is no secondary market for variable rate master demand notes, although they are
redeemable, and thus immediately repayable by the borrower, at principal amount,
plus accrued interest, at any time.
Corporate Debt Securities (Prime Fund). Investments in these securities
are limited to non-convertible corporate debt securities such as bonds and
debentures which have thirteen months or less remaining to maturity and which
are rated "A" or better by Standard & Poor's and "A" or better by Moody's and of
comparable high quality ratings by other NRSROs that have rated such securities.
The rating "P-1" is the highest commercial paper rating assigned by
Moody's and the ratings "A-1" and "A-1+" are the highest commercial paper
ratings assigned by Standard & Poor's. Debt securities rated"Aa" or better by
Moody's or "AA" or better by Standard & Poor's are generally regarded as
high-grade obligations. Those rated "Aaa" by Moody's or "AAA" by Standard &
Poor's are judged to be of the highest quality and exhibit an extremely strong
ability to pay interest and repay principal. Those rated "Aa" by Moody's or "AA"
by Standard & Poor's are judged to be of high quality by all standards and
differ from higher rated issues only in a small degree with respect to their
ability to pay interest and repay principal. Those rated "A" by Moody's and
Standard & Poor's possess many favorable attributes and are to be considered as
upper medium grade obligations, although they may be more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories.
After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, if the
security is downgraded to a level below that permitted for money market funds
under Rule 2a-7 of the Investment Company Act of 1940, as amended (the "1940
Act"), the Fund's adviser must report such event to the Board of Trustees as
soon as possible to permit the Board to
5
<PAGE>
reassess the security promptly to determine whether it may be retained as an
eligible investment for the Fund. To the extent the ratings given by a NRSRO may
change as a result of changes in such organizations or their rating systems, the
Fund will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Fund's Prospectus and
in this SAI.
Loans of Portfolio Securities (Prime Fund). The Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided:
(1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or letters of credit maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the Fund may at any time call the loan and obtain the return of the
securities loaned within five business days; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed 30% of the total
assets of the Fund.
The Fund will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Fund may pay reasonable
finders, administrative and custodial fees. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
Mortgage-Related Securities. The Government Fund and the Prime Fund
may, consistent with their respective investment objective and policies, invest
in mortgage-related securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities.
Mortgage-related securities, for purposes of the Fund's Prospectus and
this SAI, represent pools of mortgage loans assembled for sale to investors by
various governmental agencies such as the Government National Mortgage
Association and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as
by non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If the Fund purchases a mortgage-related security
at a premium, that portion may be lost if there is a decline in the market value
of the security whether resulting from changes in interest rates or prepayments
in the underlying mortgage collateral. To an even greater extent than other
interest-bearing securities, the prices of such securities may be extremely
sensitive to, and 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 since in periods of declining
interest rates the mortgages underlying the securities are prone to prepayment.
For this and other reasons, a mortgage-related security's stated maturity may be
shortened by unscheduled prepayments on the underlying mortgages and, therefore,
it is not possible to predict accurately the security's return to the Fund.
Lower than estimated prepayments from an increase in interest rates might alter
the expected average life of such securities and increase volatility. In
addition, regular payments received in respect of mortgage-related securities
include both interest and principal. No assurance can be given as to the return
a Fund will receive when these amounts are reinvested.
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 created by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest 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. Government to make payments under its guarantee. Mortgage-related
securities issued by the Federal National Mortgage Association ("FNMA") include
FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of
6
<PAGE>
the FNMA and are not backed by or entitled to the full faith and credit of
the United States. The FNMA is a government-sponsored organization owned
entirely by private stock-holders. Fannie Maes are guaranteed as to timely
payment of the principal and interest by FNMA. Mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC
Mortgage Participation Certificates (also known as ("Freddie Macs" or "PCs").
The 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 by the United States or by any Federal Home Loan
Banks 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. The FHLMC currently guarantees
timely payment of interest and either timely payment of principal or eventual
payment of principal, depending upon the date of issue. When the 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.
Repurchase Agreements. Each Fund may invest in securities pursuant to
repurchase agreements, whereby the seller agrees to repurchase such securities
at the Fund's cost plus interest within a specified time (generally one day).
The securities underlying the repurchase agreements will consist exclusively of
U.S. Government obligations in which the Funds are otherwise permitted to
invest. While repurchase agreements involve certain risks not associated with
direct investments in the underlying securities, the Funds will follow
procedures designed to minimize such risks. These procedures include effecting
repurchase transactions only with large, well-capitalized banks and registered
broker-dealers having creditworthiness determined by the Adviser to be
substantially equivalent to that of issuers of debt securities rated investment
grade. In addition, the Funds' repurchase agreements will provide that the value
of the collateral underlying the repurchase agreement will always be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement, and that the Funds' custodian will take possession of such
collateral. In the event of a default or bankruptcy by the seller, the Funds
will seek to liquidate such collateral. However, the exercise of the Funds'
right to liquidate such collateral could involve certain costs or delays and, to
the extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, a Fund could suffer a loss.
Repurchase agreements are considered to be loans by an investment company under
the Investment Company Act of 1940 (the "1940 Act"). There is no limit on the
amount of the Funds' net assets that may be subject to repurchase agreements
having a maturity of, or a liquidation feature permitting termination within a
period of, seven days or less. The Funds do not presently intend to enter into
repurchase agreements which will cause more than 10% of a Fund's net assets to
be subject to repurchase agreements having a maturity beyond seven days.
Reverse Repurchase Agreements (Prime Fund). The Fund may borrow funds
by selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). Reverse repurchase agreements involve
the risk that the market value of the securities sold by the Fund may decline
below the repurchase price. The Fund will pay interest on amounts obtained
pursuant to a reverse repurchase agreement. While reverse repurchase agreements
are outstanding, the Fund will maintain in a segregated account cash, or other
liquid assets (as determined by the Board) of an amount at least equal to the
market value of the securities, plus accrued interest, subject to the agreement.
Stripped Government Securities. Stripped securities are created by
separating the income and principal components of a debt instrument and selling
them separately. The Fund may purchase U.S. Treasury STRIPS (Separate Trading of
Registered Interest and Principal of Securities) that are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury bond by the Federal Reserve Bank. Bonds issued by the Resolution
Funding Corporation (REFCORP) can also be stripped in this fashion. REFCORP
STRIPS are eligible investments for the Fund.
7
<PAGE>
The Fund may also purchase privately stripped government securities,
which are created when a dealer deposits a Treasury security or federal agency
security with a custodian for safekeeping and then sells the coupon payments and
principal payments that will be generated by this security. Proprietary
receipts, such as Certificates of Accrual on Treasury Securities (CATS),
Treasury Investment Growth Receipts (TIGRs), and generic Treasury Receipts
(TRs), are stripped U.S. Treasury securities that are separated into their
component parts through trusts created by their broker sponsors. Bonds issued by
the Financing Corporation (FICO) can also be stripped in this fashion.
Because of the SEC's views on privately stripped government securities,
the Fund must evaluate them as it would non-government securities pursuant to
regulatory guidelines applicable to all money market funds. Accordingly, the
Fund currently intends to purchase only those privately stripped government
securities that have either received the highest rating from two NRSROs (or one,
if only one has rated the security), or, if unrated, been judged to be of
equivalent quality by GEIM.
Variable and Floating Rate Demand Obligations (VRDOs/FRDOs) are
obligations that bear variable or floating interest rates and carry rights that
permit holders to demand payment of the unpaid principal balance plus accrued
interest from the issuers or certain financial intermediaries. Floating rate
securities have interest rates that change whenever there is a change in a
designated base rate while variable rate instruments provide for a specified
periodic adjustment in the interest rate. These formulas are designed to result
in a market value for the VRDO or FRDO that approximates its par value.
A demand instrument with a conditional demand feature must have
received both a short-term and a long-term high quality rating, or, if unrated,
have been determined to be of comparable quality pursuant to procedures adopted
by the Trustees. A demand instrument with an unconditional demand feature may be
acquired solely in reliance upon a short-term high quality rating or, if
unrated, upon a finding of comparable short-term quality pursuant to procedures
to be adopted by the Trustees.
The Prime Fund may invest in fixed-rate bonds that are subject to third
party puts and in participation interests in such bonds held by a bank in trust
or otherwise. These bonds and participation interests have tender options or
demand features that permit the Fund to tender (or put) its bonds to an
institution at periodic intervals and to receive the principal amount thereof.
The Fund considers variable rate instruments structured in this way
(Participating VRDOs) to be essentially equivalent to other VRDOs it purchases.
The Prime Fund may invest in variable or floating rate instruments that
ultimately mature in more than 397 days, if the Fund acquires a right to sell
the instruments that meets certain requirements set forth in Rule 2a-7. A
variable rate instrument (including instruments subject to a demand feature)
that matures in 397 days or less may be deemed to have a maturity equal to the
earlier of the period remaining until the next readjustment of the interest rate
or the date on which principal can be recovered on demand. A variable rate
instrument that matures in greater than 397 days but that is subject to a demand
feature that is 397 days or less may be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand. A floating rate instrument that matures in more than 397 days but that
is subject to a demand feature may be deemed to have a maturity equal to the
period remaining until the principal amount may be recovered through demand. A
floating rate instrument that matures in 397 days or less shall be deemed to
have a maturity of one day.
The Government Fund and the Prime Fund may invest in variable and
floating rate instruments of the U.S. Government, and its agencies and
instrumentalities, with remaining maturities of 397 days or more provided that
they are deemed to have a maturity of less than 397 days as defined in
accordance with the rules of the SEC. A variable rate instrument that matures in
397 days or more may be deemed to have a maturity equal to the period remaining
until the next readjustment of the interest rate.
8
<PAGE>
When-Issued and Delayed-Delivery Securities (Prime Fund). The Fund may
purchase securities on a when-issued or delayed-delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the transaction. The securities so purchased are subject to
market fluctuation during this period and no income accrues to the Fund until
settlement takes place. To facilitate such acquisitions, the Fund will maintain
with the custodian a separate account with a segregated portfolio of liquid
securities in an amount at least equal to such commitments. On the delivery
dates for such transactions, the Fund will meet its obligations from maturities
or sales of the securities held in the separate account and/or from cash flow.
While the Fund normally enters into these transactions with the intention of
actually receiving or delivering the securities, it may sell these securities
before the settlement date or enter into new commitments to extend the delivery
date into the future, if the Adviser considers such action advisable as a matter
of invesment strategy. Such securities have the effect of leverage on a Fund and
may contribute to volatility of the Fund's net asset value.
Zero Coupon Securities. The Funds may invest in zero coupon securities.
Zero Coupon Bonds purchased by the Fund do not make regular interest payments;
instead they are sold at a deep discount from their face value and are redeemed
at face value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the Fund takes into account as income a portion
of the difference between a zero coupon bond's purchase price and its face
value. The market prices of zero coupon securities generally are more volatile
than the market prices of securities that pay interest periodically and are more
sensitive to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities.
MANAGEMENT
Trustees and Officers
The principal occupations for the past five years of the Trustees and
executive officers of the Trust are listed below. The address of each, unless
otherwise indicated, is 370 Seventeenth Street, Suite 3100, Denver, Colorado
80202. Trustees deemed to be "interested persons" of the Trust for purposes of
the Investment Company Act of 1940, as amended, are indicated by an asterisk.
All of the Trustees were elected at a Special Meeting of shareholders held March
21, 1997.
<TABLE>
<CAPTION>
NAME (AGE) PRINCIPAL OCCUPATION**
<S> <C> <C>
W. Robert Alexander* (70) Mr. Alexander, a member of the Board of Trustees since December 1993, is
Trustee, Chairman and the Chief Executive Officer of ALPS Mutual Funds Services, Inc. which
President provides administration and distribution services for proprietary mutual
fund complexes. Prior to co-founding ALPS, Mr. Alexander was Vice
Chairman of First Interstate Bank of Denver, responsible for Trust,
Private Banking, Retail Banking, Cash Management Services and
Marketing. Mr. Alexander is currently a member of the Board of Trustees
of the Colorado Trust, Colorado's largest foundation as well as a
Trustee of the Hunter and Hughes Trusts. Because of his affiliation
with ALPS, Mr. Alexander is considered an "interested" Trustee of
Financial Investors Trust.
Mary K. Anstine (57) President/Chief Executive Officer, HealthONE, Denver, CO; Former Trustee
Executive Vice President, First Interstate Bank of Denver. Ms. Anstine
is currently a Director of the Trust of Colorado, Trustee of the Denver
Area Council of the Boy Scouts of America, a Director of the Junior
Achievement Board and the Colorado Uplift Board, and a member of the
Advisory Boards for the Girl Scouts Mile Hi
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Council and the Hospice of Metro Denver. Formerly, Ms. Anstine served as
a Director of ALPS from October 1995 to December 1996; Director of HealthONE;
a member of the American Bankers Association Trust Executive Committee; and
Director of the Center for Dispute Resolution.
Edward B. Crowder (67) Mr. Crowder currently operates a marketing concern with operations in
Trustee the U.S. and Latin America. He has previously engaged in
business pursuits in the restaurant, oil and gas drilling, and real
estate development industries. Mr. Crowder is a former Director of
Athletics and head football coach at the University of Colorado.
John R. Moran, Jr. (68) Mr. Moran is President of The Colorado Trust, a private foundation
Trustee serving the health and hospital community in the State of
Colorado. An attorney, Mr. Moran was formerly a partner with the firm
of Kutak Rock
</TABLE>
- ----------
**Except as otherwise indicated, each individual has held the office shown or
other offices in the same company for the last five years.
The following table contains relevant information concerning the Executive
Officers of the Trust:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION** SINCE
<S> <C> <C>
H. David Lansdowne President and CEO of Tempest, Isenhart, January 1998
Vice President (51) Chafee, Lansdowne and Associates.
Robert Alder Executive Vice President of Tempest, Isenhart, January 1998
Vice President (56) Chafee, Lansdowne and Associates.
William Paston, Product Development Manager of ALPS Mutual February 1994
Vice President and Funds Services, Inc.
Treasurer (42) Prior to joining ALPS, Mr. Paston was an
associate with Lipper Analytical Services,
coordinating that firm's marketing effort in
the banking industry.
James V. Hyatt Mr. Hyatt is General Counsel of ALPS Mutual April 1998
Secretary (47) Funds Services,Inc., the Administrator and
Distributor. Prior to joining ALPS, Mr. Hyatt
served as Senior Legal Counsel for FMR Corp.
and Counsel to Fidelity Management Trust
Company.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Jeremy May Mr. May is Director of Mutual Fund Operations October 1997
Assistant Treasurer(28) at ALPS Mutual Funds Services, Inc., the
Administrator and Distributor. Prior to
joining ALPS, Mr. May was an auditor with
Deloitte & Touche LLP.
</TABLE>
- ------------
**Except as otherwise indicated, each individual has held the office shown or
other offices in the same company in the same company for the last five years.
Effective after the April 21, 1998 meeting of the Board, non-interested
Trustees of the Trust will receive from the Trust an annual fee in the amount of
$4,000 and $500 for attending each Board meeting. Prior to this meeting, the
non-interested Trustees received no annual fee and $1,000 for attending each
Board meeting. The Trustees are reimbursed for all reasonable out-of-pocket
expenses relating to attendance at meetings.
For the Trust's fiscal year ended April 30, 1998, the non-interested
Trustees were compensated as follows:
<TABLE>
<CAPTION>
Pension Or Aggregate
Retirement Estimated Compensation
Aggregate Benefits Annual From The Trust
Compensation Accrued As Benefits Paid
From the Part of Fund Upon to Trustees
Trust Expenses Retirement
-------------- ----------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Mary K. Anstine,
Trustee ......................$4,000(1) $0 $0 $4,000
--------- ------- ------- -------
Edwin B. Crowder,
Trustee ......................$4,000(1) $0 $0 $4,000
--------- ------- ------- -------
John R. Moran, Jr.,
Trustee ......................$4,000(1) $0 $0 $4,000
</TABLE>
(1) Member of the Audit Committee.
As of the date of this Statement of Additional Information the Trustees
and officers of the Trust as a group owned less than 1% of the outstanding
shares of the Trust.
Investment Adviser. The Trust retains GE Investment Management
Incorporated, (the "Adviser") as investment adviser for each Fund.
Each Advisory Contract provides that the Adviser will manage the
portfolio of each Fund and will furnish to each Fund investment guidance and
policy direction in connection therewith. The Adviser has agreed to provide to
the Trust, among other things, information relating to money market portfolio
composition, credit conditions and average maturity of the portfolio of each
Fund. Pursuant to
11
<PAGE>
each Advisory Contract, the Adviser also furnishes to the Trust's Board of
Trustees periodic reports on the investment performance of the Funds.
Sponsor and Distributor. Shares of the Funds are offered on a
continuous basis through ALPS Mutual Funds Services, Inc., ("ALPS"), the
Distributor, pursuant to the Distribution Contract. The Distributor is not
obligated to sell any specific amount of shares.
Administrator. Pursuant to the Administrative Services Contract, ALPS:
(i) provides administrative services reasonably necessary for the operation of
the Funds (other than those services which are provided by the Adviser pursuant
to each Advisory Contract); (ii) provides the Funds with office space and office
facilities reasonably necessary for the operation of the Funds; and (iii)
employs or associates with itself such persons as it believes appropriate to
assist it in performing its obligations under the Administrative Services
Contract.
Fees and Expenses
As compensation for advisory, management and administrative services, the
Adviser and ALPS ("the Administrator") are paid a monthly fee at the following
annual rates:
Treasury Fund:
<TABLE>
<CAPTION>
Portion of average daily value
of net assets of the Fund Advisory Administrative(1) Total
- -------------------------------- ---------- ------------------ --------
<S> <C> <C> <C>
Not exceeding $500 million ....................... 0.05% 0.26% 0.31%
In excess of $500 million but
not exceeding $1 billion ......................... 0.075% 0.24% 0.315%
In excess of $1 billion but not
exceeding $1.5 billion ........................... 0.10% 0.22% 0.32%
In excess of %1.5 billion ........................ 0.15% 0.22% 0.37%
Government and Prime Funds:
</TABLE>
<TABLE>
<CAPTION>
Portion of average daily value
of net assets of the Fund Advisory Administrative(1) Total
- -------------------------------- ---------- ------------------ --------
<S> <C> <C> <C>
Not exceeding $500 million ....................... 0.04% 0.16% 0.20%
In excess of $500 million but
not exceeding $1 billion ......................... 0.06% 0.14% 0.20%
In excess of $1 billion .......................... 0.08% 0.12% 0.20%
</TABLE>
(1) Subject to a minimum monthly fee of $50,000 for the Treasury Fund and
$30,000 for the Government and Prime Funds.
12
<PAGE>
At a meeting held on January 20, 1997, the Trustees approved new
Advisory Contracts with the Adviser on behalf of the Treasury and Government
Funds. The new Advisory Contracts were submitted to shareholders of each
respective Fund for their consideration pursuant to a Proxy Statement dated
March 3, 1997 and subsequently approved by a majority of the shareholders of
each respective Fund at a Special Meeting held on March 21, 1997. Effective
March 24, 1997, the Adviser assumed the role of Adviser to each Fund. During the
period from March 24, 1997 through April 30, 1997, the Adviser earned $8,799 and
$3,542 in advisory fees from the Treasury and Government Funds, respectively.
During the fiscal year ended April 30, 1998, the Adviser earned $78,117 and
$52,818 in advisory fees from the Treasury and Government Funds, respectively.
From their inception through March 23, 1997, FGIC Advisors, Inc.
"FGIC" served as the Investment Adviser to the Treasury and Government Funds.
During the fiscal year ended April 30, 1996 and the period May 1, 1996 to
March 23, 1997, FGIC earned the following advisory fees (the Prime Fund had
not commenced operations as of March 23, 1997):
<TABLE>
<CAPTION>
Period Ended Year Ended
March 23, 1997 April 30, 1996
---------------- ----------------
<S> <C> <C>
U.S. Treasury Money Market Fund
Advisory fees earned ......................... $739,988 $742,238
Advisory fees waived .............................. $(739,988) $(742,238)
U.S. Government Money Market Fund
Advisory fees earned ......................... $110,066 $136,073
Advisory fees waived .............................. $(110,066) $(85,725)
</TABLE>
(1) The Treasury Fund and the Government Funds commenced operations on
May 25, 1994 and June 7, 1994, respectively.
The Administrative fees earned by the Administrator under the
Administrative Services Agreement for the last three fiscal periods were as
follows (the Prime Fund had not commenced operations as of April 30, 1998):
<TABLE>
<CAPTION>
Fiscal Year Ended April 30,
1998 1997 1996
------------ ------------ --------------
<S> <C> <C> <C>
U.S. Treasury Money Market Fund
Administrative fees earned $665,343 $750,000 $750,000
Administrative fees waived $(349,614) $(75,890) $(190,288)
U.S. Government Money Market Fund
Administrative fees earned $294,083 $92,781 $76,135
Administrative fees waived $(143,513) $(3,949) $ 0
</TABLE>
The Administrator has stated that it will voluntarily waive a portion
of the administrative fees otherwise payable by each Fund, as well as
voluntarily assume a portion of each Fund's expenses, to the extent necessary to
maintain a total expense ratio of not more than .33%, .20% and .20% of the
average net assets of the Treasury, Government and Prime Funds, respectively.
The Administrator reserves the right to modify or terminate the fee waiver and
assumption of expenses at any time.
Except for the expenses paid by the Adviser under the Advisory Contract
and the Administrator under the Administrative Services Contract, each Fund
bears all costs of its operations. Expenses attributable to the Funds are
charged against the assets of each Fund, respectively.
13
<PAGE>
The Advisory Contract, Distribution Contract and Administrative
Services Contract will continue in effect with respect to each Fund from year to
year provided such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of a Fund or by the Trust's
Trustees; and (ii) by a majority of the Trustees who are not parties to such
contracts or "interested persons" (as defined under the 1940 Act) of any such
party. Each contract may be terminated with respect to a Fund at any time,
without payment of any penalty, by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Investment Company Act of 1940)
or by a vote of a majority of the Trustees. The Advisory Contract,
Administrative Services Contract and the Distribution Contract shall terminate
automatically in the event of their assignment (as defined in the 1940 Act).
The Trust incurs administration expenses based on the terms of the
Administrative Services Agreement. In the absence of certain fee waivers and
reimbursements, administration fees borne by the Funds might not be in
proportion to relative Fund assets.
CALCULATION OF YIELDS AND PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and effective yield
in advertisements or reports to shareholders or prospective investors. Current
yield (or "SEC Seven Day Yield") for each Fund will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of a Fund's expenses accrued over
that period (the "base period"), and stated as a percentage of the investment at
the start of the base period (the "base period return"). The base period return
is then annualized by multiplying by 365/7, with the resulting yield figure
carried to at least the nearest hundredth of one percent. "Effective yield" for
the Funds assumes that all dividends received during an annual period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula: Effective Yield - [(Base
Period Return) + 1) 365/7] - 1.
As of April 30, 1998, the Seven Day Effective Yield and the SEC Seven
Day Yield for the Treasury Fund were 5.20% and 5.08%, respectively. As of April
30, 1998, the Seven Day Effective Yield and the SEC Seven Day Yield for the
Government Fund were 5.43% and 5.28%, respectively. The Prime Fund had not
commenced operations as of April 30, 1998.
Each Fund may, from time to time, include its average annual total
returns in advertisements or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of
the average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formulas:
P (1 + T) n = ERV
or
T = [C (ERV) 1/n - 1]
P
All total return figures will reflect a proportional share of Fund
expenses (net of certain reimbursed expenses) on an annual basis, and will
assume that all dividends and distributions are
14
<PAGE>
reinvested when paid. Quotations of total return will reflect only the
performance of a hypothetical investment in the Funds during the particular time
period shown. Total return for the Fund will vary based on changes in the market
conditions and the level of a Fund's expenses, and no reported performance
figure should be considered an indication of performance, which may be expected
in the future.
The yield and total return for each Class of the Prime Fund are
calculated separately due to separate expense structures. The yield and total
return of Class II will be lower than that of Class I.
In connection with communicating its total return to current or
prospective shareholders, each Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating or ranking
services or to other unmanaged indices which may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
From time to time, in marketing pieces and other Fund literature, the
Funds' total performance may be compared to the performance of broad groups of
comparable funds or unmanaged indices of comparable securities. Evaluations of
Fund performance made by independent sources may also be used in advertisements
concerning the Funds. Sources for Fund performance information may include, but
are not limited to, the following:
Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money
market fund activity, and including certain averages as performance
benchmarks, specifically "Donoghue's Money Fund Average," and
"Donoghue's Government Money Fund Average."
Financial Times, Europe's business newspaper, which features from time
to time articles on international or country-specific funds.
Forbes, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund
industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of
fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
New York Times, a nationally distributed newspaper which regularly
covers financial news.
15
<PAGE>
Personal Investor, a monthly investment advisory publication that
includes a "Mutual Funds Outlook" section reporting on mutual fund
performance measures, yields, indices and portfolio holdings.
Sylvia Porter's Personal Finance, a monthly magazine focusing on
personal money management that periodically rates and ranks mutual
funds by performance.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies,
including comparative data on funds' backgrounds, management policies,
salient features, management results, income and dividend records, and
price ranges.
Fund Ratings. Although it is not an investment objective of the Funds,
consistent with the Funds' investment objectives and restrictions, each Fund may
seek and receive the highest rating from certain nationally recognized
statistical rating organizations (NRSROs), for example, "AAAm" from Standard &
Poor's Ratings Group, a Division of McGraw Hill, Inc., or "AAA/V-1+" from Fitch
Investor Services, Inc. An NRSRO rating is subject to change and neither insures
nor guarantees that the Fund will pay interest or repay principal. NRSRO ratings
represent the opinion of the NRSRO based on the investment adviser, quality of
the Fund's portfolio holdings, and other criteria. If an NRSRO rating is
obtained, the Fund may use the information in advertising or reports to
shareholders or prospective investors.
DETERMINATION OF NET ASSET VALUE
The Funds' net asset value per share is determined by dividing the
total current market value of the assets of a Fund, less liabilities, by the
total number of shares outstanding at the time of determination. All expenses,
including the advisory and administrative fees, are accrued daily and taken into
account for the purpose of determining the net asset value.
As indicated under "Determination of Net Asset Value" in the Funds'
Prospectuses, the Funds use the amortized cost method to determine the value of
their portfolio securities pursuant to Rule 2a-7 under the Investment Company
Act of 1940. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which the value, as determined by amortized cost, is higher or
lower than the price which the Fund would receive if the security were sold.
During these periods the yield to a shareholder may differ somewhat from that
which could be obtained from a similar fund which utilizes a method of valuation
based upon market prices. Thus, during periods of declining interest rates, if
the use of the amortized cost method resulted in a lower value of the Fund's
portfolio on a particular day, a prospective investor in the Fund would be able
to obtain a somewhat higher yield than would result from an investment in a fund
utilizing solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Funds must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities of thirteen months or less and invest only in securities determined
by the Trust's Board of Trustees to be "eligible securities" as defined by Rule
2a-7 and to present minimal credit risks. Pursuant to Rule 2a-7, the Board is
required to establish procedures designed to stabilize, to the extent
16
<PAGE>
reasonably possible, the price per share of the Funds, as computed for the
purpose of sales and redemptions, at $1.00. Such procedures include review of
the Funds' portfolio holdings by the Board of Trustees, at such intervals as it
may deem appropriate, to determine whether the net asset value of the Fund
calculated by using available market quotations deviates from $1.00 per share
based on amortized cost. The extent of any deviation will be examined by the
Board of Trustees. If such deviation exceeds 1/2 of 1%, the Board will promptly
consider what action, if any, will be initiated. In the event the Board
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, the Board will take
such corrective action as it regards as necessary and appropriate, including the
sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.
Each Fund will compute its net asset value once daily as of 5:00 p.m.
(New York City time), on each day that both the New York Stock Exchange and the
New York Federal Reserve are open for business which excludes New Year's Day,
Martin Luther King, Jr., Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Thanksgiving Day and Christmas Day.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policy
established by the Trustees, the Adviser is primarily responsible for portfolio
decisions and the placing of portfolio transactions. In placing orders, it is
the policy of the Fund to obtain the best results taking into account the
dealer's general execution and operational facilities, the type of transaction
involved and other factors such as the dealer's risk in positioning the
securities involved. While the Adviser generally seeks reasonably competitive
spreads or commissions, the Funds will not necessarily be paying the lowest
spread or commission available.
Purchases and sales of securities will often be principal transactions
in the case of debt securities traded otherwise than on an exchange. Debt
securities normally will be purchased or sold from or to issuers directly or to
dealers serving as market makers for the securities at a net price. Generally,
money market securities are traded on a net basis and do not involve brokerage
commissions. Under the 1940 Act, persons affiliated with the Adviser, the Funds
or the Distributor are prohibited from dealing with the Funds as a principal in
the purchase and sale of securities except in accordance with regulations
adopted by the Securities and Exchange Commission. Under the 1940 Act, persons
affiliated with the Adviser, the Funds or the Distributor may act as a broker
for the Funds. In order for such persons to effect any portfolio transactions
for the Funds, the commissions, fees or other remuneration received by such
persons must be reasonable and fair compared to the commissions, fees or other
remunerations paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow the affiliate to receive no
more than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arms-length transaction. The Trustees of
the Trust will regularly review the commissions paid by the Funds to affiliated
brokers.
The Adviser may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms.
17
<PAGE>
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in one of the
Funds for at least seven days may exchange those shares for shares of the other
Fund if such Fund is available for sale in their state and meets the investment
criteria of the investor.
Before effecting an exchange, shareholders should review the Prospectus
of the other Fund. Exercise of the exchange privilege is treated as a redemption
for income tax purposes and, depending on the circumstances, a gain or loss may
be recognized.
The exchange privilege may be modified or terminated upon sixty (60)
days' written notice to shareholders. Although initially there will be no limit
on the number of times a shareholder may exercise the exchange privilege, the
Funds reserve the right to impose such a limitation. Call or write the Funds for
further details.
REDEMPTIONS
In the event that a Fund does not maintain a constant net asset value
per share, the proceeds of a redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for Federal
and state and local income tax purposes. Any loss realized on the redemption of
Fund shares held, or treated as held, for six months or less will be treated as
a long-term capital loss to the extent of any long-term capital gain dividends
received on the redeemed shares.
A shareholder's account with the Funds remains open for at least one
year following complete redemption and all costs during the period will be borne
by the Funds. This permits an investor to resume investments in the Fund during
the period in an amount of $25,000 or more.
To be in a position to eliminate excessive shareholder expense burdens,
the Funds reserve the right to adopt a policy pursuant to which a Fund may
redeem, upon not less than 30 days' notice, shares of the Fund in an account
which has a value below the designated amount set forth in each Fund's
prospectus. However, any shareholder affected by the exercise of this right will
be allowed to make additional investments prior to the date fixed for redemption
to avoid liquidation of the account. Shareholder accounts which have a value
below the designated amount due to changes in the market value in portfolio
securities will not be redeemed.
The Funds may suspend the right of redemption during any period when
(i) trading on the New York Stock Exchange is restricted or that Exchange is
closed, other than customary weekend and holiday closings, (ii) the Securities
and Exchange Commission has by order permitted such suspension or (iii) an
emergency exists making disposal of portfolio securities or determination of the
value of the net assets of the Fund not reasonably practicable.
Although it would not normally do so, the Trust has the right to pay
the redemption price in whole or in part in securities of a Fund's portfolio as
prescribed by the Trustees. When a shareholder sells portfolio securities
received in this fashion he would incur a brokerage charge. The Trust has,
however, elected to be governed by Rule 18f-1 under the 1940 Act, as amended.
Under that rule, the Trust must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of a Fund's net asset value at the beginning
of such period.
18
<PAGE>
FEDERAL INCOME TAXES
The Treasury Fund and the Government Fund have each elected to be
treated as a regulated investment company and qualified as such in 1997. The
Prime Fund will elect to be treated as a regulated investment company and
intends to qualify as such. The Funds intend to continue to so qualify by
complying with the provisions of the Internal Revenue Code of 1986, as amended
(the "Code") applicable to regulated investment companies so that the Funds will
not be liable for Federal income tax with respect to amounts distributed to
shareholders in accordance with the timing requirements of the Code.
In order to qualify as a regulated investment company for a taxable
year, each Fund must, among other things, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock or securities or foreign
currency gains related to investments in stock or securities or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in stock, securities or
currency; (b) diversify its holdings so that, at the end of each quarter of its
taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies and certain other securities in respect of any
one issuer to an amount not greater in value than 5% of its assets and 10% of
the outstanding voting securities of the issuer, and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or securities of other regulated
investment companies). As such, and by complying with the applicable provisions
of the Code, the Funds will not be subject to Federal income tax on taxable
income (including realized capital gains) which is distributed to shareholders
in accordance with the timing requirements of the Code.
The amount of capital gains, if any, realized in any given year will
result from sales of securities made with a view to the maintenance of a
portfolio believed by Fund management to be most likely to attain a Fund's
investment objective. Such sales and any resulting gains or losses, may
therefore vary considerably from year to year. Since at the time of an
investor's purchase of shares, a portion of the per share net asset value by
which the purchase price is determined may be represented by realized or
unrealized appreciation in a Fund's portfolio or undistributed income of the
Fund, subsequent distributions (or portions thereof) on such shares may be
taxable to such investor even if the net asset value of his shares is, as a
result of the distributions, reduced below his cost for such shares and the
distributions (or portions thereof) represent a return of a portion of his
investment.
The Funds are required to report to the Internal Revenue Service (the
"IRS") all distributions of taxable dividends and of capital gains, as well as
the gross proceeds of share redemptions. The Funds may be required to withhold
Federal income tax at a rate of 31% ("backup withholding") from taxable
dividends (including capital gain dividends) and the proceeds of redemptions of
shares paid to non-corporate shareholders who have not furnished the Fund with a
correct taxpayer identification number and made certain required certifications
or who have been notified by the IRS that they are subject to backup
withholding. The Funds may also be required to withhold Federal income tax at a
rate of 31% if they are notified by the IRS or a broker that the taxpayer
identification number is incorrect or that backup withholding applies because of
underreporting of interest or dividend income.
Distributions of taxable net investment income and net realized capital
gains will be taxable whether made in shares or in cash. In determining amounts
of net realized capital gains to be distributed, any capital loss carryovers
from prior years will be applied against realized capital gains. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for Federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date. Fund distributions will
also be included in individual and corporate shareholders' income on which the
alternative minimum tax may be imposed.
19
<PAGE>
Any loss realized upon the redemption of shares held (or treated as
held) for six months or less will be treated as a long-term capital loss to
the extent of any long-term capital gain dividend received on the redeemed
shares. Any loss realized upon the redemption of shares within six months
after receipt of an exempt-interest dividend will be disallowed. All or a
portion of a loss realized upon the redemption of shares may be disallowed to
the extent shares are purchased (including shares acquired by means of
reinvested dividends) within 30 days before or after such redemption.
Exchanges are treated as redemptions for Federal tax purposes.
Different tax treatment is accorded to accounts maintained as IRAs,
including a penalty on early distributions. Shareholders should consult their
tax advisers for more information.
Each Fund will be separate for investment and accounting purposes and
will be treated as a separate taxable entity for Federal income tax purposes.
