As filed with the Securities and Exchange Commission on April 13, 1998
File No. 33-12289
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
-----------------------------------
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 13 [X]
(Check appropriate box or boxes)
CLEARWATER INVESTMENT TRUST
(Exact name of registrant as specified in charter)
2100 First National Bank Building, St. Paul, Minnesota 55101-1394
(Address of principal executive office) Zip Code
Registrant's Telephone Number, including Area Code: (612) 228-0935
Joseph P. Barri, Hale and Dorr LLP, 60 State Street, Boston, MA 02109
(Name and address of agent for service)
It is proposed that this filing will become effective (check appropriate box)
[X] on April 30, 1998, pursuant to paragraph (b)(2) of Rule 485
under the Securities Act
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<PAGE>
CLEARWATER INVESTMENT TRUST
Cross-Reference Sheet Showing Location in Prospectus and Statement of Additional
Information of Information Required by Items of the Registration Form
<TABLE>
<CAPTION>
Item Number in Part A Prospectus Caption
<S> <C> <C>
1. Cover Page................................................. Cover Page
2. Synopsis................................................... Expense Information
3. Condensed Financial Information............................ Financial Highlights
4. General Description of Registrant.......................... Cover Page; What Are the Funds'
Investment Objectives and Important
Policies?; Other Information
5. Management of the Fund..................................... How Are the Funds Managed?
6. Capital Stock and Other Securities......................... What Are the Funds' Investment
Objectives and Important Policies?;
Dividends, Distribution and Taxation;
Other Information
7. Purchase of Securities Being Offered....................... How Are Shares Purchased?; Exchange of
Shares
8. Redemption or Repurchase................................... How Are Shares Redeemed?; Exchange of
Shares
9. Pending Legal Proceedings.................................. Not Applicable
-1-
<PAGE>
Item Number in Part B Statement of Additional Information
Caption
10. Cover Page................................................. Cover Page
11. Table of Contents.......................................... Cover Page
12. General Information and History............................ Cover Page; The Trust
13. Investment Objectives and Policies......................... Objectives, Investment Policies and
Restrictions
14. Management of the Fund..................................... Management, Advisory and Other
Services; Executive Officers and Trustee
15. Control Persons and Principal Holders
of Securities........................................... Management, Advisory and Other
Services; Executive Officers and Trustees
16. Investment Advisory and Other
Services................................................ Management, Advisory and Other
Services; Independent Public Accountants
17. Brokerage Allocation and Other
Practices............................................... Brokerage
18. Capital Stock and Other Securities......................... The Trust
19. Purchase, Redemption and Pricing of
Securities Being Offered ........................ Determination of Net Asset Value Per
Share
20. Tax Status................................................. Taxes
21. Underwriters............................................... None
22. Calculation of Performance Data............................ Calculation of Performance Data
23. Financial Statements....................................... Cover Page
</TABLE>
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<PAGE>
CLEARWATER INVESTMENT TRUST
Clearwater Growth Fund
Clearwater Small Cap Fund
Prospectus - April 30, 1998
Clearwater Growth Fund (the "Growth Fund") and Clearwater Small Cap Fund (the
"Small Cap Fund") (each, a "Fund") are each separate, diversified investment
portfolios of Clearwater Investment Trust (the "Trust"), an open-end, management
investment company organized under the laws of The Commonwealth of
Massachusetts.
The primary investment objective of each Fund is long-term growth of capital. As
a secondary objective, each Fund seeks current investment income. To achieve its
objectives, the Growth Fund will be passively managed to track the Russell 1000
Index (the "Index"). The Index is comprised of securities of the largest 1000
public companies in the United States equity markets and is capitalization
weighted. To achieve its objective the Small Cap Fund invests in a broad list of
carefully selected, reasonably priced securities, consisting primarily of common
stocks, preferred stocks and convertible and non-convertible fixed income
securities.
This Prospectus concisely sets forth information about the Growth Fund and the
Small Cap Fund that you should know before investing. You should retain this
Prospectus for future reference. More information about the Funds is included in
the Statement of Additional Information, dated April 30, 1998, which is
incorporated herein by reference in its entirety and a copy of which may be
obtained free of charge by calling the Trust's transfer agent, Fiduciary
Counselling, Inc., at (612) 228-0935 or by written request addressed to
Fiduciary Counselling, Inc., 332 Minnesota Street, Suite 2100, St. Paul,
Minnesota 55101-1394 (attention: Clearwater Investment Trust). Other information
about the Funds has been filed with the Securities and Exchange Commission and
is available upon request and without charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
Expense Information.....................................................3
Financial Highlights....................................................4
What Are the Funds' Investment Objectives and
Important Policies?.....................................................6
How Are the Funds Managed?..............................................9
How Are Shares Purchased?..............................................12
How Are Shares Redeemed?...............................................13
Exchange of Shares.....................................................14
Dividends, Distributions and Taxation..................................14
Performance Data.......................................................16
Other Information......................................................16
Appendix--Description of Bond Ratings..................................18
2
<PAGE>
EXPENSE INFORMATION
The following table sets forth the annual operating expenses of each Fund,
expressed as a percentage of the average net assets of the Fund based on
expenses for the fiscal year ended December 31, 1997, and restated to reflect
estimated annual operating expenses for 1998. The example set forth below shows
the amount of operating expenses that would be incurred by an investor
purchasing $1,000 of shares of each Fund whether or not the investor redeems his
or her investment at the end of one, three, five and ten years.
GROWTH SMALL CAP
FUND FUND
Shareholder Transaction Expenses: None None
Annual Fund Operating Expenses (as % of average net assets):
1
Management Fees.............................................. 0.45% 1.35%
Other Fees and Expenses...................................... 0.00% 0.00%
Total Operating Expenses 0.45% 1.35%
1
As of November 1, 1997, and continuing thereafter, the management fee payable
to Clearwater Management Co., Inc. by the Growth Fund was reduced from 1.10% to
0.45%
Example:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (with or without redemption at the end of each time period):
One Year..................................................... $ 5 $ 14
Three Years.................................................. $ 14 $ 43
Five Years................................................... $ 25 $ 74
Ten Years.................................................... $ 57 $ 162
The purpose of the above table and example is to assist an investor in
understanding the various costs and expenses of each Fund that will be borne
directly or indirectly by an investor in such Fund. The costs and expenses
included in the table and example should not be considered representative of
past or future expenses. Actual returns and expenses of the Funds may vary
significantly from the returns and expenses assumed in the above table and
example. For more information regarding management fees and other expenses of
the Funds, including information regarding the basis upon which management fees
are paid, see "How Are The Funds Managed?" in the Prospectus and "Management,
Advisory and Other Services" in the Statement of Additional Information.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following audited information is covered by the independent auditor's report
on the Funds' financial statements and selected per share data and ratios and is
included in the Funds' 1997 Annual Report to Shareholders, which is incorporated
by reference in the Statement of Additional Information. The information
presented below should be read in conjunction with the Annual Report, which
includes more information about each Fund's performance and is available free of
charge by calling the Trust's transfer agent at (612) 228-0935.
Selected data for a Fund share outstanding throughout each period are as
follows:
<TABLE>
<CAPTION>
Clearwater Growth Fund
Years ended December 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year 17.88 17.01 13.62 14.49 15.98 15.42 10.91 11.55 8.52 8.32
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (loss) (0.01) (0.01) 0.01 0.06 0.09 0.11 0.14 0.16 0.13 0.12
Net realized and unrealized
gain (loss) 5.08 3.68 4.43 0.11 0.27 0.56 4.51 (0.64) 3.03 0.20
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Total from investment operations 5.07 3.67 4.44 0.17 0.36 0.67 4.65 (0.48) 3.16 0.32
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income 0.00 0.00 (0.01) (0.06) (0.09) (0.11) (0.14) (0.16) (0.13) (0.12)
Distributions from realized gains (1.78) (2.80) (1.04) (0.98) (1.76) 0.00 0.00 0.00 0.00 0.00
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Total Distributions (1.78) (2.80) (1.05) (1.04) (1.85) (0.11) (0.14) (0.16) (0.13) (0.12)
Net asset value, end of year 21.17 17.88 17.01 13.62 14.49 15.98 15.42 10.91 11.55 8.52
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 28.4% 21.6% 32.6% 1.2% 2.2% 4.4% 42.8% -4.1% 37.2% 3.8%
Net assets, end of period
(000's omitted) $106,859 93,922 84,775 65,999 61,037 67,554 65,818 42,407 42,458 30,200
Ratio of expenses to average
net assets (b) 0.98% 1.08% 1.08% 1.07% 1.08% 1.10% 1.17% 1.23% 1.24% 1.38%
Ratio of net investment income
(loss) to average net assets -0.06% -0.07% 0.06% 0.39% 0.55% 0.74% 1.05% 1.45% 1.22% 1.38%
Average brokerage commission
rate (c) $0.0571 0.0547 n/a n/a n/a n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) 38.16% 75.90% 58.64% 70.69% 52.76% 32.08% 29.27% 36.19% 53.03% 70.20%
<FN>
Effective November 1, 1997, Parametric Portfolio Associates became the subadviser to the Growth Fund.