Each Fund is subject to a 4% nondeductible excise tax to the extent
that it fails to distribute to its shareholders during each calendar year an
amount equal to (a) at least 98% of its ordinary income (excluding any capital
gain or losses) for the calendar year; plus (b) at least 98% of the excess of
its capital gains over capital losses (adjusted for ordinary losses) for the one
year period ending on October 31 of such calendar year; plus (c) any ordinary
income or capital gain net income (adjusted for certain ordinary losses) from
the preceding calendar years which was neither distributed to shareholders nor
taxed to the Fund during such year. The Funds intend to distribute to
shareholders each year an amount sufficient to avoid the imposition of such
excise tax.
It is important to note that for tax years beginning after August 5,
1997, the Taxpayer Relief Act of 1997 repealed Section 851(b)(3) which required
that a RIC must derive less than 30 percent of its gross income from the sales
or disposition of stocks or securities held for less than three months.
SHARES OF BENEFICIAL INTEREST
The Trust consists of multiple separate portfolios or Funds. When
certain matters affect one Fund but not another, the shareholders would vote as
a Fund regarding such matters. Subject to the foregoing, on any matter submitted
to a vote of shareholders, all shares then entitled to vote will be voted
separately by the Fund unless otherwise required by the 1940 Act, in which case
all shares will be voted in the aggregate. For example, a change in a Fund's
fundamental investment policies would be voted upon only by shareholders of the
Fund. Additionally, approval of the Advisory Contract is a matter to be
determined separately by each Fund. Approval by the shareholders of one Fund is
effective as to that Fund whether or not sufficient votes are received from the
shareholders of the other Fund to approve the proposal as to that Fund. As used
in the Prospectuses and in this Statement of Additional Information, the term
"majority," when referring to approvals to be obtained from shareholders of a
Fund means the vote of the lesser of (i) 67% of the shares of the Fund or class
represented at a meeting if the holder of more than 50% of the outstanding
shares of the Fund or class are present in person or by proxy, or (ii) more than
50% of the outstanding shares of the Fund. The term "majority", when referring
to the approvals to be obtained from shareholders of the Trust as a whole means
the vote of the lesser of (i) 67% of the Trust's shares represented at a meeting
if the holders of more than 50% of the Trust's outstanding shares are present in
person or proxy, or (ii) more than 50% of the Trust's outstanding shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held.
The Trust may dispense with annual meetings of shareholders in any year
in which it is not required to elect trustees under the 1940 Act. However, the
Trust undertakes to hold a special meeting of its shareholders if the purpose of
voting on the question of removal of a director or trustees is requested in
writing by the holders of at least 10% of the Trust's outstanding voting
securities, and to assist in communicating with other shareholders as required
by Section 16(c) of the 1940 Act.
20
<PAGE>
Each share of a Fund represents an equal proportional interest in the
Fund with each other share and is entitled to such dividends and distributions
out of the income earned on the assets belonging to the Fund as are declared in
the discretion of the Trustees. In the event of the liquidation or dissolution
of the Trust, shareholders of each Fund are entitled to receive the assets
attributable to such Fund that are available for distribution, and a
distribution of any general assets of the Trust not attributable to a particular
Fund that are available for distribution in such manner and on such basis as the
Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Trust.
As of July 31, 1998, the following shareholders owned 5% or more of
the outstanding shares of the Funds as listed below:
<TABLE>
<CAPTION>
FUND PERCENTAGE INTEREST
- ------------------------------------ -------------------
U.S. TREASURY MONEY MARKET FUND
<S> <C>
City of Cranston 15.55%
869 Park Avenue
Cranston, RI 02910
City of Bridgeport 11.63%
Attn: Sharon D. Lemdon
45 Lyons Terrace
Bridgeport, CT 06604
Union Labor Life Insurance Co. 9.69%
111 Massachusetts Avenue, N.W.
Washington, DC 20001
Metropolitan District 7.88%
555 Main Street, Po. Box 800
Hartford, CT 06142-0800
Riverside County Transportation Commission 5.64%
3560 University Place
Riverside, CA 92501
U.S. GOVERNMENT MONEY MARKET FUND
Diplomat Properties LTD Partnership 22.95%
901 Massachusetts Avenue, N.W.
Washington, D.C.
City of Hartford 11.42%
City Treasurer's Office
Denise Nappier
550 Main Street
Hartford, CT 06103
City of Quincy 8.81%
1305 Hancock Street
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Quincy, MA 02169
County of Rock Island 7.71%
1504 Third Avenue
Rock Island, IL 61201-8684
</TABLE>
DISTRIBUTION PLAN
The Trustees of the Trust have adopted a Distribution Plan on behalf of
Class II of the Prime Fund (the "Plan") pursuant to Rule 12b-1 (the "Rule")
under the 1940 Act. The Rule provides in substance that a mutual fund may not
engage directly or indirectly in financing any activity that is intended
primarily to result in the sale of shares of the fund except pursuant to a plan
adopted by the fund under the Rule. The Trustees have adopted the Plan to allow
the Prime Fund and ALPS to incur distribution expenses. The Plan provides for
payment of a distribution fee (12b-1 fee) of up to 0.30% of the average net
assets of Class II of the Prime Fund (these fees are in addition to the fees
paid to ALPS under the Administration Agreement). The Trust or ALPS, on behalf
of Class II of the Prime Fund, may enter into servicing agreements (Service
Agreements) with banks, broker/dealers or other institutions (Agency
Institutions). The Plan provides that ALPS may use its fees and other resources
to make payments to Agency Institutions for performance of distribution-related
services, including those enumerated below. The Service Agreements further
provide for compensation to broker/dealers for their efforts to sell Class II
shares of the Prime Fund. The distribution-related services include, but are not
limited to, the following: formulation and implementation of marketing and
promotional activities, such as mail promotions and television, radio,
newspaper, magazine and other mass media advertising; preparation, printing and
distribution of sales literature; preparation, printing and distribution of
prospectuses of the Prime Fund and reports to recipients other than existing
shareholders of the Prime Fund; obtaining such information, analyses and reports
with respect to marketing and promotional activities as ALPS may, from time to
time, deem advisable; making payments to securities dealers and others engaged
in the sales of Class II Shares of the Prime Fund; and providing training,
marketing and support to such dealers and others with respect to the sale of
Class II Shares of the Prime Fund. The Plan recognizes ALPS may use its fees and
other resources to pay expenses associated with the promotion and administration
of activities primarily intended to result in the sale of shares.
The Plan has been approved by the Trustees, including the majority of
disinterested Trustees. As required by the Rule, the Trustees carefully
considered all pertinent factors relating to the implementation of the Plan
prior to its approval, and have determined that there is a reasonable likelihood
that the Plan will benefit the Prime Fund and its shareholders. To the extent
that the Plan gives ALPS greater flexibility in connection with the distribution
of shares of the class, additional sales of shares may result.
The Plan could be construed as compensation because ALPS is paid a
fixed fee and is given discretion concerning what expenses are payable under the
Plan. ALPS may spend more for marketing and distribution than it receives in
fees and reimbursements from the Prime Fund. However, to the extent fees
received exceed expenses, including indirect expenses such as overhead, ALPS
could be said to have received a profit. For example, if ALPS pays $1 for
distribution-related expenses for Class II of
22
<PAGE>
the Prime Fund and receives $2 under the Plan, the $1 difference could be
said to be a profit for ALPS. (Because ALPS is reimbursed for its out-of-pocket
direct promotional expenses, the Plan also could be construed as a reimbursement
plan. Until the issue is resolved by the SEC, unreimbursed expenses incurred in
one year will not be carried over to a subsequent year.) If after payment by
ALPS for marketing and distribution there are any remaining fees attributable to
the Plan, these may be used as ALPS may elect. Since the amount payable under
the Plan will be commingled with ALPS' general funds, including the revenues it
receives in the conduct of its business, it is possible that certain of ALPS'
overhead expenses will be paid out of Plan fees and that these expenses may
include items such as the costs of leases, depreciation, communications,
salaries, training and supplies. The Prime Fund believes that such expenses, if
paid, will be paid only indirectly out of the fees being paid under the Plan.
OTHER INFORMATION
The Trust's Registration Statement, including the Prospectuses, the
Statement of Additional Information and the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C. Statements contained in
the Prospectuses or the Statement of Additional Information as to the contents
of any contract or other document referred to herein or in the Prospectuses are
not necessarily complete, and, in each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
CUSTODIAN AND SUB-CUSTODIAN
State Street Bank & Trust Company of Connecticut, N.A. acts as
Custodian for the Trust. The Custodian, among other things, maintains a custody
account or accounts in the name of the Funds; receives and delivers all assets
for the Funds upon purchase and upon sale or maturity; collects and receives all
income and other payments and distributions on account of the assets of the
Funds and pays all expenses of the Funds. For its services as Custodian, State
Street receives an asset-based fee and transaction charges. State Street Bank
and Trust Company serves as Sub-Custodian for the Trust. The Administrative
Services Agreement between ALPS Mutual Fund Services and the Trust currently
provides that the asset-based fee and transaction costs of the Trust's Custodian
and Sub-Custodian be paid by ALPS Mutual Fund Services.
EXPERTS
Deloitte & Touche LLP has been selected as the independent accountants
for the Trust. Deloitte & Touche provides audit services, tax return preparation
and assistance and consultation in connection with review of certain SEC
filings. Deloitte & Touche's address is 555 Seventeenth Street, Suite 3600,
Denver, Colorado 80202.
FINANCIAL STATEMENTS
The Treasury and Government Funds' financial statements and financial
highlights for the fiscal year ended April 30, 1998 are included in the Trust's
Annual Report which is a separate report supplied independent of this Statement
of Additional Information. The Prime Fund had not commenced operations as of
April 30, 1998. The Treasury and Government Funds' financial statements and
financial highlights are incorporated herein by reference.
23
<PAGE>
ARISTATA COLORADO QUALITY TAX-EXEMPT FUND
370 17th Street
Suite 3100
Denver, CO 80202
General & Account Information: (800) 644-8595
TEMPEST, ISENHART, CHAFEE, LANSDOWNE & ASSOC., INC.
Investment Adviser ("Tempest, Isenhart" or the "Adviser")
ALPS MUTUAL FUNDS SERVICES, INC.
Administrator, Distributor and Sponsor ("ALPS" or the "Distributor")
This prospectus describes the Aristata Colorado Quality Tax-Exempt Fund
(the"Fund"), managed by Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc., a
Colorado corporation. The Fund is a separate investment fund of Financial
Investors Trust (the "Trust"), a Delaware business trust and registered
management investment company. The Fund's investment objective is to seek to
provide as high a level of current income exempt from Colorado and Federal
income taxes as is consistent with the preservation of capital by investing in
municipal obligations which pay interest exempt from Colorado State and Federal
income taxes. Shares of the Fund are sold to the public by the Distributor as an
investment vehicle for individuals, institutions, corporations and fiduciaries.
Investments in shares of the Fund involve risk, including possible loss of
principal. The net asset value of the Fund will fluctuate as market conditions
change.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated August 27, 1998,
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information number printed above.
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.
August 28, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
HIGHLIGHTS 3
FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 7
THE FUND 8
MANAGEMENT OF THE FUND 8
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND 10
PORTFOLIO TRANSACTIONS 10
FUND SHARE VALUATION 11
MINIMUM PURCHASE REQUIREMENTS 11
PURCHASE OF FUND SHARES 11
REDEMPTION OF FUND SHARES 13
EXCHANGE OF FUND SHARES 14
DIVIDEND AND TAX INFORMATION 15
RISKS OF INVESTING IN THE FUND 20
OTHER INFORMATION 22
APPENDIX 25
</TABLE>
2
<PAGE>
HIGHLIGHTS
Investment Objective and Policies of the Fund
The investment objective of the Aristata Colorado Quality Tax-Exempt Fund is to
seek to provide investors with as high a level of current income exempt from
Colorado and Federal income taxes as is consistent with the preservation of
capital by investing in municipal obligations which pay interest exempt from
Colorado State and Federal income taxes. There is a risk in any investment
program, including the risk of changing economic and market conditions, and
there is no assurance the Fund will achieve its investment objective.
The Fund seeks to achieve its investment objective by investing primarily in
Colorado Obligations ("Colorado Obligations"). "Quality" Colorado Obligations
are considered to be those obligations rated in one of the four highest
categories by a nationally recognized statistical rating organization, such as
Moody's Investors Service ("Moody's") or Standard & Poor's Corporation ("S&P")
or, if unrated, are determined to be of comparable quality by the Adviser (see
the Appendix to this Prospectus). The Fund may invest up to 15% of its total
assets in such unrated securities. If the rating on a security in the Fund's
portfolio changes, the Fund will consider this change in its evaluation of the
security's overall investment merits. A change in a security's rating, however,
does not automatically require the Fund to sell the security. For a description
of the various rating categories, please see "APPENDIX - DESCRIPTION OF RATINGS"
in this Prospectus and the SAI.
As used in the Prospectus and the Statement of Additional Information, the term
"Colorado Obligations" means obligations, including those of certain
non-Colorado issuers, of any maturity which pay interest that, in the opinion of
bond counsel or other appropriate counsel, is exempt from regular Federal income
taxes and not subject to Colorado income taxes. Although exempt from regular
Federal income tax, interest paid on certain types of Colorado Obligations, and
dividends which the Fund might pay from this interest, are preference items as
to the Federal alternative minimum tax; for further information, see "DIVIDEND
AND TAX INFORMATION." As a fundamental policy, at least 80% of the Fund's net
assets will be invested in Colorado Obligations the income paid upon which will
not be subject to the alternative minimum tax; accordingly, the Fund can invest
up to 20% of its net assets in obligations which are subject to the Federal
alternative minimum tax. The Fund may refrain entirely from purchasing these
types of Colorado Obligations. (See "DIVIDEND AND TAX INFORMATION.")
The non-Colorado bonds or other Obligations the interest on which is exempt
under present law from regular Federal and Colorado income taxes are those
issued by or under the authority of Guam, the Northern Mariana Islands, Puerto
Rico and the Virgin Islands. As a Colorado-oriented fund, at least 65% of the
Fund's total assets will be invested in Colorado Obligations of Colorado
issuers. It is possible, although not currently anticipated, that up to 35% of
the Fund's total assets could be in municipal obligations of a state, territory
or local government other than Colorado.
Colorado Obligations are a type of municipal obligation. Municipal obligations
are issued by or on behalf of states, territories and possessions of the United
States and their political subdivisions, agencies and instrumentalities to
obtain funds for various public purposes. The two principal classifications of
municipal obligations are "notes" and "bonds." Municipal notes are generally
used to provide for short-term capital needs and generally have maturities of
one year or less while municipal bonds have extended maturities. Municipal notes
include: project notes, which sometimes carry a U.S. Government guarantee; tax
anticipation notes; revenue anticipation notes; bond anticipation notes;
construction loan notes and floating and variable rate demand notes. Municipal
obligations include municipal lease/purchase agreements that are similar to
installment purchase contracts for property or equipment. The purposes for which
municipal obligations such as bonds are issued include the construction of a
wide range of public facilities such as airports, highways, bridges, schools,
hospitals, housing, mass transportation, streets and water sewer works. Other
public purposes for which municipal obligations
3
<PAGE>
may be issued include the refunding of outstanding obligations, the obtaining of
funds for general operating expenses and the obtaining of funds to lend to other
public institutions and facilities.
The Fund will invest substantially all of its assets in investment grade
securities. Investment grade municipal obligations are securities rated in one
of the four highest rating categories of a nationally recognized rating service,
such as Moody's S&P or Fitch Investors Services, L.P. ("Fitch"), and also
include unrated securities that the Adviser considers comparable in quality to
securities that have been rated investment grade. The four highest rating
categories are Aaa, Aa, A and Baa for Moody's and AAA, AA, A and BBB for both
S&P and Fitch. Although securities rated in the fourth highest rating category
are considered investment grade, they are generally more vulnerable to adverse
economic conditions than securities rated in the three highest categories and
are considered to have some speculative characteristics.
The Fund has no restrictions on the maturity of municipal obligations in which
it may invest. The Fund attempts to invest in municipal obligations with
maturities that, in the Adviser's judgment, will provide as high a level of
current income as is consistent with prudent investing. The Adviser will also
consider current market conditions when determining the securities it wants to
buy and whether to hold securities currently in the Fund's portfolio.
The Fund may invest more than 25% of its total assets in municipal obligations
in particular market segments, including, but not limited to, hospital revenue
bonds, housing agency bonds, tax-exempt industrial development revenue bonds,
transportation bonds, or pollution control revenue bonds. An economic, business,
political or other change that affects one security may also affect other
securities in the same market segment, thereby potentially increasing market
risk. Examples of changes that may affect certain market segments include
proposed legislation affecting the financing of a project, shortages or price
increases of needed materials, or declining markets or needs for the projects.
Under normal market conditions, the Fund invests its assets as described above.
For temporary defensive purposes, however, the Fund may invest up to 100% of its
total assets in taxable obligations, including (i) commercial paper rated at
least P-1 by Moody's, A-1 by S&P, or F-1 by Fitch; (ii) obligations issued or
guaranteed by the full faith and credit of the U.S. government; or (iii) with
respect to the Fund, municipal securities of a state, territory or local
government other than its respective state (Colorado) or territory.
Investment Risks
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Additionally, there can be no assurance that the
Fund will achieve its investment objectives or be successful in preventing or
minimizing the risk of loss that is inherent in investing in particular types of
investment products. Because there are no restrictions on the maturity of any
individual assets in which the Fund will invest, an investment in the Fund
carries some risk of volatility in principal value. The value of the securities
in which the Fund may invest will fluctuate inversely with movements in interest
rates, therefore, the market values of fixed-income securities generally
increase when rates decline and generally decrease when interest rates rise.
The Fund is classified as a "non-diversified" investment company under the
Investment Company Act of 1940 (the "1940 Act"). The Fund also intends to
qualify as a "regulated investment company" under the Internal Revenue Code (the
"Code"). One of the tests for such qualification under the Code is, in general,
that at the end of each fiscal quarter of the Fund, (i) at least 50% of the
market value of the Fund's assets is represented by cash and cash items
(including receivables), U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and not greater than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities of any one issuer
4
<PAGE>
(other than U.S. Government securities or the securities of other regulated
investment companies). If the Fund had elected to register under the 1940 Act as
a "diversified" investment company, it would have to meet the same test as to
75% of its assets. The Fund may therefore not have as much diversification among
securities, and thus diversification of risk, as if it had made this election
under the 1940 Act. In general, the more the Fund invests in the securities of
specific issuers, the more the Fund is exposed to risks associated with
investments in those issuers. The Fund's assets, being primarily or entirely
Colorado issues, are accordingly subject to economic and other conditions
affecting Colorado. (See "RISKS OF INVESTING IN THE FUND-CONSIDERATIONS
REGARDING INVESTMENTS IN COLORADO OBLIGATIONS.")
The foregoing is a summary of risks; see "RISKS OF INVESTING IN THE FUND" in
this Prospectus.
FUND EXPENSES
The purpose of the following table is to assist the shareholder in understanding
the various costs and expenses that an investor in the Fund will bear, either
directly or indirectly. The Fund's costs and expenses are based upon the Fund's
expenses for the fiscal period ended April 30, 1998.
Fee Table
<TABLE>
<S> <C>
Shareholder Transactions Expenses
Maximum Sales Load Imposed on Purchases None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None
Dividends (as a percentage of offering price)
Deferred Sales Load None
(as a percentage of redemption proceeds)
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after waivers)* 0.03%
12b-1 Fees None
Other Expenses 0.42%
----------
Total Portfolio Operating Expenses (after waivers and
reimbursements)* 0.45%
</TABLE>
- ----------------
*Management Fees consisting of investment advisory fees (before waivers and
reimbursements) would be .50%. The fee waivers and reimbursements reflected in
the table are voluntary and may be modified or terminated at any time without
the Fund's consent. Total Portfolio Operating Expenses (before waivers and
reimbursements) would have been 0.92%.
5
<PAGE>
Example:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return, (2) redemption at the end of each time period, (3) that
operating expenses are the same as described above, and (4) reinvestment of all
dividends and distributions:
<TABLE>
<S> <C>
1 Year $ 5
3 Years $16
5 Years $28
10 Years $63
</TABLE>
THIS ASSUMED 5% ANNUAL RETURN AND THE EXPENSES SHOWN SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED PERFORMANCE OR OPERATING EXPENSES OF ANY FUND,
BOTH OF WHICH MAY VARY SIGNIFICANTLY.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights have been derived from the Fund's financial statements
for the period ended April 30, 1998, which have been audited by Deloitte &
Touche LLP, independent auditors. Their report on the financial statements and
the financial highlights of the Fund is included in the Annual Report. The
financial statements and financial highlights are incorporated by reference into
the Fund's Statement of Additional Information. You should read the financial
highlights with the financial statements and related notes. Further information
about the performance of the Fund is available in the Annual Report. You may
obtain both the Statement of Additional Information and the Annual Report free
of charge by calling or writing to the Trust at the telephone number or address
listed on the first page.
Aristata Colorado Quality Tax-Exempt Fund
Selected data for a share of beneficial interest outstanding throughout the
period March 2, 1998 to April 30, 1998
Aristata Colorado Quality Tax-Exempt Fund
<TABLE>
<S> <C>
Selected Per-Share Data:
Net asset value-beginning of period $10.00
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08
- ------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.06)
- ------------------------------------------------------------------------------------------------
Total income from investment operations 0.02
- ------------------------------------------------------------------------------------------------
Distributions from net investment income (0.08)
- ------------------------------------------------------------------------------------------------
Net asset value-end of period $9.94
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total Return 0.22%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Ratios and Supplemental Data:
Net assets, end of period (000) $23,381
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (1) 0.45%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (1) 5.00%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets without fee waivers (1) 0.92%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets without fee waivers (1) 4.53%
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate (1) 17.64%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
7
<PAGE>
THE FUND
The Fund is a separate investment fund or portfolio, commonly known as a mutual
fund. The Fund is a portfolio of a Delaware business trust organized under the
laws of the State of Delaware as an open-end management investment company on
November 30, 1993. The Trust's Board of Trustees oversees the overall management
of the Fund and elects the officers of the Trust.
The types of securities and investment practices used by the Fund are described
in greater detail in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Adviser: Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc.
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc., acts as the investment
adviser to the Fund under the supervision of the Trust's Board of Trustees. The
Adviser's address is 1380 Lawrence Street, Suite 1050, Denver, Colorado 80204.
The Adviser manages the investment and reinvestment of the assets of the Fund
and continuously reviews, supervises and administers the Fund's investments. The
Adviser is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
The Adviser utilizes a team management system for the Fund. The Adviser's
investment professional team has an average of more than 25 years of investment
research and portfolio management experience. These individuals bring a broad
base of experience, ideas, knowledge, and expertise to the Fund's management.
The team of analysts and portfolio managers provides management of the Fund. The
Adviser's investment team is led by H. David Lansdowne, CFA, President and Chief
Executive Officer of Tempest, Isenhart, and its Chief Investment Officer since
1988. The Fund's other key investment management team include: Robert J. Alder,
CFA, J. Jeffrey Dohse, Barbara Grummel and Greg H. Thompson, CFA.
Mr. Lansdowne earned both his B.S. (1969) and his M.B.A. from the University of
Denver in 1972. He was awarded the Chartered Financial Analyst (CFA) designation
in 1977. Mr. Lansdowne joined the Adviser in 1983 as Director of Research. He
began his career as an Investment Officer with Colorado National Bank in Denver.
He joined United Capital Management, a subsidiary of United Bank of Denver,
where he was Vice President and Portfolio Manager, overseeing pension plans of
Fortune 500 Companies. Immediately prior to joining Tempest, Isenhart, he was
Senior Vice President and Director of Research for Financial Programs mutual
funds and for their subsidiary for privately-managed accounts, Financial Trust
Company.
Mr. Alder earned his B.S. from the University of Colorado in 1969. He was
awarded the Chartered Financial Analyst (CFA) designation in 1977. His
investment management career began in 1969 as a portfolio manager and analyst
with the Trust Investment Division of the First National Bank of Denver. In
1977, he joined the Trust Investment Division of Colorado National Bank and
became head of the department in 1982. In 1987, he was instrumental in creating
Colorado National Bank's wholly-owned registered investment advisory subsidiary,
Colorado Capital Advisors and was President of that subsidiary until 1993, when
he joined the Adviser in his current capacity as Executive Vice President.
Mr. Dohse earned his B.S. from Culver-Stockton College in Canton, Missouri, in
1963 and his M.B.A. from Loyola University in Chicago in 1971. He worked in the
investment industry for 15 years before joining Tempest, Isenhart in 1983. He
began his career with American National Bank & Trust Company in Chicago as a
management trainee involved in all facets of bank and trust investments. He then
joined the United Bank of Denver as Investment Officer, managing trust
portfolios. Prior to joining the
8
<PAGE>
Adviser, Mr. Dohse was a Vice President and Portfolio Manager at IntraWest
Bank of Denver, with responsibility for various investment management
portfolios.
Ms. Grummel earned her B.S. from the University of Colorado in 1979. She worked
for the National Association of Securities Dealers, N. Donald and Company and
the underwriting and asset management divisions of Merrill Lynch. Prior to
joining the Adviser, she was Executive Vice President with Lord Abbett and
Company, the New York based mutual fund group, where her responsibilities
included state-specific municipal bond fund management, individual fixed income
portfolio management and new business development. Ms. Grummel is the lead
portfolio manager for the Aristata Colorado Quality Tax-exempt Fund.
Mr. Thompson earned his B.S. from the University of Wyoming in 1967 and his
M.B.A. from the University of Denver in 1972. He was awarded the Chartered
Financial Analyst designation in 1988. He joined the Adviser, in 1987. His
previous positions include three years as a Financial Analyst with Standard &
Poor's Compustat Services, Inc. in Englewood, Colorado and twelve years with
Page T. Jenkins, a Denver proprietorship. He was an Investment Manager and
Security Analyst with Jenkins, conducting research and managing securities and
mineral portfolios for the firm.
For the advisory services it provides to the Funds, the Adviser receives from
the Fund a monthly fee, based on average daily net assets, at the annual rate of
0.50%.
Although the Adviser has not previously managed a registered investment company,
it has been providing investment advisory services to clients since 1976.
Substantially all of the initial investors in the Fund were previously
participants in an unregistered commingled fund created and administered by the
Colorado State Bank & Trust ("CSB&T"). Tempest, Isenhart acted as the Adviser to
that commingled fund since its origination in late 1976. The Adviser was
unaffiliated with CSB&T at the time it managed the commingled fund and remains
unaffiliated with CSB&T.
The Administrator and Distributor
ALPS Mutual Funds Services, Inc. is the Administrator and Distributor for the
Fund. ALPS is located at 370 17th Street, Suite 3100, Denver, Colorado 80202. As
Distributor, ALPS sells shares of the Fund on behalf of the Trust. As
Administrator, ALPS provides certain administrative services necessary for the
Fund's operations including: (i) coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, independent accountants
and legal counsel; regulatory compliance, including the compilation of
information for documents such as reports to, and filings with, the SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for the Fund; (ii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's Officers and Board of Trustees; and (iii) furnishing office space
and certain facilities required for conducting the business of the Fund. Other
costs borne by the administrator include custodian and transfer agent fees and
expenses; Trustees' fees and expenses; audit fees and expenses; and expenses of
preparation and distribution to existing shareholders of reports and
prospectuses. For these services, ALPS receives a fee from the Fund, computed
daily and payable monthly, at the annual rate of the greater of $60,000 or 0.20%
of the Fund's average daily net assets. ALPS also serves as administrator and
distributor of other mutual funds.
Service Organizations
Various banks, trust companies, broker-dealers or other financial organizations
(collectively, "Service Organizations") also may provide administrative services
for the Fund, such as maintaining shareholder accounts and records at a fee of
up to an annual rate of 0.25% of Fund's average daily net assets serviced. The
Glass-Steagall Act and other applicable laws provide that, among other things,
banks may not engage in the business of underwriting, selling or distributing
securities. There is currently no precedent prohibiting banks from performing
administrative and shareholder servicing functions as
9
<PAGE>
service organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank service organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Fund and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences. The Adviser and Administrator also may pay service organizations
from time to time for rendering services to shareholders.
Other Expenses
The Fund bears all costs of its operations other than expenses specifically
assumed by ALPS or the Adviser. The costs borne by the Fund include legal and
certain accounting expenses; insurance premiums; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of maintaining the Fund's legal existence and
of shareholders' meetings; and expenses of preparation and distribution of
proxies to existing shareholders. The Fund bears its own expenses associated
with its establishment as a series of the Trust; these expenses are amortized
over a five-year period from the commencement of the Fund's operations. Expenses
of the Trust directly attributable to the Fund are charged to that Fund; other
expenses are allocated proportionately among all of the Funds in the Trust in
relation to the net assets of each Fund.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The Fund follows its own investment policies and practices, including certain
investment restrictions. The "Investment Restrictions" section of the SAI
contains specific investment restrictions (the "Investment Restrictions") which
govern the Fund's investments. Except for the Fund's investment objective, which
is a fundamental policy that may not be changed without a majority vote of
shareholders of the Fund, and those restrictions specifically identified as
fundamental, all other investment policies and practices described in this
Prospectus and in the SAI are not fundamental, and may therefore be changed by
the Board of Trustees without shareholder approval.
The Adviser selects investments and makes investment decisions based on the
investment objectives and policies of the Fund.
The types of securities and investment practices used by the Fund are described
in greater detail in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Adviser places orders for the
purchase and sale of portfolio investments for the Fund's accounts with dealers
selected by it in its discretion. In effecting purchases and sales of debt
securities for the account of the Fund, the Adviser will seek the best execution
of the Fund's orders. Purchases and sales of portfolio debt securities for the
Fund are generally placed by the Adviser with primary market makers for these
securities on a net basis, without any brokerage commission being paid by the
Fund. Trading of portfolio debt securities does, however, involve transaction
costs. Transactions with dealers serving as primary market makers reflect the
spread between the bid and asked prices. The Adviser may allocate purchase and
sales orders for portfolio securities to dealers that are affiliated with the
Adviser or Distributor, if the Adviser believes the quality of the transaction
and spreads are comparable to what they would be with other qualified firms.
Subject to the policy of seeking best overall price and execution, sales of
shares of the Fund may be considered by the Adviser in the selection of broker
or dealer firms for a Fund's portfolio transactions.
10
<PAGE>
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 4:00 p.m. Eastern
time, Monday through Friday, on each day the New York Stock Exchange is open for
trading, which excludes the following business holidays: New Year's Day, Martin
Luther King Jr.'s Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per
share of the Fund is computed by dividing the value of the Fund's net assets
(i.e., the value of the assets less the liabilities) by the total number of the
Fund's outstanding shares. All expenses, including fees paid to the Adviser and
ALPS, are accrued daily and taken into account for the purpose of determining
the net asset value.
Securities listed on an exchange or over-the-counter are valued on the basis of
the last sale prior to the time the valuation is made. If there has been no sale
since the immediately previous valuation, then the average of the last bid and
asked prices is used. Quotations are taken from the exchange where the security
is primarily traded. Portfolio securities which are primarily traded on foreign
exchanges may be valued with the assistance of pricing services and are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
foreign security is valued is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees. Notwithstanding the
above, bonds and other fixed-income securities are valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. All assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and asked prices of such currencies against U.S. dollars as last
quoted by any major bank. Further information with respect to the valuation of
the Fund's assets is included in the Statement of Additional Information.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $2,000. Any subsequent investments
must be at least $50. All initial investments should be accompanied by a
completed Purchase Application. A Purchase Application accompanies this
Prospectus. The Fund reserves the right to reject any purchase order.
PURCHASE OF FUND SHARES
Shares of the Fund may be purchased through an authorized broker, service
organization or investment adviser, or directly from the Fund, using any of the
methods described below. Orders for the purchase of shares will be executed at
the net asset value per share next determined after an order has been received
in good form. All funds received are invested in full and fractional shares of
the Fund. Certificates for shares are not issued. ALPS serves as Transfer Agent
pursuant to a Transfer Agent Agreement dated March 15, 1994. ALPS maintains
records of each shareholder's holdings of Fund shares, and each shareholder
receives a statement of transactions, holdings and dividends. The Trust reserves
the right to reject any purchase.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. Orders for the purchase of shares will be
executed at the net asset value per share (the "public offering price") next
determined after an order has been received. Orders transmitted to the Fund in
proper form prior to 4:00 p.m., Eastern Time will become effective that day.
Investments may be made using any of the following methods:
11
<PAGE>
Through an Authorized Broker, Investment Adviser or Service Organization
Shares are available to new and existing shareholders through authorized
brokers, Service Organizations and investment advisers. To make an investment
using this method, simply complete a Purchase Application (if your purchase is
an initial investment) and contact your broker or investment adviser with
instructions as to the amount you wish to invest. Your broker will then contact
the Fund to place the order on your behalf. Authorized brokers, Service
Organizations and investment advisers may impose additional requirements and
charges for the services rendered.
Orders received by your broker or Service Organization for the Fund in proper
order prior to the determination of net asset value and transmitted to the Fund
prior to the close of its trading (which is currently 4:00 p.m. Eastern time),
will become effective that day. Brokers who receive orders are obligated to
transmit them promptly. You should receive written confirmation of your order
within a few days of receipt of instructions from your broker.
Directly with the Fund
By Mail. Make your check payable to the Aristata Colorado Quality Tax-Exempt
Fund and mail it, along with the Purchase Application (if your purchase is an
initial investment), to the address indicated on the Purchase Application.
Purchases made by check are not permitted to be redeemed until payment of the
purchase has been collected, which may take up to fifteen calendar days. Third
party and foreign checks will not be accepted. Please include the Fund name and
your account number on all checks.
By Bank Transfer. Bank transfer allows you to transfer money from your bank
account via the Automated Clearing House (ACH) network to your Fund account.
First, an account must be established with the Fund. Your Purchase Application
must indicate your desire to have this option. Next, contact a representative
from your bank to arrange for bank transfer services. A deposit account must be
opened, or already be open at a bank providing bank transfer services and you
must arrange for this service to be provided. Once you have completed this
process, you can initiate a bank transfer by contacting a representative from
your bank, providing the required information for the bank, and authorizing the
transfer to take place. Please allow two or three days after the authorization
for the transfer to occur.
By Wire. Investments may be made directly through the use of wire transfers of
Federal funds. In most cases, your bank will either be a member of the Federal
Reserve Banking System or have a relationship with a bank that is. Your bank
will normally charge you a fee for handling the transaction. To purchase shares
by a Federal funds wire, please first contact ALPS at 1-800 644-8595. An account
must be established with the Fund prior to any wire transfer. You can initiate a
wire transfer by contacting a representative from your bank, providing the
required information for the bank, and authorizing the transfer to take place.
Federal Funds should be wired to:
State Street Bank & Trust Co.
ABA# 011000028
Aristata Colorado Quality Tax-Exempt Fund
Credit DDA# 22404081
(Account Registration)
(Account Number)
Automatic Investment Program. The Automatic Investment Program offers a simple
way to maintain a regular investment program. You may arrange automatic
transfers (minimum $50 per transaction) from your bank account to your Fund
account on a periodic basis by simply completing the Automatic Investment Plan
section of your Purchase Application. When you participate in this program, the
minimum initial investment in each Portfolio is $250. You may change the amount
of your automatic
12
<PAGE>
investment, skip an investment, or stop the Automatic Investment Program by
calling the Fund at (800) 644-8595 at least three Business Days prior to your
next scheduled investment date.