(a) Total return figures are based on the change in net asset value of a share during
the period and assumes reinvestment of distributions at net asset value.
(b) The year 1996 includes federal and state taxes of 0.01%.
(c) For fiscal years beginning on or after September 1, 1995, the fund is required to disclose the average
commission rate per share it paid on trades for which commissions were charged.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Clearwater Small Cap Fund
Eleven
Years end December 31, Months
---------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.74 11.47 9.89 12.26 11.50 11.30 9.37 10.16 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment Income (loss) (0.02) 0.00 0.04 0.17 0.17 0.29 0.37 0.43 0.36
Net realized and unrealized
gain (loss) 5.14 1.71 2.56 (0.99) 1.60 0.25 1.93 (0.79) 0.32
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.12 1.71 2.60 (0.82) 1.77 0.54 2.30 (0.36) 0.68
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income 0.00 0.00 (0.04) (0.17) (0.17) (0.29) (0.37) (0.43) (0.36)
Excess distributions from net
investment income 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from realized gains (2.62) (0.42) (0.98) (1.38) (0.84) (0.05) 0.00 0.00 (0.16)
Tax return of capital 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.62) (0.44) (1.02) (1.55) (1.01) (0.34) (0.37) (0.43) (0.52)
Net asset value, end of year $15.24 12.74 11.47 9.89 12.26 11.50 11.30 9.37 10.16
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 40.2% 15.0% 26.3% -6.7% 15.4% 4.9% 24.9% -3.6% 6.8%
Net assets, end of period
(000's omitted) $40,838 32,774 26,826 17,998 13,972 13,128 12,537 7,936 7,650
Ratio of expenses to average
net assets (b) (c) 1.35% 1.37% 1.35% 1.40% 1.47% 1.49% 1.62% 1.91% 2.44%
Ratio of net investment income
(loss) to average net assets (c) -0.17% 0.00% 0.36% 1.61% 1.38% 2.54% 3.64% 4.37% 4.64%
Average brokerage commission
rate (d) $0.0503 0.0424 n/a n/a n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) 92.22% 89.25% 77.46% 122.88% 58.49% 73.07% 67.42% 36.95% 42.63%
<FN>
Effective May 1, 1994 a change was implemented in the fund's investment policies whereby the
fund must invest at least 65% of its total assets in securities of companies that have a total
equity market capitalizations of $1 billion or lower. Also effective January 1, 1994, Kennedy
Capital Management became the sub-advisor for the fund.
(a) Total return figures are based on the change in net asset value of a share during
the period and assumes reinvestment of distributions at net asset value
(b) The year 1996 includes federal and state taxes of 0.04%
(c) The ratios for the eleven month period ended December 31, 1989, are adjusted to an annual basis.
(d) For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose the average
commission rate per share it paid on trades for which commissions were charged .
</FN>
</TABLE>
5
<PAGE>
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES AND IMPORTANT POLICIES?
Growth Fund
The primary investment objective of the Growth Fund is long-term capital growth.
As a secondary objective, the Growth Fund seeks current investment income. To
achieve its objective, the Growth Fund will be passively managed to track the
Russell 1000 Index (the "Index"). The Index is comprised of securities of the
largest 1000 public companies in the United States equity markets and is
capitalization weighted. The Growth Fund attempts to track the investment
results of the Index by investing in all 1000 or a statistical sampling of the
common stocks that comprise the Index. Unlike other equity funds that seek to
outperform stock market averages, the Growth Fund seeks to track the Index to
provide a return that matches that of the benchmark. However, because the Growth
Fund is also managed to reduce tax liability to the Growth Fund's shareholders
and bears certain expenses not factored into the performance of the Index, the
Growth Fund will not track the performance of the Index perfectly. To the extent
the Growth Fund tracks the Index, the Growth Fund will not pursue opportunities
for total return by investing in companies that are not included in the Index.
Under normal circumstances, the Growth Fund will invest substantially all of its
assets in the common stocks of companies represented in the Index. The Growth
Fund may invest in certain short-term fixed income securities such as cash
equivalents, although cash and cash equivalents are normally expected to
represent less than 1% of the Growth Fund's total assets. The Growth Fund
intends to remain fully invested, to the extent practicable, in a pool of
securities which will duplicate the investment characteristics of the Index.
The Growth Fund may also utilize securities and securities index futures
contracts and options in order to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions, or to minimize trading costs. The
Growth Fund's use of futures and options will be limited by the Growth Fund's
avoidance of tax liability and its low turnover rate. The Growth Fund may engage
in short sales, purchase securities on a when-issued basis, may purchase or sell
securities on a delayed delivery basis, make loans of portfolio securities and
enter into repurchase agreements. See "Objectives, Investment Policies and
Restrictions" in the Statement of Additional Information.
Small Cap Fund
The primary investment objective of the Small Cap Fund is long-term capital
growth. As a secondary objective, the Small Cap Fund seeks current investment
income. Under normal market conditions, the Small Cap Fund pursues these
objectives by investing at least 65% of its total assets in equity and fixed
income securities of companies that have total equity market capitalizations of
$1 billion or lower. The proportions among the types of securities in which the
Small Cap Fund's assets are invested will vary from time to time depending on
the outlook for the economy and the securities markets, the quality of available
investments, the level of interest rates and other factors. The Small Cap Fund
may also write (sell) covered call options with
6
<PAGE>
respect to portfolio securities, make loans of portfolio securities and enter
into repurchase agreements. See "Objectives, Investment Policies and
Restrictions" in the Statement of Additional Information.
* * * * * *
The investment objectives of the Growth Fund and the Small Cap Fund and the
investment policies described in the Prospectus and Statement of Additional
Information are non-fundamental and may be changed by the Trustees without
shareholder approval. Each Fund has adopted certain fundamental investment
restrictions that may not be changed without shareholder approval. See
"Objectives, Investment Policies and Restrictions" in the Statement of
Additional Information.
Since all investments are subject to inherent market risks and fluctuations in
value due to earnings, economic conditions and other factors, neither the Growth
Fund nor the Small Cap Fund can assure that its investment objectives will be
achieved.
Investment Policies
To reduce the potential for realization of capital gain from disposition of
portfolio securities, Parametric intends to gradually align the Growth Fund's
portfolio with the Index over a period of several years. Until the Growth Fund's
portfolio is aligned with the Index, the Growth Fund may continue to hold common
stocks, preferred stocks, fixed income securities and foreign securities in
amounts that do not match the weightings in the Index and be subject to the
risks of such securities.
Equity Securities. Each Fund's portfolio of equity securities may consist of
common and preferred stocks that trade on national securities exchanges or are
quoted on the National Association of Securities Dealers' NASDAQ National Market
and either have the potential for capital appreciation or pay dividends or both,
as well as fixed income securities that are convertible into such common or
preferred stocks.
Fixed Income Securities. The Small Cap Fund may invest in long-term fixed income
securities (with maturities exceeding ten years) and intermediate-term fixed
income securities (with maturities ranging from one to ten years) and each Fund
may invest in short-term fixed income securities (with maturities of less than
one year). Because fixed income securities tend to decrease in value when
interest rates rise and increase in value when interest rates fall, each Fund's
performance may be affected by its Subadviser's ability to anticipate and
respond to fluctuations in market interest rates.
In order to reduce the risk of nonpayment of principal or interest on fixed
income securities, the Small Cap Fund will invest in such securities only if
they are rated, at the time of investment, BBB or better by Standard & Poor's
Ratings Group ("Standard & Poor's") or Baa or better by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, determined to be of equivalent quality
by the Small Cap Fund's portfolio Subadviser (i.e., investment grade). Fixed
income securities in
7
<PAGE>
the lowest investment grade category (i.e., BBB or Baa) may have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade securities. The Small Cap Fund is
not required to dispose of securities whose ratings drop below investment grade,
but may do so if considered appropriate by its portfolio Subadviser. See the
Appendix to this Prospectus for a description of the corporate bond ratings
assigned by Moody's and Standard & Poor's.
The Small Cap Fund's investments in zero coupon, stripped or certain other fixed
income securities with original issue discount or market discount could require
the Fund to sell certain of its portfolio securities in order to generate
sufficient cash to satisfy certain income distribution requirements. See "Taxes"
in the Statement of Additional Information.
Foreign Securities. Each Fund may invest up to 25% of its total assets in equity
and fixed income securities of foreign issuers from developed and developing
countries throughout the world. To the extent that foreign securities are
represented in the Index, the Growth Fund may invest in these securities.
Changes in foreign currency exchange rates will affect the value of foreign
securities that are denominated in foreign currencies and investment in such
securities may result in higher expenses due to costs associated with converting
U.S. dollars to foreign currencies. In addition, investment in foreign
securities generally may present a greater degree of risk than investment in
domestic securities because of the possibility of less publicly-available
financial and other information, more volatile and less liquid securities
markets, less securities regulation, higher brokerage costs, imposition of
foreign withholding and other taxes, war, expropriation or other adverse
governmental actions.
U.S. Government Securities. The U.S. Government Securities in which each Fund
may invest include (1) U.S. Treasury obligations, which differ only in their
interest rates, maturities and dates of issuance and include U.S. Treasury bills
(maturities of one year or less), U.S. Treasury notes (maturities of one to ten
years) and U.S. Treasury bonds (generally maturities of greater than ten years);
and (2) obligations of varying maturities issued or guaranteed by agencies or
instrumentalities of the U.S. Government. Although the payment when due of
interest and principal on U.S. Treasury securities is backed by the full faith
and credit of the United States, such guarantee does not extend to the market
value of such securities and, accordingly, each Fund's investments in such
securities will cause its net asset value to fluctuate.
Temporary Defensive Investments. When in the judgment of its Subadviser adverse
market conditions warrant, each Fund may adopt a temporary defensive position by
investing up to 100% of its assets in cash, repurchase agreements and money
market instruments, including short-term U.S. Government Securities, bankers'
acceptances, commercial paper rated at least A3 by Standard & Poor's, Prime by
Moody's or, if not rated, determined to be of equivalent quality by the Fund's
Subadviser.
Portfolio Turnover. Parametric Portfolio Associates, the Growth Fund's
Subadviser, believes that a passive portfolio management strategy, combined with
tax management techniques, will provide the best opportunity for the optimal
level of after tax total return for the Growth Fund's
8
<PAGE>
shareholders. Passive portfolio management will limit the Growth Fund's
portfolio turnover rate to the lowest possible level. Low turnover improves the
opportunity for higher after-tax performance because realization of capital
gains can be deferred.
The Small Cap Fund pursues the policy of selling that security in its portfolio
which seems the least attractive security owned whenever it is desired to obtain
funds not otherwise available for the purchase of a security that is considered
more attractive. A high rate of portfolio turnover (100% or more) involves
correspondingly greater transaction costs which must be borne by a Fund and its
shareholders. Although neither Fund purchases and sells securities for
short-term profits, each Fund will sell portfolio securities without regard to
the time they have been held whenever such action seems advisable.
HOW ARE THE FUNDS MANAGED?
Trustees and Officers
The Trust's Board of Trustees has overall responsibility for management and
supervision of the Funds. By virtue of the functions performed by Clearwater
Management Co., Inc., the Trust's Manager (the "Manager"), the Trust requires no
employees other than its executive officers, all of whom receive their
compensation from the Manager or other sources.
The Manager and Portfolio Subadvisers
Clearwater Management Co., Inc. The Manager is a privately-owned investment
adviser registered under the Investment Advisers Act of 1940, and advises the
Trust in accordance with a management contract dated March 1, 1998 (the
"Management Contract"). The Manager is organized as a Minnesota corporation and
the Manager's office is located at 332 Minnesota Street, Suite 2090, St. Paul,
Minnesota 55101.
Under the Management Contract, the Manager, subject to the general supervision
of the Trust's Board of Trustees, supervises the Trust's business operations and
is responsible for administrative and other management functions necessary for
the conduct of the Funds' affairs. Under the Management Contract, the Manager
also is responsible for the payment or reimbursement of all of the Funds'
expenses, except brokerage, taxes, interest and extraordinary expenses. As
compensation for the services provided to the Funds and expenses assumed, the
Manager receives a management fee at an annual rate of 0.45% and 1.35% of the
net assets of the Growth Fund and the Small Cap Fund, respectively. Prior to
November 1, 1997, the Manager received a management fee at an annual rate of
1.10% of the net assets of the Growth Fund. The Manager's fees are calculated
and accrued on a daily basis as a percentage of each Fund's daily net assets.
Under the Management Contract, the Manager assumes various Fund expenses that
most other investment companies pay out of their own assets. The Manager's fees
with respect to the Growth Fund and the Small Cap Fund for the year ended
December 31, 1997 were 0.98% of the Growth Fund's net assets and 1.35% of the
Small Cap Fund's net assets, respectively.
9
<PAGE>
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. That
failure could have a negative impact on handling securities trades pricing and
account services. The Adviser and the Funds' service providers have taken steps
that they believe are reasonably designed to address the Year 2000 Problem with
respect to the computer systems that they use and expect that their systems will
be adapted in time for that event.
Parametric Portfolio Associates. In connection with the management of the Growth
Fund, the Trust, the Manager and Parametric Portfolio Associates ("Parametric ")
entered into a Subadvisory Contract dated November 1, 1997 (the "Growth
Subadvisory Contract"). Parametric was founded in 1987 as a global equity
manager and is a sub-partnership of PIMCO Advisors, L.P., a publicly traded
investment management organization. Parametric is located at 701 Fifth Avenue,
Suite 7310, Seattle, Washington 98104-7090. Parametric combines indexing with
tax management to increase the potential for higher after-tax return for taxable
investors.
Under the Growth Subadvisory Contract, Parametric develops, recommends and
implements an investment program and strategy for the Growth Fund which is
consistent with the Growth Fund's investment objectives and policies. Parametric
is also responsible for making all portfolio and brokerage decisions. As
compensation, Parametric receives a fee that is based on the Growth Fund's net
assets. This fee is calculated and accrued on a monthly basis as a percentage of
the Growth Fund's month-end net assets. The annualized compensation paid to
Parametric with respect to the Growth Fund for the period from November 1, 1997
through December 31, 1997 was .15% of the Growth Fund's net assets. For the
period January 1, 1997 to October 31, 1997 Sit Investment Associates, Inc.
("Sit") served as the Subadviser to the Fund. The annualized compensation paid
to Sit with respect to the Growth Fund for the period January 1, 1997 to October
31, 1997, was .53% of the Growth Fund's net assets. Under the Growth Subadvisory
Contract, the Manager, and not the Growth Fund, is responsible for payment of
Subadvisory fees to Parametric. For more information on Parametric's Subadvisory
fee, see "Management, Advisory and Other Services" in the Statement of
Additional Information.
Kennedy Capital Management. Kennedy Capital Management ("KCM"), a Missouri
corporation that is a registered investment adviser under the Investment
Advisers Act of 1940, has managed the Small Cap Fund's portfolio since January
1, 1994. In connection with the management of the Small Cap Fund, the Trust, the
Manager and KCM have entered into a Subadvisory contract dated May 1, 1994 (the
"Small Cap Subadvisory Contract"). KCM devotes full time to investment
counseling and provides advice, management and other services to investors and
accounts. KCM's address is 10829 Olive Boulevard, St. Louis, Missouri
63141-7739.
Under the Small Cap Subadvisory Contract, KCM develops, recommends and
implements an investment program and strategy for the Small Cap Fund which is
consistent with the Small Cap Fund's investment objectives and policies. KCM is
also responsible for making all portfolio and brokerage decisions. As
compensation, KCM receives a fee that is based on the
10
<PAGE>
Small Cap Fund's net assets. This fee is calculated and accrued on a monthly
basis as a percentage of the Small Cap Fund's month-end net assets. The
compensation paid to KCM with respect to the Small Cap Fund for the year ended
December 31, 1997 was 0.88% of the Small Cap Fund's net assets. For more
information on KCM's Subadvisory fee, see "Management, Advisory and Other
Services" in the Statement of Additional Information. Under the Small Cap
Subadvisory Contract, the Manager, and not the Small Cap Fund, is responsible
for payment of Subadvisory fees to KCM.
Portfolio Managers
Growth Fund. David Stein, Managing Director and Chief Investment Officer of
Parametric, leads the investment, research and product development activities at
Parametric. In addition, Mr. Stein chairs Parametric's Investment Policy
Committee. Prior to joining Parametric in 1996, Mr. Stein held positions as
Director of Investment Research at GTE Investment Management (1995-1996);
Director of Active Equity Strategies at the Vanguard Group (1994-1995); and
Director of Quantitative Portfolio Management and Research at IBM Retirement
Funds (1977-1994).
Small Cap Fund. Richard Sinise, a Vice President and the Director of Research of
KCM, is primarily responsible for the day-to-day management of the Small Cap
Fund's portfolio and has been since January 1, 1994. As an officer of KCM, Mr.