The Fund may in its discretion discontinue, suspend or change the practice of
accepting orders by any of the methods described above. Orders for the purchase
of shares are subject to acceptance by the Fund. The Fund reserves the right to
suspend the sale of shares, or to reject any purchase order, including orders in
connection with exchanges, for any reason.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on each day the Fund
is valued (see "FUND SHARE VALUATION"). Shares will be redeemed at the net asset
value next determined after a redemption request in good form has been received
by the Fund.
A redemption may be a taxable transaction on which gain or loss may be
recognized. See "DIVIDEND TAX INFORMATION" for more information.
Where the shares to be redeemed have been purchased by check, the payment of
redemption proceeds may be delayed until the purchasing check has cleared, which
may take up to 15 calendar days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Fund may, however, take up to seven days to make payment. This will not be the
customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Fund may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow the
procedures described below. Although the Fund has no present intention to do so,
the Fund reserves the right to refuse or to limit the frequency of any
telephone, wire or bank transfer redemptions. Of course, it may be difficult to
place orders by telephone during periods of severe market or economic change,
and a shareholder should consider alternative methods of communications. The
Fund may modify or terminate its services and provisions at any time. If the
Fund terminates any particular service, it will do so only after giving written
notice to shareholders. Redemption by mail will always be available to
shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Investment Adviser, or Service Organization
You may redeem your shares by contacting your authorized broker, service
organization or investment adviser and instructing him or her to redeem your
shares. He or she will then contact ALPS and place a redemption trade on your
behalf.
Directly with the Fund
By Mail. You may redeem your shares by sending a letter directly to ALPS. To be
accepted, a letter requesting redemption must include: (i) the Fund name and
account registration from which you are redeeming shares; (ii) your account
number; (iii) the amount to be redeemed; (iv) the signatures of all registered
owners; and (v) for redemptions exceeding $1,000, a signature guarantee by any
eligible guarantor institution, including a member of a national securities
exchange, or a commercial bank or
13
<PAGE>
trust company, broker-dealer, credit union or savings association. Corporations,
partnerships, trusts or other legal entities will be required to submit
additional documentation.
By Telephone. If you have established the telephone redemption privilege on
your Purchase Application, you may redeem your shares by calling the Fund at
(800) 644-8595. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Fund. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Fund fails to employ
such reasonable procedures, it may be liable for any loss, damage or expense
arising out of any telephone transactions purporting to be on a shareholder's
behalf. In order to assure the accuracy of instructions received by telephone,
the Fund requires some form of personal identification prior to acting upon
instructions received by telephone, records telephone instructions and provides
written confirmation to investors of such transactions. Telephone redemptions
will be suspended for a period of 10 days following a telephone address change.
You may instruct the Fund to send your redemption proceeds via federal wire
($1,000 minimum per transaction) or bank transfer to your personal bank. Your
instructions should include: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. Wire and bank transfer redemptions can be
made only if the privilege has been established on your Purchase Application and
you have attached a copy of a voided check or a letter summarizing the wiring
instructions of the account where proceeds are to be wired. Your bank may charge
you a fee for receiving a wire payment on your behalf.
Systematic Withdrawal Plan. An owner of $10,000 or more of the Fund may elect to
have periodic redemptions from his or her account to be paid on a monthly,
quarterly, semi-annual or annual basis by simply completing the Systematic
Withdrawal Plan section of the Purchase Application. The minimum periodic
withdrawal is $100. A sufficient number of shares to make the scheduled
redemption will normally be redeemed on the fifth or twentieth day of the
selected month(s). Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. If a shareholder participates in the Systematic
Withdrawal Plan, all dividends will automatically be reinvested.
EXCHANGE OF FUND SHARES
The Fund offers two convenient ways to exchange shares in one Fund for shares in
another Fund in the Trust. Before engaging in an exchange transaction, a
shareholder should read carefully the Prospectus describing the Fund into which
the exchange will occur, which is available without charge and can be obtained
by writing to ALPS at the address listed on the cover of this Prospectus. A
shareholder may not exchange shares of one Fund for shares of another Fund if
the new Fund is not qualified for sale in the state of the shareholder's
residence. Please call the Fund at (800) 644-8595 for questions regarding state
registration. The minimum amount for an initial and subsequent exchange is $50.
The Trust may terminate or amend the terms of the exchange privilege at any time
upon at least 60 days' prior written notice to shareholders of any modification
or termination of the exchange privilege.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. See "DIVIDEND AND TAX INFORMATION" for more information.
Shareholders will receive written confirmation of the exchange following
completion of the transaction.
14
<PAGE>
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to the Fund. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties; (v) for exchanges
exceeding $1,000, a signature guarantee by an eligible guarantor institution,
including a member of a national securities exchange, or by a commercial bank or
trust company, broker/dealer, credit union or savings association.
Exchange by Telephone. If you have established the telephone exchange privilege
on your Purchase Application, you may exchange Fund shares by telephone by
simply calling the Fund at (800) 644-8595. You should be prepared to give the
telephone representative the following information: (i) your account number,
social security or tax identification number and account registration; (ii) the
name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
will be suspended for a period of ten days following a telephone address change.
See "REDEMPTION OF FUND SHARES - By Telephone" for a discussion of telephone
transactions generally.
DIVIDEND AND TAX INFORMATION
General Information
The Fund intends to continue to qualify as a regulated investment company for
each taxable year pursuant to the provisions of Subchapter M of the Code. By so
qualifying and electing, the Fund generally will not be subject to Federal
income tax to the extent that it distributes investment company taxable income
and net realized capital gains in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses). The
Fund will declare distributions of net investment income daily and pay those
dividends monthly. The Fund intends to distribute, at least annually,
substantially all net capital gains (the excess of net long-term capital gains
over net short-term capital losses). In determining amounts of capital gains to
be distributed, any capital loss carryovers from prior years will be applied
against capital gains.
The amount declared each day as a dividend may be based on projections of
estimated monthly net investment income and may differ from the actual
investment income determined in accordance with generally accepted accounting
principles. An adjustment will be made to the dividend each month to account for
any difference between the projected and actual monthly investment income.
On or before March 2, 1998, common trust fund assets managed by the Adviser
contributed assets to the Fund in exchange for shares of the Fund. This transfer
may result in adverse tax consequences under certain circumstances to either the
investors transferring shares from a common trust or collective investment fund
for shares of the Fund ("reorganizing shareholders") or to investors who acquire
shares of the Fund after a transfer ("new shareholders"). As a result, the Fund
acquired some securities that have appreciated in value or depreciated in value
from the date they were acquired. If appreciated securities are sold after the
transfer, the amount of the gain would be taxable to new shareholders as well as
to reorganizing shareholders. New shareholders would therefore incur a tax
liability on distributions of capital gains realized by the Fund even though the
value of their investment in the Fund may not have increased. The effect on
shareholders who transferred into the Fund would be to reduce their potential
liability for tax on capital gains by spreading it over a larger asset base. The
opposite may occur if the Fund acquires securities having an unrealized capital
loss. In that case, shareholders who transferred into the Fund will be unable to
utilize the loss to offset gains, but, because the transfer will not result in
any
15
<PAGE>
gains, the inability of shareholders to utilize unrealized losses will have
no immediate tax effect. For new shareholders, to the extent that unrealized
losses are realized by the Fund, new shareholders may benefit by any reduction
in net tax liability attributable to the losses.
For all distributions, the shareholder may elect in writing, not less than five
full business days prior to the record date, to receive such distributions in
cash. Dividends declared in, and attributable to, the preceding period will be
paid within five business days after the end of the period. Unless the
shareholder chooses to receive dividend and/or capital gain distributions in
cash, distributions will be automatically reinvested in additional shares of the
Fund at net asset value. If you elect to receive distributions in cash and
checks (1) are returned and marked as "undeliverable" or (2) remain uncashed for
six months, your cash election will be changed automatically and your future
dividend and capital gains distributions will be reinvested in the Fund at the
per share net asset value determined as of the date of payment of the
distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in the Fund at
the per share net asset value determined as of the date of cancellation.
Investors who redeem all or a portion of Fund shares prior to a dividend payment
date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of net investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) generally will be
taxable to shareholders as ordinary income. Distributions of net long-term or
mid-term capital gains designated by the Fund as capital gain distributions will
be taxable as long-term or mid-term capital gains, regardless of how long a
shareholder has held his Fund shares. Distributions are taxable in the same
manner whether received in additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as paid
on December 31 of the calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders (and therefore
taxable) in the calendar year in which the distributions are declared, rather
than the calendar year in which the distributions are received.
The Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
or her Fund shares. Distributions in excess of a shareholder's cost basis in his
or her shares would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in complete liquidation of
the Fund, generally will be a capital gain or loss which will be long-term,
mid-term or short-term generally depending upon the shareholder's holding period
of the shares. A loss realized by a shareholder on a redemption, sale, or
exchange of shares of the Fund with respect to which capital gain dividends have
been paid will be characterized as a long-term or mid-term capital loss to the
extent of such capital gain dividends.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct
16
<PAGE>
taxpayer identification number or to make required certifications, or where the
Fund or shareholder has been notified by the Internal Revenue Service that the
shareholder is subject to backup withholding. Most corporate shareholders and
certain other shareholders specified in the Code are exempt from backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Fund as to the Federal tax status
of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisers as to the Federal, state and local tax consequences of ownership of
shares of the Fund in their particular circumstances.
Information on Tax-Exempt Distributions
Net interest income on obligations exempt from federal income tax, when
distributed to shareholders and designated by the Fund as exempt-interest
dividends, will be exempt from regular federal income tax in the hands of the
shareholders. Short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested. Long-term capital gain
distributions to shareholders will be treated as taxable long-term capital gain,
whether received in shares of the Fund or in cash, regardless of how long a
shareholder has held his shares. It is not likely that the Fund will retain
undistributed capital gains; however, in such an event, a shareholder must
include in income, as long-term capital gain, his share of undistributed
long-term capital gain designated by the Fund. Under such circumstances, the
shareholder may claim a refundable credit against the tax for his proportionate
share of any capital gain tax paid by the Fund.
Under present law, capital gains are subject to a maximum tax rate of 28%.
With respect to bonds (including other securities) purchased after April 1993,
the amount of any "market discount" (generally the amount by which the cost is
less than the face amount of the bond) is taxed as ordinary income. This means
that most "capital appreciation" on these bonds will now be distributed to, and
taxed to, the shareholders as ordinary interest income (rather than as capital
gains).
Under Section 55 of the Code, the alternative minimum tax now applies to all
taxpayers, including corporations, and increases a taxpayer's tax liability only
to the extent it exceeds the taxpayer's regular income tax (less certain
credits) for the year. The alternative minimum tax is equal to 26% (or in some
cases, 28%) in the case of individuals (20% for corporations) of the excess of
the taxpayer's taxable excess, which is the amount by which alternative minimum
taxable income exceeds the applicable exemption amount. The exemption is $45,000
for spouses filing a joint return, $33,750 for a single taxpayer, and $22,500
for a married taxpayer filing a separate return, or for a trust or estate. The
exemption is phased out at the rate of $.25 for each dollar by which a
taxpayer's alternative taxable income exceeds a predetermined amount.
"Alternative minimum taxable income" is a taxpayer's taxable income (i)
determined with specified adjustments for the alternative minimum tax and (ii)
increased by "items of tax preference." The types of income constituting "items
of tax preference" include otherwise allowable tax-exempt interest on private
activity bonds issued after August 7, 1986 (except bonds issued by charities
qualifying under Section 501(c)(3) of the Code).
Under the Code any loss on the sale or exchange of shares in the Fund held by a
shareholder for six months or less will be disallowed to the extent the
shareholder received exempt-interest dividends with respect to those shares.
17
<PAGE>
Distributions from the Fund's non-exempt investment income and from any net
realized short-term gain will be taxable to shareholders as ordinary income,
whether received in cash or in additional shares of the Fund. Under the Code,
interest on indebtedness incurred or continued to purchase or carry shares of
the Fund will not be deductible to the extent that the Fund's distributions are
exempt from federal income tax.
Subject to modification by Regulations to be published, written notice
concerning the federal income tax status of distributions will be mailed within
60 days after the close of the year to shareholders of the Fund annually in
accordance with applicable provisions of the Code.
Regulated investment companies will be subject to a non-deductible excise tax
equal to 4% of the excess of the amount required to be distributed for the
calendar year over the distributed amount for the calendar year. The Fund
intends to avoid the imposition of this excise tax, and will therefore
distribute during each calendar year at least 98% of its ordinary income for
such calendar year and 98% of its capital gain net income for the one year
period ending on October 31 of the calendar year.
UNLESS A SHAREHOLDER INCLUDES HIS TAXPAYER IDENTIFICATION NUMBER (SOCIAL
SECURITY NUMBER FOR INDIVIDUALS) IN THE GENERAL AUTHORIZATION FORM AND CERTIFIES
THAT HE IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS REQUIRED TO WITHHOLD
AND REMIT TO THE U.S. TREASURY 31% OF NON-EXEMPT DISTRIBUTIONS AND OTHER
REPORTABLE PAYMENTS TO THE SHAREHOLDER.
Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds should consult
their tax advisers before purchasing Fund shares.
The limitations on the deduction of miscellaneous itemized deductions do not
apply to publicly offered regulated investment companies. The Investment Adviser
intends to use its best efforts to ensure that the Fund qualifies as a publicly
offered regulated investment company for the purposes of the foregoing
provision.
With respect to the Fund, dividends derived from interest excludable from gross
income under Internal Revenue Code (the "Code") Section 103 on obligations
issued by states or political subdivisions thereof and which are designated by a
Fund as "exempt-interest dividends" are not subject to the regular Federal
income tax. The Fund will be qualified to designate and pay exempt-interest
dividends if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of securities on which the interest
payments are exempt from Federal income tax under Code Section 103. To the
extent that the Fund's dividends distributed to shareholders are derived from
earnings on interest income exempt from Federal income tax and are designated as
"exempt-interest dividends" by that Fund, they will be excludable from a
shareholder's gross income for regular Federal income tax purposes. Other
dividends paid by the Fund, if any, will be taxable to shareholders.
The Fund may derive interest on temporary taxable investments and realize
capital gains or losses from its portfolio transactions, including the sale of
securities. Dividends derived from such interest, short-term capital gains, and
long-term capital gains, respectively, will be taxable to shareholders as
described above, whether such distributions are made in cash or in additional
shares of the Fund. In addition, a sale of shares in the Fund (including a
redemption of such shares and an exchange of shares between Funds) may be a
taxable event and may result in a taxable gain or loss to the shareholder. It is
possible that a portion of the distributions of the Fund may constitute taxable
rather than tax-exempt income in the hands of a shareholder. A loss realized by
a shareholder on the redemption, sale, or exchange of shares of the Fund with
respect to which exempt-interest dividends have been paid will be disallowed to
the extent of the exempt-interest dividends received if such shares have been
held by the shareholder for six months or less.
18
<PAGE>
Tax-exempt interest from certain private activity bonds and exempt-interest
dividends attributable to that interest income constitute an item of tax
preference under the alternative minimum tax. Therefore, if the Fund invests in
such private activity bonds, certain shareholders may become subject to the
alternative minimum tax on that part of the Fund's exempt-interest dividends
derived from interest income on such bonds. See the SAI for further information
about the tax consequences for certain types of investors of a Fund investing in
private activity bonds.
The entire amounts of exempt-interest dividends received from the Fund by most
corporations will be part of an adjustment in computing alternative minimum
taxable income.
There could be retroactive revocation of the tax-exempt status of certain
municipal obligations after their issuance. In addition, in connection with
budget and tax reform efforts, proposals may be made or adopted which would
change the tax treatment arising from an investment in the Fund. It is not
possible to predict the precise impact of any of these events, but they may
affect the value of the securities in the Fund's portfolio.
Shareholders should be aware that redeeming shares of the Fund after tax-exempt
interest income has been accrued by the Fund but before that income has been
declared as a dividend may be disadvantageous. This is because the gain, if any,
on the redemption will be taxable, even though such gain may be attributable in
part to the accrued tax-exempt interest which, if distributed to the shareholder
as a dividend rather than as a redemption proceed, might have qualified as an
exempt-interest dividend.
Deductions for interest expense incurred (or deemed incurred) to acquire or
carry shares of the Fund may be subject to limitations that reduce or eliminate
such deductions. In addition, under rules issued by the Internal Revenue Service
for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds, even though the borrowed funds
are not directly traceable to the purchase of shares.
Up to 85% of an individual's social security benefits and certain railroad
benefits may be subject to Federal income tax. Along with other factors, total
tax-exempt income, including exempt-interest dividends, is used to calculate the
portion of such benefits that are taxed.
The treatment for state, local and municipal tax purposes of distributions of
exempt-interest dividends from the Fund will vary according to the laws of the
state and local taxing authorities. Exempt-interest dividends and other
dividends may be subject to state and local taxation. Investors should consult
with their tax advisers as to the availability of any exemptions from such
taxes. Persons who may be "substantial users" (or "related persons" of
substantial users) of facilities financed by private activity bonds may suffer
adverse tax consequences from investing in the Fund and, therefore, should
consult their tax advisers before purchasing Fund shares. In some instances, a
state or city may exempt from tax the portion of the distribution from a Fund
that represents interest received on obligations of that state or its political
subdivisions. Under the laws of certain other states and cities, the entire
amount of any such distribution may be taxable. Shareholders will be notified
annually of the Federal income tax status of distributions and the percentage of
municipal obligation interest income received, with its source indicated. The
interest on most private activity bonds is subject to the Federal alternative
minimum tax and, except under unusual market conditions, the Fund will invest at
least 80% of its net assets in securities that pay interest that is exempt
(except for certain corporate shareholders) from the Federal alternative minimum
tax.
19
<PAGE>
Colorado Income Taxes
Individuals, trusts, estates, and corporations who are holders of shares of the
Fund and who are subject to Colorado income tax will not be subject to Colorado
tax on distributions from the Fund to the extent that such distributions qualify
as either (1) exempt interest dividends of a regulated investment company under
Section 852(b)(5) of the Code, which are derived from interest on tax-exempt
obligations of the State of Colorado or any of its political subdivisions; or
(2) distributions derived from interest on obligations of the United States or
its possessions included in federal adjusted gross income.
To the extent that distributions on shares of the Fund are attributable to
sources of income not described in the preceding sentences, including capital
gains, such distributions will not be exempt from Colorado income tax.
There are no municipal income taxes in Colorado. As intangibles, shares in the
Fund will be exempt from Colorado property taxes.
RISKS OF INVESTING IN THE FUND
Certain Risk Considerations
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. For example, the value of the Fund's shares will
generally fluctuate inversely with the movements in interest rates. Shareholders
of the Fund should expect the value of their shares to fluctuate with changes in
the value of the securities owned by the Fund. There is, of course, no assurance
that the Fund will achieve its investment objectives or be successful in
preventing or minimizing the risk of loss that is inherent in investing in
particular types of investment products. In order to attempt to minimize that
risk, the Adviser monitors developments in the economy, the securities markets,
and with each particular issuer. Also, as noted earlier, the Fund is managed
within certain limitations that restrict the amount of the Fund's investment in
any single issuer.
The Adviser and the Trust's service providers rely upon their existing
information systems to provide investment management and administrative
services, respectively, to the Trust. The costs of maintaining and upgrading
such information systems to comply with the impact of the Year 2000 is an
operational and financial responsibility of the Adviser and the other service
providers, respectively. The Trust is in the process of assessing and
formulating any responses to any material issues, if any, relating to Year 2000
with the Adviser and all other major service providers. However, no assurance
can be given that these steps will be sufficient to avoid any material adverse
impact to the Trust.
Considerations Regarding Investments in Colorado Obligations. Because the Fund
will be highly concentrated in the securities of Colorado State and municipal
issuers, the Fund will not be diversified. Investment in a non-diversified fund
could, therefore, entail greater risks than investment in a "diversified" fund,
including a risk of greater fluctuations in yield and share price. There are
risks to investment in the Fund posed by the economic strength of and pending
legal actions against, the State of Colorado. It is not currently possible to
assess the impact of such economic factors and cases or current legislation and
policies on the long-term ability of Colorado state and municipal issuers to pay
interest or repay principal on their obligations.
The value of the Colorado Obligations in which the Fund invests will fluctuate
depending in large part on changes in prevailing interest rates. If the
prevailing interest rates go up after the Fund buys Colorado Obligations, the
value of these obligations will normally go down; if these rates go down, the
value of these obligations will normally go up. Changes in value and yield based
on changes in prevailing interest rates may have different effects on short-term
Colorado Obligations than on long-term obligations. Long-term obligations (which
often have higher yields) may fluctuate in value more than
20
<PAGE>
short-term ones. For this reason, the Fund may, to achieve a defensive position,
shorten the average maturity of its portfolio.
The following is a discussion of the general factors that might influence the
ability of Colorado issuers to repay principal and interest when due on the
Colorado Obligations contained in the portfolio of the Fund. Such information is
derived from sources that are generally available to investors and is believed
by the Fund to be accurate, but has not been independently verified and may not
be complete.
Because of limitations contained in the state constitution, the State of
Colorado issues no general obligation bonds secured by the full faith and credit
of the state. Several agencies and instrumentalities of state government are
authorized by statute to issue bonds secured by revenues from specific projects
and activities. Additionally, the state currently is authorized to issue
short-term revenue anticipation notes.
There are approximately 2,000 units of local government in Colorado, including
counties, statutory cities and towns, home-rule cities and counties, school
districts and a variety of water, irrigation, and other special districts and
special improvement districts, all with various constitutional and statutory
authority to levy taxes and incur indebtedness. The major source of revenue for
funding such indebtedness is the ad valorem property tax, which presently is
levied and collected solely at the local level, although the state is also
authorized to levy such taxes. There is a statutory restriction on the amount of
annual increases in taxes that can be levied by the various taxing jurisdictions
in Colorado without electoral approval.
On November 3, 1992, an amendment to the Constitution of the State of Colorado
was approved and went into effect. In general, the effect of the amendment is to
limit the ability of the State and local governments to increase revenues and
expenditures, issue debt and enter into other financial obligations and raise
taxes. At the date of this Prospectus, it is not possible to predict how the
amendment will affect the various issuers of existing and future Colorado
Obligations, but in general it could reduce the tax coverage for Colorado
Obligations, limit the ability of municipalities to issue new obligations and
could impair the liquidity of Colorado Obligations. In addition, the various
provisions of the amendment may result in legislation and have resulted in
litigation that may have effects on Colorado Obligations that cannot now be
predicted. The principal provisions of the amendment and other matters relating
to it are summarized in the SAI.
Colorado's economy is diversified and the state has become the services center
for the Rocky Mountain region. The state's economy includes agriculture,
manufacturing (especially high technology activities), construction, tourism
(ski resorts and national parks) and mining (primarily oil production). Colorado
has recovered from economic difficulties experienced during the past several
years, which caused state government revenue shortfalls at that time.
Employment in Colorado is diversified among services, trade, government and
manufacturing. Employment growth in Colorado has exceeded that of the United
States as a whole since 1989.
It can be expected that federal deficit reduction measures will have significant
direct and indirect impact on the economy of that state as a whole and on
specific localities with a large presence of federal activity. As a result of
all these factors, there can be no assurance that further economic difficulties
and their impact on state and local government finances will not adversely
affect the market value of the Colorado Obligations held by the Fund or the
ability of the respective obligors to pay debt service on certain of such
obligations. Obligations of non-Colorado issuers are subject to the risks of
general economic and other factors affecting those issuers.
21
<PAGE>
OTHER INFORMATION
Capitalization
Financial Investors Trust was organized as a Delaware business trust on November
30, 1993 and currently consists of six separately managed portfolios. The Board
of Trustees may establish additional portfolios in the future. The
capitalization of the Funds consists solely of an unlimited number of shares of
beneficial interest with no par value. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
Voting
Shareholders have the right to vote in the election of Trustees and on any and
all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Fund is not required to hold regular
annual meetings of shareholders and does not intend to do so.
The Declaration of Trust provides that the holders of not less than two-thirds
of the outstanding shares of the Fund may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of considering the
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Fund and in
connection with such meeting to comply with the shareholders' communications
provisions of Section 16(c) of the Act. See "OTHER INFORMATION Voting Rights" in
the SAI.
Shares entitle their holders to one vote per share (with proportionate voting
for fractional shares). As used in the Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means the vote of the lesser of:
(1) 67% of the shares of a Fund present at a meeting if the holders of more than
50% of the outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of a Fund.
Performance Information
The Fund may, from time to time, include its yield, taxable equivalent yield and
total return in advertisements or reports to shareholders or prospective
investors. The methods used to calculate the yield, taxable equivalent yield and
total return of the Fund are mandated by the SEC.
Quotations of "yield" for the Fund will be based on the investment income per
share during a particular 30-day (or one month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
Quotations of yield and effective yield reflect only the Fund's performance
during the particular period on which the calculations are based. Yield and
effective yield for the Fund will vary based on changes in market conditions,
the level of interest rates and the level of the Fund's expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar, and other entities or organizations which
22
<PAGE>
track the performance of investment companies. Any performance information
should be considered in light of the Fund's investment objectives and policies,
characteristics and quality of the Fund and the market conditions during the
time period indicated, and should not be considered to be representative of what
may be achieved in the future. For a description of the methods used to
determine yield and total return for Fund, see the SAI.
The Colorado Quality Tax-Exempt Fund may also advertise its "taxable equivalent
yield." Taxable equivalent yield is the yield that an investment, subject to
both Federal and Colorado personal income taxes, would need to earn in order to
equal, on an after-tax basis, the yield on an investment exempt from such taxes
(normally calculated assuming the maximum combined Federal and Colorado marginal
tax rate). A taxable equivalent yield quotation for a Fund will be higher than
the yield or the effective yield quotations for a Fund.
The Fund commenced operations on March 2, 1998 subsequent to the transfer of
assets by an unregistered commingled pool to the Fund in exchange for shares of
such Fund. The Fund will employ materially equivalent investment objectives,
policies, restrictions and guidelines as those employed by the Adviser with
respect to the predecessor unregistered commingled pool. The Fund's portfolio of
investments on March 2, 1998 was the same as the portfolio of the corresponding
unregistered commingled pool immediately prior to the transfer. The commingled
pool performance is not necessarily representative of the past performance of
the portfolio managers acting individually or as a team.
The commingled pool was not a registered investment company as it was exempt
from registration under the Investment Company Act of 1940, as amended. Since,
in a practical sense the commingled pool constitutes the "predecessor" of the
Fund, the Trust calculates the performance of the Fund in accordance with SEC
guidelines for periods commencing prior to the transfer of the commingled assets
to the Fund by including the corresponding commingled pool total return adjusted
to reflect the deduction of anticipated fees and expenses applicable to the
Fund.
The quoted performance data includes the performance of the commingled pool for
periods before the Trust's Registration Statement became effective. As noted
above, the commingled pool was not registered under the 1940 Act and thus not
subject to certain investment restrictions that are imposed by the 1940 Act and
the Internal Revenue Code. If the commingled pool had been registered under the
1940 Act, the commingled pool performance might have been adversely affected.
<TABLE>
<CAPTION>
Assets Included in Lipper Intermediate
Adviser's Municipal Adviser's Municipal Municipal Index (Lehman
Year(1) Performance Performance(2) Index Prior to 1991)(3)
------- ------------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
1976(4) $249,464 4.87% 5.03%
1977 $262,787 7.25% 7.77% Index Not
1978 $833,728 -1.56% -1.08% Available
1979 $854,732 -3.84% -3.37% Until 1979
1980 $790,883 -19.35% 18.95% -8.90%
1981 $725,230 -10.22% -9.79% -10.20%
1982 $3,469,564 30.80% 31.41% 40.90%
1983 $5,126,081 5.22% 5.72% 8.10%
1984 $6,702,900 8.41% 8.92% 10.60%
1985 $11,636,383 23.42% 24.00% 20.00%
1986 $18,092,331 0.61% 21.18% 19.30%
1987 $18,170,711 -4.10% 14.19% 10.80%
1990 $20,173,419 5.44% 5.94% 7.60%
1991 $21,055,078 11.31% 11.84% 10.80%
1992 $21,624,650 8.16% 8.68% 7.50%
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
1993 $23,382,449 10.15% 10.68% 9.94%
1994 $23,906,936 -3.24% -2.79% -3.52%
1995 $27,173,100 11.15% 11.68% 12.86%
1996 $25,234,140 3.93% 4.43% 3.70%
1997 $25,291,237 6.13% 6.64% 7.08%
For 5 Years Ended 1997 5.50% 6.00% 5.86%
For 10 Years Ended 1997 7.79% 8.30% 7.60%
Since Inception (August 31, 1976) 6.01% 6.52% NA
</TABLE>
- --------------------------------------
(1) All periods are ended December 31.
(2) Annual total return is represented for each year and compounded annual
return is presented for each period, net of expenses, in accordance with SEC
guidelines. The performance in the first column has been restated to reflect a
total expense ratio of .93% which is the gross expense ratio that the Fund is
expected to incur during the current fiscal year and which reflects a management
fee of .50% of net assets. Performance in the second column has been restated to
reflect a total expense ratio of .45% which reflects voluntary fee waivers
and/or expense reimbursements. These waivers and/or reimbursements may be
modified or terminated at any time.
(3) For comparison, the Lehman Municipal Index of municipal bonds has a maturity
and duration which approximated the predecessor commingled fund during the
1980s. Because the average maturity of the predecessor commingled fund was
actively decreased during the 1980s, the appropriate benchmark was changed to
the Lipper Intermediate Municipal Bond Index (a more comparable maturity and
duration) after 1991 and then linked with the prior Lehman Index returns.
(4) Data for the period August 31, 1976 to December 31, 1976.
Account Services
All transactions in shares of the Fund will be reflected in a monthly statement
for each shareholder. In those cases where another organization or its nominee
is the shareholder of record of shares purchased for its customer, the Fund has
been advised that the statement may be transmitted to the customer at the
discretion of such organization.
ALPS acts as the Fund's transfer agent. The Fund compensates ALPS, pursuant to a
Services Agreement, for providing personnel and facilities to perform dividend
disbursing and transfer agency-related services for the Fund.
Shareholder Inquiries
All shareholder inquiries should be directed to the Fund at 370 17th Street,
Suite 3100, Denver, CO 80202.
General and Account Information: (800) 644-8595.
24
<PAGE>
APPENDIX
Key to Moody's Bond Ratings
Aaa Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most likely to impair the fundamentally strong position of
such issues.
Aa Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present that make the long-term risks appear somewhat larger than
in Aaa securities.
A Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment some time in
the future.
Baa Bonds that are rated Baa are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
Ba Bonds that are rated Ba are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
B Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Key to S & P's Bond Ratings
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
25
<PAGE>
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits 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 Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "BBB" rating.
B Debt rated "B" has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category
is also used for debt subordinated to senior debt that is assigned an
actual or implied "BB-" rating.
CCC Debt rated "CCC" 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 The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is 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 The rating "CI" is reserved for income bonds on which no interest is being
paid.
D Debt rated "D" is in payment default. The "D" rating category 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 that
such payments will be made during such grace period. The "D" rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
26
<PAGE>
INVESTMENT ADVISER
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc.
1380 Lawrence Street, Suite 1050
Denver, Colorado 80204
ADMINISTRATOR, DISTRIBUTOR AND TRANSFER AGENT
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202
CUSTODIAN
Fifth Third Bank, N.A.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
FOR MORE INFORMATION CALL
1-800-644-8595
THESE FUNDS ARE NOT INSURED BY TEMPEST, ISENHART, COLORADO STATE BANK
AND TRUST, THE FDIC OR ANY OTHER INSURER.
27
<PAGE>
ARISTATA QUALITY BOND FUND
370 17th Street
Suite 3100
Denver, CO 80202
General & Account Information: (800) 644-8595
TEMPEST, ISENHART, CHAFEE, LANSDOWNE & ASSOC., Inc.
Investment Adviser ("Tempest, Isenhart" or the "Adviser")
ALPS MUTUAL FUNDS SERVICES, INC.
Administrator, Distributor and Sponsor ("ALPS" or the "Distributor")
This prospectus describes the Aristata Quality Bond Fund (the "Fund"), managed
by Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc., a Colorado corporation.
The Fund is a diversified series of Financial Investors Trust (the "Trust"), a
Delaware business trust and registered open-end management investment company.
The Fund's investment objective is to seek to provide as high a level of current
income as is consistent with the preservation of capital. Shares of the Fund are
sold to the public by the Distributor as an investment vehicle for individuals,
institutions, corporations and fiduciaries. Investments in shares of the Fund
involve risk, including possible loss of principal. The net asset value of a
share of the Fund will fluctuate as market conditions change.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated August 27, 1998,
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information number printed above.
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.
August 28, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
HIGHLIGHTS 3
FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 6
THE FUND 7
MANAGEMENT OF THE FUND 7
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND 10
PORTFOLIO TRANSACTIONS 11
FUND SHARE VALUATION 11
MINIMUM PURCHASE REQUIREMENTS 12
PURCHASE OF FUND SHARES 12
REDEMPTION OF FUND SHARES 14
EXCHANGE OF FUND SHARES 15
INDIVIDUAL RETIREMENT ACCOUNTS 16
DIVIDEND AND TAX INFORMATION 16
RISKS OF INVESTING IN THE FUND 18
OTHER INFORMATION 18
APPENDIX 21
</TABLE>
2
<PAGE>
HIGHLIGHTS
Investment Objective and Policies of the Fund
The investment objective of the Aristata Quality Bond Fund is to seek to provide
investors with as high a level of current income as is consistent with the
preservation of capital. There are risks in any investment program, including
the risk of changing economic and market conditions, and there is no assurance
that the Fund will achieve its investment objective.
The Fund pursues its objective by investing, under normal conditions, in debt
securities, at least 65% of which consist of U.S. Government obligations,
corporate debt obligations and mortgage-backed and asset-backed securities that
are rated A or better by a nationally recognized statistical rating organization
("NRSRO") or which are of comparable quality in the judgment of the Adviser. The
balance of the Fund's assets will be invested in investment grade securities.
"Quality" obligations are considered to be those obligations rated in one of the
four highest categories by a NRSRO or, if unrated, deemed by the Adviser to be
of comparable quality.
The time to maturity of individual investments and the average, dollar-weighted
maturity of all fixed-income instruments held by the Fund reflect the Adviser's
judgment as to the most attractive relative yields. Accordingly, the Fund has no
restrictions on the maturity of the obligations in which it may invest.
Fluctuations in the value of fixed-income portfolio securities do not affect
interest income on such securities available for distribution to Fund
shareholders, but are reflected in the Fund's net asset value.
The Fund's permitted investments include notes, bonds and bills of the U.S.
Government and its agencies or instrumentalities; domestic issues of corporate
debt obligations having floating or fixed rates of interest; mortgage-backed and
asset-backed securities and commercial paper. The Fund may also invest in
certificates of deposit, bankers' acceptances, and commercial paper rated in one
of the two highest categories by a nationally recognized statistical rating
organization. Unrated securities deemed to be of comparable quality to rated
securities as set forth above will not exceed 10% of the value of the total
assets of the Fund.
U.S. Government agencies and instrumentalities include, but are not limited to
the Farm Credit System Financial Assistance Corporation, the Federal Home Loan
Banks System, the Student Loan Marketing Association and the Tennessee Valley
Authority. Obligations issued or guaranteed by some of these agencies or
instrumentalities are not guaranteed by the Government, but instead rely solely
on the assets and credit of the issuing agency or instrumentality. The United
States Treasury agency and instrumentality securities in which the Fund may
invest include adjustable rate securities and United States Treasury inflation
protection securities. The principal amount of such inflation protection
securities is adjusted for inflation, and periodic interest payments are an
amount equal to a fixed percentage of the inflation adjusted principal amount.