Sinise has been responsible for developing investment strategies for clients of
KCM and KCM affiliates since 1979.
Transfer Agent and Custodian
Fiduciary Counselling, Inc. (the "Transfer Agent") is the transfer agent for
shares of the Funds. The Transfer Agent services the Funds' shareholder
accounts, and its duties include: (i) effecting sales, redemptions and exchanges
of shares; (ii) distributing income dividends and capital gain dividends; and
(iii) maintaining account records and responding to shareholder inquiries. The
Transfer Agent's offices are located at 332 Minnesota Street, Suite 2100, St.
Paul, Minnesota 55101-1394, and inquiries to the Transfer Agent should be mailed
to the Transfer Agent at that address.
Investors Fiduciary Trust Company (the "Custodian") serves as the custodian of
the Funds' assets. The Custodian's responsibilities include determining the
Funds' net asset values, safekeeping and controlling the Funds' cash and
portfolio securities, handling the receipt and delivery of the Funds' portfolio
securities and determining income and collecting interest and dividends on the
Funds' investments. The Custodian does not determine the investment policies of
the Funds or decide which portfolio securities will be purchased or sold. The
Funds may, however, invest in securities, including repurchase agreements,
issued by the Custodian and may deal with the Custodian as principal in
securities transactions. The principal business address of the Custodian is 801
Pennsylvania, Kansas City, Missouri 64105.
11
<PAGE>
HOW ARE SHARES PURCHASED?
Shares may be purchased directly from each Fund. There is no sales charge or
underwriting commission on purchases of shares of the Funds. In order to
purchase shares of either Fund, an investor must either send a check or wire
funds to the Transfer Agent and deliver to the Transfer Agent a completed
Purchase Order and Account Application.
Pricing of Shares
Net asset value per share of each Fund is determined after the close of regular
trading on the New York Stock Exchange (the "Closing Time") on each day that the
Exchange is open for trading if such determination is then required to properly
process a purchase order, redemption request or exchange request for shares of
such Fund. Net asset value per share is determined by dividing the value of all
of a Fund's assets, less its liabilities, by the number of shares outstanding.
Investments in securities are valued at the Closing Time at the last available
sale price on the principal exchange or market where they are traded. Securities
which have not traded on the date of valuation or securities for which sales
prices are not generally reported are valued at the mean between the last bid
and asked prices. Securities for which no market quotations are readily
available (including those for which trading has been suspended) will be valued
at fair value as determined in good faith by the Board of Trustees, although the
actual computations may be made by persons acting at the direction of the Board
of Trustees. The price at which a Purchase Order is filled is the net asset
value per share next computed after payment and a properly completed application
are received by the Transfer Agent, unless a later computation date is specified
by the investor on the Purchase Order.
Minimum Purchases
No initial or subsequent investment of less than $1,000 will be accepted by the
Funds. However, reinvestments of dividends and capital gain distributions will
be permitted, even if the amount of any such reinvestment is less than $1,000.
If a shareholder holds shares of either Fund in an account which, as a result of
redemptions, has an aggregate net asset value of less than $1,000, the Fund may
redeem the shares held in such account at net asset value if the shareholder has
not increased the net asset value of such shares in the account to at least
$1,000 within three months of notice in writing by the Fund to the shareholder
of the Fund's intention to redeem such shareholder's shares. During the three
months following the mailing of such notice, each shareholder so notified has
the opportunity to increase the value of his or her account to $1,000 and avoid
redemption. An involuntary redemption consummated at a price below the
shareholder's cost would result in a loss to the shareholder.
The Trust reserves the right in its sole discretion to withdraw all or any part
of the offering of shares of the Funds when, in the judgment of the Trustees or
the Manager, such withdrawal is in the best interests of the Trust. An order to
purchase shares is not binding on, and may be rejected by, the Trust until it
has been confirmed in writing.
12
<PAGE>
Fund Accounts
When a shareholder first purchases shares of either Fund, an account is opened
in his or her name on the records of that Fund. This account provides a
convenient means to make additional investments and provides for regular
transaction statements without the necessity of receiving and storing
certificates. When a shareholder purchases or sells shares of a Fund, an account
statement showing the details of such transaction will be sent to the
shareholder.
Certificates representing shares of a Fund ordinarily will not be issued.
However, the Board of Trustees may, in its sole discretion, authorize the
issuance of certificates for shares of a Fund to shareholders who make a
specific written request for share certificates.
HOW ARE SHARES REDEEMED?
Any shareholder of either Fund has the right to offer shares for redemption by
the Trust. Redemptions shall be effected at the net asset value per share next
determined after receipt by the Transfer Agent of all required documents from
the redeeming shareholder, unless a later redemption date is specified by the
investor on the Redemption Request. Payment will be made within seven days after
a redemption has been effected. However, if shares to be redeemed were recently
purchased by check, a Fund may delay transmittal of redemption proceeds until it
has assured itself that good funds have been collected for the purchase of such
shares. This may take up to 15 days. A Fund may effect redemptions in kind
(i.e., pay redemption proceeds consisting of portfolio securities or other
non-cash assets) for redemptions in excess of $1 million if the Manager
determines, in its sole discretion, that any such redemption would be in the
best interests of the Fund. In order to redeem shares of either Fund, a
shareholder must deliver to the Transfer Agent a Redemption Request which has
been endorsed by the recordholder(s) exactly as the shares are registered with
signature(s) guaranteed by any one of the following institutions: (i) a bank;
(ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency, provided that any such institution satisfies the standards established
by the Transfer Agent. If a share certificate has been issued at the discretion
of the Trustees, the shares represented by such certificate may be redeemed only
if the share certificate is included with such Redemption Request and the
certificate is properly endorsed with signature(s) so guaranteed or is
accompanied by a properly endorsed stock power with signature(s) so guaranteed.
Net asset value per share for the purpose of redemption is determined in the
manner described above under "Pricing of Shares." The net asset value per share
received upon redemption may be more or less than the cost of shares to an
investor, and a redemption is a taxable transaction for the redeeming
shareholder.
13
<PAGE>
Redemptions may be suspended or payment postponed during any period in which any
of the following conditions exists: the New York Stock Exchange is closed or
trading on said Exchange is restricted; an emergency exists as a result of which
disposal by the Trust of securities owned by a Fund is not reasonably
practicable or it is not reasonably practicable for the Custodian fairly to
determine the value of the Fund's net assets; or the Securities and Exchange
Commission, by order, so permits.
EXCHANGE OF SHARES
Subject to the restrictions set forth below, some or all of the shares of either
Fund, including shares purchased with reinvested dividends and/or capital gain
distributions, may be exchanged for shares of the other Fund on the basis of the
net asset value per share of each Fund at the time of exchange.
Instructions for exchanges are made by delivery to the Transfer Agent of an
Exchange Request signed by the record owner(s) exactly as the shares being
exchanged are registered. New accounts must be established with the same
registration information as the account from which the exchange is to be made.
The dollar amount exchanged must at least equal the $1,000 minimum investment
required for each of the Funds. However, exchanges of shares of one Fund for
shares of the other Fund in which the shareholder has an existing account will
be permitted, even if the value of the shares exchanged is less than $1,000.
A shareholder should consider the differences in investment objectives and
policies of the Funds, as described in this Prospectus, before making any
exchange. For federal and (generally) state income tax purposes, an exchange of
shares is treated as a redemption of the shares exchanged and, therefore, is a
taxable transaction for the shareholder making the exchange.
Currently, there is no charge for the exchange privilege or limitation as to the
frequency of exchanges. The Trust may terminate or suspend the right to make
Exchange Requests, or impose a limit on the number of exchanges that may be
effected by a shareholder within any calendar year, or impose a transaction fee
in connection with any exchange, at any time with notice to shareholders as
required by law.
DIVIDENDS, DISTRIBUTIONS AND TAXATION
Each Fund is treated as a separate entity for federal income tax purposes, has
elected to be treated and has qualified as a "regulated investment company"
under the Code, and intends to continue to qualify for such treatment for each
taxable year. To qualify as a regulated investment company under the Code and be
free from any federal income tax on income and gains distributed to shareholders
in accordance with the Code, each Fund must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders.
14
<PAGE>
Each Fund intends to distribute all of its net investment income, any excess of
net short-term capital gain over net long-term capital loss, and any excess of
net long-term capital gain over net short-term capital loss, after taking into
account any capital loss carryovers of the Fund, if any, at least once each
year. Distributions from net investment income, certain net foreign currency
gains and the excess of net short-term capital gain over net long-term capital
loss will be taxable to shareholders as ordinary income. Distributions from the
excess of net long-term capital gain over net short-term capital loss will be
taxable to shareholders as capital gain, regardless of the shareholder's holding
period for the shares. These capital gain distributions are taxable at different
maximum federal tax rates (which will be indicated in the annual tax information
the Funds provide to shareholders) for individuals and other noncorporate
shareholders, depending generally upon the source of, and a Fund's holding
periods for the assets that produce, the gains. Certain distributions paid by a
Fund in January of a given year will be taxable to shareholders as if received
on December 31 of the prior year.
Dividends and/or capital gain distributions, if any, may be taken in cash or
automatically reinvested in additional shares (at the net asset value per
share). All distributions are taxable as described above whether a shareholder
takes them in cash or reinvests them in additional shares of a Fund.
Shareholders who purchase shares immediately prior to a distribution will be
required to treat the distribution as ordinary income or capital gain as
described above, even though economically it represents a return of a portion of
their investment. Information regarding the tax status of each year's
distributions will be provided to shareholders annually.
Each Fund may be subject to foreign withholding or other foreign taxes on its
income (possibly including, in some cases, capital gains) from certain of its
foreign investments, if any, and neither Fund will be eligible to elect to pass
such taxes and associated foreign tax credits or deductions through to its
shareholders.
Dividends, capital gain distributions and the proceeds of redemptions, exchanges
or repurchases of shares of a Fund paid to an individual or other non-exempt
payee will be subject to 31% backup withholding of federal income tax if such
shareholder does not provide the Fund with his or her correct taxpayer
identification number and certain certifications required by the Internal
Revenue Service ("IRS") or if the Trust is notified by the IRS or a broker that
the shareholder is subject to such withholding. Please refer to the Purchase
Order and Account Application for additional information.
Special tax rules apply to IRA or other retirement plans or accounts and to
other special classes of investors, such as tax-exempt organizations, banks and
insurance companies. You should consult with your own tax adviser regarding the
application of any such rules in your particular circumstances.
The description above relates only to U.S. federal income tax consequences for
shareholders who are U.S. persons (i.e., U.S. citizens or residents or U.S.
corporations, partnerships, trusts, or estates) and who are subject to federal
income tax. In addition to federal taxes, a shareholder may be subject to
foreign, state and local taxes on distributions from or on the value of shares
of a Fund, depending on the laws of the shareholder's place of residence. For
further information on
15
<PAGE>
the tax consequences of an investment in a Fund, see "Taxes" in the Statement of
Additional Information. Shareholders also may inquire about these and other
matters by calling the Transfer Agent at (612) 228-0935.
PERFORMANCE DATA
The Trust may furnish to existing or prospective shareholders information
concerning the average annual total return on an investment in the Funds for a
designated period of time. Average annual total return for a given period is
computed by determining the average annual compounded rate of return that would
cause a hypothetical investment made on the first day of the designated period
(assuming all dividends and distributions are reinvested) to equal the resulting
net asset value of such hypothetical investment on the last day of the
designated period. Computations of average annual total return of a Fund will
not take into account any required payments of federal or state income taxes.
The average annual total return of each Fund will vary from time to time
depending on market conditions, the composition of the Fund's portfolio and
operating expenses of the Fund. These factors and possible differences in the
methods used in calculating returns should be considered when comparing
performance information regarding a Fund to information published for other
investment companies and other investment vehicles. Any return quotation should
also be considered relative to changes in the values of a Fund's shares and the
risks associated with that Fund's investment objectives and policies. At any
time in the future, any return quotation may be higher or lower than a past
return quotation and there can be no assurance that any historical return
quotation will continue in the future. For more information regarding the
computation of average annual total return, see the Statement of Additional
Information.
OTHER INFORMATION
Each Fund is a series of the Trust, which was established as a Massachusetts
business trust under the laws of Massachusetts by a Declaration of Trust dated
January 12, 1987, as amended and restated March 1, 1998 (the "Declaration of
Trust"). Under the Declaration of Trust, the Board of Trustees is authorized to
issue an unlimited number of shares of beneficial interest which may, without
shareholder approval, be divided into an unlimited number of series. Shares of
the Trust are freely transferable, are entitled to dividends as declared by the
Board of Trustees and, in liquidation, are entitled to receive the net assets of
their series, but not of any other series. Shareholders are entitled to cast one
vote per share (with proportional voting for fractional shares) on any matter
requiring a shareholder vote. Shareholders of each series vote separately as a
class on any matter submitted to shareholders except when otherwise required by
the Investment Company Act of 1940, in which case the shareholders of all series
affected by the matter in question will vote together as one class. If the Board
of Trustees determines that a matter does not affect the interests of a series,
then the shareholders of that series will not be entitled to vote on that
matter.
16
<PAGE>
As of April 1, 1998, Mr. William T. Weyerhaeuser, 1145 Broadway, Suite 1500,
P.O. Box 1278, Tacoma, WA 98402, owned or had the power to vote more than 25% of
the shares of Clearwater Growth Fund.
Under Massachusetts law, there is a remote possibility that shareholders of a
Massachusetts business trust could, under certain circumstances, be held
personally liable as partners for the obligations of such trust. For further
information regarding potential shareholder liability, see "The Trust" in the
Statement of Additional Information.
17
<PAGE>
APPENDIX
Description of Bond Ratings
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's Ratings Group
AAA: Bonds rated AAA are the highest grade obligations. This rating indicates an
extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
18
<PAGE>
CLEARWATER INVESTMENT TRUST
Clearwater Growth Fund
Clearwater Small Cap Fund
332 Minnesota Street, Suite 2100
St. Paul, MN 55101-1394
EXECUTIVE OFFICERS: TRUSTEES:
Philip W. Pascoe Samuel B. Carr, Jr.
Chairman of the Board Stanley R. Day, Jr.
Treasurer Philip W. Pascoe
Robert J. Phares
Frederick T. Weyerhaeuser
INVESTMENT MANAGER: CLEARWATER GROWTH FUND
Clearwater Management Co., Inc. SUBADVISOR:
332 Minnesota Street, Suite 2090 Parametric Portfolio Associates
St. Paul, MN 55101 701 Fifth Avenue, Suite 7310
Seattle, Washington 98104-7090
CUSTODIAN: CLEARWATER SMALL CAP FUND
Investors Fiduciary Trust Company SUBADVISOR:
801 Pennsylvania Kennedy Capital Management
Kansas City, MO 64105 10829 Olive Boulevard
St. Louis, MO 63141-7739
COUNSEL FOR THE FUNDS: TRANSFER AGENT AND
Hale and Dorr LLP SHAREHOLDER SERVICES:
60 State Street Fiduciary Counselling, Inc.
Boston, MA 02109 332 Minnesota Street, Suite 2100
St. Paul, MN 55101-1394
(612) 228-0935
PROSPECTUS
April 30, 1998
19
<PAGE>
CLEARWATER INVESTMENT TRUST
Clearwater Growth Fund
Clearwater Small Cap Fund
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus dated April 30,1998 of Clearwater Growth Fund
(the "Growth Fund") and Clearwater Small Cap Fund, formerly named Clearwater
Value Fund (the "Small Cap Fund"). A copy of the Prospectus can be obtained free
of charge by calling Fiduciary Counselling, Inc. at 612-228-0935 or by written
request to Fiduciary Counselling, Inc. at 332 Minnesota Street, Suite 2100, St.
Paul, Minnesota 55101-1394 (Attention: Clearwater Investment Trust). The most
recent Annual Report to Shareholders of the Growth Fund and the Small Cap Fund
accompanies this Statement of Additional Information and is incorporated herein.
TABLE OF CONTENTS
Objectives, Investment Policies and Restrictions.........B-5
Executive Officers and Trustees..........................B-6
Determination of Net Asset Value Per Share...............B-8
Brokerage................................................B-8
Taxes....................................................B-9
Calculation of Performance Data..........................B-10
The Trust................................................B-10
Independent Public Accountants...........................B-12
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
April 30, 1998
<PAGE>
OBJECTIVES, INVESTMENT POLICIES AND RESTRICTIONS
The Prospectus of the Growth Fund and the Small Cap Fund (each a "Fund"), dated
April 30, 1998, identifies the investment objectives and principal investment
policies of the Funds. Other policies of the Funds are set forth below.
Options on Securities and Securities Indices. The Growth Fund may write (sell)
covered call and put options and purchase call and put options on any securities
in which it may invest or on any securities index composed of securities in
which it may invest. The writing of options will be limited by the Growth Fund's
policy to have a low portfolio turnover rate.
The Small Cap Fund may write (sell) covered call options in standard contracts
traded on national securities exchanges or those which may be traded
over-the-counter ("OTC") and quotes in a NASDAQ market, provided that the Small
Cap Fund continues to own the securities covering each call until the call has
been exercised or has expired, or until the Small Cap Fund has purchased a
closing call to offset its obligations to deliver securities pursuant to the
call it has written.