Asset-backed and mortgage-backed securities include interests in pools of debt
securities, or consumer loans or mortgages, or complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed securities. The
value of these securities may be significantly affected by changes in interest
rates, the market's perception of the issuers, and the creditworthiness of the
parties involved. Some securities may have a structure that makes their reaction
to interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.
3
<PAGE>
In addition, the Fund may (i) enter into repurchase agreements with respect to
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and (ii) attempt to purchase securities on a when-issued or
delayed-delivery basis.
The Fund may hold up to 100% of its assets in cash or short-term debt securities
for temporary defensive purposes. The Fund will adopt a temporary defensive
position when, in the opinion of the Adviser, such a position is more likely to
provide protection against adverse market conditions than adherence to the
Fund's other investment policies. The types of short-term instruments in which
the Fund may invest for such purposes include short-term money market securities
such as repurchase agreements and securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, certificates of deposit, time
deposits and bakers' acceptances of certain qualified financial institutions and
corporate commercial paper rated at the time of purchase at least within the "A"
rating category by S&P or within the "Prime" category by Moody's (or, if not
rated, issued by companies having an outstanding long-term unsecured debt issue
rated at least within the "A" rating category by S&P or within the "Prime"
category by Moody's). See the Statement of Additional Information.
For additional information concerning the investment policies, practices and
risk considerations of the Fund, see "THE INVESTMENT POLICIES AND PRACTICES OF
THE FUND" and "RISKS OF INVESTING IN THE FUND" in this Prospectus.
Investment Risks
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Additionally, there can be no assurance that the
Fund will achieve its investment objectives or be successful in preventing or
minimizing the risk of loss that is inherent in investing in particular types of
investment products. Because there are no restrictions on the maturity of any
individual assets in which the Fund will invest, an investment in the Fund
carries some risk of volatility in principal value. The value of the securities
in which the Fund may invest will fluctuate inversely with movements in interest
rates, therefore, the market values of fixed-income securities generally
increase when rates decline and generally decrease when interest rates rise.
If a percentage limitation on investments by the Fund stated herein or in the
SAI is adhered to at the time of an investment, a later increase or decrease in
percentage resulting from changes in asset values will not be deemed to violate
the limitation, except in the case of the limitation on illiquid investments.
The Fund is limited to investing in securities with specified ratings but is not
required to sell a security if its rating is reduced or discontinued after
purchase, although the Adviser may consider doing so.
The foregoing is a summary of risks; see "RISKS OF INVESTING IN THE FUNDS" in
this Prospectus for further explanation.
4
<PAGE>
FUND EXPENSES
The purpose of the following table is to assist the shareholder in understanding
the various costs and expenses that an investor in the Fund will bear, either
directly or indirectly. The Fund's costs and expenses are based upon the Fund's
expenses for the fiscal period ended April 30, 1998.
<TABLE>
<CAPTION>
Fee Table
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) None
Deferred Sales Load
(as a percentage of redemption proceeds) None
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after waivers)* 0.32%
12b-1 Fees None
Other Expenses 0.33%
----------------
Total Portfolio Operating Expenses (after waivers and
reimbursements)* 0.65%
</TABLE>
- ----------------
*Management Fees consisting of investment advisory fees (before waivers) would
be .50%. The fee waivers and reimbursements reflected in the table are voluntary
and may be modified or terminated at any time without the Fund's consent. Total
Portfolio Operating Expenses (before waivers and reimbursements) would be 0.83%.
Example:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return, (2) redemption at the end of each time period, (3) that
operating expenses are the same as described above, and (4) reinvestment of all
dividends and distributions:
<TABLE>
<S> <C> <C>
1 Year $ 7
3 Years $24
5 Years $ 47
10 Years $ 111
</TABLE>
THIS ASSUMED 5% ANNUAL RETURN AND THE EXPENSES SHOWN SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED PERFORMANCE OR OPERATING EXPENSES OF ANY FUND,
BOTH OF WHICH MAY VARY SIGNIFICANTLY.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights have been derived from the Fund's financial statements
for the period ended April 30, 1998, which have been audited by Deloitte &
Touche LLP, independent auditors. Their report on the financial statements and
the financial highlights of the Fund is included in the Annual Report. The
financial statements and financial highlights are incorporated by reference into
the Fund's Statement of Additional Information. You should read the financial
highlights with the financial statements and related notes. Further information
about the performance of the Fund is available in the Annual Report. You may
obtain both the Statement of Additional Information and the Annual Report free
of charge by calling or writing to the Trust at the telephone number or address
listed on the first page.
Aristata Quality Bond Fund
Selected data for a share of beneficial interest outstanding throughout the
period March 2, 1998 to April 30, 1998
<TABLE>
Selected Per-Share Data:
<S> <C>
Net asset value-beginning of period $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.03)
- -----------------------------------------------------------------------------------------------------------
Total income from investment operations 0.07
- -----------------------------------------------------------------------------------------------------------
Distributions from net investment income (0.10)
- -----------------------------------------------------------------------------------------------------------
Net asset value-end of period $9.97
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Total Return 0.69%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data:
Net assets, end of period (000) $57,510
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (1) 0.65%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (1) 6.00%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets without fee waivers (1) 0.83%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets without fee waivers (1) 5.82%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (1) 11.44%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
(1) Annualized
</TABLE>
6
<PAGE>
THE FUND
The Fund is a separate investment series or portfolio, commonly known as a
mutual fund. The Fund is a portfolio of a Delaware business trust organized
under the laws of the State of Delaware as an open-end management investment
company on November 30, 1993. The Trust's Board of Trustees oversees the overall
management of the Fund and elects the officers of the Trust.
The types of securities and investment practices used by the Fund are described
in greater detail in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Adviser: Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc.
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc., acts as the investment
adviser to the Fund under the supervision of the Trust's Board of Trustees. The
Adviser's address is 1380 Lawrence Street, Suite 1050, Denver, Colorado 80204.
The Adviser manages the investment and reinvestment of the assets of the Fund
and continuously reviews, supervises and administers the Fund's investments. The
Adviser is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
The Adviser utilizes a team management system for the Fund. The Adviser's
investment professional team has an average of more than 25 years of investment
research and portfolio management experience. These individuals bring a broad
base of experience, ideas, knowledge, and expertise to the Fund's management.
The team of analysts and portfolio managers provides management of the Fund. The
Adviser's investment team is led by H. David Lansdowne, CFA, President and Chief
Executive Officer of Tempest, Isenhart, and its Chief Investment Officer since
1988. The Fund's other key investment management team include: Robert J. Alder,
CFA, J. Jeffrey Dohse, Barbara Grummel and Greg H. Thompson, CFA.
Mr. Lansdowne earned both his B.S. (1969) and his M.B.A. from the University of
Denver in 1972. He was awarded the Chartered Financial Analyst (CFA) designation
in 1977. Mr. Lansdowne joined Tempest, Isenhart in 1983 as Director of Research.
He began his career as an Investment Officer with Colorado National Bank in
Denver. He joined United Capital Management, a subsidiary of United Bank of
Denver, where he was Vice President and Portfolio Manager, overseeing pension
plans of Fortune 500 Companies. Immediately prior to joining Tempest, Isenhart,
he was Senior Vice President and Director of Research for Financial Programs
Mutual Funds and for their subsidiary for privately-managed accounts, Financial
Trust Company.
Mr. Alder earned his B.S. from the University of Colorado in 1969. He was
awarded the Chartered Financial Analyst (CFA) designation in 1977. His
investment management career began in 1969 as a portfolio manager and analyst
with the Trust Investment Division of the First National Bank of Denver. In
1977, he joined the Trust Investment Division of Colorado National Bank and
became head of the department in 1982. In 1987, he was instrumental in creating
Colorado National Bank's wholly-owned registered investment advisory subsidiary,
Colorado Capital Advisors and was President of that subsidiary until 1993, when
he joined Tempest, Isenhart in his current capacity as Executive Vice President.
Mr. Dohse earned his B.S. from Culver-Stockton College in Canton, Missouri, in
1963 and his M.B.A. from Loyola University in Chicago in 1971. He worked in the
investment industry for 15 years before joining Tempest, Isenhart in 1983. He
began his career with American National Bank & Trust Company
7
<PAGE>
in Chicago as a management trainee involved in all facets of bank and trust
investments. He then joined the United Bank of Denver as Investment Officer,
managing trust portfolios. Prior to joining Tempest, Isenhart, Mr. Dohse was a
Vice President and Portfolio Manager at IntraWest Bank of Denver, with
responsibility for various investment management portfolios.
Ms. Grummel earned her B.S. from the University of Colorado in 1979. She worked
for the National Association of Securities Dealers, N. Donald and Company and
the underwriting and asset management divisions of Merrill Lynch. Prior to
joining Tempest, Isenhart she was Executive Vice President with Lord Abbett and
Company, the New York based mutual fund group, where her responsibilities
included state-specific municipal bond fund management, individual fixed income
portfolio management and new business development. Ms. Grummel is the lead
portfolio manager for the Aristata Quality Bond Fund.
Mr. Thompson earned his B.S. from the University of Wyoming in 1967 and his
M.B.A. from the University of Denver in 1972. He was awarded the Chartered
Financial Analyst designation in 1988. He joined Tempest, Isenhart in 1987. His
previous positions include three years as a Financial Analyst with Standard &
Poor's Compustat Services, Inc. in Englewood, Colorado and twelve years with
Page T. Jenkins, a Denver proprietorship. He was an Investment Manager and
Security Analyst with Jenkins, conducting research and managing securities and
mineral portfolios for the firm.
For the advisory services it provides to the Funds, Tempest, Isenhart receives
from the Fund a monthly fee, based on average daily net assets, at the annual
rate of 0.50%
Adviser's Fixed Income Performance
Although the Adviser did not manage a registered investment company prior to
March 2, 1998, it has been providing investment advisory services to clients
since 1976. Substantially all of the initial investors in the Fund were
previously participants in unregistered commingled pools created and
administered by the Colorado State Bank & Trust ("CSB&T"). Tempest Isenhart
acted as the investment adviser to those commingled pools since their
origination in late 1976. Tempest, Isenhart was unaffiliated with CSB&T at the
time it managed the commingled pools and remains unaffiliated with CSB&T.
Below are actual investment returns of the unregistered commingled taxable bond
pools managed by the Adviser, that have been converted into the Fund. The
unregistered commingled pools were managed with investment objectives, policies
and strategies substantially similar to those employed by the Adviser in
managing the Fund. The Adviser's fixed income performance is a weighted average
of the unregistered commingled fixed income pools managed by the Adviser and is
calculated in accordance with SEC guidelines net of anticipated Fund fees and
expenses.
The unregistered commingled pools were not subject to certain investment
limitations, diversification requirements, and other restrictions imposed by the
1940 Act and the Internal Revenue Code which, if applicable, may have adversely
affected performance. Portfolio management strategies used on the unregistered
commingled pools and those for the Fund may vary. This performance does not
represent historical performance of the Aristata Quality Bond Fund which is
newly organized and has no performance of its own. This performance should not
be interpreted as indicative of future performance of the Fund, which may be
higher or lower than that shown. Past performance is not a guarantee of future
results. The commingled pool performance is not necessarily representative of
the past performance of the portfolio managers acting individually or as a team.
8
<PAGE>
<TABLE>
<CAPTION>
Assets Included in Adviser's Lehman
Adviser's Fixed Income Fixed Income Gov't/Corp.
Year(1) Performance Performance(2) Index(3)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1976(4) $968,179 4.94% 4.99% 6.00%
1977 $1,445,191 2.01% 2.16% 3.00%
1978 $2,009,274 -2.80% -2.65% 1.20%
1979 $2,420,222 -6.10% -5.96% 2.30%
1980 $3,454,650 -5.39% -5.24% 3.10%
1981 $5,447,729 3.60% 3.76% 7.30%
1982 $8,763,872 34.69% 34.89% 31.10%
1983 $9,312,049 7.42% 7.58% 8.00%
1984 $12,254,388 14.77% 14.94% 15.00%
1985 $15,825,978 28.51% 28.69% 21.30%
1986 $21,717,302 20.63% 20.81% 15.60%
1987 $21,136,741 -4.17% -4.02% 2.30%
1988 $23,312,790 10.18% 10.35% 7.60%
1989 $30,805,533 21.23% 21.41% 14.00%
1990 $29,695,223 2.84% 3.00% 8.30%
1991 $32,838,982 19.30% 19.48% 16.10%
1992 $35,641,126 8.45% 8.61% 7.60%
1993 $39,889,055 13.49% 13.66% 11.20%
1994 $39,788,637 -6.26% -6.12% -3.50%
1995 $46,617,593 20.90% 21.07% 19.30%
1996 $48,554,576 2.33% 2.48% 2.90%
1997 $56,284,947 8.36% 8.52% 9.80%
For 5 Years Ended 1997 7.36% 7.52% 7.64%
For 10 Years Ended l997 9.75% 9.91% 9.14%
Since Inception (August 31, 1976) 8.75% 8.91% 9.55%
</TABLE>
(1) All periods are ended December 31.
(1) Annual total return is represented for each year and compounded annual
return is presented for each period, net of expenses, in accordance with
SEC guidelines. The performance information in the first column is a
weighted average of the unregistered commingled pools managed by the
Adviser and has been restated to reflect a total expense ratio of .83%
which is the gross expense ratio that the Fund is expected to incur during
the current fiscal year and which reflects a management fee of .50% of net
assets. Performance information in the second column has been restated to
reflect a total expense ratio of 0.65% which reflects voluntary fee waivers
and/or expense reimbursements. These waivers and/or reimbursements may be
modified or terminated at any time.
(2) Annual total return is presented for each year. The Lehman Gov't./Corp.
Index reflects the investment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
(4) Data for the period August 31, 1976 to December 31, 1976.
The Administrator and Distributor
ALPS Mutual Funds Services, Inc. is the Administrator and Distributor for the
Fund. ALPS is located at 370 17th Street, Suite 3100, Denver, Colorado 80202. As
Distributor, ALPS sells shares of the Fund on behalf of the Trust. As
Administrator, ALPS provides certain administrative services necessary for the
Fund's operations including: (i) coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, independent accountants
and legal counsel; regulatory compliance, including the compilation of
information for documents such as reports to, and filings with, the SEC and
state securities commissions; and preparation of proxy statements and
shareholder reports for the Fund; (ii)
9
<PAGE>
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's Officers and Board of
Trustees; and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. Other costs borne by the administrator
include custodian and transfer agent fees and expenses; Trustees' fees and
expenses; audit fees and expenses; and expenses of preparation and distribution
to existing shareholders of reports and prospectuses. For these services, ALPS
receives a fee from the Fund, computed daily and payable monthly, at the annual
rate of the greater of $90,000 or 0.20% of the Fund's average daily net assets.
ALPS also serves as administrator and distributor of other mutual funds.
Service Organizations
Various banks, trust companies, broker-dealers or other financial organizations
(collectively, "service organizations") also may provide administrative services
for the Funds, such as maintaining shareholder accounts and records at a fee of
up to an annual rate of 0.25% of Fund average daily net assets serviced. The
Glass-Steagall Act and other applicable laws provide that, among other things,
banks may not engage in the business of underwriting, selling or distributing
securities. There is currently no precedent prohibiting banks from performing
administrative and shareholder servicing functions as service organizations.
However, judicial or administrative decisions or interpretations of such laws,
as well as changes in either Federal or state regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, could
prevent a bank service organization from continuing to perform all or part of
its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The Adviser and the
Administrator also may pay service organizations from time to time for rendering
services to shareholders.
Other Expenses
The Fund bears all costs of its operations other than expenses specifically
assumed by ALPS or the Adviser. The costs borne by the Fund include legal and
certain accounting expenses; insurance premiums; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of maintaining the Fund's legal existence and
of shareholders' meetings; and expenses of preparation and distribution of
proxies to existing shareholders. The Fund bears its own expenses associated
with its establishment as a series of the Trust; these expenses are amortized
over a five-year period from the commencement of the Fund's operations. Expenses
of the Trust directly attributable to the Fund are charged to that Fund; other
expenses are allocated proportionately among all of the Funds in the Trust in
relation to the net assets of each Fund.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The Fund follows its own investment policies and practices, including certain
investment restrictions. The "Investment Restrictions" section of the SAI
contains specific investment restrictions (the "Investment Restrictions") which
govern the Fund's investments. Except for the Fund's investment objective, which
is a fundamental policy that may not be changed without a majority vote of
shareholders of the Fund, and those restrictions specifically identified as
fundamental, all other investment policies and practices described in this
Prospectus and in the SAI are not fundamental, and may therefore be changed by
the Board of Trustees without shareholder approval.
The Adviser selects investments and makes investment decisions based on the
investment objective and policies of the Fund.
10
<PAGE>
In selecting debt securities for the Fund, the Adviser seeks to select those
instruments that appear best calculated to achieve the Fund's investment
objective within the credit and risk tolerances established for the Fund. In
accordance with those policies, the Fund may purchase commercial paper rated in
one of the two highest rating categories by an NRSRO, corporate debt securities
rated in one of the four highest rating categories by an NRSRO, mortgage- and
asset-backed securities rated in one of the four highest rating categories by an
NRSRO, and other debt instruments which are of comparable quality in the
Adviser's opinion. It is the intention of the Funds, unless otherwise indicated,
that with respect to the Fund's policies that are the result of the application
of law, the Fund will take advantage of the flexibility provided by rules or
interpretations of the SEC currently in existence or promulgated in the future
or changes to such laws.
For temporary defensive purposes, during times of unusual market conditions, the
Fund may without limitation hold cash or cash equivalents. Cash items may
include short-term items such as rated commercial paper, certificates of
deposit, bankers acceptances, obligations of the United States Government or its
agencies or instrumentalities or repurchase agreements collateralized by
eligible investments.
The types of securities and investment practices used by the Fund are described
in greater detail in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Adviser places orders for the
purchase and sale of portfolio investments for the Fund's accounts with dealers
selected by it in its discretion. In effecting purchases and sales of debt
securities for the account of the Fund, the Adviser will seek the best execution
of the Fund's orders. Purchases and sales of portfolio debt securities for the
Fund are generally placed by the Adviser with primary market makers for these
securities on a net basis, without any brokerage commission being paid by the
Fund. Trading of portfolio debt securities does, however, involve transaction
costs. Transactions with dealers serving as primary market makers reflect the
spread between the bid and asked prices. The Adviser may allocate purchase and
sales orders for portfolio securities to dealers that are affiliated with the
Adviser or Distributor, if the Adviser believes the quality of the transaction
and spreads are comparable to what they would be with other qualified firms.
Subject to the policy of seeking best overall price and execution, sales of
shares of the Fund may be considered by the Adviser in the selection of broker
or dealer firms for the Fund's portfolio transactions.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 4:00 p.m. (Eastern
time), Monday through Friday, on each day the New York Stock Exchange is open
for trading, which excludes the following business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of the Fund is computed by dividing the value of the Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of the Fund's outstanding shares. All expenses, including fees paid to the
Adviser and ALPS, are accrued daily and taken into account for the purpose of
determining the net asset value.
Securities listed on an exchange or over-the-counter are valued on the basis of
the last sale prior to the time the valuation is made. If there has been no sale
since the immediately previous valuation, then the average of the last bid and
asked prices is used. Quotations are taken from the exchange where the security
is primarily traded. Portfolio securities which are primarily traded on foreign
exchanges may be valued with the assistance of pricing services and are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
11
<PAGE>
foreign security is valued is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees. Notwithstanding the
above, bonds and other fixed-income securities are valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. All assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and asked prices of such currencies against U.S. dollars as last
quoted by any major bank. Further information with respect to the valuation of
the Fund's assets is included in the Statement of Additional Information.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $2,000; including an IRA
investment. Any subsequent investments must be at least $50, including an IRA
investment. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus. A
separate application is required for an IRA. The Fund reserves the right to
reject any purchase order.
PURCHASE OF FUND SHARES
Shares of the Fund may be purchased through an authorized broker, service
organization or investment adviser, or directly from the Fund, using any of the
methods described below. Orders for the purchase of shares will be executed at
the net asset value per share next determined after an order has been received
in good form. All funds received are invested in full and fractional shares of
the Fund. Certificates for shares are not issued. ALPS serves as Transfer Agent
pursuant to a Transfer Agent Agreement dated March 15, 1994. ALPS maintains
records of each shareholder's holdings of Fund shares, and each shareholder
receives a statement of transactions, holdings and dividends. The Trust reserves
the right to reject any purchase.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. Orders for the purchase of shares will be
executed at the net asset value per share (the "public offering price") next
determined after an order has been received. Orders transmitted to the Fund in
proper form prior to 4:00 p.m., Eastern Time will become effective that day.
Investments may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser, or Service Organization
Shares are available to new and existing shareholders through authorized
brokers, investment advisers and service organizations. To make an investment
using this method, simply complete a Purchase Application and contact your
broker, investment adviser or service organization with instructions as to the
amount you wish to invest. Your broker will then contact the Fund to place the
order on your behalf on that day. In addition, shares in the Fund may be
purchased by forwarding an application directly to the Distributor. Authorized
brokers, investment advisers and service organizations may impose additional
requirements and charges for the services rendered.
Orders received by your broker or service organization for the Funds in proper
order prior to the determination of net asset value and transmitted to the Fund
prior to the close of its trading (which is currently 4:00 p.m., Eastern time),
will become effective that day. Brokers who receive orders are obligated to
transmit them promptly. You should receive written confirmation of your order
within a few days of receipt of instructions from your broker.
12
<PAGE>
Directly with the Fund
By Mail. Make your check payable to the Aristata Quality Bond Fund and mail it,
along with the Purchase Application (if your purchase is an initial investment),
to the address indicated on the Purchase Application. Purchases made by check
are not permitted to be redeemed until payment of the purchase has been
collected, which may take up to fifteen calendar days. Third party and foreign
checks will not be accepted. Please include the Fund name and your account
number on all checks.
By Bank Transfer. Bank transfer allows you to transfer money from your bank
account via the Automated Clearing House (ACH) network to your Fund account.
First, an account must be established with the Fund. Your Purchase Application
must indicate your desire to have this option. Next, a deposit account must be
opened, or already be open, at a bank providing bank transfer services and you
must arrange for this service to be provided. Once you have completed this
process, you can initiate a bank transfer by contacting a representative from
your bank, providing the required information for the bank, and authorizing the
transfer to take place. Please allow two or three days after the authorization
for the transfer to occur.
By Wire. Investments may be made directly through the use of wire transfers of
Federal funds. In most cases, your bank will either be a member of the Federal
Reserve Banking System or have a relationship with a bank that is. Your bank
will normally charge you a fee for handling the transaction. To purchase shares
by a Federal funds wire, please first contact ALPS at 1-800 644-8595. An account
must be established with the Fund prior to any wire transfer. You can initiate a
wire transfer by contacting a representative from your bank, providing the
required information for the bank, and authorizing the transfer to take place.
Federal Funds should be wired to:
State Street Bank & Trust Co.
ABA# 011000028
Aristata Bond Fund
Credit DDA# 22404081
(Account Registration)
(Account Number)
Automatic Investment Program. The Automatic Investment Program offers a simple
way to maintain a regular investment program. You may arrange automatic
transfers (minimum $50 per transaction) from your bank account to your Fund
account on a periodic basis by simply completing the Automatic Investment Plan
section of your Purchase Application. When you participate in this program, the
minimum initial investment in each Portfolio is $250. You may change the amount
of your automatic investment, skip an investment, or stop the Automatic
Investment Program by calling the Fund at (800) 644-8595 at least three Business
Days prior to your next scheduled investment date.
The Fund may in its discretion discontinue, suspend or change the practice of
accepting orders by any of the methods described above. Orders for the purchase
of shares are subject to acceptance by the Fund. The Fund reserves the right to
suspend the sale of shares, or to reject any purchase order, including orders in
connection with exchanges, for any reason.
13
<PAGE>
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on each day the Fund
is valued (see "FUND SHARE VALUATION"). Shares will be redeemed at the net asset
value next determined after a redemption request in good form has been received
by the Fund.
A redemption may be a taxable transaction on which gain or loss may be
recognized. See "DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX" for more
information.
Where the shares to be redeemed have been purchased by check, the payment of
redemption proceeds may be delayed until the purchasing check has cleared, which
may take up to 15 calendar days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Fund may, however, take up to seven days to make payment. This will not be the
customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Fund may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow the
procedures described below. Although the Fund has no present intention to do so,
the Fund reserves the right to refuse or to limit the frequency of any
telephone, wire or bank transfer redemptions. Of course, it may be difficult to
place orders by telephone during periods of severe market or economic change,
and a shareholder should consider alternative methods of communications. The
Fund may modify or terminate its services and provisions at any time. If the
Fund terminates any particular service, it will do so only after giving written
notice to shareholders.
Redemption by mail will always be available to shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Service Organization or Investment Adviser
You may redeem your shares by contacting your authorized broker, service
organization or investment adviser and instructing him or her to redeem your
shares. He or she will then contact ALPS and place a redemption trade on your
behalf.
Directly with the Fund
By Mail. You may redeem your shares by sending a letter directly to ALPS. To be
accepted, a letter requesting redemption must include: (i) the Fund name and
account registration from which you are redeeming shares; (ii) your account
number; (iii) the amount to be redeemed; (iv) the signatures of all registered
owners; and (v) for redemptions exceeding $1,000, a signature guarantee by any
eligible guarantor institution, including a member of a national securities
exchange, or a commercial bank or trust company, broker-dealer, credit union or
savings association. Corporations, partnerships, trusts or other legal entities
will be required to submit additional documentation.
By Telephone. If you have established the telephone redemption privilege on your
Purchase Application, you may redeem your shares by calling the Fund at (800)
644-8595. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Fund. The
14
<PAGE>
Fund employs reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to employ such reasonable procedures,
it may be liable for any loss, damage or expense arising out of any telephone
transactions purporting to be on a shareholder's behalf. In order to assure the
accuracy of instructions received by telephone, the Fund requires some form of
personal identification prior to acting upon instructions received by telephone,
records telephone instructions and provides written confirmation to investors of
such transactions. Telephone redemptions will be suspended for a period of 10
days following a telephone address change.
You may instruct the Fund to send your redemption proceeds via federal wire
($1,000 minimum per transaction) or bank transfer to your personal bank. Your
instructions should include: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. Wire and bank transfer redemptions can be
made only if the privilege has been established on your Purchase Application and
you have attached a copy of a voided check or a letter summarizing the wiring
instructions of the account where proceeds are to be wired. Your bank may charge
you a fee for receiving a wire payment on your behalf.
The above-mentioned service "By Telephone" is not available for IRAs.
Systematic Withdrawal Plan. An owner of $10,000 or more of the Fund may elect to
have periodic redemptions from his or her account to be paid on a monthly,
quarterly, semi-annual or annual basis by simply completing the Systematic
Withdrawal Plan section of the Purchase Application. The minimum periodic
withdrawal is $100. A sufficient number of shares to make the scheduled
redemption will normally be redeemed on the fifth or twentieth day of the
selected month(s). Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. If a shareholder participates in the Systematic
Withdrawal Plan, all dividends will automatically be reinvested.
EXCHANGE OF FUND SHARES
The Fund offers two convenient ways to exchange shares in one Fund for shares in
another Fund in the Trust. Before engaging in an exchange transaction, a
shareholder should read carefully the Prospectus describing the Fund into which
the exchange will occur, which is available without charge and can be obtained
by writing to ALPS at the address listed on the cover of this Prospectus. A
shareholder may not exchange shares of one Fund for shares of another Fund if
the new Fund is not qualified for sale in the state of the shareholder's
residence. Please call the Fund at (800) 644-8595 for questions regarding state
registration. The minimum amount for an initial and subsequent exchange is $50.
The Trust may terminate or amend the terms of the exchange privilege at any time
upon at least 60 days' prior written notice to shareholders of any modification
or termination of the exchange privilege.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. See "DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX" for more
information. Shareholders will receive written confirmation of the exchange
following completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to the Fund. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties; (v) for exchanges
exceeding $1,000, a signature guarantee by an eligible guarantor institution,
including a member of a national securities exchange, or by a commercial bank or
trust company, broker/dealer, credit union or savings association.
15
<PAGE>
Exchange by Telephone. If you have established the telephone exchange privilege
on your Purchase Application, you may exchange Fund shares by telephone by
simply calling the Fund at (800) 644-8595. You should be prepared to give the
telephone representative the following information: (i) your account number,
social security or tax identification number and account registration; (ii) the
name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
will be suspended for a period of ten days following a telephone address change.
See "REDEMPTION OF FUND SHARES - By Telephone" for a discussion of telephone
transactions generally.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as a funding medium for traditional and Roth IRAs. In
addition, a traditional or Roth IRA may be established through a custodial
account with the Fund. Completion of a special application is required in order
to create such an account, and the minimum initial investment for an IRA is
$2000. Contributions to IRAs are subject to prevailing amount limits set by the
Internal Revenue Service. For more information call the Funds at 1-800 644-8595.
Additional account level fees may be imposed for IRA accounts.
DIVIDEND AND TAX INFORMATION
The Fund intends to continue to qualify as a regulated investment company for
each taxable year pursuant to the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By so qualifying and electing,
the Fund generally will not be subject to Federal income tax to the extent that
it distributes investment company taxable income and net realized capital gains
in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses). The
Fund will declare distributions of net investment income daily and pay those
dividends monthly. The Fund intends to distribute, at least annually,
substantially all net capital gains (the excess of net long-term capital gains
over net short-term capital losses). In determining amounts of capital gains to
be distributed, any capital loss carryovers from prior years will be applied
against capital gains.
The amount declared each day as a dividend may be based on projections of
estimated monthly net investment income and may differ from the actual
investment income determined in accordance with generally accepted accounting
principles. An adjustment will be made to the dividend each month to account for
any difference between the projected and actual monthly investment income.
On or before March 2, 1998, common trust and collective investment fund assets
managed by the Adviser contributed assets to the Fund in exchange for shares of
the Fund. This transfer may result in adverse tax consequences under certain
circumstances to either the investors transferring shares from a common trust or
collective investment fund for shares of the Fund ("reorganizing shareholders")
or to investors who acquire shares of the Fund after a transfer ("new
shareholders"). As a result the Fund may have acquired some securities that have
appreciated in value or depreciated in value from the date they were acquired.
If appreciated securities are sold after the transfer, the amount of the gain
would be taxable to new shareholders as well as to reorganizing shareholders.
New shareholders would therefore incur a tax liability on distributions of
capital gains realized by the Fund even though the value of their investment in
the Fund may not have increased. The effect on shareholders who transferred into
the Fund would be to reduce their potential liability for tax on capital gains
by spreading it over a larger
16
<PAGE>
asset base. The opposite may occur if the Fund acquires securities having an
unrealized capital loss. In that case, shareholders who transferred into the
Fund will be unable to utilize the loss to offset gains, but, because the
transfer will not result in any gains, the inability of shareholders who
transferred into the Fund to utilize unrealized losses will have no immediate
tax effect. For new shareholders, to the extent that unrealized losses are
realized by the Fund, new shareholders may benefit by any reduction in net tax
liability attributable to the losses.
For all distributions, the shareholder may elect in writing, not less than five
full business days prior to the record date, to receive such distributions in
cash. Dividends declared in, and attributable to, the preceding period will be
paid within five business days after the end of the period. Unless the
shareholder chooses to receive dividend and/or capital gain distributions in
cash, distributions will be automatically reinvested in additional shares of the
Fund at net asset value. If you elect to receive distributions in cash and
checks (1) are returned and marked as "undeliverable" or (2) remain uncashed for
six months, your cash election will be changed automatically and your future
dividend and capital gains distributions will be reinvested in the Fund at the
per share net asset value determined as of the date of payment of the
distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in the Fund at
the per share net asset value determined as of the date of cancellation.
Investors who redeem all or a portion of Fund shares prior to a dividend payment
date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
Distributions of net investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) generally will be
taxable to shareholders as ordinary income. Distributions of net long-term or
mid-term capital gains designated by the Fund as capital gain distributions will
be taxable as long-term or mid-term capital gains, regardless of how long a
shareholder has held his Fund shares. Distributions are taxable in the same
manner whether received in additional shares or in cash.
Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as paid
on December 31 of the calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders (and therefore
taxable) in the calendar year in which the distributions are declared, rather
than the calendar year in which the distributions are received.
Special tax rules may apply to the Fund's acquisition of financial futures
contracts, forward contracts, and options on futures contracts. Such rules may,
among other things, affect whether gains and losses from such transactions are
considered to be short-term or long-term, may have the effect of deferring
losses and/or accelerating the recognition of gains or losses, and, for purposes
of qualifying as a regulated investment company, may limit the extent to which
the Fund may be able to engage in such transactions.
The Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
or her Fund shares. Distributions in excess of a shareholder's cost basis in his
or her shares would be treated as a gain realized from a sale of such shares.
17
<PAGE>
Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in complete liquidation of
the Fund, generally will be a capital gain or loss which will be long-term,
mid-term or short-term generally depending upon the shareholder's holding period
of the shares. A loss realized by a shareholder on a redemption, sale, or
exchange of shares of the Fund with respect to which capital gain dividends have
been paid will be characterized as a long-term or mid-term capital loss to the
extent of such capital gain dividends.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Fund as to the Federal tax status
of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisers as to the Federal, state and local tax consequences of ownership of
shares of the Fund in their particular circumstances.
RISKS OF INVESTING IN THE FUND
Certain Risk Considerations
The price per share of each of the Fund will fluctuate with changes in value of
the investments held by the Fund. For example, the value of the Fund's shares
will generally fluctuate inversely with the movements in interest rates.
Shareholders of the Fund should expect the value of their shares to fluctuate
with changes in the value of the securities owned by the Fund. There is, of
course, no assurance that the Fund will achieve its investment objectives or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of investment products. In order to attempt to
minimize that risk, the Adviser monitors developments in the economy, the
securities markets, and with each particular issuer. Also, as noted earlier, the
Fund is managed within certain limitations that restrict the amount of the
Fund's investment in any single issuer. The Adviser and the Trust's service
providers rely upon their existing information systems to provide investment
management and administrative services, respectively, to the Trust. The costs of
maintaining and upgrading such information systems to comply with the impact of
the Year 2000 is an operational and financial responsibility of the Adviser and
the other service providers, respectively. The Trust is in the process of
assessing and formulating any responses to any material issues, if any, relating
to Year 2000 with the Adviser and all other major service providers. However, no
assurance can be given that these steps will be sufficient to avoid any material
adverse impact to the Trust.
OTHER INFORMATION
Capitalization
Financial Investors Trust was organized as a Delaware business trust on November
30, 1993 and currently consists of six separately managed portfolios. The Board
of Trustees may establish additional portfolios in the future. The
capitalization of the Funds consists solely of an unlimited number of shares
18
<PAGE>
of beneficial interest with no par value. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
Voting
Shareholders have the right to vote in the election of Trustees and on any and
all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Fund is not required to hold regular
annual meetings of shareholders and does not intend to do so.
The Declaration of Trust provides that the holders of not less than two-thirds
of the outstanding shares of the Fund may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of considering the
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Fund and in
connection with such meeting to comply with the shareholders' communications
provisions of Section 16(c) of the Act. See "OTHER INFORMATION - Voting Rights"
in the SAI.
Shares entitle their holders to one vote per share (with proportionate voting
for fractional shares). As used in the Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means the vote of the lesser of:
(1) 67% of the shares of a Fund present at a meeting if the holders of more than
50% of the outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of a Fund.
Performance Information
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Fund are mandated by the
SEC.
Quotations of "yield" for the Fund will be based on the investment income per
share during a particular 30-day (or one month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
Quotations of yield and effective yield reflect only the Fund's performance
during the particular period on which the calculations are based. Yield and
effective yield for the Fund will vary based on changes in market conditions,
the level of interest rates and the level of the Fund's expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar, and other entities or organizations which track the performance of
investment companies. Any performance information should be considered in light
of the Fund's investment objectives and policies, characteristics and quality of
the Fund and the market conditions during the time period indicated, and should
not be considered to be representative of what may be achieved in the future.
For a description of the methods used to determine yield and total return for
Fund, see the SAI.
19
<PAGE>
Account Services
All transactions in shares of the Fund will be reflected in a monthly statement
for each shareholder. In those cases where another organization or its nominee
is the shareholder of record of shares purchased for its customer, the Fund has
been advised that the statement may be transmitted to the customer at the
discretion of such organization.
ALPS acts as the Fund's transfer agent. The Fund compensates ALPS, pursuant to a
Services Agreement, for providing personnel and facilities to perform dividend
disbursing and transfer agency-related services for the Fund.
Shareholder Inquiries
All shareholder inquiries should be directed to the Fund at 370 17th Street,
Suite 3100, Denver, CO 80202.
General and Account Information: (800) 644-8595.
20
<PAGE>
<TABLE>
<CAPTION>
APPENDIX
Key to Moody's Bond Ratings
<S> <C>
Aaa Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most likely to impair the fundamentally strong position
of such issues.
Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
some time in the future.
Baa Bonds that are rated Baa are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Ba Bonds that are rated Ba are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
B Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance
of other terms of the contract over any long period of time may be
small.
Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds that are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
</TABLE>
<TABLE>
<CAPTION>
Key to S & P's Bond Ratings
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits 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 Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "BBB" rating.
B Debt rated "B" has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BB-" rating.
CCC Debt rated "CCC" 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 The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is 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 The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category 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 that such payments will be made during such grace period. The
"D" rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
</TABLE>
22
<PAGE>
INVESTMENT ADVISER
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc.
1380 Lawrence Street, Suite 1050
Denver, Colorado 80204
ADMINISTRATOR, DISTRIBUTOR AND TRANSFER AGENT
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202
CUSTODIAN
Fifth Third Bank, N.A.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
FOR MORE INFORMATION CALL
1-800-644-8595
THESE FUNDS ARE NOT INSURED BY TEMPEST, ISENHART, COLORADO STATE BANK
AND TRUST, THE FDIC OR ANY OTHER INSURER.
23
<PAGE>
ARISTATA EQUITY FUND
370 17th Street
Suite 3100
Denver, CO 80202
General & Account Information: (800) 644-8595
TEMPEST, ISENHART, CHAFEE, LANSDOWNE & ASSOC., INC.
Investment Adviser ("Tempest, Isenhart" or the "Adviser")
ALPS MUTUAL FUNDS SERVICES, INC.
Administrator, Distributor and Sponsor ("ALPS" or the "Distributor")
This prospectus describes the Aristata Equity Fund (the "Fund"), managed by
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc., a Colorado corporation. The
Fund is a diversified series of Financial Investors Trust (the "Trust"), a
Delaware business trust and registered open-end management investment company.
The Fund's investment objective is to seek to provide investors with long-term
growth of capital and dividend income by investing primarily in common stocks
and securities convertible into or with rights to purchase common stocks
("equity securities"). Shares of the Fund are sold to the public by the
Distributor as an investment vehicle for individuals, institutions, corporations
and fiduciaries. Investments in shares of the Fund involve risk, including
possible loss of principal. There are risks in any investment program, including
the risk of changing economic and market conditions, and there is no assurance
that the Fund will achieve its investment objective. The net asset value of a
share of the Fund will fluctuate as market conditions change.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated August 27, 1998,
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission (the "SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or calling the Fund at the address and
information number printed above.
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.
August 28, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
HIGHLIGHTS 3
FUND EXPENSES 4
FINANCIAL HIGHLIGHTS 6
THE FUND 7
MANAGEMENT OF THE FUND 7
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND 10
PORTFOLIO TRANSACTIONS 11
FUND SHARE VALUATION 12
MINIMUM PURCHASE REQUIREMENTS 12
PURCHASE OF FUND SHARES 13
REDEMPTION OF FUND SHARES 14
EXCHANGE OF FUND SHARES 16
INDIVIDUAL RETIREMENT ACCOUNTS 16
DIVIDEND AND TAX INFORMATION 17
RISKS OF INVESTING IN THE FUND 19
OTHER INFORMATION 19
</TABLE>
2
<PAGE>
HIGHLIGHTS
Investment Objective and Policies of the Fund
The investment objective of the Aristata Equity Fund is to seek to provide
investors with long-term growth of capital and dividend income by investing
primarily in common stocks and securities convertible into or with rights to
purchase common stocks ("equity securities"). There is no assurance the Fund
will achieve its investment objective.
The Fund seeks to achieve its objective by investing, under normal conditions,
at least 80% of the value of its net assets in equity securities consisting of
common stocks, and preferred stocks or other securities which are convertible
into common stocks. The balance of the Fund's assets may be held in fixed-income
securities, cash and cash equivalents rated at the time of purchase at least
within the "A" rating category by Standard & Poor's Corporation ("S&P") or
within the "Prime" category by Moody's Investor's Service, Inc. ("Moody's") (or,
if not rated, issued by companies having an outstanding long-term unsecured debt
issue rated at least within the "A" rating category by S&P or within the "Prime"
category by Moody's) or, if unrated, determined by the Adviser to be of
comparable quality.
The Fund will seek to achieve long-term growth of capital and income by
investing in a diversified portfolio of equity securities considered by the
Adviser to be undervalued. In general the Adviser favors securities that, due to
industry, economic, or market conditions, are out of favor and, as a result, are
unduly depressed. The Adviser believes that the cyclical nature of investor
attitudes, the normal business cycle and changing industry conditions can create
undervalued securities. This approach results in the selection of equity
securities with average portfolio characteristics that generally include lower
price/earnings and price/book ratios than the overall market, and a dividend
yield as high or higher than market averages.
The Fund may also invest up to 10% of its total assets in securities of foreign
issuers, including sponsored and unsponsored American Depository Receipts
("ADRs").
The Fund may invest up to 10% of its total assets in securities issued by other
investment companies. Such securities will be acquired by the Fund within the
limits prescribed by the Investment Company Act of 1940, as amended (the "Act"),
which include a prohibition against a Fund investing more than 10% of the value
of its total assets in such securities. Investors should recognize that the
purchase of securities of other investment companies results in duplication of
expenses such that investors indirectly bear a proportionate share of the
expenses of such companies, including operating costs, and investment advisory
and administrative fees.
The Fund may hold up to 100% of its assets in cash or short-term fixed-income
securities for temporary defensive purposes. The Fund will adopt a temporary
defensive position when, in the opinion of the Investment Manager, such a
position is more likely to provide protection against adverse market conditions
than adherence to the Fund's other investment policies. The types of short-term
instruments in which the Fund may invest for such purposes include short-term
money market securities such as repurchase agreements and securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
certificates of deposit, time deposits and bankers' acceptances of certain
qualified financial institutions and corporate commercial paper rated at the
time of purchase at least within the "A" rating category by S&P or within the
"Prime" category by Moody's (or, if not rated, issued by companies having an
outstanding long-term unsecured debt issue rated at least within the "A" rating
category by S&P or within the "Prime" category by Moody's). See the Statement of
Additional Information.
For additional information concerning the investment policies, practices and
risk considerations of the Fund, see "THE INVESTMENT POLICIES AND PRACTICES OF
THE FUND" and "RISKS OF INVESTING IN THE FUND" in this Prospectus.
3
<PAGE>
In addition to the equity securities described above, the Fund may invest in
U.S. Treasury obligations, certificates of deposit, time deposits, U.S.
government agency securities, repurchase agreements, reverse repurchase
agreements, when-issued securities and forward commitments. The Fund may also
invest in variable and floating rate notes, bankers' acceptances and commercial
paper rated in one of the two highest categories by a nationally recognized
statistical rating organization ("NRSRO") or, if unrated, determined by the
Adviser to be of comparable quality.
Investment Risks
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. Additionally, there can be no assurance that the
Fund will achieve its investment objectives or be successful in preventing or
minimizing the risk of loss that is inherent in investing in particular types of
investment products. An investment in the Fund may involve greater risk than is
inherent in other types of investments since it seeks capital appreciation, and
the value of its investments will generally fluctuate in response to stock
market conditions. Further, investment in the securities of issuers in any
foreign country involves special risks and considerations not typically
associated with investing in U.S. issuers.
The foregoing is a summary of risks; see "RISKS OF INVESTING IN THE FUND" in
this Prospectus.
FUND EXPENSES
The purpose of the following table is to assist the shareholder in understanding
the various costs and expenses that an investor in the Fund will bear, either
directly or indirectly. The Fund's costs and expenses are based upon the Fund's
expenses for the fiscal period ended April 30, 1998.
Fee Table
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of offering price)
Deferred Sales Load None
(as a percentage of redemption proceeds)
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after waivers)* 0.63%
12b-1 Fees None
Other Expenses 0.32%
------------
Total Portfolio Operating Expenses (after waivers and
reimbursements)* 0.95%
</TABLE>
4
<PAGE>
- ----------
* Management Fees consisting of investment advisory fees (before waivers and
reimbursements) would be 0.85%. The fee waivers and reimbursements reflected in
the table are voluntary and may be modified or terminated at any time without
the Fund's consent. Total Portfolio Operating Expenses (before waivers and
reimbursements) would have been 1.17%.
Example:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
gross annual return, (2) redemption at the end of each time period, (3) that
operating expenses are the same as described above, and (4) reinvestment of all
dividends and distributions:
<TABLE>
<S> <C>
1 Year $ 10
3 Years $ 30
5 Years $ 53
10 Years $117
</TABLE>
THIS ASSUMED 5% ANNUAL RETURN AND THE EXPENSES SHOWN SHOULD NOT BE CONSIDERED
INDICATIONS OF ACTUAL OR EXPECTED PERFORMANCE OR OPERATING EXPENSES OF ANY FUND,
BOTH OF WHICH MAY VARY SIGNIFICANTLY.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights have been derived from the Fund's financial statements
for the period ended April 30, 1998, which have been audited by Deloitte &
Touche LLP, independent auditors. Their report on the financial statements and
the financial highlights of the Fund is included in the Annual Report. The
financial statements and financial highlights are incorporated by reference into
the Fund's Statement of Additional Information. You should read the financial
highlights with the financial statements and related notes. Further information
about the performance of the Fund is available in the Annual Report. You may
obtain both the Statement of Additional Information and the Annual Report free
of charge by calling or writing to the Trust at the telephone number or address
listed on the first page.
Aristata Equity Fund
Selected data for a share of beneficial interest outstanding throughout the
period March 2, 1998 to April 30, 1998
<TABLE>
<S> <C>
Selected Per-Share Data:
Net asset value-beginning of period $10.00
- --------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.01
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.44
- --------------------------------------------------------------------------------------
Total income from investment operations 0.45
- --------------------------------------------------------------------------------------
Distributions from net investment income (0.01)
- --------------------------------------------------------------------------------------
Net asset value-end of period $10.44
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Return 4.54%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratios and Supplemental Data:
Net assets, end of period (000) $101,614
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratio of expenses to average net assets (1) 0.95%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (1) 0.84%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratio of expenses to average net assets without fee waivers (1) 1.17%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratio of net investment income to average net assets without fee waivers (1) 0.62%
- --------------------------------------------------------------------------------------
Portfolio turnover rate (1) 14.20%
- --------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
6
<PAGE>
THE FUND
The Fund is a separate investment series or portfolio, commonly known as a
mutual fund. The Fund is a portfolio of a Delaware business trust organized
under the laws of the State of Delaware as an open-end management investment
company on November 30, 1993. The Trust's Board of Trustees oversees the overall
management of the Fund and elects the officers of the Trust.
The types of securities and investment practices used by the Fund are described
in greater detail in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Adviser: Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc.
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc., acts as the investment
adviser to the Fund under the supervision of the Trust's Board of Trustees. The
Adviser's address is 1380 Lawrence Street, Suite 1050, Denver, Colorado 80204.
The Adviser manages the investment and reinvestment of the assets of the Fund
and continuously reviews, supervises and administers the Fund's investments. The
Adviser is responsible for placing orders for the purchase and sale of the
Fund's investments directly with brokers and dealers selected by it in its
discretion.
The Adviser utilizes a team management system for the Fund. The Adviser's
investment professional team has an average of more than 25 years of investment
research and portfolio management experience. These individuals bring a broad
base of experience, ideas, knowledge, and expertise to the Fund's management.
The team of analysts and portfolio managers provides management of the Fund. The
Adviser's investment team is led by H. David Lansdowne, CFA, President and Chief
Executive Officer of Tempest, Isenhart, and its Chief Investment Officer since
1988. The Fund's other key investment management team include: Robert J. Alder,
CFA, J. Jeffrey Dohse, Barbara Grummel and Greg H. Thompson, CFA.
Mr. Lansdowne earned both his B.S. (1969) and his M.B.A. from the University of
Denver in 1972. He was awarded the Chartered Financial Analyst (CFA) designation
in 1977. Mr. Lansdowne joined Tempest, Isenhart in 1983 as Director of Research.
He began his career as an Investment Officer with Colorado National Bank in
Denver. He joined United Capital Management, a subsidiary of United Bank of
Denver, where he was Vice President and Portfolio Manager, overseeing pension
plans of Fortune 500 Companies. Immediately prior to joining the Adviser, he was
Senior Vice President and Director of Research for Financial Programs Mutual
Funds and for their subsidiary for privately-managed accounts, Financial Trust
Company.
Mr. Alder earned his B.S. from the University of Colorado in 1969. He was
awarded the Chartered Financial Analyst (CFA) designation in 1977. His
investment management career began in 1969 as a portfolio manager and analyst
with the Trust Investment Division of the First National Bank of Denver. In
1977, he joined the Trust Investment Division of Colorado National Bank and
became head of the department in 1982. In 1987, he was instrumental in creating
Colorado National Bank's wholly-owned registered investment advisory subsidiary,
Colorado Capital Advisors and was President of that subsidiary until 1993, when
he joined the Adviser in his current capacity as Executive Vice President.
Mr. Dohse earned his B.S. from Culver-Stockton College in Canton, Missouri, in
1963 and his M.B.A. from Loyola University in Chicago in 1971. He worked in the
investment industry for 15 years before joining Tempest Isenhart in 1983. He
began his career with American National Bank & Trust Company in Chicago as a
management trainee involved in all facets of bank and trust investments. He then
joined
7
<PAGE>
the United Bank of Denver as Investment Officer, managing trust portfolios.
Prior to joining the Adviser, Mr. Dohse was a Vice President and Portfolio
Manager at IntraWest Bank of Denver, with responsibility for various investment
management portfolios. Mr. Dohse is the lead portfolio manager for the Aristata
Equity Fund.
Ms. Grummel earned her B.S. from the University of Colorado in 1979. She worked
for the National Association of Securities Dealers, N. Donald and Company and
the underwriting and asset management divisions of Merrill Lynch. Prior to
joining the Adviser she was Executive Vice President with Lord Abbett and
Company, the New York based mutual fund group, where her responsibilities
included state-specific municipal bond fund management, individual fixed income
portfolio management and new business development.
Mr. Thompson earned his B.S. from the University of Wyoming in 1967 and his
M.B.A. from the University of Denver in 1972. He was awarded the Chartered
Financial Analyst designation in 1988. He joined the Adviser in 1987. His
previous positions include three years as a Financial Analyst with Standard &
Poor's Compustat Services, Inc. in Englewood, Colorado and twelve years with
Page T. Jenkins, a Denver proprietorship. He was an Investment Manager and
Security Analyst with Jenkins, conducting research and managing securities and
mineral portfolios for the firm.
For the advisory services it provides to the Funds, Tempest, Isenhart receives
from the Fund a monthly fee, based on average daily net assets, at the annual
rate of 0.85%.
Adviser's Equity Performance
Although the Adviser did not manage a registered investment company prior to
March 2, 1998, it has been providing investment advisory services to clients
since 1976. Substantially all of the initial investors in the Fund were
previously participants in unregistered commingled pools created and
administered by the Colorado State Bank & Trust ("CSB&T"). Tempest Isenhart
acted as the investment adviser to those commingled pools since their
origination in late 1976. The Adviser was unaffiliated with CSB&T at the time it
managed the commingled pools and remains unaffiliated with CSB&T.
Below are actual investment returns of the unregistered commingled equity pools
managed by the Adviser that have been converted into the Fund. The unregistered
commingled pools were managed with investment objectives, policies and
strategies substantially similar to those employed by the Adviser in managing
the Fund. The Adviser's equity performance is a weighted average of the
unregistered commingled pools managed by the Adviser and is calculated in
accordance with SEC guidelines net of anticipated Fund fees and expenses.
The unregistered commingled equity pools were not subject to certain investment
limitations, diversification requirements, and other restrictions imposed by the
1940 Act and the Internal Revenue Code which, if applicable, may have adversely
affected performance. Portfolio management strategies used on the unregistered
commingled pools and those for the Fund may vary. This performance does not
represent historical performance of the Fund which is newly organized and has no
performance of its own. This performance should not be interpreted as indicative
of future performance of the Fund which may be higher or lower than that shown.
Past performance is not a guarantee of future results. The commingled pool
performance is not necessarily representative of the past performance of the
portfolio managers acting individually or as a team.
8
<PAGE>
<TABLE>
<CAPTION>
Assets Included in S&P
Adviser's Equity Adviser's Equity 500 Index
Year(1) Performance Performance(2) Return(3)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1976(4) $ 1,518,789 8.65% 8.71% 5.90%
1977 $ 2,065,101 -1.06% -0.89% -7.40%
1978 $ 2,761,815 8.03% 8.21% 6.50%
1979 $ 4,296,091 32.09% 32.31% 18.50%
1980 $ 8,555,330 53.71% 53.96% 32.40%
1981 $ 8,576,467 -3.95% -3.78% -5.00%
1982 $ 9,303,758 22.75% 22.96% 21.60%
1983 $11,429,058 16.88% 17.08% 22.60%
1984 $12,488,443 4.00% 4.18% 6.40%
1985 $17,084,735 36.62% 36.85% 31.90%
1986 $21,918,621 16.25% 16.45% 18.80%
1987 $21,331,298 -0.02% 0.15% 5.20%
1988 $23,289,415 20.05% 20.25% 16.50%
1989 $29,968,045 23.06% 23.26% 31.70%
1990 $29,015,064 -9.19% -9.04% -3.20%
1991 $42,041,677 18.94% 19.14% 30.50%
1992 $49,730,021 10.90% 11.09% 7.60%
1993 $60,287,572 15.64% 15.84% 10.10%
1994 $62,698,066 -4.58% -4.42% 1.20%
1995 $77,240,261 26.67% 26.89% 37.40%
1996 $89,294,058 15.95% 16.14% 22.94%
1997 $96,455,061 26.44% 26.65% 33.29%
For 5 Years Ended 1997 15.43% 15.62% 20.20%
For 10 Years Ended l997 13.75% 13.94% 18.00%
Since Inception (August 31, 1976) 14.93% 15.12% 15.42%
</TABLE>
- ----------
(1) All periods are ended December 31.
(2) Annual total return is represented for each year and compounded annual
return is presented for each period, net of expenses, in accordance with SEC
guidelines. The performance information in the first column is a weighted
average of the unregistered commingled equity pools managed by the Adviser and
has been restated to reflect a total expense ratio of 1.17% which is the gross
expense ratio that the Fund is expected to incur during the current fiscal year
and which reflects a management fee of .85% of net assets. Performance
information in the second column has been restated to reflect a total expense
ratio of 0.95% which reflects voluntary fee waivers and/or expense
reimbursements. These waivers and/or reimbursements may be modified or
terminated at any time.
(3) Annual total return is presented for each year and compounded annual return
is presented for each period. The S&P 500 Index is an unmanaged index containing
common stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the U.S. stock market. The
index reflects the investment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
(4) Data for the period August 31, 1976 to December 31, 1976.
The Administrator and Distributor
ALPS Mutual Funds Services, Inc. is the Administrator and Distributor for the
Fund. ALPS is located at 370 17th Street, Suite 3100, Denver, Colorado 80202. As
Distributor, ALPS sells shares of the Fund on behalf of the Trust. As
Administrator, ALPS provides certain administrative services necessary for the
Fund's operations including: (i) coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, independent accountants
and legal counsel; regulatory compliance, including
9
<PAGE>
the compilation of information for documents such as reports to, and filings
with, the SEC and state securities commissions; and preparation of proxy
statements and shareholder reports for the Fund; (ii) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Fund's Officers and Board of Trustees; and (iii)
furnishing office space and certain facilities required for conducting the
business of the Fund. Other costs borne by the administrator include custodian
and transfer agent fees and expenses; Trustees' fees and expenses; audit fees
and expenses; and expenses of preparation and distribution to existing
shareholders of reports and prospectuses. For these services, ALPS receives a
fee from the Fund, computed daily and payable monthly, at the annual rate of the
greater of $180,000 or 0.20% of the Fund's average daily net assets. ALPS also
serves as administrator and distributor of other mutual funds.
Service Organizations
Various banks, trust companies, broker-dealers or other financial organizations
(collectively, "service organizations") also may provide administrative services
for the Fund, such as maintaining shareholder accounts and records at a fee of
up to an annual rate of 0.25% of Fund average daily net assets serviced. The
Glass-Steagall Act and other applicable laws provide that, among other things,
banks may not engage in the business of underwriting, selling or distributing
securities. There is currently no precedent prohibiting banks from performing
administrative and shareholder servicing functions as service organizations.
However, judicial or administrative decisions or interpretations of such laws,
as well as changes in either Federal or state regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, could
prevent a bank service organization from continuing to perform all or part of
its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. The Adviser and the
Administrator also may pay service organizations from time to time for rendering
services to shareholders.
Other Expenses
The Fund bears all costs of its operations other than expenses specifically
assumed by ALPS or the Adviser. The costs borne by the Fund include legal and
certain accounting expenses; insurance premiums; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of maintaining the Fund's legal existence and
of shareholders' meetings; and expenses of preparation and distribution of
proxies to existing shareholders. The Fund bears its own expenses associated
with its establishment as a series of the Trust; these expenses are amortized
over a five-year period from the commencement of the Fund's operations. Expenses
of the Trust directly attributable to the Fund are charged to that Fund; other
expenses are allocated proportionately among all of the Funds in the Trust in
relation to the net assets of each Fund.
THE INVESTMENT POLICIES AND PRACTICES OF THE FUND
The Fund follows its own investment policies and practices, including certain
investment restrictions. The "Investment Restrictions" section of the statement
of additional information ("SAI") contains specific investment restrictions
which govern the Fund's investments. Except for the Fund's investment objective,
which is a fundamental policy that may not be changed without a majority vote of
shareholders of the Fund, and those restrictions specifically identified as
fundamental, all other investment policies and practices described in this
Prospectus and in the SAI are not fundamental, and may therefore be changed by
the Board of Trustees without shareholder approval. The Adviser selects
investments and makes investment decisions based on the investment objective and
policies of the Fund.
10
<PAGE>
The Fund will seek to achieve long-term growth of capital and income by
investing in a diversified portfolio of equity securities considered by the
Adviser to be undervalued in relation to their basic earnings, dividends, and/or
assets; that is, equity securities undervalued in relation to traditional
intrinsic valuation factors. The Adviser uses a variety of analytical approaches
to determine the extent of such undervaluation. In general, the Adviser favors
securities which because of company, industry, economic, market or other
conditions are currently out of favor and as a result, in the Adviser's
judgment, are unduly depressed in market valuation. The Adviser believes that
the cyclical nature of investor attitudes, which swing from enthusiasm to
pessimism and back to enthusiasm, the normal business cycle, and changing
industry conditions can contribute to situations where market values are unduly
depressed and thus represent opportunities in companies with a favorable
combination of good underlying long-term prospects at a reasonable price. These
analytical approaches generally result in the selection of equity securities
with average portfolio characteristics which include price/earnings ratios which
are lower than that of the general market, an average dividend yield which
generally may be as high or higher than average, and price/book value ratios
lower than average.
It is the intention of the Fund, unless otherwise indicated, that with respect
to the Fund's policies that are the result of the application of law, the Fund
will take advantage of the flexibility provided by rules or interpretations of
the SEC currently in existence or promulgated in the future or changes to such
laws.
The types of securities and investment practices used by the Fund are described
in greater detail in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Adviser places orders for
the purchase and sale of portfolio investments for the Fund's accounts with
brokers or dealers selected by it in its discretion. In effecting purchases
and sales of equity and debt securities for the account of the Fund, the
Adviser will seek the best execution of the Fund's orders. If the Advisor
believes more than one broker or dealer can provide the best execution, it
may consider research and related services when selecting a broker or dealer.
The Adviser will choose brokers by judging professional ability, quality of
service and reasonableness of commissions. Higher commissions may be paid to
those firms that provide research, superior execution and other services. The
Adviser may use any such research information in managing the assets of the
Fund. Purchases and sales of portfolio debt securities for the Fund are
generally placed by the Adviser with primary market makers for these
securities on a net basis, without any brokerage commission being paid by the
Fund. Trading of portfolio debt securities does, however, involve transaction
costs.
Transactions with dealers serving as primary market makers reflect the spread
between the bid and asked prices. The Adviser may allocate purchase and sales
orders for portfolio securities to dealers that are affiliated with the Adviser
or Distributor, if the Adviser believes the quality of the transaction and
spreads are comparable to what they would be with other qualified firms. Subject
to the policy of seeking best overall price and execution, sales of shares of
the Fund may be considered by the Adviser in the selection of broker or dealer
firms for a Fund's portfolio transactions.
Portfolio Turnover
The Adviser has employed and will continue to use a stock selection style based
on fundamental research analysis and techniques which focuses on the long-term
business, industry and economic cycle. This long-term cyclical view typically
results in lower turnover strategy. Because of this long-term investment
perspective and the desire to minimize net short term capital gains, (see
Managing Taxable Distributions), the Fund generally will not engage in the
trading of securities for the purposes of realizing short-term profits.
Short-term realized capital gains cannot be eliminated however, as certain
market conditions may, in the Adviser's best judgment, warrant realizing such
gains.
11
<PAGE>
Managing Taxable Distributions
While the Fund's overriding objective is long-term, capital growth and current
income, the Adviser may use certain investment techniques designed to reduce the
payment by the Fund of taxable capital gain distributions to shareholders and
thereby reduce the impact of taxes on shareholders. Such techniques will be used
only if, in the Adviser's judgment, the impact on the Fund's pre-tax returns
will be no worse than neutral. Such techniques may include, among others: 1)
using an investment philosophy and time horizon which is based on a
market/business cycle which, due to its long term horizon minimizes portfolio
turnover; 2) selling securities which have declined in value to offset gains
realized on the sale of other securities; and 3) when selling a portion of a
holding, selling those lots with the highest cost basis first. The use of such
techniques will not eliminate taxable distributions but rather attempts to
minimize taxable distributions.
FUND SHARE VALUATION
The net asset value per share of the Fund is calculated at 4:00 p.m. (Eastern
time), Monday through Friday, on each day the New York Stock Exchange is open
for trading, which excludes the following business holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of the Fund is computed by dividing the value of the Fund's net
assets (i.e., the value of the assets less the liabilities) by the total number
of the Fund's outstanding shares. All expenses, including fees paid to the
Adviser and ALPS, are accrued daily and taken into account for the purpose of
determining the net asset value.
Securities listed on an exchange or over-the-counter are valued on the basis of
the last sale prior to the time the valuation is made. If there has been no sale
since the immediately previous valuation, then the average of the last bid and
asked prices is used. Quotations are taken from the exchange where the security
is primarily traded. Portfolio securities which are primarily traded on foreign
exchanges may be valued with the assistance of pricing services and are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
foreign security is valued is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees. Notwithstanding the
above, bonds and other fixed-income securities are valued by using market
quotations and may be valued on the basis of prices provided by a pricing
service approved by the Board of Trustees. All assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the mean
between the bid and asked prices of such currencies against U.S. dollars as last
quoted by any major bank. Further information with respect to the valuation of
the Fund's assets is included in the Statement of Additional Information.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $2,000; including an IRA
investment. Any subsequent investments must be at least $50, including an IRA
investment. All initial investments should be accompanied by a completed
Purchase Application. A Purchase Application accompanies this Prospectus. A
separate application is required for an IRA. The Fund reserves the right to
reject any purchase order.
12
<PAGE>
PURCHASE OF FUND SHARES
Shares of the Fund may be purchased through an authorized broker, service
organization or investment adviser, or directly from the Fund, using any of the
methods described below. Orders for the purchase of shares will be executed at
the net asset value per share next determined after an order has been received
in good form. All funds received are invested in full and fractional shares of
the Fund. Certificates for shares are not issued. ALPS serves as Transfer Agent
pursuant to a Transfer Agent Agreement dated March 15, 1994. ALPS maintains
records of each shareholder's holdings of Fund shares, and each shareholder
receives a statement of transactions, holdings and dividends. The Trust reserves
the right to reject any purchase.
An initial investment in the Fund must be preceded or accompanied by a
completed, signed application. Orders for the purchase of shares will be
executed at the net asset value per share (the "public offering price") next
determined after an order has been received. Orders transmitted to the Fund in
proper form prior to 4:00 p.m., Eastern Time will become effective that day.
Investments may be made using any of the following methods.
Through an Authorized Broker, Investment Adviser, or Service Organization
Shares are available to new and existing shareholders through authorized
brokers, investment advisers and service organizations. To make an investment
using this method, simply complete a Purchase Application and contact your
broker, investment adviser or service organization with instructions as to the
amount you wish to invest. Your broker will then contact the Fund to place the
order on your behalf on that day. In addition, shares in the Fund may be
purchased by forwarding an application directly to the Distributor. Authorized
brokers, investment advisers and service organizations may impose additional
requirements and charges for the services rendered.
Orders received by your broker or service organization for the Fund in proper
order prior to the determination of net asset value and transmitted to the Fund
prior to the close of its trading (which is currently 4:00 p.m., Eastern time),
will become effective that day. Brokers who receive orders are obligated to
transmit them promptly. You should receive written confirmation of your order
within a few days of receipt of instructions from your broker.
Directly with the Fund
By Mail. Make your check payable to the Aristata Equity Fund and mail it, along
with the Purchase Application (if your purchase is an initial investment), to
the address indicated on the Purchase Application. Purchases made by check are
not permitted to be redeemed until payment of the purchase has been collected,
which may take up to fifteen calendar days. Third party and foreign checks will
not be accepted. Please include the Fund name and your account number on all
checks.
By Bank Transfer. Bank transfer allows you to transfer money from your bank
account via the Automated Clearing House (ACH) network to your Fund account.
First, an account must be established with the Fund. Your Purchase Application
must indicate your desire to have this option. Next, a deposit account must be
opened, or already be open, at a bank providing bank transfer services and you
must arrange for this service to be provided. Once you have completed this
process, you can initiate a bank transfer by contacting a representative from
your bank, providing the required information for the bank, and authorizing the
transfer to take place. Please allow two or three days after the authorization
for the transfer to occur.
By Wire. Investments may be made directly through the use of wire transfers of
Federal funds. In most cases, your bank will either be a member of the Federal
Reserve Banking System or have a relationship with a bank that is. Your bank
will normally charge you a fee for handling the transaction. To purchase
13
<PAGE>
shares by a Federal funds wire, please first contact ALPS at 1-800-644-8595. An
account must be established with the Fund prior to any wire transfer. You can
initiate a wire transfer by contacting a representative from your bank,
providing the required information for the bank, and authorizing the transfer to
take place. Federal Funds should be wired to:
State Street Bank & Trust Co.
ABA# 011000028
Aristata Equity Fund
Credit DDA# 22404081
(Account Registration)
(Account Number)
Automatic Investment Program. The Automatic Investment Program offers a simple
way to maintain a regular investment program. You may arrange automatic
transfers (minimum $50 per transaction) from your bank account to your Fund
account on a periodic basis by simply completing the Automatic Investment Plan
section of your Purchase Application. When you participate in this program, the
minimum initial investment in each Portfolio is $250. You may change the amount
of your automatic investment, skip an investment, or stop the Automatic
Investment Program by calling the Fund at (800) 644-8595 at least three Business
Days prior to your next scheduled investment date.
The Fund may in its discretion discontinue, suspend or change the practice of
accepting orders by any of the methods described above. Orders for the purchase
of shares are subject to acceptance by the Fund. The Fund reserves the right to
suspend the sale of shares, or to reject any purchase order, including orders in
connection with exchanges, for any reason.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on each day the Fund
is valued (see "FUND SHARE VALUATION"). Shares will be redeemed at the net asset
value next determined after a redemption request in good form has been received
by the Fund.
A redemption may be a taxable transaction on which gain or loss may be
recognized. See "DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX" for more
information.
Where the shares to be redeemed have been purchased by check, the payment of
redemption proceeds may be delayed until the purchasing check has cleared, which
may take up to 15 calendar days. Shareholders may avoid this delay by investing
through wire transfers of Federal funds. During the period prior to the time the
shares are redeemed, dividends on the shares will continue to accrue and be
payable and the shareholder will be entitled to exercise all other beneficial
rights of ownership.
Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Fund may, however, take up to seven days to make payment. This will not be the
customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Fund may suspend redemptions or postpone payment dates.
To ensure acceptance of your redemption request, it is important to follow the
procedures described below. Although the Fund has no present intention to do so,
the Fund reserves the right to refuse or to limit the frequency of any
telephone, wire or bank transfer redemptions. Of course, it may be difficult to
place orders by telephone during periods of severe market or economic change,
and a shareholder should consider alternative methods of communications.
14
<PAGE>
The Fund may modify or terminate its services and provisions at any time. If the
Fund terminates any particular service, it will do so only after giving written
notice to shareholders. Redemption by mail will always be available to
shareholders.
You may redeem your shares using any of the following methods:
Through an Authorized Broker, Service Organization or Investment Adviser
You may redeem your shares by contacting your authorized broker, service
organization or investment adviser and instructing him or her to redeem your
shares. He or she will then contact ALPS and place a redemption trade on your
behalf.
Directly with the Fund
By Wire. You may redeem your shares by sending a letter directly to ALPS. To be
accepted, a letter requesting redemption must include: (i) the Fund name and
account registration from which you are redeeming shares; (ii) your account
number; (iii) the amount to be redeemed; (iv) the signatures of all registered
owners; and (v) for redemptions exceeding $1,000, a signature guarantee by any
eligible guarantor institution, including a member of a national securities
exchange, or a commercial bank or trust company, broker-dealer, credit union or
savings association. Corporations, partnerships, trusts or other legal entities
will be required to submit additional documentation.