Neither Fund may write covered call options on more than 25% of the market value
of any single portfolio security. In addition, neither Fund has a present
intention of writing covered call options on portfolio securities with an
aggregate market value exceeding 5% of the Fund's net assets.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The use of options to seek to
increase total return involves the risk of loss if the Subadviser is incorrect
in its expectation of fluctuations in securities prices or interest rates. The
successful use of options for hedging purposes also depends in part on the
ability of the Subadviser to manage future price fluctuations and the degree of
correlation between the options and securities markets. If the Subadviser is
incorrect in its expectation of changes in securities prices or determination of
the correlation between the securities indices on which options are written and
purchased and the securities in a Fund's investment portfolio, the investment
performance of the Fund will be less favorable than it would have been in the
absence of such options transactions.
As the writer of a call option, a Fund receives a premium less commission and,
in exchange, forgoes the opportunity to profit from increases in the market
value of the security covering the call above the sum of the premium and the
exercise price of the option during the life of the option. The purchaser of
such a call has the ability to purchase the security from the Fund's portfolio
at the option price at any time during the life of the option. Portfolio
securities on which options may be written are purchased solely on the basis of
investment considerations consistent with the Fund's investment objectives.
Futures Contracts and Options on Futures Contracts. To seek to increase total
return or to hedge against changes in interest rates, securities prices or
currency exchange rates, the Growth Fund may purchase and sell various kinds of
futures contracts, and purchase and write call and put options on any of such
futures contracts. The Growth Fund may also enter into closing purchase and sale
transactions with respect to any such contracts and options. The futures
contracts may be based on various securities and securities indices. The Growth
Fund will engage in futures and related options transactions for bona fide
hedging purposes as defined in regulations of the Commodity Futures Trading
Commission or to seek to increase total return to the extent permitted by such
regulations. The Growth Fund may not purchase or sell futures contracts or
purchase or sell related options to seek to increase total return, except for
closing purchase or sale transactions, if immediately thereafter the sum of the
amount of initial margin deposits and premiums paid on the Growth Fund's
outstanding positions in futures and related options entered into for the
purpose of seeking to increase total return would exceed 5% of the market value
of the Growth Fund's net assets. These transactions involve brokerage costs,
require margin deposits and, in the case of contracts and options obligating the
Growth Fund to purchase securities or currencies, require the Growth Fund to
segregate and maintain cash or liquid assets with a value equal to the amount of
the Growth Fund's obligations.
B-2
<PAGE>
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain risks. Thus, while
the Growth Fund may benefit from the use of futures and options on futures,
unanticipated changes in securities prices may result in poorer overall
performance than if the Growth Fund had not entered into any futures contracts
or options transactions. Because perfect correlation between a futures position
and portfolio position that is intended to be protected is impossible to
achieve, the desired protection may not be obtained and the Growth Fund may be
exposed to risk of loss. The loss incurred by the Growth Fund in entering into
futures contracts and in writing call options on futures is potentially
unlimited and may exceed the amount of the premium received. Futures markets are
highly volatile and the use of futures may increase the volatility of the Growth
Fund's net asset value. The profitability of Growth Fund's trading in futures to
seek to increase total return depends upon the ability of the Subadviser to
correctly analyze the futures markets. In addition, because of the low margin
deposits normally required in futures trading, a relatively small price movement
in a futures contract may result in substantial losses to the Growth Fund.
Further, futures contracts and options on futures may be illiquid, and exchanges
may limit fluctuations in futures contract prices during a single day.
Repurchase Agreements. In order to earn income for periods as short as
overnight, each Fund may enter into repurchase agreements with commercial and
investment banks that furnish collateral at least equal in value or market price
to the amount of their repurchase obligations. However, each Fund currently does
not intend to enter into repurchase agreements with respect to more than 5% of
its net assets. Under a repurchase agreement, a Fund acquires a money market
instrument (generally a U.S. Government Security) which is subject to resale by
the Fund on a specified date (within one week) at a specified price (which price
reflects an agreed-upon interest rate effective for the period of time the Fund
holds the investment and is unrelated to the interest rate on the instrument).
If the other party or "seller" defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
underlying securities and other collateral held by the Fund in connection with
the related repurchase agreement are less than the repurchase price. In
addition, in such event, a Fund could suffer a loss of interest on or principal
of the security and could incur costs associated with delay and enforcement of
the repurchase agreement. Repurchase agreements entered into by a Fund will be
fully collateralized by obligations with a market value, monitored daily by the
portfolio manager, of not less than 100% of the obligation plus accrued
interest. Collateral will be held in a segregated, safekeeping account for the
benefit of the Fund. The staff of the SEC has taken the position that repurchase
agreements of more than seven days' duration are illiquid securities.
Lending of Portfolio Securities. Each Fund may earn additional income by lending
portfolio securities to broker/dealers that are members of the New York Stock
Exchange and other financial institutions under agreements which require that
the loans be secured continuously by collateral in cash, cash equivalents or
United States Treasury Bills maintained on a current basis at an amount at least
equal to the market value of the securities loaned. However, each Fund currently
does not intend to make loans of portfolio securities that represent more than
5% of its net assets. A Fund will continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and also will
receive compensation based on investment of the collateral. A Fund will not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but will attempt to call the loan in anticipation of an
important vote to be taken among holders of the securities or of an opportunity
to give or withhold consent on a material matter affecting the investment.
Lending portfolio securities involves risk of delay in recovery of the loaned
securities and in some cases loss of rights in the collateral should the
borrower fail financially. Loans of portfolio securities will be made only to
borrowers, which have been approved in advance by the Trust's Board of Trustees.
The Board of Trustees will monitor the creditworthiness of such firms on a
continuing basis. At no time will the value of securities loaned by the Growth
Fund or the Small Cap Fund exceed 33% of the value of such Fund's total assets.
The Funds have no current intention to loan securities in excess of 5% of the
Funds' total assets.
Short Sales Against the Box. The Growth Fund may engage in short sales against
the box. In a short sale against the box, the Fund agrees to sell at a future
date a security that it either contemporaneously owns or has the right to
acquire at no extra cost. If the price of the security has declined at the time
the Fund is required to deliver the security, the Fund will benefit from the
difference in the price. If the price of the security has increased, the Fund
will be required to pay the difference.
B-3
<PAGE>
When-Issued Securities. The Growth Fund may purchase securities on a when-issued
basis and may purchase or sell securities on a delayed delivery basis. These
terms refer to securities that have been created and for which a market exists,
but which are not available for immediate delivery. There may be a risk of loss
to the Growth Fund if the value of the security declines prior to the settlement
date.
Investment Restrictions. Each Fund has adopted certain fundamental investment
restrictions which may not be changed without the affirmative vote of the
holders of a majority of that Fund's outstanding voting securities which, as
used in the Prospectus and the Statement of Additional Information, means
approval of the lesser of (1) the holders of 67% or more of the shares
represented at a meeting if the holders of more than 50% of the outstanding
shares are present in person or by proxy or (2) the holders of more than 50% of
the outstanding shares.
A Fund may not:
(1) invest more than 5% of its assets in commodities or commodity
contracts, except that each Fund may invest without regard to the
5% limitation in interest rate futures contracts, options on
securities, securities indices, currency and other financial
instruments, futures contracts on securities, securities indices,
currency and other financial instruments, options on such futures
contracts, forward commitments, securities index put and call
warrants and repurchase agreements entered into in accordance with
the Fund's investment policies;
(2) underwrite any issue of securities;
(3) make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into
repurchase agreements, or (c) lending portfolio securities;
(4) purchase securities on margin, except for short-term credit
necessary for clearance or portfolio transactions;
(5) borrow money or issue senio securities, excep as permitted by
the Investment Company Act of 1940;
(6) invest more than 25% of its total assets in securities of issuers
in any one industry except that this limitation does not apply to
(i) obligations of the U.S. Government or any of its agencies or
instrumentalities (i.e., U.S. Government Securities), or (ii)
Clearwater Growth Fund to the extent that the adviser or
subadviser determines that investment without regard to the stated
limits is necessary in order to pursue Clearwater Growth Fund's
policy of tracking the Russell 1000 Index or any substitute index.
(7) with respect to 75% of its total assets, purchase any security
(other than U.S. Government Securities) if, immediately after and
as a result of such purchase, (a) more than 5% of the value of the
Fund's total assets would be invested in securities of the issuer
or (b) the Fund would hold more than 10% of the voting securities
of the issuer.