By Telephone. If you have established the telephone redemption privilege on your
Purchase Application, you may redeem your shares by calling the Fund at (800)
644-8595. You should be prepared to give the telephone representative the
following information: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. The conversation may be recorded to protect
you and the Fund. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Fund fails to employ
such reasonable procedures, it may be liable for any loss, damage or expense
arising out of any telephone transactions purporting to be on a shareholder's
behalf. In order to assure the accuracy of instructions received by telephone,
the Fund requires some form of personal identification prior to acting upon
instructions received by telephone, records telephone instructions and provides
written confirmation to investors of such transactions. Telephone redemptions
will be suspended for a period of 10 days following a telephone address change.
You may instruct the Fund to send your redemption proceeds via federal wire
($1,000 minimum per transaction) or bank transfer to your personal bank. Your
instructions should include: (i) your account number, social security number and
account registration; (ii) the Fund name from which you are redeeming shares;
and (iii) the amount to be redeemed. Wire and bank transfer redemptions can be
made only if the privilege has been established on your Purchase Application and
you have attached a copy of a voided check or a letter summarizing the wiring
instructions of the account where proceeds are to be wired. Your bank may charge
you a fee for receiving a wire payment on your behalf.
The above-mentioned service "By Telephone" is not available for IRAs.
Systematic Withdrawal Plan. An owner of $10,000 or more of the Fund may elect to
have periodic redemptions from his or her account to be paid on a monthly,
quarterly, semi-annual or annual basis by simply completing the Systematic
Withdrawal Plan section of the Purchase Application. The minimum periodic
withdrawal is $100. A sufficient number of shares to make the scheduled
redemption will normally be redeemed on the fifth or twentieth day of the
selected month(s). Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. If a shareholder participates in the Systematic
Withdrawal Plan, all dividends will automatically be reinvested.
15
<PAGE>
EXCHANGE OF FUND SHARES
The Fund offers two convenient ways to exchange shares in one Fund for shares in
another Fund in the Trust. Before engaging in an exchange transaction, a
shareholder should read carefully the Prospectus describing the Fund into which
the exchange will occur, which is available without charge and can be obtained
by writing to ALPS at the address listed on the cover of this Prospectus. A
shareholder may not exchange shares of one Fund for shares of another Fund if
the new Fund is not qualified for sale in the state of the shareholder's
residence. Please call the Fund at (800) 644-8595 for questions regarding state
registration. The minimum amount for an initial and subsequent exchange is $50.
The Trust may terminate or amend the terms of the exchange privilege at any time
upon at least 60 days' prior written notice to shareholders of any modification
or termination of the exchange privilege.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the net asset value next determined following receipt of the
request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. See "DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAX" for more
information. Shareholders will receive written confirmation of the exchange
following completion of the transaction.
Exchange by Mail. To exchange Fund shares by mail, simply send a letter of
instruction to the Fund. The letter of instruction must include: (i) your
account number; (ii) the Fund from and the Fund into which you wish to exchange
your investment; (iii) the dollar or share amount you wish to exchange; and (iv)
the signatures of all registered owners or authorized parties; (v) for exchanges
exceeding $1,000, a signature guarantee by an eligible guarantor institution,
including a member of a national securities exchange, or by a commercial bank or
trust company, broker/dealer, credit union or savings association.
Exchange by Telephone. If you have established the telephone exchange privilege
on your Purchase Application, you may exchange Fund shares by telephone by
simply calling the Fund at (800) 644-8595. You should be prepared to give the
telephone representative the following information: (i) your account number,
social security or tax identification number and account registration; (ii) the
name of the Fund from and the Fund into which you wish to transfer your
investment; and (iii) the dollar or share amount you wish to exchange. The
conversation may be recorded to protect you and the Funds. Telephone exchanges
will be suspended for a period of ten days following a telephone address change.
See "REDEMPTION OF FUND SHARES - By Telephone" for a discussion of telephone
transactions generally.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as a funding medium for traditional and Roth IRAs. In
addition, a traditional or Roth IRA may be established through a custodial
account with the Fund. Completion of a special application is required in order
to create such an account, and the minimum initial investment for an IRA is
$2,000. Contributions to IRAs are subject to prevailing amount limits set by the
Internal Revenue Service. For more information, call the Funds at 1-800
644-8595.
Additional account level fees may be imposed for IRA accounts.
16
<PAGE>
DIVIDEND AND TAX INFORMATION
The Fund intends to continue to qualify as a regulated investment company for
each taxable year pursuant to the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). By so qualifying and electing,
the Fund generally will not be subject to Federal income tax to the extent that
it distributes investment company taxable income and net realized capital gains
in the manner required under the Code.
The Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains (generally
including any net option premium income) over net long-term capital losses). The
Fund will declare and pay distributions of net investment income dividends
monthly. The Fund intends to distribute, at least annually, substantially all
net capital gains (the excess of net long-term capital gains over net short-term
capital losses). In determining amounts of capital gains to be distributed, any
capital loss carryovers from prior years will be applied against capital gains.
The amount declared monthly as a dividend may be based on projections of
estimated monthly net investment income and may differ from the actual
investment income determined in accordance with generally accepted accounting
principles. An adjustment will be made to the dividend each month to account for
any difference between the projected and actual monthly investment income.
On or before March 2, 1998, common trust and collective investment fund assets
managed by the Adviser contributed assets to the Fund in exchange for shares of
the Fund. This transfer may result in adverse tax consequences under certain
circumstances to either the investors transferring shares from a common trust or
collective investment fund for shares of the Fund ("reorganizing shareholders")
or to investors who acquire shares of the Fund after a transfer ("new
shareholders"). As a result the Fund may have acquired some securities that have
appreciated in value or depreciated in value from the date they were acquired.
If appreciated securities are sold after the transfer, the amount of the gain
would be taxable to new shareholders as well as to reorganizing shareholders.
New shareholders would therefore incur a tax liability on distributions capital
gains realized by the Fund even though the value of their investment in the Fund
may not have increased. The effect on shareholders who transferred into the Fund
would be to reduce their potential liability for tax on capital gains by
spreading it over a larger asset base. The opposite may occur if the Fund
acquires securities having an unrealized capital loss. In that case,
shareholders who transferred into the Fund will be unable to utilize the loss to
offset gains, but, because the transfer will not result in any gains, the
inability of shareholders who transferred into the Fund to utilize unrealized
losses will have no immediate tax effect. For new shareholders, to the extent
that unrealized losses are realized by the Fund, new shareholders may benefit by
any reduction in net tax liability attributable to the losses.
For all distributions, the shareholder may elect in writing, not less than five
full business days prior to the record date, to receive such distributions in
cash. Dividends declared in, and attributable to, the preceding period will be
paid within five business days after the end of the period. Unless the
shareholder chooses to receive dividend and/or capital gain distributions in
cash, distributions will be automatically reinvested in additional shares of the
Fund at net asset value. If you elect to receive distributions in cash and
checks (1) are returned and marked as "undeliverable" or (2) remain uncashed for
six months, your cash election will be changed automatically and your future
dividend and capital gains distributions will be reinvested in the Fund at the
per share net asset value determined as of the date of payment of the
distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in the Fund at
the per share net asset value determined as of the date of cancellation.
Investors who redeem all or a portion of Fund shares prior to a dividend payment
date will be entitled on the next dividend payment date to all dividends
declared but unpaid on those shares at the time of their redemption.
17
<PAGE>
Distributions of net investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) generally will be
taxable to shareholders as ordinary income. Distributions of net long-term or
mid-term capital gains designated by the Fund as capital gain distributions will
be taxable as long-term or mid-term capital gains, regardless of how long a
shareholder has held his Fund shares. Distributions are taxable in the same
manner whether received in additional shares or in cash.
Earnings of the Funds not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.
A distribution, including an "exempt-interest dividend," will be treated as paid
on December 31 of the calendar year if it is declared by the Fund during
October, November, or December of that year to shareholders of record in such a
month and paid by the Fund during January of the following calendar year. Such
distributions will be treated as received by shareholders (and therefore
taxable) in the calendar year in which the distributions are declared, rather
than the calendar year in which the distributions are received.
The Fund's distributions with respect to a given taxable year may exceed the
current and accumulated earnings and profits of the Fund available for
distribution. In that event, distributions in excess of such earnings and
profits would be characterized as a return of capital to shareholders for
Federal income tax purposes, thus reducing each shareholder's cost basis in his
or her Fund shares. Distributions in excess of a shareholder's cost basis in his
or her shares would be treated as a gain realized from a sale of such shares.
Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in complete liquidation of
the Fund, generally will be a capital gain or loss which will be long-term,
mid-term or short-term generally depending upon the shareholder's holding period
of the shares. A loss realized by a shareholder on a redemption, sale, or
exchange of shares of the Fund with respect to which capital gain dividends have
been paid will be characterized as a long-term or mid-term capital loss to the
extent of such capital gain dividends.
The Fund may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where the Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Most corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Shareholders will be notified annually by the Fund as to the Federal tax status
of distributions made by the Fund in which they invest. Depending on the
residence of the shareholder for tax purposes, distributions also may be subject
to state and local taxes, including withholding taxes. Foreign shareholders may,
for example, be subject to special withholding requirements. Special tax
treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. Shareholders should consult their own
tax advisers as to the Federal, state and local tax consequences of ownership of
shares of the Fund in their particular circumstances.
18
<PAGE>
RISKS OF INVESTING IN THE FUND
Certain Risk Considerations
The price per share will fluctuate with changes in value of the investments held
by the Fund. Shareholders of the Fund should expect the value of their shares to
fluctuate with changes in the value of the securities owned by the Fund. There
is, of course, no assurance that the Fund will achieve its investment objectives
or be successful in preventing or minimizing the risk of loss that is inherent
in investing in particular types of investment products. In order to attempt to
minimize that risk, the Adviser monitors developments in the economy, the
securities markets, and with each particular issuer. Also, as noted earlier, the
Fund is managed within certain limitations that restrict the amount of the
Fund's investment in any single issuer.
The Fund may invest in securities of small capitalization companies, defined as
companies with stock market capitalization of $1 billion or less at the time of
initial purchase. This investment may involve greater risks since these
securities may have limited marketability and, thus, may be more volatile.
Because small capitalization companies normally have fewer shares outstanding
than larger companies, it may be more difficult for the Fund to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. In addition, small capitalization companies are typically subject to a
greater degree of changes in earnings and business prospects than are larger,
more established companies. There is typically less publicly available
information concerning small capitalization companies than for larger, more
established ones. Therefore, an investment in these Funds may involve a greater
degree of risk than an investment in other mutual funds that seek capital
appreciation by investing in better-known, larger companies.
The Adviser and the Trust's service providers rely upon their existing
information systems to provide investment management and administrative
services, respectively, to the Trust. The costs of maintaining and upgrading
such information systems to comply with the impact of the Year 2000 is an
operational and financial responsibility of the Adviser and the other service
providers, respectively. The Trust is in the process of assessing and
formulating any responses to any material issues, if any, relating to Year 2000
with the Adviser and all other major service providers. However, no assurance
can be given that these steps will be sufficient to avoid any material adverse
impact to the Trust.
OTHER INFORMATION
Capitalization
Financial Investors Trust was organized as a Delaware business trust on November
30, 1993 and currently consists of six separately managed portfolios. The Board
of Trustees may establish additional portfolios in the future. The
capitalization of the Funds consists solely of an unlimited number of shares of
beneficial interest with no par value. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
Voting
Shareholders have the right to vote in the election of Trustees and on any and
all matters on which, by law or under the provisions of the Declaration of
Trust, they may be entitled to vote. The Fund is not required to hold regular
annual meetings of shareholders and does not intend to do so.
The Declaration of Trust provides that the holders of not less than two-thirds
of the outstanding shares of the Fund may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of considering the
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the
19
<PAGE>
outstanding shares of the Fund and in connection with such meeting to comply
with the shareholders' communications provisions of Section 16(c) of the Act.
See "OTHER INFORMATION - Voting Rights" in the SAI.
Shares entitle their holders to one vote per share (with proportionate voting
for fractional shares). As used in the Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund means the vote of the lesser of:
(1) 67% of the shares of a Fund present at a meeting if the holders of more than
50% of the outstanding shares are present in person or by proxy; or (2) more
than 50% of the outstanding shares of a Fund.
Performance Information
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. The methods
used to calculate the yield and total return of the Fund are mandated by the
SEC.
Quotations of "yield" for the Fund will be based on the investment income per
share during a particular 30-day (or one month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
Quotations of yield and effective yield reflect only the Fund's performance
during the particular period on which the calculations are based. Yield and
effective yield for the Fund will vary based on changes in market conditions,
the level of interest rates and the level of the Fund's expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5 and 10 years (up to the life of the
Fund), reflect the deduction of a proportional share of Fund expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.
Performance information for the Fund may be compared to various unmanaged
indices, such as those indices prepared by Lipper Analytical Services,
Morningstar, and other entities or organizations which track the performance of
investment companies. Any performance information should be considered in light
of the Fund's investment objectives and policies, characteristics and quality of
the Fund and the market conditions during the time period indicated, and should
not be considered to be representative of what may be achieved in the future.
For a description of the methods used to determine yield and total return for
Fund, see the SAI.
Account Services
All transactions in shares of the Fund will be reflected in a monthly statement
for each shareholder. In those cases where another organization or its nominee
is the shareholder of record of shares purchased for its customer, the Fund has
been advised that the statement may be transmitted to the customer at the
discretion of such organization.
ALPS acts as the Fund's transfer agent. The Fund compensates ALPS, pursuant to a
Services Agreement, for providing personnel and facilities to perform dividend
disbursing and transfer agency-related services for the Fund.
20
<PAGE>
Shareholder Inquiries
All shareholder inquiries should be directed to the Fund at 370 17th Street,
Suite 3100, Denver, CO 80202.
General and Account Information: (800) 644-8595.
21
<PAGE>
INVESTMENT ADVISER
Tempest, Isenhart, Chafee, Lansdowne & Assoc., Inc.
1380 Lawrence Street, Suite 1050
Denver, Colorado 80204
ADMINISTRATOR, DISTRIBUTOR AND TRANSFER AGENT
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202
CUSTODIAN
Fifth Third Bank, N.A.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
FOR MORE INFORMATION CALL
1-800-644-8595
THESE FUNDS ARE NOT INSURED BY TEMPEST, ISENHART, COLORADO STATE BANK
AND TRUST, THE FDIC OR ANY OTHER INSURER.
22
<PAGE>
ARISTATA EQUITY FUND
ARISTATA QUALITY BOND FUND
ARISTATA COLORADO QUALITY TAX-EXEMPT FUND
370 17th Street, Suite 3100
Denver, Colorado 80202
August 28, 1998
General & Account Information: (800) 644-8595
STATEMENT OF ADDITIONAL INFORMATION
Financial Investors Trust (the "Trust") is an open-end, diversified management
investment company with multiple diversified investment portfolios, including
the U.S. Treasury Money Market Fund, the U.S. Government Money Market Fund, the
Prime Money Market Fund, the Aristata Equity Fund (the "Equity Fund"), the
Aristata Quality Bond Fund (the "Bond Fund"), and the Aristata Colorado Quality
Tax-Exempt Fund (the "Colorado Bond Fund") (collectively, the "Funds"). This
Statement of Additional Information ("SAI") describes the shares of three Funds
managed by Tempest, Isenhart, Chafee, Landsdowne & Assoc. ("Tempest, Isenhart").
The Funds are:
Aristata Equity Fund
Aristata Quality Bond Fund
Aristata Colorado Quality Tax-Exempt Fund
The SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the prospectus for shares of the Funds dated August
28, 1998 (the "Prospectus"). This SAI contains additional and more detailed
information than that set forth in the Prospectus and should be read in
conjunction with the Prospectus. The Prospectus may be obtained without charge
by writing or calling the Funds at the address and information number printed
above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT POLICIES 4
Bank Obligations 4
Commercial Paper 4
Common Stocks 4
Corporate Debt Securities 4
Preferred Stock 5
Repurchase Agreements 5
Reverse Repurchase Agreements 5
Variable and Floating Rate Demand and Master Demand Notes 5
Loans of Portfolio Securities 6
Mortgage-Related Securities 6
Other Asset-Backed Securities 7
Foreign Securities 7
Foreign Currency Transactions 8
Depositary Receipts 8
Real Estate Securities 9
Investment Company Securities 9
U.S. Government Securities 10
Interest Rate Futures Contracts 10
Stock Index Futures Contracts 11
Put Options on Stock Index Futures Contracts 11
Forward Commitment and When-Issued Securities 12
Colorado Municipal Obligations and Special Risk Considerations 12
Economic Factors 12
Restrictions of Appropriations and Revenues 13
Colorado State Finances 16
Debt 16
Anticipation Notes 16
Illiquid Securities 17
Zero Coupon Securities 18
INVESTMENT RESTRICTIONS 18
MANAGEMENT 20
Trustees and Officers 20
Adviser 22
Distribution of Fund Shares 23
Administrator, Bookkeeping and Pricing Agent 23
Fees and Expenses 23
DETERMINATION OF NET ASSET VALUE 24
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 24
PORTFOLIO TRANSACTIONS 25
Portfolio Turnover 26
TAXATION 27
The Colorado Bond Fund 31
OTHER INFORMATION 31
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Capitalization 31
Voting Rights 32
Custodian and Transfer Agent 33
Yield and Performance Information 33
Tax-Equivalent Yield Calculations 34
Independent Accountants 36
Registration Statement 36
FINANCIAL STATEMENTS 36
APPENDIX KEY TO MOODY'S BOND RATINGS 37
KEY TO S & P's BOND RATINGS 37
</TABLE>
3
<PAGE>
INVESTMENT POLICIES
The prospectus discusses the investment objectives of the Funds and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and portfolio
strategies that the Funds may utilize, and certain risks attendant to such
investments, policies and strategies.
BANK OBLIGATIONS (All Funds). These obligations include negotiable
certificates of deposit and bankers' acceptances. A description of the banks,
the obligations of which the Funds may purchase, is set forth in the prospectus.
A certificate of deposit is a short-term, interest-bearing negotiable
certificate issued by a commercial bank against funds deposited in the bank. A
bankers' acceptance is a short-term draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial transaction.
The borrower is liable for payment, as is the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date.
COMMERCIAL PAPER (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions and similar taxable instruments issued by government
agencies and instrumentalities. All commercial paper purchased by the Funds is,
at the time of investment, (i) rated in one of the two highest rating categories
by at least two nationally recognized statistical rating organizations
("NRSROs"), (ii) issued or guaranteed as to principal and interest by issuers
having an existing debt security rating in one of the two highest rating
categories by a least two NRSROs, or (iii) securities which, if not rated or
single rated, are, in the opinion of the Funds' adviser, of an investment
quality comparable to rated commercial paper in which the Funds may invest. See
"VARIABLE AND FLOATING RATE AND MASTER DEMAND NOTES."
COMMON STOCKS (Equity Fund). Common stock represents the residual
ownership interest in the issuer after all of its obligations and preferred
stocks are satisfied. Common Stocks fluctuate in price in response to many
factors, including historical and prospective earnings of the issuer, the value
of its assets, general economic conditions, interest rates, investor perceptions
and market volatility. Furthermore, the Fund may invest in smaller companies.
Small companies may have limited product lines, markets or financial resources;
may lack depth of experience; and may be more vulnerable to adverse general
market or economic developments than larger company issues, and can display
abrupt or erratic movements at times, due to limited volumes and less publicly
available information.
CORPORATE DEBT SECURITIES (Equity Fund and Bond Fund). Fund investment
in these securities is limited to corporate debt securities (corporate bonds,
debentures, notes and similar corporate debt instruments) which meet the rating
criteria established for each Fund.
The ratings of Standard & Poor's Corporation ("S&P"), Moody's investors
service ("Moody's"), Inc., and other NRSROs represent their respective opinion
as to the quality of the obligations they undertake to rate (a description of
S&P's and Moody's ratings is attached hereto as Appendix A). Ratings, however,
are general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices. After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Funds'
adviser will consider such event in its determination of whether the Fund should
continue to hold the security. To the extent the ratings given by an NRSRO may
change as a result of changes in such organizations or their rating systems, the
adviser will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the prospectus and in this
SAI.
4
<PAGE>
It is possible that unregistered securities purchased by a Fund in
reliance upon Rule 144a under the Securities Act of 1933 could have the effect
of increasing the level of the Fund's illiquidity to the extent that qualified
institutional buyers become, for a period, uninterested in purchasing these
securities.
PREFERRED STOCKS (Equity Fund). Preferred stock has a preference over
common stock in liquidation and generally in dividends as well, but is
subordinated to the liabilities of the issuer in all respects. Preferred stock
may or may not be convertible into common stock. As a general rule, the market
value of preferred stock with a fixed dividend rate and no conversion element
varies inversely with interest rates and perceived credit risk. Because
preferred stock is junior to debt securities and other obligations of the
issuer, deterioration in the credit quality of the issuer will cause greater
changes in the value of a preferred stock than in a more senior debt security
with similar stated yield characteristics.
REPURCHASE AGREEMENTS (All Funds). The Funds may invest in securities
subject to repurchase agreements with U.S. banks or broker-dealers. Such
agreements may be considered to be loans by the Funds for purposes of the
investment company act of 1940, as amended (the "1940 Act"). A repurchase
agreement is a transaction in which the seller of a security commits itself at
the time of the sale to repurchase that security from the buyer at a mutually
agree upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. The adviser will monitor the value of the
underlying security at the time the transaction is entered into and at all times
during the term of the repurchase agreement to ensure that the value of the
security always equals or exceeds the repurchase price. In the event of default
by the seller under the repurchase agreement, the funds may have problems in
exercising their rights to the underlying securities and may incur costs and
experience time delays in connection with the disposition of such securities.
REVERSE REPURCHASE AGREEMENTS (All Funds). A Fund may borrow funds by
selling portfolio securities to financial institutions such as banks and
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price. A Fund will pay interest on amounts obtained
pursuant to a reverse repurchase agreement. While reverse repurchase agreements
are outstanding, a Fund will maintain in a segregated account cash, or other
liquid assets (as determined by the board) of an amount at least equal to the
market value of the securities, plus accrued interest, subject to the agreement.
VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND NOTES (All Funds).
The Funds may acquire variable and floating rate instruments as described in the
prospectus. Variable and floating rate instruments are frequently not rated by
credit rating agencies; however, unrated variable and floating rate instruments
purchased by a Fund will be determined by the adviser under guidelines
established by the board of trustees to be of comparable quality at the time of
purchase to rated instruments eligible for purchase by the Funds. In making such
determinations, the adviser will consider the earning power, cash flows and
other liquidity ratios of the issuers of such instruments (such issuers include
financial, merchandising, investment banking, bank holding and other companies)
and will continuously monitor their financial condition. There may not be an
active secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund. The absence of such an active secondary market
could make it difficult for a Fund to dispose of the variable or floating rate
instrument involved. In the event the issuer of the instrument defaulted on its
payment obligations, a Fund could, for this or other reasons, suffer a loss to
the extent of the default. Variable and floating rate instruments may be secured
by bank letters of credit, guarantees or lending commitments.
5
<PAGE>
Instruments having variable or floating interest rates or demand
features may be deemed to have remaining maturities as follows: (a) a U.S.
government security with a variable rate of interest readjusted no less
frequently than every 762 days may be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate; (b) an
instrument with a floating rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in 397 days or less, may be
deemed to have a maturity equal to one day; (c) an instrument with a variable
rate of interest, the principal amount of which is scheduled on the face of the
investment to be paid in more than 397 days, and that is subject to a demand
feature may be deemed to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand; (d) an
instrument with a variable rate of interest, the principal amount of which is
scheduled to be paid in 397 days or less may be deemed to have a maturity equal
to the earlier of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; and (e) an instrument with a floating rate of
interest, the principal amount of which is scheduled to be paid in more than 397
days, that is subject to a demand feature, may be deemed to have a maturity
equal to the period remaining until the principal amount can be recovered
through demand.
LOANS OF PORTFOLIO SECURITIES (All Funds). The Funds may lend their
portfolio securities to brokers, dealers and financial institutions, provided:
(1) the loan is secured continuously by collateral consisting of U.S. government
securities, other high-grade debt obligations or cash or letters of credit
maintained on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned; (2) the Funds may at any time
call the loan and obtain the return of the securities loaned within five
business days; (3) the Funds will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed 5% of the total assets of a particular Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay reasonable
finders, administrative and custodial fees. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
MORTGAGE-RELATED SECURITIES (Equity and Bond Fund). 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 guaranteed by the Government National
Mortgage Association ("GNMA") 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 issued by the Federal National Mortgage Association ("FNMA") include
FNMA guaranteed mortgage pass-through certificates (also known as "FANNIE MAEs")
which are solely the obligations of the FNMA and are not backed by or entitled
to the full faith and credit of the United States, but 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 the principal and interest by FNMA. Mortgage-related
securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC")
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 by the United States or by any federal
home loan bank 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
6
<PAGE>
payment of principal at any time after default on an underlying mortgage but in
no event later than one year after it becomes payable.
OTHER ASSET-BACKED SECURITIES (Bond Fund). Other asset-backed
securities (unrelated to mortgage loans) have been offered to investors, such as
Certificates for Automobile Receivables ("CARS"). CARS represent undivided
fractional interests in a trust ("trust") whose assets consist of a pool of
motor vehicle retail installment sales contracts and security interest in the
vehicles securing the contracts. Payments of principal and interest on CARS are
"passed through" monthly to certificate holders and are guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the trustee or originator of the trust.
Underlying sales contracts are subject to prepayment, which may reduce the
overall return to certificate holders. If the letter of credit is exhausted,
certificate holders may also experience delays in payment or losses on CARS if
the full amounts due on underlying sales contracts are not realized by the trust
because of unanticipated legal or administrative costs of enforcing the
contracts, or because of depreciation, damage or loss of the vehicles securing
the contracts, or other factors. For asset-backed securities, the industry
standard uses a principal prepayment model, the "ABS Model", which is similar to
the PSA identified previously under the first paragraph of "Mortgage-Related
Securities." Either the PSA model, the ABS model or other similar models that
are standard in the industry will be used by the Fund in calculating maturity
for purposes of its investment in asset-backed securities.
FOREIGN SECURITIES (Equity Fund and Bond Fund). The Funds may invest
directly in both sponsored and unsponsored U.S. dollar or foreign
currency-denominated corporate securities (including preferred or preference
stock in the case of the Equity Fund), certificates of deposit and bankers'
acceptances issued by foreign banks, and obligations of foreign governments or
their subdivisions, agencies and instrumentalities, international agencies and
supranational entities. There may be less information available to the Funds
concerning unsponsored securities, for which the paying agent is located outside
the United States.
The Equity Fund will ordinarily purchase foreign securities traded in
the United States. However, the Fund may purchase the securities of foreign
issuers directly in foreign markets, although the Fund does not intend to invest
more than 5% of its net assets directly in foreign markets, although it may
invest up to 10% of its net assets in American Depository Receipts ("ADRs"),
discussed below. Securities of foreign issuers that are not listed on a
recognized domestic or foreign securities exchange are deemed to be illiquid
investments subject to a limitation of no more than 15% of the Fund's net
assets. See "Illiquid Investments" below.
The Equity Fund may also invest directly in foreign equity securities
and in securities represented by European Depositary Receipts (EDRs") or ADRs.
ADRs are dollar-denominated receipts generally issued by domestic banks which
represent the deposit with the bank of a security of a foreign issuer, and which
are publicly traded on exchanges or over-the-counter in theUnited States. EDRs
are receipts similar to unsponsored ADR programs. Because the non-U.S. company
does not actively participate in the creation of the ADR program, the underlying
agreement for service and payment will be between the depositary and the
shareholder. The company issuing the stock underlying the ADRs pays nothing to
establish the unsponsored facility, as fees for ADR issuance and cancellation
are paid by brokers. Investores directly bear the expenses associated with
certificate transfer, custody and dividend payment.
In addition, in an unsponsored ADR program, there may be several
depositaries with no defined legal obligations to the non-U.S. company. The
duplicate depositaries may lead to marketplace confusion because there would be
no central source of information to buyers, sellers and intermediaries. The
efficiency of centralization gained in a sponsored program can greatly reduce
the delays in delivery of dividends and annual reports.
7
<PAGE>
Changes in foreign exchange rates will affect the value of securities
denominated or quoted in currencies other than the U.S. dollar. The Funds do not
intend to invest more than 5% net assets directly in foreign markets.
FOREIGN CURRENCY TRANSACTIONS. The Funds may enter into forward foreign
currency exchange contracts for hedging purposes in anticipation of or in order
to attempt to minimize the effect of fluctuations in the level of future foreign
exchange rates. The Funds will set aside cash or other liquid assets in an
amount at least equal to the market value to the instruments underlying the
contract, less the amount of initial margin.
Since the Funds may invest in securities denominated in currencies
other than the U.S. dollar, and since those funds may temporarily hold funds in
bank deposits or other money market investments denominated in foreign
currencies, a Fund may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates will influence values within
the Fund from the perspective of U.S. investors. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities, and net investment income and
gains, if any, to be distributed to shareholders by the Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
Those Funds that purchase foreign currency-denominated securities may
enter into foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. these contracts are entered into in the interbank market conducted
between currency traders (usually large commercial banks) and their customers.
Forward foreign currency exchange contracts may be bought or sold to protect a
Fund against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar, or between foreign
currencies. Although such contracts are intended 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 which might result should the value of such
currency increase.
DEPOSITARY RECEIPTS (Equity Fund) - the Fund may invest up to 10% of
its net assets in the securities of foreign issuers in the form of American
Depositary Receipts ("ADRs"), European Depository Receipts ("EDRs") and other
depositary receipts. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs, which are sometimes referred to as Continental Depositary Receipts
("CDRs"), are receipts issued in Europe typically by non-United States banks and
trust companies that evidence ownership of either foreign or domestic
securities. Generally, ADRs in registered form are designed for use in the
United States securities markets and EDRs and CDRs in bearer form are designed
for use in Europe. The Fund may invest in ADRs, EDRs and CDRs through"sponsored"
or "unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depositary, whereas a depositary may
establish an unsponsored facility without participation by the issuer of the
deposited security. Holders of unsponsored depositary receipts generally bear
all the costs of such communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts in
respect of the deposited securities.
There are certain risks associated with investments in unsponsored ADR
and EDR programs. Because the non-U.S. company does not actively participate in
the creation of the ADR or EDR program, the underlying agreement for service and
payment will be between the depositary and the shareholder. The company issuing
the stock underlying the ADRs or EDRs pays nothing to establish the
8
<PAGE>
unsponsored facility, as fees for ADR or EDR issuance and cancellation are paid
by brokers. Investors directly bear the expenses associated with certificate
transfer, custody and dividend payment.
In an unsponsored ADR or EDR program, there also may be several
depositaries with no defined legal obligations to the non-U.S. company. The
duplicate depositaries may lead to marketplace confusion because there would be
no central source of information to buyers, sellers and intermediaries. The
efficiency of centralization gained in a sponsored program can greatly reduce
the delays in delivery of dividends and annual reports.
In addition, with respect to all ADRs and EDRs, there is always the
risk of loss due to currency fluctuations.
REAL ESTATE SECURITIES (Equity Fund). The Fund may invest in REITS.
Investing in REITS involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Although the
Fund will not invest directly in real estate, the Fund may invest in equity
securities of issuers primarily engaged in or related to the real estate
industry. Therefore, an investment in REITS is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in the
value of real estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; overbuilding; extended
vacancies of properties; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; and changes in
interest rates. To the extent that assets underlying the REITS' investments are
concentrated geographically, by property type or in certain other respects, the
REITS may be subject to certain of the foregoing risks to a greater extent.
Equity REITS may be affected by changes in the value of the underlying property
owned by the REITS, while mortgage REITS may be affected by the quality of any
credit extended. REITS are dependent upon management skills, are not
diversified, are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITS are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the U.S. internal revenue code
and failing to maintain their exemptions from registration under the 1940 act.
REITS (especially mortgage REITS) are also subject to interest rate
risks. When interest rates decline, the value of a REIT'S investment in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investment in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITS involves risks similar to those associated with
investing in small capitalization companies. REITS may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
INVESTMENT COMPANY SECURITIES (All Funds). The Funds may invest in
securities issued by other investment companies. Each Fund currently intends to
limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made: (i)
not more than 5% of the value of the fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund or by the Funds as a
whole.
9
<PAGE>
U.S. GOVERNMENT SECURITIES (Bond Fund). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Treasury bills, which have a maturity of up to one year,
are direct obligations of the United States and are the most frequently issued
marketable U.S. Government security. The U.S. Treasury also issues securities
with longer maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt
securities issued by U.S. Government-sponsored enterprises and Federal agencies.
Some obligations of agencies are supported by the full faith and credit of the
United States or by the U.S. Treasury guarantees, such as mortgage-backed
certificates, which may be guaranteed by the Government National Mortgage
Association; others, such as obligations of the Federal Home Loan Banks, Federal
Farm Credit Bank, Bank for Cooperatives, Federal Intermediate Credit Banks and
the Federal Land Bank, are guaranteed by the right of the issuer to borrow from
the U.S. Treasury; others, such as obligations of the Federal National Mortgage
Association, are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as obligations of the Student Loan Marketing Association and the Tennessee
Valley Authority, are backed only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment.
Although U.S. Government securities generally do not involve the credit
risks associated with other types of fixed income securities, the market values
of U.S. Government Securities do go up and down as interest rates change. Thus,
for example, the value of an investment in a Fund that holds U.S. Government
securities may fall during times of rising interest rates. Yields on U.S.
Government Securities tend to be lower than those on corporate securities of
comparable maturities.
INTEREST RATE FUTURES CONTRACTS (Bond Fund Only). The Fund may purchase
and sell interest rate futures contracts ("futures contracts") as a hedge
against changes in interest rates. A futures contract is an agreement between
two parties to buy and sell a security for a set price on a future date. Future
contracts are traded on designated "contracts markets" which, through their
clearing corporations, guarantee performance of the contracts. Currently, there
are futures contracts based on securities such as long-term U.S. treasury bonds,
U.S. treasury notes, GNMA certificates and three-month U.S. treasury bills.
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). Entering into a futures contract for
the sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Fund holds long-term U.S. government securities and
the adviser anticipates a rise in long-term interest rates, it could, in lieu of
disposing of its portfolio securities, enter into futures contracts for the sale
of similar long-term securities. If rates increased and the value of the Fund's
portfolio securities declined, the value of the Fund's futures contracts would
increase, thereby protecting the Fund by preventing its net asset value from
declining as much as it otherwise would have. Similarly, entering into futures
contracts for the purchase of securities has an effect similar to actual
purchase of the underlying securities, but permits the continued holding of
securities other than the underlying securities. For example, if the adviser
expects long-term interest rates to decline, the Fund might enter into futures
contracts for the purchase of long-term securities, so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase, while continuing to hold higher-yielding short-term
securities or waiting for the long-term market to stabilize. Futures
transactions may fail as hedging techniques where price movements of the
underlying securities do not follow price movements of the portfolio securities
subject to the hedge. The loss with respect to futures transactions is
potentially unlimited. Also, the Fund may be unable to control losses by closing
its position where a liquid secondary market does not exist.
10
<PAGE>
STOCK INDEX FUTURES CONTRACTS (Equity Fund). A stock index futures
contract is an agreement in which one party agrees to deliver to the other an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. As the aggregate market
value of the stocks in the index changes, the value of the index also will
change. In the event that the index level rises above the level at which the
stock index futures contract was sold, the seller of the stock index futures
contract will realize a loss determined by the difference between the two index
levels at the time of expiration of the stock index futures contract, and the
purchaser will realize a gain in that amount. In the event the index level falls
below the level at which the stock index futures contract was sold, the seller
will recognize a gain determined by the difference between the two index levels
at the expiration of the stock index futures contract, and the purchaser will
realize a loss. Stock index futures contracts expire on a fixed date, currently
one to seven months from the date of the contract, and are settled upon
expiration of the contract.
The Fund intends to utilize stock index futures contracts primarily for
the purpose of attempting to protect the value of its common stock portfolio in
the event of a decline in stock prices. The Fund, therefore, usually will be the
seller of stock index futures contracts. This risk management strategy is an
alternative to selling securities in the portfolio and investing in money market
instruments. Also, stock index futures contracts may be purchased to protect a
Fund against an increase in prices of stocks which the Fund intends to purchase.
if the Fund is unable to invest its cash (or cash equivalents) in stock in an
orderly fashion, the Fund could purchase a stock index futures contract which
may be used to offset any increase in the price of the stock. However, it is
possible that the market may decline instead, resulting in a loss on the stock
index futures contract. If the Fund then concludes not to invest in stock at
that time, or if the price of the securities to be purchased remains constant or
increases, the Fund will realize a loss on the stock index futures contract that
is not offset by a reduction in the price of securities purchased. The Fund also
may buy or sell stock index futures contracts to close out existing futures
positions. See "interest rate futures contracts" above for more information on
the risks of stock index futures contracts.
PUT OPTIONS ON STOCK INDEX FUTURES CONTRACTS (Equity Fund). The Fund
may also purchase put options on stock index futures contracts. Sales of such
options may also be made to close out an open option position. The Fund may, for
example, purchase a put option on a particular stock index futures contract or
stock index to protect against a decline in the value of the common stocks it
holds. If the stocks in the index decline in value, the put should become more
valuable and the Fund could sell it to offset losses in the value of the common
stocks. In this way, put options may be used to achieve the same goals the Funds
seek in selling futures contracts. A put option on a stock index future gives
the purchaser the right, in return for a premium paid, to assume a short (i.e.,
the right to sell stock index futures) position in a stock index futures
contract at a specified exercise price ("strike price") at any time during the
period of the option. If the option is exercised by the holder before the last
trading date during the option period, the holder receives the futures position,
as well as any balance in the futures margin account. If an option is exercised
on the last trading day prior to the expiration date of the option, the
settlement will be made entirely in cash in an amount equal to the difference
between the strike price and the closing level of the relevant index on the
expiration date.
The adviser expects that an increase or decrease in the index in
relation to the strike price level would normally correlate to an increase or
decrease (but not necessarily to the same extent) in the value of the Fund's
common stock portfolio against which the option was written. Thus, any loss in
the option transaction may be offset by an increase in the value of the common
stock portfolio to the extent changes in the index correlate to changes in the
value of that portfolio. The Fund may liquidate the put options it has purchased
by effecting a "closing sale transaction," rather than exercising the option.
This is accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that the Fund will be able to effect
the closing sale transaction. The Fund will realize a gain from a closing sale
transaction if the price at which the transaction is effected exceeds the
premium paid to purchase the option and, if less, the Fund will realize a loss.
11
<PAGE>
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES (All Funds). The Funds
may purchase when-issued securities and make contracts to purchase securities
for a fixed price at a future date beyond customary settlement time if a Fund
holds, and maintains until the settlement date in a segregated account, cash or
other liquid assets in an amount sufficient to meet the purchase price, or if
the Funds enters into offsetting contracts for the forward sale of other
securities it owns. Purchasing securities on a when-issued basis and forward
commitments involve a risk of loss if the value of the security to be purchased
declines and prior to the settlement date, which risk is in addition to ther
risk of decline in value of the Fund's other assets. No income accrues on
securities purchased on a when-issued basis prior to the time delivery of the
securities is made, although the Fund may earn interest on securities it has
deposited in the segregated account because it does not pay for the when-issued
securities until they are delivered. Investing in when-issued securities has the
effect of (but is not the same as) leveraging the Fund's assets. Although the
Fund would generally purchase securities on a when-issued basis or enter into
forward commitments with the intention of actually acquiring securities, the
Fund may dispose of a when-issued security of forward commitment prior to
settlement, if the Adviser deems it appropriate to do so. The Fund may realize
short-term profits or losses upon such sales.
COLORADO MUNICIPAL OBLIGATIONS AND SPECIAL RISK CONSIDERATIONS
(Colorado Bond Fund). The ability of this Fund to achieve its investment
objective depends on the ability of issuers of Colorado municipal obligations to
meet their continuing obligations for the payment of principal and interest.
The concentration of the Colorado tax-free 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.
Many municipal debt obligations, including many lower-rated tax-exempt
obligations, permit the issuers to call the security and thereby redeem their
obligations earlier than the stated maturity dates. Issuers are more likely to
call tax-exempt obligations during periods of declining interest rates. In these
cases, if the Fund owns a tax-exempt obligation which is called, the Fund will
receives its return of principal earlier than expected and would likely be
required to reinvest the proceeds at lower interest rates, thus reducing income
to the Fund.
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 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, fourth quarter, fiscal year 1997, June 20, 1997 (the "economic
report"), nearly 54% of non-agricultural employment in Colorado in 1996 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 next largest employment sectors in the state, representing
approximately 16.3% and 10.3%, respectively, of non-agricultural employment in
the state in 1996. The office of planning and budgeting projects similar
concentrations for calendar years 1997 and 1998.
According to the economic report, the Colorado unemployment rate
remained unchanged with an average of 4.2% during both 1995 and 1996.
Total retail sales increased by 16.7% during 1996.
12
<PAGE>
Colorado continued to surpass the employment growth rate of the U.S. with a 3.4%
rate of growth for Colorado in 1996, as compared with 2.0% for the nation as a
whole. However, the rate of job growth in Colorado is projected in the economic
report to be lower in 1997 than 1996 as a result of layoffs at various
employers.
Personal income rose 6.8% in Colorado during 1996, as compared with an
increase of 5.5% for the nation as a whole.
RESTRICTIONS OF APPROPRIATIONS 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 has been 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 has been set at 3% for 1995 and later years.
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
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 fiscal year upon the declaration of a state fiscal emergency by the
state general assembly.
According to the economic report, the fiscal year 1996 ending general
Fund balance was $368.5 million, which was $211.8 million over the combined
unappropriated reserve and emergency reserve requirements. The 1995 fiscal year
ending general Fund balance was $488.5 million, or $262.4 million over the
required unappropriated reserve and emergency reserve. Based on economic report
estimates, the fiscal year 1997 ending general Fund balance is expected to be
approximately $386.3 million, or $220.3 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 restricts 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 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, the imposition of a new tax, creation of debt, or mill
levy or valuation for assessment ratio increases or a change of tax policy
resulting in a net revenue gain. 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 property tax revenue 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
13
<PAGE>
percentage change in state population in the prior calendar year. The bases for
initial spending and revenue limits were fiscal year 1992 spending and 1991
property taxes collected in 1992. The bases for spending and revenue limits for
all subsequent fiscal years is 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.
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 obligation bonds without obtaining voter approval; (ii) whether a
multi-year lease-purchase agreement subject to annual appropriation 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 voter approved 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 provided that such bonds or bonds
issued to refund such bonds were voter approved. In later 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. Many Colorado local governments interpret
this decision to mean that a government with taxing power cannot be an
enterprise but that a business activity (such as a utility) owned by such a
government can be. Additional litigation in the "enterprise" arena may be filed
in the future to clarify these issues. The Colorado supreme court has also
decided that voters can authorize a government to keep and spend all revenues
received in excess of the spending limits. Other aspects of the spending limit
are being litigated in district court actions.
In 1985, the Colorado general assembly passed legislation creating a
self-insurance Fund and established a mechanism for claims adjustment,
investigation and defense, as well as authorizing the settlement and payment of
claims and judgements against the state. The general assembly also utilizes the
self-insurance Fund for payment of the state's workers' compensation
liabilities. The state currently maintains self-insurance for claims arising on
or after September 15, 1985 under the Colorado governmental immunity act and
claims against the state, its officials, or its employees arising under federal
law. Valid claims are paid from the risk management Fund created for this
purpose by the general assembly. Since its inception through June 30, 1997
approximately $49.3 million has been appropriated to the risk management Fund
for liability claims, other than workers' compensation, substantially all of
which amount has been expended or is encumbered for claims and expenses. The
state's actuarial estimate of unfunded liability as of June 30, 1996 was
approximately $103.9 million, approximately 80% of which is related to workers'
compensation liability. The state's risk management Fund appropriation for
fiscal year 1997-98 is approximately $42.7 million, of which approximately 72.7%
is related to workers' compensation liability. Costs of administration of the
risk management Fund, legal fees and claims are payable from the risk management
Fund.
Judgements awarded against the state for which there is no insurance
coverage or which are not payable from the state's risk management Fund
ordinarily require a legislative appropriation before they may be paid.
Sovereign immunity is not a defense available to the state in an action based
upon contract. Even so, as a general matter, the state takes the position that
judgements entered into against the state, except for certain federal civil
rights judgements, are payable only to the extent of appropriations therefor.
The state is a defendant in numerous lawsuits in which the plaintiffs
allege that the state has acted negligently or wrongfully. It is the state's
position that recoveries in such lawsuits would be
14
<PAGE>
limited by the Colorado governmental immunity act. Payment of such judgements,
if any, would be payable from insurance, the risk management Fund or would
require separate appropriations.
The state is a defendant in the following material litigation:
- a suit filed by the state of Kansas alleging wrongful conduct in
connection with the state's use of interstate water;
- suits filed by numerous employees of the state seeking compensation
for overtime under the federal labor standards act;
- a suit filed by a group of property owners for alleged actions and
inactions of the state with respect to the summitville mining site;
- a suit filed by the U.S. alleging the filing of false reports
regarding allegedly unauthorized flights by the Colorado national guard;
- a suit filed by certain professors at Metropolitan State college
alleging that their salaries have been improperly computed;
- a suit filed by a certified class of inmates seeking injunctive
relief against the state for alleged non-compliance under the Americans with
Disabilities Act, an adverse result in which would require the state to
implement significant capital improvements or alterations to some or all of 22
state prison facilities; and
- numerous suits filed or threatened demanding that the state pay for
all or a portion of the clean-up of several areas which are alleged to be
environmentally unsafe.
In addition, the state has been threatened with litigation by certain
lessees of water located beneath lands owned by the state and by certain
property owners alleging misuse of certain environmental clean-up moneys. The
monetary damages claimed or expected to be claimed in these pending and
threatened suits would exceed the insurance coverage available by a material
amount. The state is vigorously defending these suits.
The state is a defendant in numerous suits involving claims of
inadequate, negligent or unconstitutional treatment of prisoners and mental
patients. In some of these suits, plaintiffs are seeking or have obtained
certification of a class for a class action. Most of these cases involved
allegations of actual or punitive damages which may be material. In addition,
numerous other cases are pending in which plaintiffs allege that the state has
deprived persons of their civil rights. In the aggregate, the monetary damages
claimed (actual, punitive and attorney's fees) in these cases would exceed the
insurance coverage available by a material amount. However, the state believes
it is highly unlikely that there will be actual awards of judgements in material
amounts.
The state is currently a defendant in numerous federal civil rights
actions which individually, except as disclosed in the previous paragraph, do
not involve material damage claims; however, in the aggregate, such actions
could have a material effect on the state.
Revenues received by the state may be affected by tax appeals brought
by taxpayers from various tax assessments. In most instances, the amount of any
refunds resulting from such appeals would not be material. The state's revenues
may also be affected by claims made by taxpayers for refunds of income taxes
previously paid to the state. The amounts of such refund claims, in some
instance, may be material.
According to the economic report, for fiscal year 1996, general Fund
revenues (adjusted for cash Funds that are exempt from the amendment) were
$3,941.9 million and program revenues (cash Funds)
15
<PAGE>
were $1,815.5 million, for revenues totaling $5,757.3 million. During calendar
year 1995, population and inflation grew at rates of 4.4% and 2.7%,
respectively, for a combined total limit of 7.1%. Accordingly, under the
amendment, increases in state expenditures during the 1996 fiscal year could not
exceed $6,166.1 million and the actual 1996 general Fund and program revenues of
$6,124.3 million were under the limit. The limitation for fiscal year 1997 is
5.5% over revenues during the 1996 fiscal year; accordingly, 1997 fiscal year
revenues cannot exceed $6,528.5 million. Fiscal year 1997 revenues are estimated
to be approximately $140 million over the limitation. The limitation for the
1998 fiscal year is currently projected to be 5.2% which translates to a revenue
limit of approximately $6,946.5 million for fiscal year 1998. The state
currently projects that revenues will exceed the amendment limitation for the
foreseeable future. There will be a special session of the legislature in
October to determine how to refund the surplus for fiscal year 1997. It is
possible that in future legislative sessions proposals to reform the state tax
structure to minimize such surpluses may be considered. The state will have to
refund, or obtain voter approval to retain, the excess over the limitation in
1998.
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. According to state of Colorado audited finance reports, under
generally accepted accounting principles, the state had unrestricted general
Fund ending balances at June 30 of approximately $133.3 million in fiscal year
1992, $326.8 million in fiscal year 1993, $320.4 million in fiscal year 1994,
$408.0 million in fiscal year 1995, and $368.5 million for fiscal year 1996.
For fiscal year 1996, the following tax categories generated the
following percentages of the state's $4,268.7 million total revenues (accrual
basis): individual income taxes represented 54.3% of gross fiscal year 1996
receipts; sales, use, and other excise taxes represented 33.2% of gross fiscal
year 1996 receipt; and corporate income taxes represented 4.8% of gross fiscal
year 1996 receipts. For fiscal year 1997, general Fund revenues of approximately
$4,645.8 million and appropriations of approximately $4,553.2 million are
projected. The percentages of general Fund revenue generated by type of tax for
fiscal year 1997 are not expected to be significantly different from fiscal year
1996 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.
The major risks to a continued economic recovery in Colorado are
reduced federal expenditures, particularly in the area of defense, cessation of
large public works projects in the state, a drop in tourism caused by the lack
of any state-sponsored advertising, and reduced commercial real estate values.
Any of
16
<PAGE>
these potential events could adversely affect the Colorado economy and
local governmental revenues. Additionally, on November 3, 1992, Colorado voters
approved an amendment to the Colorado constitution which is commonly referred to
as the taxpayer's bill of rights ("Tabor"). Tabor imposes various limits and new
requirements on spending by the state of Colorado and all Colorado local
governments (each of which is referred to in this section as a "governmental
unit"). Any of the following, for example, now requires prior voter approval:
(i) any increase in a governmental unit's spending from one year to the next in
excess of the rate of inflation plus a "growth factor," as defined in Tabor;
(ii) any increase in the real property tax revenues of a local governmental unit
(not including the state) from one year to the next in excess of inflation plus
the appropriate "growth factor"; (iii) any new tax, tax rate increase, mill levy
increase, valuation for assessment ratio increase for a property class,
extension of an expiring tax or tax policy change directly causing a net tax
revenue gain; and (iv) except for refinancing bonded indebtedness at a lower
interest rate or adding new employees to existing pension plans, creation of any
multiple-fiscal year direct or indirect debt or other financial obligation
whatsoever without adequate present cash reserves pledged irrevocably and held
for payments in all future fiscal years. Tabor has already reduced the financial
flexibility of all levels of Colorado government. In particular, governmental
units dependent on taxes on residential property are being squeezed between
Tabor requirements of voter approval for increased mill levies and an earlier
state constitutional amendment which has had the effect of lowering the
assessment rate on residential property from 21.0% to 10.36% over the past eight
years.
There can be no assurance that these, or other events, will not
negatively affect the market value of the securities in the Fund or the ability
of municipal entities to pay their debt obligations in a timely manner.
Economic conditions in the state may have continuing effects on other
governmental units within the state (including issuers or the Colorado
obligations in the Fund), which, to varying degrees, have also experienced
reduced revenues as a result of recessionary conditions and other factors.
ILLIQUID SECURITIES. It is the policy of the Funds that illiquid
securities whose transfer is restricted by law (including certain securities
unregistered under federal securities law) and other illiquid securities
(including repurchase agreements of more than seven days' duration, variable and
floating rate demand and master demand notes not requiring receipt of the
principal note amount within seven days' notice and securities of foreign
issuers that are not listed on a recognized domestic or foreign securities
exchange) may not constitute, at the time of purchase or at any time, more than
15% of the value of the total net assets of the Fund in which they are held.
Securities with restrictions on resale by that have a readily available market
are not deemed illiquid for purposed of this limitation.
The Funds have adopted a policy with respect to investments in illiquid
securities. Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the securities act of 1933, as amended ("Securities Acts"),
securities that are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities that have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the securities act,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
17
<PAGE>
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The Funds may also invest in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration "transactions by an
issuer not involving any public offering." Section 4(2) instruments are
restricted in the sense that they can only be resold through the issuing dealer
and only to institutional investors; they cannot be resold to the general public
without registration. Restricted securities issued under Section 4(2) of the
securities act will be treated as liquid if determined to be liquid by the
advisor pursuant to the procedures adopted by the board.
The commission has adopted Rule 144a, which allows a broader
institutional trading market for securities otherwise subject to restrictions on
resale to the general public. Rule 144a establishes a "safe harbor" from the
registration requirements of the Securities Act applicable to resales of certain
securities to qualified institutional buyers. The adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this new 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 National Association of Securities Dealers, Inc. (the "NASD").
Consequently, it is the intent of the Fund to invest, pursuant to procedures
established by the board of trustees and subject to applicable investment
restrictions, in securities eligible for resale under Rule 144a which are
determined to be liquid based upon the trading markets for the securities.
The adviser will monitor the liquidity of restricted securities in the
Funds' portfolio under the supervision of the trustees. In reaching liquidity
decisions, the adviser will consider, inter alia, the following factors: (1) the
frequency of trades and quotes for the security over the course of six months or
as determined in the discretion of the adviser; (2) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers over the course of six months or as determined in the discretion of
the adviser, (3) dealer undertakings to make a market in the security; (4) 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), and (5) other factors, if any, which the adviser
deems relevant. The adviser will also monitor the purchase of Rule 144a
securities to assure that the total of all Rule 144a securities held by a Funds
do not exceed 15% of the Fund's average daily net assets. Rule 144a securities
which are determined to be liquid based upon their trading markets will not,
however, be required to be included among the securities considered to be
illiquid for purposes of Investment Restriction No. 3.
ZERO COUPON SECURITIES (Bond Fund). The Fund may invest in "zero
coupon" fixed income securities. These securities accrue interest at a specified
rate, but do not pay interest in cash on a current basis. The Fund is required
to distribute the income on these securities to Fund shareholders as the income
accrues, even though the Fund is not receiving the income in cash on a current
basis. Thus the Fund may have to sell other investments to obtain cash to make
income distributions at times when the Adviser would not otherwise deem it
advisable to do so. The market value of zero coupon securities is often more
volatile than that of non-zero coupon fixed income securities of comparable
quality and maturity.
INVESTMENT RESTRICTIONS
The following restrictions restate or are in addition to those
described under "Investment Restrictions" in the Prospectus.
Each Fund, except as indicated, may not:
18
<PAGE>
(1) Invest more than 15% of the value of its net assets in investments
which are illiquid (including repurchase agreements having maturities of more
than seven calendar days, variable and floating rate demand and master demand
notes not requiring receipt of principal note amount within seven days notice
and securities of foreign issuers which are not listed on a recognized domestic
or foreign securities exchange);
(2) Borrow money or pledge, mortgage or hypothecate its assets, except
that a Fund may enter into reverse repurchase agreements or borrow from banks up
to 30% of the current value of its net assets for temporary or emergency
purposes and those borrowings may be secured by the pledge of not more than 15%
of the current value of such Fund's total net assets (but investments may not be
purchased by a Fund while borrowings from banks exceed 5% of such Fund's net
assets);
(3) Issue senior securities, except insofar as a Fund may be deemed to
have issued a senior security in connection with any repurchase agreement or any
permitted borrowing;
(4) Lend more than 30% in value of the Fund's securities, including
investments in repurchase agreements, to broker-dealers or other financial
organizations. All such loans will be collateralized by cash, U.S. Government
obligations or other high-grade debt obligations that are maintained at all
times in an amount equal to at least 102% of the current value of loaned
securities;
(5) Invest in companies for the purpose of exercising control or
management;
(6) Invest more than 10% of its net assets in shares of other
investment companies;
(7) Invest in real property or mortgage loans (including limited
partnership interest but excluding real estate investment trusts and master
limited partnerships), commodities, commodity contracts, or oil, gas and other
mineral resource, exploration, development, lease or arbitrage transactions,
provided that the Fund may invest in collateralized mortgage obligations;
(8) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may technically
cause it to be considered an underwriter as that term is defined under the
Securities Act of 1933;
(9) Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(10) Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(11) Purchase or retain the securities of any issuer, if the individual
officers and Trustees of the Funds, the Adviser or the Distributor, each owning
beneficially more than 1/2 of 1% of the securities of such issuer, together own
more than 5% of the securities of such issuer;
(12) (Equity and Bond Funds Only) Purchase a security if, as a result,
more than 25% of the value of its total assets would be invested in securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) this limitation shall not apply to obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities; (b) wholly-owned finance companies will be considered to be
in the industries of their parents; and (c) utilities will be divided according
to their services. For example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry;
19
<PAGE>
(13) Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount no more than 2% of the
value of the Fund's net asset, may be warrants which are not listed on the New
York or American Stock Exchanges;
(14) Write, purchase or sell puts, calls or combinations thereof,
except that the equity and fixed income funds may purchase or sell puts and
calls as otherwise described in the Prospectus or SAI; however, no Fund will
invest more than 5% of its total assets in these classes of securities for
purposes other than bona fide hedging;
(15) Invest more than 5% of the current value of its total assets in
the securities of companies which, including predecessors, have a record of less
than three years' continuous operation;
(16) Acquire the outstanding voting securities of any one issuer if,
immediately after and as a result of such investment, the current market value
of the holdings of the Fund in the securities of such issuer exceeds 10% of the
market value of such issuers outstanding voting securities; or
(17) Pledge more than 15% of its net assets to secure indebtedness;
the purchase or sale of Securities on a "when-issued" basis is not deemed to be
a pledge of assets.
The Colorado Bond Fund will not make loans except that the Fund may
invest in Colorado Obligations which it is permitted to buy. The Fund will not
lend its portfolio securities.
With respect to 75% of its assets, no Fund (except the Colorado Bond
Fund), will invest more than 5% of its total assets in the securities of any one
issuer (except for U.S. Government securities). In addition, no Fund will
purchase more than 10% of the outstanding voting securities of any one issuer.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's investments will not constitute a violation of such
limitation, except that any borrowing by a Fund that exceeds the fundamental
investment limitations stated above must be reduced to meet such limitations
within the period required by the 1940 Act (currently three days) and
investments in illiquid securities which exceed 15% of net assets will be
reduced as promptly as possible to adhere to such limitation. Otherwise, a Fund
may continue to hold a security even though it causes the Fund to exceed a
percentage limitation because of fluctuation in the value of the Fund's assets.
MANAGEMENT
TRUSTEES AND OFFICERS
The principal occupations for the past five years of the Trustees and
executive officers of the Trust are listed below. The address of each, unless
otherwise indicated, is 370 Seventeenth Street, Suite 3100, Denver, Colorado
80202. Trustees deemed to be "interested persons" of the Trust for purposes of
the Investment Company Act of 1940, as amended, are indicated by an asterisk.
All of the Trustees were elected at a Special Meeting of shareholders held March
21, 1997.
<TABLE>
<CAPTION>
NAME (AGE) PRINCIPAL OCCUPATION**
<S> <C> <C>
W. Robert Alexander* (70) Mr. Alexander, a member of the Board of Trustees since December 1993, is
Trustee, Chairman and the Chief Executive Officer of ALPS Mutual Funds Services, Inc. which
President provides administration and distribution services for proprietary mutual
fund complexes. Prior to co-founding ALPS, Mr. Alexander was Vice
Chairman of First Interstate Bank of Denver, responsible for Trust,
Private Banking, Retail Banking, Cash Management Services and
Marketing. Mr. Alexander is
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
currently a member of the Board of Trustees of the Colorado Trust,
Colorado's largest foundation as well as a Trustee of the Hunter and
Hughes Trusts. Because of his affiliation with ALPS, Mr. Alexander is
considered an "interested" Trustee of Financial Investors Trust.
Mary K. Anstine (57) President/Chief Executive Officer, HealthONE, Denver, CO; Former Trustee
Executive Vice President, First Interstate Bank of Denver. Ms. Anstine
is currently a Director of the Trust of Colorado, Trustee of the Denver
Area Council of the Boy Scouts of America, a Director of the Junior
Achievement Board and the Colorado Uplift Board, and a member of the
Advisory Boards for the Girl Scouts Mile Hi Council and the Hospice of
Metro Denver. Formerly, Ms. Anstine served as a Director of ALPS from
October 1995 to December 1996; Director of HealthONE; a member of the
American Bankers Association Trust Executive Committee; and Director of
the Center for Dispute Resolution.
Edward B. Crowder (67) Mr. Crowder currently operates a marketing concern with operations in
Trustee the U.S. and Latin America. He has previously engaged in
business pursuits in the restaurant, oil and gas drilling, and real
estate development industries. Mr. Crowder is a former Director of
Athletics and head football coach at the University of Colorado.
John R. Moran, Jr. (68) Mr. Moran is President of The Colorado Trust, a private foundation
Trustee serving the health and hospital community in the State of
Colorado. An attorney, Mr. Moran was formerly a partner with the firm
of Kutak Rock
</TABLE>
- ----------
**Except as otherwise indicated, each individual has held the office shown or
other offices in the same company for the last five years.
The following table contains relevant information concerning the Executive
Officers of the Trust:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION** SINCE
<S> <C> <C>
H. David Lansdowne President and CEO of Tempest, Isenhart, January 1998
Vice President (51) Chafee, Lansdowne and Associates.
Robert Alder Executive Vice President of Tempest, Isenhart, January 1998
Vice President (56) Chafee, Lansdowne and Associates.
William Paston, Product Development Manager of ALPS Mutual February 1994
Vice President and Funds Services, Inc.
Treasurer (42) Prior to joining ALPS, Mr. Paston was an
associate with Lipper Analytical Services,
coordinating that firm's
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
marketing effort in the banking industry.
James V. Hyatt Mr. Hyatt is General Counsel of ALPS Mutual April 1998
Secretary (47) Funds Services,Inc., the Administrator and
Distributor. Prior to joining ALPS, Mr. Hyatt
served as Senior Legal Counsel for FMR Corp.
and Counsel to Fidelity Management Trust
Company.
Jeremy May Mr. May is a Director of Mutual Fund October 1997
Assistant Treasurer (28) Operations at ALPS Mutual Funds Services,
Inc., the Administrator and Distributor.
Prior to joining ALPS, Mr. May was an auditor
with Deloitte & Touche LLP in their Denver
office.
</TABLE>
- ------------
**Except as otherwise indicated, each individual has held the office shown or
other offices in the same company in the same company for the last five years.
Effective after the April 21, 1998 meeting of the Board, non-interested
Trustees of the Trust will receive from the Trust an annual fee in the amount of
$4,000 and $500 for attending each Board or committee meeting. Prior to this
meeting, the non-interested Trustees received no annual fee and $1,000 for
attending each Board meeting. The Trustees are reimbursed for all reasonable
out-of-pocket expenses relating to attendance at meetings.
For the Trust's fiscal year ended April 30, 1998, the non-interested
Trustees were compensated as follows:
<TABLE>
<CAPTION>
Pension or Aggregate
Retirement Estimated Compensation
Aggregate Benefits Annual From the Trust
Compensation Accrued As Benefits and Fund
from the Part of Fund Upon Complex Paid
Trust Expenses Retirement to Trustees
<S> <C> <C> <C> <C>
Mary K. Anstine, $4,000(1) $0 $0 $4,000
Trustee
- ------------------------------------------------------------------------------------------------------------------------
Edwin B. Crowder, $4,000(1) $0 $0 $4,000
Trustee
- ------------------------------------------------------------------------------------------------------------------------
John R. Moran, Jr., $4,000(1) $0 $0 $4,000
Trustee
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) Member of the Audit Committee.
ADVISER
Tempest, Isenhart, Chafee, Landsdowne & Assoc. ("Tempest, Isenhart"),
1380 Lawrence Street, Suite 1050, Denver, Colorado, acts as the investment
adviser to the Funds. Tempest, Isenhart manages
22
<PAGE>
the investment and reinvestment of the assets of the Funds and continuously
reviews, supervises and administers the Funds' investments. The Adviser is
responsible for placing orders for the purchase and sale of each Fund's
investments directly with brokers and dealers selected by it in its discretion.
The Investment Advisory contract ("Advisory Agreement") for the Funds
became effective on February 20, 1998. Each Advisory Agreement will continue in
effect for a two-year period 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 Tempest, Isenhart 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 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 obligations under the Advisory Agreement.
DISTRIBUTION OF FUND SHARES
Shares of the Funds are offered on a continuous basis through ALPS
Mutual Funds Services, Inc. ("ALPS") as Sponsor and Distributor of the Funds.
ALPS also serves as administrator and distributor of other mutual funds. As
distributor, ALPS acts as the Funds' agent to underwrite, sell and distribute
shares in a continuous offering.
ADMINISTRATOR, TRANSFER AGENT, BOOKKEEPING AND PRICING AGENT
Pursuant to an Administration Contract, ALPS acts as Administrator for
the Funds. ALPS provides management and administrative services necessary for
the operation of the Funds, including among other things, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission ("SEC") and
state securities commissions and (iii) general supervision of the operation of
the Funds, including coordination of the services performed by the Funds'
Adviser, custodian, independent accountants, legal counsel and others. In
addition, ALPS furnishes office space and facilities required for conducting the
business of the Funds and pays the compensation of the Funds' officers,
employees and Trustees affiliated with ALPS.
The Administration Agreements for the Bond Fund, Equity Fund and
Colorado Bond Fund were approved by the Board of Trustees, including a majority
of the Trustees who are not parties to the Contracts or interested persons of
such parties, at its meeting held on January 20, 1998. At any time, each
Administration Agreement is terminable with respect to a Fund without penalty,
at any time, by vote of a majority of the Trustees who are not "interested
persons" of the Funds and who have no direct or indirect financial interest in
the Administration Agreement upon not more than 60 days written notice to ALPS
or by vote of the holders of a majority of the shares of the Fund involved, or,
upon 60 days notice, by ALPS.
FEES AND EXPENSES
As compensation for advisory, management ad administrative services,
the Adviser and ALPS (the "Administrator") are paid a monthly fee at the
following annual rates:
23
<PAGE>
<TABLE>
<CAPTION>
ADVISORY FEE ADMINISTRATIVE FEE
------------ ------------------
<S> <C> <C>
Aristata Quality Bond Fund 0. 50% 0.20%*
Aristata Equity Fund 0.85% 0.20%*
Aristata Colorado Quality 0.50% 0.20%*
Tax-Exempt Fund
</TABLE>
* Subject to minimum annual fee of $90,000, $180,000 and $60,000 for the Bond
Fund, Equity Fund and Colorado Bond Fund, respectively.
During the fiscal period from March 2, 1998 (the inception date for
each Fund) and April 30, 1998, the Adviser and ALPS were compensated by each
fund as follows:
<TABLE>
<CAPTION>
Adviser Administrator
------- -------------
<S> <C> <C>
Aristata Quality Bond Fund $47,180 $18,872
Aristata Equity Fund $141,096 $33,199
Colorado Quality Tax-Exempt Fund $19,665 $9,863
</TABLE>
During the fiscal period April 30, 1998, the Adviser waived fees in the amount
of $17,002, $37,555 and $18,406 for the Bond, Equity and Colorado Bond Funds,
respectively.
DETERMINATION OF NET ASSET VALUE
As indicated under "Fund Share Valuation" in the Prospectus, each
Fund's net asset value per share for the purpose of pricing purchase and
redemption orders is determined at 4:00 p.m. (Eastern time) on each day the New
York Stock Exchange is open for trading with the exception of certain bank
holidays. The Funds will be closed on the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payment for shares may, in the discretion of the Adviser, be made in
the form of securities that are permissible investments for the Funds as
described in the Prospectus. For further information about this form of payment
please contact ALPS. In connection with an in-kind securities payment, a Fund
will require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund and that the
Fund receive satisfactory assurances that (i) it will have good and marketable
title to the securities received by it; (2) the securities are in proper form
for transfer to the Fund; and (3) adequate information will be provided
concerning the basis and other matters relating to the securities.
Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange is closed (other than customary weekend and holiday
closings), or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of
24
<PAGE>
which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Fund may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
The Funds may suspend redemption rights or postpone redemption payments
(as well as suspend the recordation of the transfer of shares) for such periods
as are permitted under the 1940 Act. The Funds may also redeem shares
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Funds' responsibilities under
the 1940 Act.
In addition, the Funds may redeem shares involuntarily to reimburse a
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder.
All redemptions of shares of the Funds will be made in cash, except
that the commitment to redeem shares in cash extends only to redemption requests
made by each shareholder of a Fund during any 90-day period of up to the lesser
of $250,000 or 1% of the net asset value of that Fund at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC and
is a fundamental policy of the Funds that may not be changed without shareholder
approval. In the case of redemption requests by shareholders in excess of such
amounts, the Board of Trustees reserves the right to have the Funds make
payment, in whole or in part, in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of a Fund
to the detriment of its existing shareholders. In this event, the securities
would be valued in the same manner as the securities of that Fund are valued. If
the recipient were to sell such securities, he or she may incur brokerage or
other transactional charges.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other investment
advisory clients of the Adviser are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling the security. In some instances, one client may sell
a particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as possible, averaged as
to price and allocated between such clients in a manner which in the Adviser's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
The Funds have no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Funds' Board of Trustees, the Adviser is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Funds to obtain the best results
taking into account the broker-dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available. The reasonableness of such
spreads or brokerage commissions will be evaluated by comparing spreads or
commissions among brokers or dealers in consideration of the factors listed
immediately above and research services described below.
Purchases and sales of securities will often be principal transactions
in the case of debt securities and equity securities traded otherwise than on an
exchange. The purchase or sale of equity securities will
25
<PAGE>
frequently involve the payment of a commission to a broker-dealer who effects
the transaction on behalf of a Fund. Debt securities normally will be purchased
or sold from or to issuers directly or to dealers serving as market makers for
the securities at a net price. Under the 1940 Act, persons affiliated with the
Funds or the Sponsor are prohibited from dealing with the Funds as a principal
in the purchase and sale of securities except in limited situations permitted by
SEC regulations, unless a permissive order allowing such transactions is
obtained from the SEC.
The Adviser may, in circumstances in which two or more broker-dealers
are in a position to offer comparable results, give preference to a dealer which
has provided statistical or other research services to the Adviser. By
allocating transactions in this manner, the Adviser is able to supplement its
research and analysis with the views and information of securities firms. These
items, which in some cases may also be purchased for cash, include such matters
as general economic and security market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to the Adviser in advising
various of its clients (including the Funds), although not all of these services
are necessarily useful and of value in managing the Funds. The management fee
paid by the Funds is not reduced because the Adviser and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934
(the "Act"), the Adviser may cause the Funds to pay a broker-dealer which
provides "brokerage and research services" (as defined in the Act) to the
Adviser an amount of disclosed commission for effecting a securities transaction
for the Funds in excess of the commission which another broker-dealer would have
charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
PORTFOLIO TURNOVER
Changes may be made in the portfolio consistent with the investment
objectives and policies of the Funds whenever such changes are believed to be in
the best interests of the Funds and their shareholders. 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 the period and dividing it by the
monthly average of the market value of such securities during the period.