The following investment restrictions are designated as nonfundamental and may
be changed by the Trust's Board of Trustees without shareholder approval. A Fund
may not:
(1) buy or sell real estate in the ordinary course of its business;
provided, however, that the Fund may (i) invest in readily
marketable debt securities secured by real estate or interests
therein or issued by companies, including real estate investment
trusts, which invest in real estate or interests therein and (ii)
hold and sell real estate acquired as the result of its ownership
of securities;
(2) invest in companies for the purpose of exercising control or
management;
B-4
<PAGE>
(3) purchase any security, including any repurchase agreement maturing
in more than seven days, which is not readily marketable, if more
than 15% of the net assets of the Fund, taken at market value,
would be invested in such securities; or
(4) sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no
additional cost securities identical to those sold short;
MANAGEMENT, ADVISORY AND OTHER SERVICES
Clearwater Management Co., Inc. Clearwater Investment Trust (the "Trust") has
contracted with Clearwater Management Co., Inc. (the "Manager"), 332 Minnesota
Street, Suite 2090, St. Paul, Minnesota, to act as manager of the Trust. The
initial term of the Management Contract between the Trust and the Manager is two
years and is renewable annually for successive one year terms.
Under the terms of the Management Contract, the Manager supervises all of the
Trust's business operations and is responsible for formulating and implementing
investment strategies for the Funds. The Manager performs all administrative and
other management functions necessary to the supervision and conduct of the
affairs of the Funds.
Pursuant to the Management Contract, the Manager pays for office space and
equipment, clerical, secretarial and administrative services and executive and
other personnel as are necessary to fulfill its responsibilities and all other
ordinary operating expenses related to its services for the Trust, including
executive salaries of the Trust. Pursuant to the Management Contract, the
Manager also pays all of the Funds' other expenses, except brokerage, taxes,
interest and extraordinary expenses.
As compensation for its management services and expenses assumed, the Manager
receives a management fee at the annual rate of 0.45% and 1.35% of the net
assets of the Growth Fund and the Small Cap Fund, respectively. The management
fee for the Growth Fund was previously 1.10% of the Fund's average annual net
assets. The reduction in the management fee to 0.45% of net assets was effective
November 1, 1997. The Manager's fees are calculated and accrued daily as a
percentage of each Fund's daily net assets, and are paid quarterly. During the
three years ended December 31, 1995, 1996 and 1997, the total dollar amounts
paid to the Manager by the Growth Fund were $831,562 $977,321 and $1,012,399,
respectively. The net assets of Growth Fund at December 31, 1997 were
$106,859,255. During the three years ended December 31, 1995, 1996 and 1997 the
total dollar amounts paid to the Manager by the Small Cap Fund were $312,702,
$392,202 and $534,172, respectively. The net assets of the Small Cap Fund at
December 31, 1997 were $40,838,409.
Subadvisory Contracts. Under the terms of the Management Contract, the Manager
is authorized to enter into Subadvisory contracts with one or more investment
advisers which will have responsibility for rendering investment advice to all
or a portion of the Funds' portfolios.
As described in the Prospectus, the Trust, on behalf of the Growth Fund, the
Manager and Parametric Portfolio Associates ("Parametric") have entered into a
Subadvisory Contract, whereby Parametric develops, recommends and implements an
investment program and strategy for the Growth Fund, subject to approval of the
Board of Trustees. Fees payable to Parametric are calculated and accrued monthly
on the basis of month-end net assets, and are paid quarterly by the Manager at
an annual rate of 0.15% of the Fund's net assets.
The Growth Fund is not responsible for payment of the Subadvisory fees to
Parametric. During the years ended December 31, 1995 and 1996 and the period
January 1, 1997 through October 31, 1997, the Manager paid Subadvisory fees of
$450,103, $507,628 and $450,753, respectively to Sit Investment Associates, Inc.
(the previous subadviser). During the period from November 1, 1997 through
December 31, 1997, the Manager paid subadvisory fees of $28,999 to Parametric.
The Trust, on behalf of the Small Cap Fund, the Manager and Kennedy Capital
Management ("KCM") have entered into a Subadvisory Contract, whereby KCM
develops, recommends and implements an investment program and strategy for the
Small Cap Fund, subject to approval of the Board of Trustees. Fees payable to
KCM are calculated and accrued monthly on the basis of month-end net assets, and
are paid quarterly by the Manager according to the following schedule:
B-5
<PAGE>
Percent Net Assets
0.85% Up to and including $50 million
0.80% More than $50 million
The Small Cap Fund is not responsible for payment of the Subadvisory fees to
KCM. During the years ended December 31, 1995, 1996 and 1997, the Manager paid
Subadvisory fees of $235,243, $298,894 and $346,861 respectively to KCM. On
February 24, 1998, shareholders of the Trust ratified a reduction in the
subadvisory fee paid to KCM that had previously been approved by the Board of
Trustees. The reduction in the rate of the subadvisory fee will be retroactive
to January 1, 1997 and ongoing as of January 1, 1998. The new rate that CMC will
pay to KCM is 0.85% of the Fund's net assets up to and including $50 million and
0.80% of such assets over $50 million.
Other Provisions of the Contracts. Any amendment to the Management Contract or
either of the Subadvisory Contracts requires approval by vote of (a) a majority
of the outstanding voting securities of the affected Fund and (b) a majority of
the Trustees who are not interested persons of the Trust or of any other party
to such Contract. Each Contract terminates automatically in the event of its
assignment and the Subadvisory Contracts terminate automatically upon
termination of the Management Contract. Also, each Contract may be terminated by
not more than 60 days nor less than 30 days' written notice by either the Trust
or the Manager or upon not less than 120 days' notice by the Subadviser. Each
Contract provides that the Manager or the Subadviser shall not be liable to the
Trust, to any shareholder of the Trust, or to any other person, except for loss
resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
Subject to the above-described termination provisions, each Contract has an
initial term of two years and will continue in effect thereafter if such
continuance is approved at least annually by (a) a majority of the Trustees who
are not interested persons of the Trust or of any other party to such Contract
and (b) either (i) a majority of all of the Trustees of the Trust or (ii) by
vote of a majority of the outstanding voting securities of the affected Funds.
EXECUTIVE OFFICERS AND TRUSTEES
The Trustees and executive officers of the Trust are listed below, together with
their principal occupations during the past five years and their ages and
addresses.
Philip W. Pascoe* (51), Trustee, Chairman and Treasurer
of the Trust
Chairman, Clearwater Management Co., Inc. (1996/Present) Managing
Director, Investments of Piper Jaffray, Inc. (1996/Present)
Senior Vice President, Dean Witter Reynolds, Inc. (1996)
Associate Vice President, Dean Witter Reynolds, Inc. (1982-1996)
1145 Broadway, Suite 1500
P.O. Box 1278
Tacoma, Washington 98402
Samuel B. Carr, Jr. (42), Trustee
President and Chief Investment Officer, S. B. Carr Investments,
Inc. (1990/present)
124 Auburn Street, Suite 200 North
Cambridge, Massachusetts 02138-5700
B-6
<PAGE>
Stanley R. Day, Jr. (39), Trustee
President and Director, SRAM Corporation, (1987/present)
361 West Chestnut Street
Chicago, Illinois 60611
Robert J. Phares (34), Trustee
Chief Executive Officer, Battle Ridge Ranch Company,
(1986/present)
Route One, Box 258
Wilsall, Montana 59086
Daniel C. Titcomb (44), Vice President and Secretary
President and Director, Research Engineering and Design, Inc.,
(1994/Present) President and Director, Titcomb Associates, Inc.,
(1987/1994)
332 Minnesota Street, Suite 2090
St. Paul, Minnesota 55101
Frederick T. Weyerhaeuser* (66), Trustee
Chairman and Treasurer of the Trust (1987/1998)
Chairman, Clearwater Management Co., Inc. (1987/1996) Director,
Potlatch Corporation, a forest products company (1960/present)
Trustee, The Minnesota Mutual Life Insurance Company
(1968/present) Director, Weeden Securities Corporation
(1987/present)
332 Minnesota Street, Suite 2090
St. Paul, Minnesota 55101
The business address of all officers of the Trust is 332 Minnesota Street, Suite
2100, St. Paul, Minnesota 55101.
As of April 1, 1998 all of the Trustees and officers of the Trust, as a group,
owned of record 1.41% of the outstanding shares of the Growth Fund and 6.69% of
the outstanding shares of the Small Cap Fund.
- ------------------------
*Messrs. Frederick T. Weyerhaeuser and Philip W. Pascoe are "interested persons"
(as defined in the Investment Company Act of 1940, as amended) of the Trust.