The Adviser has employed and will continue to use a stock selection
style based on fundamental research analysis and techniques which focuses on the
long-term business, industry, and economic cycle. This long-term cyclical view
typically results in a low turnover strategy. Because of this long-term
investment perspective and the desire to minimize net short-term capital gains,
the Funds generally will not engage in the trading of securities for the
purposes of realizing short-term profits. Short-term realized capital gains
cannot be eliminated, however, as certain market conditions may, in the
Adviser's best judgment, warrant realizing such gains.
For purposes of this calculation, portfolio securities exclude all
securities having a maturity when purchased of one year or less. The Funds'
annualized portfolio turnover rates for the fiscal period from March 2, 1998 to
April 30, 1998 were 11.44%, 14.20% and 17.64% for the Bond, Equity and Colorado
Bond Funds, respectively.
26
<PAGE>
TAXATION
The Funds intend to continue to qualify to be treated as regulated
investment companies for each taxable year pursuant to the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify as a regulated investment company, a Fund must (a) distribute to
shareholders at least 90% of its investment company taxable income (which
includes, among other items, dividends, taxable interest and the excess of net
short-term capital gains over net long-term capital losses); (b) derive in each
taxable year at least 90% of its gross income from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition of
stock, securities or foreign currencies or other income derived with respect to
its business of investing in such stock, securities or currencies; and (c)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by cash
and cash items (including receivables), U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and not greater than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies). In addition, a Fund
earning tax-exempt interest must, in each year, distribute at least 90% of its
net tax-exempt income. By meeting these requirements, the Funds generally will
not be subject to Federal income tax on its investment company taxable income
and net capital gains which are distributed to shareholders. If the Funds do not
meet all of these Code requirements, they will be taxed as ordinary corporations
and their distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely
basis in accordance with a calendar year distribution requirement are subject to
a nondeductible 4% excise tax. To prevent imposition of the excise tax, each
Fund must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and ( 3) all ordinary income and capital gain net
income (adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution, including an "exempt-interest
dividend," will be treated as paid on December 31, of a calendar year if it is
declared by a Fund during October, November or December of that year to
shareholders of record on a date in such a month and paid by the Fund during
January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Some Funds may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC under the Code if at least
one-half of its assets constitutes investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock. A
Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, a Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. If this election is made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply. In addition,
other elections may become available that
27
<PAGE>
would affect the tax treatment of PFIC stock held by a Fund. Each Fund's
intention to qualify annually as a regulated investment company may limit its
elections with respect to PFIC stock.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders and that will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not invest in PFIC stock. Investors should consult
their own tax advisors in this regard.
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions from certain of the
Funds may be eligible for the dividends-received deduction available to
corporations. To the extent dividends received by a Fund are attributable to
foreign corporations, a corporation that owns shares will not be entitled to the
dividends-received deduction with respect to its pro rata portion of such
dividends, since the dividends-received deduction is generally available only
with respect to dividends paid by domestic corporations. Proposed legislation,
if enacted, would reduce the dividends-received deduction from 70 to 50 percent.
Distributions of net long-term capital gains, if any, designated by the
Funds as long- term capital gain dividends are taxable to shareholders as
long-term capital gain, regardless of the length of time the Funds' shares have
been held by a shareholder. All distributions are taxable to the shareholder in
the same manner whether reinvested in additional shares or received in cash.
Shareholders will be notified annually as to the Federal tax status of
distributions.
Distributions by a Fund reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a shareholder's
cost basis, such distribution, nevertheless, would be taxable to the shareholder
as ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Funds. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a distribution which
nevertheless generally will be taxable to them.
Upon the taxable disposition (including a sale or redemption) of shares
of a Fund, a shareholder may realize a gain or loss depending upon his basis in
his shares. Such gain or loss generally will be treated as capital gain or loss
if the shares are capital assets in the shareholders' hands. Such gain or loss
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be treated as
long-term capital loss if such shares have been held by the shareholder for six
months or less. A loss realized on the redemption, sale or exchange of Fund
shares will be disallowed to the extent an exempt interest dividend was received
with respect to those shares if the shares have been held by the shareholder for
six months or less. Further, a loss realized on a disposition will be disallowed
to the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for Federal income tax purposes in each share received equal to the
net asset value of a share of the Funds on the reinvestment date.
The taxation of equity options is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by a Fund for selling a put
or call option is not included in income at the time of receipt. If the option
expires, the premium is short-term capital gain to the Fund. If the Fund enters
into a
28
<PAGE>
closing transaction, the difference between the amount paid to close out its
position and the premium received is short-term capital gain or loss. If a call
option written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the sale
of such security and any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term depending upon the holding period of the
security. With respect to a put or call option that is purchased by a Fund, if
the option is sold any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term, depending upon the holding period of the
option. If the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the option. If the
option is exercised, the cost of the option, in the case of a call option, is
added to the basis of the purchased security and in the case of a put option,
reduces the amount realized on the underlying security in determining gain or
loss.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds may invest in are so-called
"section 1256 contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of a taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to market" with the result that unrealized
gains or losses are treated as though they were realized and the resulting gain
or loss is treated as 60/40 gain or loss. Investors should consult their own tax
advisors in this regard.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that is part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. Hedging
transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to stockholders.
A Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under the rules according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders and which will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a Fund that did not engage in such hedging transactions. Investors
should consult their own tax advisors in this regard.
Certain requirements that must be met under the Code in order for a
Fund to qualify as a regulated investment company, may limit the extent to which
a Fund will be able to engage in transactions in options, futures, and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest, dividends
or other receivables, or accrues expenses or other liabilities denominated in a
foreign currency, and the time the Fund actually collects such receivables, or
pays such liabilities, generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of certain options and forward and futures
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "section 988" gains or losses, may
increase, decrease, or eliminate the amount of a Fund's investment company
taxable income to be
29
<PAGE>
distributed to its shareholders as ordinary income. Investors should consult
their own tax advisors in this regard.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, the Fund will
be eligible and intends to elect to "pass-through" to its shareholders the
amount of such foreign taxes paid by the Fund. Pursuant to this election, a
shareholder would be required to include in gross income (in addition to taxable
dividends actually received) his pro rata share of the foreign taxes paid by a
Fund and would be entitled either to deduct his pro rata share of foreign taxes
in computing his taxable income or to use it as a foreign tax credit against his
U.S. Federal income tax liability, subject to limitations. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions,
but such a shareholder may be eligible to claim the foreign tax credit (see
below). Each shareholder will be notified within 60 days after the close of a
Fund's taxable year whether the foreign taxes paid by a Fund will "pass-through"
for that year and, if so, such notification will designate (a) the shareholder's
portion of the foreign taxes paid to each such country, and (b) the portion of
the dividend which represents income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the foreign tax
credit) including foreign source passive income of a Fund. The foreign tax
credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income.
The Funds are required to report to the Internal Revenue Service
("IRS") all distributions except in the case of certain exempt shareholders. All
such distributions generally are subject to withholding of Federal income tax at
a rate of 31% ("backup withholding") in the case of non-exempt shareholders if
(1) the shareholder fails to furnish the Funds with and to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the Funds or a shareholder that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions, whether
reinvested in additional shares or taken in cash, will be reduced by the amounts
required to be withheld. Backup withholding is not an additional tax. Any amount
withheld may be credited against the shareholder's U.S. Federal income tax
liability. Investors may wish to consult their tax advisers about the
applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local income taxes in certain states. Shareholders should consult
their tax advisers with respect to particular questions of Federal, state and
local taxation. Shareholders who are not U.S. persons should consult their tax
advisers regarding U.S. and foreign tax consequences of ownership of shares of
the Funds including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
30
<PAGE>
THE COLORADO BOND FUND. The Fund intends to manage its portfolio so
that it will be eligible to pay "exempt-interest dividends" to shareholders. The
Fund will so qualify if, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consists of state, municipal, and
certain other securities, the interest on which is exempt from the regular
Federal income tax. To the extent that the Fund's dividends distributed to
shareholders are derived from such interest income and are designated as
exempt-interest dividends by the Fund, they will be excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends, however, must be taken into account by shareholders in determining
whether their total incomes are large enough to result in taxation of up to 85%
of their Social Security benefits and certain railroad retirement benefits. The
Fund will inform shareholders annually as to the portion of the distributions
from the Fund which constitute exempt-interest dividends. In addition, for
corporate shareholders of each Fund, exempt-interest dividends may comprise part
or all of an adjustment to alternative minimum taxable income. Exempt-interest
dividends that are attributable to certain private activity bonds, while not
subject to the regular Federal income tax, may constitute an item of tax
preference for purposes of the alternative minimum tax.
Individuals, trusts, estates, and corporations who are holders of
shares of the Colorado Bond Fund and who are subject to Colorado income tax will
not be subject to Colorado tax on distributions from the Colorado Bond Fund to
the extent that such distributions qualify as either (1) exempt interest
dividends of a regulated investment company under Section 852(b)(5) of the Code,
which are derived from interest on tax-exempt obligations of the State of
Colorado or any of its political subdivisions; or (2) distributions derived from
interest on obligations of the United States or its possessions included in
federal adjusted gross income.
To the extent that distributions on shares of the Fund are attributable
to sources of income not described in the preceding sentences, including capital
gains, such distributions will not be exempt from Colorado income tax.
There are no municipal income taxes in Colorado. As intangibles, shares
in the Colorado Bond Fund will be exempt from Colorado property taxes.
Changes in the tax law, including provisions relating to tax-exempt
income, frequently come under consideration. If such changes are enacted, the
tax consequences arising from an investment in the Colorado Bond Fund may be
affected. Since the Funds do not undertake to furnish tax advice, it is
important for shareholders to consult their tax advisers regularly about the tax
consequences to them of investing in one or more of the Funds.
OTHER INFORMATION
CAPITALIZATION
The Trust is a Delaware business trust established under a Declaration
of Trust dated November 30, 1993 and currently consists of five separately
managed portfolios, three of which are discussed in this SAI.
The capitalization of the Funds consists solely of an unlimited number
of shares of beneficial interest with no par value. The Board of Trustees may
establish additional Funds (with different investment objectives and fundamental
policies) at any time in the future. Establishment and offering of additional
Funds will not alter the rights of the shareholders. When issued, shares are
fully paid, non-assessable, redeemable and freely transferable. Shares do not
have preemptive rights or subscription rights. In any liquidation of a Fund,
each shareholder is entitled to receive his pro rata share of the net assets of
that Fund.
31
<PAGE>
In the event of a liquidation or dissolution of the Funds or an
individual Fund, shareholders of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution. Shareholders of a Fund are entitled to
participate in the net distributable assets of the particular Fund involved in
liquidation, based on the number of shares of the Fund that are held by each
shareholder.
VOTING RIGHTS
Under the Declaration of Trust, the Funds are not required to hold
annual meetings of each Fund's shareholders to elect Trustees or for other
purposes. It is not anticipated that the Funds will hold shareholders' meetings
unless required by law or the Declaration of Trust. In this regard, the Trust
will be required to hold a meeting to elect Trustees to fill any existing
vacancies on the Board if, at any time, fewer than a majority of the Trustees
have been elected by the shareholders of the Funds. In addition, the Declaration
of Trust provides that the holders of not less than two-thirds of the
outstanding shares of the Funds may remove persons serving as Trustee either by
declaration in writing or at a meeting called for such purpose. The Trustees are
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Funds. To the extent required by
applicable law, the Trustees shall assist shareholders who seek to remove any
person serving as Trustee.
The Funds' shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
Shareholders of all of the Funds, as well as those of any other
investment portfolio now or hereafter offered by the Fund, will vote together in
the aggregate and not separately on a Fund-by-Fund basis, except as otherwise
required by law or when permitted by the Board of Trustees. 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 Funds 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 auditors, the approval of
principal underwriting contracts and the election of trustees may be effectively
acted upon by shareholders of the Funds voting together in the aggregate without
regard to a particular Fund.
As of July 31, 1998, the following shareholders owned 5% or more of the
outstanding shares of the Funds as listed below:
<TABLE>
<CAPTION>
PERCENTAGE
FUND INTEREST
- --------------------------------------------------------------------------------
<S> <C>
EQUITY FUND
Colorado State Bank & Trust 96.05%
Attn: Trust Department
1600 Broadway
Denver, CO 80202
32
<PAGE>
BOND FUND
Colorado State Bank & Trust 97.88%
Attn: Trust Department
1600 Broadway
Denver, CO 80202
COLORADO BOND FUND
Colorado State Bank & Trust 90.73%
Attn: Trust Department
1600 Broadway
Denver, CO 80202
</TABLE>
CUSTODIAN AND TRANSFER AGENT
Fifth Third Bank has been appointed as the Funds' custodian. Pursuant
to a Custodian Agreement, Fifth Third Bank is responsible for holding the Funds'
cash and portfolio securities.
ALPS has been appointed as Transfer Agent for the Funds and will
perform dividend disbursing and transfer agency-related services for the Funds.
YIELD AND PERFORMANCE INFORMATION
The Funds may, from time to time, include their yields, effective
yields, tax equivalent yields and average annual total returns in advertisements
or reports to shareholders or prospective investors.
Quotations of yield for the Funds will be based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during a period ("net investment income") and will be computed by dividing net
investment income by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD=2[(a-b+1 )(6)-1]
----------------
cd
where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of any reimbursements), c = the average daily number
of shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period. As
of April 30, 1998 the 30 day SEC yields for the Bond and Colorado Bond Funds
were 5.40% and 3.94% including fee waivers and reimbursements and 5.21% and
3.46% without fee waivers and reimbursements, respectively.
Quotations of tax-equivalent yield for the Bond Fund will be calculated
by: (a) dividing the portion of the Fund's yield that is exempt from both
federal and California 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
portion, if any, of the Fund's yield that is not exempt from federal income tax.
33
<PAGE>
Quotations of average annual total return will be expressed in terms of
the average annual compounded rate of return of a hypothetical investment in a
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P(l+T)(n)=ERV
(where P = a hypothetical initial payment of $1,000, T= the average
annual total return, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period). All
total return figures will reflect a proportional share of Fund expenses (net of
certain reimbursed expenses) on an annual basis, and will assume that all
dividends and distributions are reinvested when paid. As of April 30, 1998, the
total return since inception (3/2/98) was 0.69%, 4.54% and 0.22% for the Bond,
Equity and Colorado Bond Funds, respectively.
Quotations of yield and total return will reflect only the performance
of a hypothetical investment in the Funds during the particular time period
shown. Yield and total return for the Funds will vary based on changes in the
market conditions and the level of a Fund's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In connection with communicating its yields or total return to current
or prospective shareholders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indices which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in reports
and promotional literature, to: (i) the Standard & Poor's 500 Stock Index,
Dow Jones Industrial Average, or other unmanaged indices so that investors
may compare the Funds' results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities markets in
general; (ii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets, or tracked by other
services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment
of dividends but generally do not reflect deductions for administrative and
management costs and expenses.
TAX EQUIVALENT YIELD CALCULATIONS - COLORADO QUALITY BOND FUND
The Colorado Bond 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 be one minus a stated federal income tax rate, and (c)
adding the figures resulting from (a) and (b) above to that portion, if any, of
the Fund's yield that is not exempt from federal income tax.
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 Quality Bond Fund.
The following table shows how to translate the yield of an investment
that is exempt from both Federal and Colorado personal income taxes into a
taxable equivalent yield for the 1997 taxable year. The last four columns of the
table show approximately how much a taxable investment would have to yield in
order to generate an after-tax (Federal and Colorado) yield of 2%, 3%, 4%, 5%
and 6%. For example, the table shows that a married taxpayer filing a joint
return with taxable income of $50,000 would have to earn a yield of
approximately 10.23% before Federal and Colorado personal income taxes in order
to earn a yield after such taxes of 7%.
34
<PAGE>
1997 Tax Rates and Tax-Equivalent Yields
<TABLE>
<CAPTION>
Federal Tax Individual tax exempt yield:
Taxable Income* Bracket**
2% 3% 4% 5% 6%
Single Return Joint Return Taxable equivalent yield:
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 24,650 $ -- $ 41,200 $ 15.0% 2.35% 3.53% 4.71% 5.88% 7.06%
$ 24,651 $ 59,750 $ 41,201 $ 99,600 28.0% 2.78% 4.17% 5.56% 6.94% 8.33%
$ 59,751 $124,650 $ 99,601 $151,750 31.0% 2.90% 4.35% 5.80% 7.25% 8.70%
$124,651 $271,050 $151,751 $271,050 36.0% 3.13% 4.69% 6.25% 7.81% 9.38%
$271,051 above $271,051 above 39.6% 3.31% 4.97% 6.62% 8.28% 9.93%
</TABLE>
* Taxable income (gross income after all exemptions, adjustments, and
deductions) based on 1997 tax rates.
** Excludes the impact of the phaseout of personal exemptions, limitation on
itemized deductions, and other credits, exclusions, and adjustments which
may raise a taxpayer's marginal tax rate. An increase in a shareholder's
marginal tax rate would increase that shareholder's tax-equivalent yield.
Colorado individual income tax is levied at a flat rate of 5%
<TABLE>
<CAPTION>
Effective
Combined
Federal Colorado Federal &
Tax Rate Tax Rate Tax Rate
<S> <C> <C>
15.0% 5.0% 19.25%
28.0% 5.0% 31.60%
31.0% 5.0% 34.45%
36.0% 5.0% 39.20%
39.6% 5.0% 42.62%
</TABLE>
When your effective combined federal and Colorado state tax rate is:
<TABLE>
<S> <C> <C> <C> <C>
19.25% 31.60% 34.45% 39.20% 42.62%
</TABLE>
Then your tax-equivalent yield is:
Tax-Equivalent Yield*
<TABLE>
<S> <C> <C> <C> <C> <C>
2.0% 2.48% 2.92% 3.05% 3.29% 3.49%
3.0% 3.72% 4.39% 4.58% 4.93% 5.23%
4.0% 4.95% 5.85% 6.10% 6.58% 6.97%
5.0% 6.19% 7.31% 7.63% 8.22% 8.71%
6.0% 7.43% 8.77% 9.15% 9.87% 10.46%
7.0% 8.67% 10.23% 10.68% 11.51% 12.20%
8.0% 9.91% 11.70% 12.20% 13.16% 13.94%
</TABLE>
* The Portfolio may invest a portion of its assets in obligations that are
subject to state or federal income tax. When the Portfolio invests in
these obligations, its tax- equivalent yield will be lower. In the table
above, tax-equivalent yields are calculated assuming investments are
100% federally and state tax-free.
35
<PAGE>
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP serves as the independent accountants for the
Funds. Deloitte & Touche provides audit services, tax return preparation and
assistance and consultation in connection with review of SEC filings. Deloitte &
Touche's address is 555 Seventeenth Street, Suite 3600, Denver, Colorado 80202.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included
in the Funds' Registration Statement filed with the SEC under the Securities Act
of 1933 with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
Registration Statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of
any contract or other documents referred to are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The financial statements appearing in the most current fiscal year
Annual Report to shareholders and the report thereon of the independent
accountants appearing therein, namely D&T, are incorporated by reference in this
Statement of Additional Information and are included in reliance upon such
report and on the authority of such firm as experts in auditing and accounting.
The Annual Report to shareholders which contains the referenced statements, is
available upon request and without charge.
36
<PAGE>
APPENDIX
KEY TO MOODY'S BOND RATINGS
Aaa Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most likely to impair the fundamentally strong position
of such issues.
Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
some time in the future.
Baa Bonds that are rated Baa are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Ba Bonds that are rated Ba are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
B Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance
of other terms of the contract over any long period of time may be
small.
Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds that are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
KEY TO S & P'S BOND RATINGS
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
37
<PAGE>
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits 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 Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "BBB" rating.
B Debt rated "B" has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BB-" rating.
CCC Debt rated "CCC" 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 The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is 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 The rating "CI" is reserved for income bonds on which no interest
is being paid.
D Debt rated "D" is in payment default. The "D" rating category 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 that such payments will be made during such grace period. The
"D" rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
38
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements for the fiscal year ended
April 30, 1998 are incorporated by reference to the
Trust's Annual Report on Form N-30D dated April 30,
1998.
(b) Exhibits
<TABLE>
<S> <C> <C>
* (1) (a) Trust Instrument.
* (1) (b) Revised Trust Instrument.
* (2) (a) By-Laws of Registrant.
* (2) (b) Revised By-Laws of Registrant.
(3) None.
(4) None.
* (5) (a) Investment Advisory Contract between Registrant and GE Investment Management,
Incorporated with respect to the U.S. Treasury Money Market Fund.
* (5) (b) Investment Advisory Contract between Registrant and GE Investment Management,
Incorporated with respect to the U.S. Government Money Market Fund.
** (5) (c) Investment Advisory Contract between Registrant and Tempest, Isenhart, Chafee, Lansdowne
& Associates, Inc. with respect to the Aristata Equity Fund.
** (5) (d) Investment Advisory Contract between Registrant and Tempest, Isenhart, Chafee, Lansdowne
& Associates, Inc. with respect to the Aristata Quality Bond Fund.
** (5) (e) Investment Advisory Contract between Registrant and Tempest, Isenhart, Chafee, Lansdowne
& Associates, Inc. with respect to the Aristata Colorado Quality Tax-Exempt Fund.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
** (5) (f) Investment Advisory Contract between Registrant and GE Investment Management,
Incorporated with respect to the Prime Money Market Fund.
** (6) (a) Distribution Agreement between Registrant and
ALPS Mutual Funds Services, Inc.
** (b) Amended and restated Administration Agreement between Registrant and ALPS Mutual Funds
Services, Inc.
(7) None.
* (8) (a) Custodian Contract between Registrant and State Street Bank and Trust Company.
* (8) (b) Custodian Contract between Registrant and Fifth Third Bank.
** (9) (a) Transfer Agency and Service Agreement between Registrant and ALPS Mutual Funds Services,
Inc.
** (9) (c) Bookkeeping and Pricing Agreement between Registrant and ALPS Mutual Funds Services,
Inc.
(10) None.
(11) None.
(12) None.
*** (13) Subscription Agreement.
(14) None.
(15) None.
* (16) Schedule of Computation of Performance Calculations.
**** (17) Financial Data Schedules.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(18) None
**** (99.B10) Opinion and Consent of Davis, Graham & Stubbs LLP, counsel to Registrant.
**** (99.B11) Consent of Independent Public Accountants.
</TABLE>
Other Exhibits
* (a) Power of Attorney dated April 15, 1997.
* Filed with Post-Effective Amendment No. 7 to Registrant's Registration
Statement on August 28, 1997.
** Filed with Post-Effective Amendment No. 10 to Registrant's
Registration Statement on June 12, 1998
*** Filed with Post-Effective Amendment No. 5 to Registrant's Registration
Statement on August 28, 1996.
**** Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of July 31, 1998:
<TABLE>
<S> <C> <C>
U.S. Treasury Money Market Fund 333
Government Money Market Fund 105
Prime Fund 0
Aristata Equity Fund 18
Aristata Quality Bond Fund 11
Aristata Colorado Quality Tax-Exempt Fund 14
</TABLE>
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment
Company Act of 1940 (the "1940 Act") and pursuant to Article X of the
Registrant's Trust Instrument (Exhibit 1 to the Registration Statement), Section
7 of each Investment Advisory Agreement (Exhibits 5(a), 5(b), 5(c), 5(d) and
5(e) to this Registration Statement) and Sections 1.9 and 1.10 of the
Distribution Agreement (Exhibit 6(a) to this Registration Statement), officers,
trustees, employees and agents of the Registrant will not be liable to the
Registrant, any shareholder, officer, trustee, employee, agent or other person
for any action or failure to act, except for bad faith, willful misfeasance,
gross negligence or reckless disregard of duties, and those individuals may be
indemnified against liabilities
<PAGE>
in connection with the Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its
officers and trustees against liabilities, and certain costs of defending claims
against such officers and trustees, to the extent such officers and trustees are
not found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 7 of each Investment Advisory Contract and Section 1.9
of the Distribution Contract limit the liability of GE Investment Management,
Inc., Tempest, Isenhart, Chafee, Lansdowne & Associates, Inc. and ALPS Mutual
Funds Services, Inc., respectively, to liabilities arising from willful
misfeasance, bad faith or gross negligence in the performance of their
respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, By-Laws, Investment
Advisory Contracts and Distribution Contract in a manner consistent with Release
No. 11330 of the Securities and Exchange Commission under the 1940 Act so long
as the interpretations of Section 17(h) and 17(i) of such Act remain in effect
and are consistently applied.
Item 28. Business and Other Connections of Investment Advisers
With respect to all Funds, reference is made to "Management of
the Trust" in the Prospectus for each such Fund forming Part A and "Management"
in the Statement of Additional Information for such Funds forming Part B of this
Registration Statement.
The list required by this Item 28 of officers and directors of
GEIM, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by those officers and directors
during the past two
<PAGE>
years, is incorporated by reference to Schedules A and D of
Form ADV filed by GEIM pursuant to the Investment Advisers Act of 1940, as
amended (SEC File No. 801-31947).
The list required by this Item 28 of officers and directors of
Tempest, Isenhart, Chafee, Lansdowne & Assocs. ("Tempest"), together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by those officers and directors during the past
two years, is incorporated by reference to Schedules A and D of Form ADV filed
by Tempest pursuant to the Investment Advisers Act of 1940, as amended (SEC File
No. 801-11809-3).
Item 29. Principal Underwriter
(a) ALPS Mutual Funds Services, Inc. acts as Distributor/Underwriter for
various other unrelated registered investment companies.
(b) Officers and Directors
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Positions and Offices with
Business Address* Registrant Underwriter
- ------------------ -------------------------- --------------------------
<S> <C> <C>
W. Robert Alexander Chairman of the Board of Chairman and Chief Executive
Trustees and President Officer and Secretary
Arthur J. L. Lucey None President and Director
Thomas A. Carter None Chief Financial Officer
Edmund J. Burke None Executive Vice President
and Director
James V. Hyatt Secretary General Counsel
Jeremy O. May Assistant Treasurer Vice Presdent
William N. Paston Vice President and Treasurer Vice President
Rick A. Pederson None Director
Chris Woessner None Director
John Hannon None Director
</TABLE>
<PAGE>
- ----------------------
*All addresses are 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202.
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are maintained at the offices of ALPS Mutual Funds Services, Inc.,
General Electric Investment Management, Inc. and Tempest, Isenhart, Chafee,
Lansdowne & Associates, Inc..
Item 31. Management Services
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the removal of a trustee
if requested to do so by the holders of at least 10% of
the Registrant's outstanding shares.
(b) Registrant undertakes to provide the support to
shareholders specified in Section 16(c) of the 1940 Act
as though that section applied to the Registrant.
(c) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of
Registrant's latest annual report upon request and
without a charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Post-Effective
Amendment No. 11 of its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Denver, and State of
Colorado, on August 28, 1998.
FINANCIAL INVESTORS
TRUST (Registrant)
By: /s/ W. ROBERT ALEXANDER
-------------------------------
W. Robert Alexander
Trustee and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- -----
<S> <C> <C>
/s/ W. ROBERT ALEXANDER Trustee and August 28, 1998
- ------------------------ President
W. Robert Alexander
/s/ WILLIAM PASTON Vice President and August 28, 1998
- ------------------------ Treasurer (Principal
William Paston Financial Officer)
/s/ MARY K. ANSTINE* Trustee August 28, 1998
- ------------------------
Mary K. Anstine
/s/ EDWIN B. CROWDER* Trustee August 28, 1998
- ------------------------
Edwin B. Crowder
/s/ JOHN R. MORAN, JR* Trustee August 28, 1998
- -----------------------
John R. Moran, Jr.
</TABLE>
* Signature affixed by James V. Hyatt pursuant to a Power of Attorney
dated April 15, 1997 and filed with Post-Effective Amendment No. 7 to
Registrant's Registration Statement on August 28, 1997.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AND
THE INVESTMENT COMPANY ACT OF 1940
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCIAL INVESTORS TRUST
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document
------ --------
<S> <C>
27 Financial Data Schedules
99.B10 Opinion and Consent of Davis, Graham & Stubbs LLP, counsel
to Registrant.
99.B11 Consent of Independent Public Accountants
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000915802
<NAME> FINANCIAL INVESTORS TRUST
<SERIES>
<NUMBER> 4
<NAME> ARISTATA QUALITY BOND FUND
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 54740931
<INVESTMENTS-AT-VALUE> 56956602
<RECEIVABLES> 900040
<ASSETS-OTHER> 24583
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57881225
<PAYABLE-FOR-SECURITIES> 250000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 121515
<TOTAL-LIABILITIES> 371515
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55242791
<SHARES-COMMON-STOCK> 5766594
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 71
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51177
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2215671
<NET-ASSETS> 57509710
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 627284
<OTHER-INCOME> 0
<EXPENSES-NET> (61334)
<NET-INVESTMENT-INCOME> 565950
<REALIZED-GAINS-CURRENT> 51177
<APPREC-INCREASE-CURRENT> (210020)
<NET-CHANGE-FROM-OPS> 407107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (565879)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5929965
<NUMBER-OF-SHARES-REDEEMED> (206697)
<SHARES-REINVESTED> 43326
<NET-CHANGE-IN-ASSETS> 57509710
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 47180
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78336
<AVERAGE-NET-ASSETS> 57420055
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000915802
<NAME> FINANCIAL INVESTORS TRUST
<SERIES>
<NUMBER> 5
<NAME> ARISTATA COLORADO QUALITY TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 21392306
<INVESTMENTS-AT-VALUE> 22738284
<RECEIVABLES> 456930
<ASSETS-OTHER> 290328
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23485542
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 104935
<TOTAL-LIABILITIES> 104935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22038822
<SHARES-COMMON-STOCK> 2351160
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 20
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (4213)
<ACCUM-APPREC-OR-DEPREC> 1345978
<NET-ASSETS> 23380607
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 214130
<OTHER-INCOME> 0
<EXPENSES-NET> (17699)
<NET-INVESTMENT-INCOME> 196431
<REALIZED-GAINS-CURRENT> (4213)
<APPREC-INCREASE-CURRENT> (124231)
<NET-CHANGE-FROM-OPS> 67987
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (196411)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2499879
<NUMBER-OF-SHARES-REDEEMED> (149018)
<SHARES-REINVESTED> 299
<NET-CHANGE-IN-ASSETS> 23380607
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19665
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 36105
<AVERAGE-NET-ASSETS> 23887567
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> (.06)
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000915802
<NAME> FINANCIAL INVESTORS TRUST
<SERIES>
<NUMBER> 1
<NAME> US TREASURY MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 137188912
<INVESTMENTS-AT-VALUE> 137188912
<RECEIVABLES> 1494107
<ASSETS-OTHER> 122325
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 138805544
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 636600
<TOTAL-LIABILITIES> 636600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138196581
<SHARES-COMMON-STOCK> 138196581
<SHARES-COMMON-PRIOR> 167725567
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (27637)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 138169944
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8599436
<OTHER-INCOME> 0
<EXPENSES-NET> (513002)
<NET-INVESTMENT-INCOME> 8086434
<REALIZED-GAINS-CURRENT> 6180
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8092614
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8086434)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 597251125
<NUMBER-OF-SHARES-REDEEMED> (634698326)
<SHARES-REINVESTED> 7918215
<NET-CHANGE-IN-ASSETS> (29522806)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (33817)
<GROSS-ADVISORY-FEES> 78117
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 862616
<AVERAGE-NET-ASSETS> 156233424
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .00
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000915802
<NAME> FINANCIAL INVESTORS TRUST
<SERIES>
<NUMBER> 2
<NAME> US GOVERNMENT MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 150404340
<INVESTMENTS-AT-VALUE> 150404340
<RECEIVABLES> 406467
<ASSETS-OTHER> 92899
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150903706
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 681639
<TOTAL-LIABILITIES> 681639
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 150386485
<SHARES-COMMON-STOCK> 150235196
<SHARES-COMMON-PRIOR> 87428781
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (164418)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 150222067
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7333087
<OTHER-INCOME> 0
<EXPENSES-NET> (407601)
<NET-INVESTMENT-INCOME> 7068999
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7068999
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7068999)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 438749225
<NUMBER-OF-SHARES-REDEEMED> (382031631)
<SHARES-REINVESTED> 6088821
<NET-CHANGE-IN-ASSETS> 62806415
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (164418)
<GROSS-ADVISORY-FEES> 52818
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107601
<AVERAGE-NET-ASSETS> 132042270
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .00
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000915802
<NAME> FINANCIAL INVESTORS TRUST
<SERIES>
<NUMBER> 3
<NAME> ARISTATA EQUITY FUND
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 59200246
<INVESTMENTS-AT-VALUE> 101529233
<RECEIVABLES> 170692
<ASSETS-OTHER> 37614
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 101737539
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 123705
<TOTAL-LIABILITIES> 123705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58039464
<SHARES-COMMON-STOCK> 9732527
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 9136
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1236247
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42328987
<NET-ASSETS> 101613834
<DIVIDEND-INCOME> 266057
<INTEREST-INCOME> 32040
<OTHER-INCOME> 0
<EXPENSES-NET> (157696)
<NET-INVESTMENT-INCOME> 140401
<REALIZED-GAINS-CURRENT> 1236247
<APPREC-INCREASE-CURRENT> 3076768
<NET-CHANGE-FROM-OPS> 4453416
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (131265)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9936749
<NUMBER-OF-SHARES-REDEEMED> (213348)
<SHARES-REINVESTED> 9126
<NET-CHANGE-IN-ASSETS> 101613834
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 141096
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195251
<AVERAGE-NET-ASSETS> 101114197
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.44
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
DAVIS, GRAHAM & STUBBS LLP
A LIMITED LIABILITY PARTNERSHIP
ATTORNEYS AT LAW
SUITE 4700
370 SEVENTEENTH STREET
DENVER, COLORADO 80202
[LETTERHEAD]
LESTER R. WOODWARD
(303) 303-892-7392
[email protected]
August 28, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Financial Investors Trust (the "Trust"); Amendment to Form
N-1A
Dear Ladies and Gentlemen:
Accompanying this letter for filing on behalf of the above-referenced
Trust under Rule 485(b) of the Securities Act of 1933, as amended, is
Post-Effective Amendment No. 11 to the Trust's Registration Statement on Form
N-1A. This filing is the annual post-effective amendment for the Trust, which
includes financial statements for the fiscal year ended April 30, 1998.
The Trust is filing this Amendment pursuant to Rule 485(b) under the
1933 Act, to become effective upon filing. Pursuant to Rule 485(e) under the
1933 Act, we hereby confirm that this firm has reviewed the enclosed Amendment
and that the Amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b) of Rule 485.
Please contact the undersigned at 303-892-7392 with any questions
concerning this certification.
Very truly yours,
/s/ Lester R. Woodward
Lester R. Woodward
for
Davis, Graham & Stubbs LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 11 to Registration Statement No. 33-72424 of our reports dated June 22,
1998, appearing in the April 30, 1998 Annual Reports of Financial Investors
Trust Funds and Aristata Funds and to the references to us under the captions
"Financial Highlights" appearing in the Prospectus and "Experts" appearing in
the Statement of Additional Information which are included in such Registration
Statement.
Denver, Colorado
August 27, 1998