Compensation of Trustees and Officers
The Trust pays no salaries or compensation to any of its officers. Pursuant to
the Management Contract, the Manager, on behalf of the Trust, pays each of the
Trustees an annual fee of $2,000, plus $500 per meeting attended; expenses
incurred by Trustees in attending meetings are reimbursed. Such fees and
expenses are reimbursed by the Manager to the Trust under the Management
Contract. The following table sets forth the amounts of compensation received by
each Trustee during the fiscal year ended December 31, 1997. Mr. Pascoe was
elected as a Trustee on February 24, 1998. He received no compensation during
the fiscal year ended December 31, 1997.
B-7
<PAGE>
Compensation With Respect
Name of Trustees to Trust/Complex
Samuel B. Carr, Jr. $ 4,000
Stanley R. Day, Jr. $ 3,000
Philip W. Pascoe $ 0
Robert J. Phares $ 3,500
Frederick T. Weyerhaeuser $ 4,000
---------------- --------
Total $ 14,500
DETERMINATION OF NET ASSET VALUE PER SHARE
The net asset value per share of each Fund is determined as of the close of
regular trading on the New York Stock Exchange on each day that the Exchange is
open for trading if such determination is then required to properly process a
purchase order, redemption request or exchange request for shares of such Fund.
The New York Stock Exchange is 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.
BROKERAGE
Decisions relating to the purchase and sale of portfolio securities for each
Fund, the allocation of portfolio transactions and, where applicable, the
negotiation of commission rates or transaction costs are made by the respective
portfolio Subadvisers. It is the primary consideration in all portfolio
transactions to seek the most favorable price and execution and to deal directly
with principal market makers in over-the-counter transactions except when, in
the opinion of such Subadviser, an equal or better market exists elsewhere.
The determination of what may constitute best price and execution by a
broker-dealer in effecting a securities transaction involves a number of
considerations (some of which are subjective), including, without limitation,
the overall net economic result to the portfolio (involving price paid or
received, any commissions and other costs paid) and the efficiency with which
the transaction is effected, the ability to effect the transaction at all where
a large block is involved, availability of the broker to stand ready to execute
possibly difficult transactions in the future and the financial strength and
stability of the broker. Because of such factors, a broker-dealer effecting a
transaction may be paid a commission higher than that charged by another
broker-dealer. As permitted by Section 28(e) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and subject to such policies as the Trustees
may adopt, each Fund may pay an unaffiliated broker or dealer that provides
"brokerage and research services" (as defined in the 1934 Act) an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the applicable portfolio subadviser determines in good faith
that the amount of commissions charged by the broker is reasonable in relation
to the value of the brokerage and research services provided by such broker. The
Subadvisers of the Funds have advised the Manager that neither of them has paid
any such excess in connection with brokerage transactions for the Funds.
Nevertheless, the Subadvisers have received brokerage and research services
consisting of written research reports, access to investment analysis and
information services and related electronic components, all of which may be used
for any of their respective clients.
During the three years ended December 31, 1995, 1996 and 1997, the Growth Fund
paid brokerage commissions in the amounts of $133,636, $156,583 and $88,681
respectively. During the three years ended December 31, 1995, 1996 and 1997, the
Small Cap Fund paid brokerage commissions in the amounts of $64,979, $94,093 and
$165,105 respectively.
During the three years ended December 31, 1995, 1996 and 1997, (i) the Growth
Fund paid brokerage commissions of $770.00 (0.58% of brokerage commissions
paid), $495.00 (0.32% of brokerage commissions paid) and $0 (0% of brokerage
commissions paid), respectively, and (ii) the Small Cap Fund
B-8
<PAGE>
paid brokerage commissions of $3,402 (2.52% of brokerage commissions paid) to
Weeden & Co., LP in 1997 only. One of the Funds' Trustees is also a director of
Weeden Securities Corporation, the general partner of Weeden & Co, LP.
TAXES
Under the Internal Revenue Code of 1986, as amended (the "Tax Code"), each Fund
is treated as a separate taxpayer for federal income tax purposes. The Funds do
not expect to incur other than nominal state income tax liability in 1998.
For purposes of the 70% dividends-received deduction available to corporations,
dividends received by either Fund, if any, from U.S. domestic corporations in
respect of any share of stock with a tax holding period of at least 46 days (91
days in the case of certain preferred stock) that is satisfied during a
prescribed period before and after each dividend in an unleveraged position and
distributed and properly designated by the Fund may be treated as qualifying
dividends. Any corporate shareholder should consult its tax advisor regarding
the possibility that its tax basis in its shares may be reduced, for Federal
income tax purposes, by reason of "extraordinary dividends" received with
respect to the shares and, to the extent such basis would be reduced below zero,
current recognition of income may be required. Corporate shareholders must meet
the minimum holding period requirement stated above (46 or 91 days), taking into
account any holding period reductions from certain hedging or other positions
that diminish risk of loss, with respect to their Fund shares in order to
qualify for the deduction and, if they borrow to acquire Fund shares, may be
denied a portion of the dividends-received deduction. The entire qualifying
dividend, including the otherwise deductible amount, will be included in
determining the excess (if any) of a corporation's adjusted current earnings
over its alternative minimum taxable income, which may increase a corporation's
alternative minimum tax liability.
Under the Tax Code, each of the Funds will be subject to a nondeductible 4%
excise tax on substantially all of its undistributed ordinary income and capital
gain if it fails to meet certain distribution requirements by the end of each
calendar year.
Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currency denominated debt securities, forward
foreign currency contracts (if any), foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders.
If either Fund acquires stock, including certain options, in certain non-U.S.
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties or capital
gain) or hold at least 50% of their assets in investments producing such passive
income ("passive foreign investment companies"), the Fund could be subject to
Federal income tax and additional interest charges on "excess distributions"
received from such companies or gain from the sale of stock in such companies,
even if all income or gain actually received by the Fund is timely distributed
to its shareholders. A Fund would not be able to pass through to its
shareholders any credit or deduction for such a tax. An election may generally
be available that would ameliorate these adverse tax consequences, but any such
election could require the Fund to recognize taxable income or gain (subject to
tax distribution requirements) without the concurrent receipt of cash. These
investments could also result in the treatment of associated capital gains as
ordinary income.
Investment by a Fund in zero coupon, stripped or certain other securities with
original issue discount or market discount (if the Fund elects to include market
discount in income on a current basis) or in certain options or futures
contracts that are subject to mark-to-market rules could require the Fund to
recognize income or gain prior to the receipt of cash and hence require it to
liquidate investments in order to generate cash for distributions required by
the Tax Code with respect to such income or gain. Management of the Funds will
consider these potential adverse tax consequences in evaluating the
appropriateness of these investments.
A Fund's transactions involving options and futures contracts will be subject to
special tax rules, the effect of which may be to accelerate the Fund's
recognition of income, defer Fund losses, cause adjustments in the holding
periods of securities or otherwise affect the treatment as long-term or
short-term of certain
B-9
<PAGE>
capital gains or losses. A Fund may also be required to recognize gain upon
entering into a short sale against the box or any other transaction that is
treated under the Code as a constructive sale of an appreciated financial
position of the Fund. These rules could therefore affect the amount, timing and
character of distributions to shareholders.
All or a portion of a loss realized on a redemption of shares may be disallowed
or recharacterized under tax rules relating to wash sales or redemptions of
shares held for six months or less.
Shareholders who are not U.S. persons, as defined in the Prospectus, are subject
to different tax rules, including a possible U.S. withholding tax at rates up to
30% on certain dividends treated as ordinary income, and should consult their
tax advisers for information on the application of these rules to their
particular situations.
CALCULATION OF PERFORMANCE DATA
The Funds' average annual total return quotations, as they may appear in the
Prospectus, this Statement of Additional Information or in advertising and sales
material, are calculated by standard methods prescribed by the SEC.
Average annual total return quotations are computed by finding the average
annual compounded rates of return that would cause a hypothetical investment
made on the first day of a designated period (assuming all dividends and
distributions are reinvested) to equal the ending redeemable value of such
hypothetical investment on the last day of the designated period in accordance
with the following formula:
n
P (1 + T) = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1000 payment made at the
beginning of a designated period at the
end of the designated period (or
fractional portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Funds are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided above) of
each Fund, recurring fees, if any, that are charged to all shareholder accounts
are taken into consideration. For any account fees that vary with the size of
the account, the account fees used for purposes of the above computation are
assumed to be the fees that would be charged to the mean account size of such
Fund.
The average annual total return of the Growth Fund for the one, five and ten
year periods ended December 31, 1997, were 28.4%, 16.4% and 15.9% respectively.
The average annual total return for the Small Cap Fund for the year ended
December 31, 1997, for the five years ended December 31, 1997 and for the period
since the Small Cap Fund commenced operations on January 31, 1989 through
December 31, 1997 were 40.20%, 17.0% and 12.9%, respectively. The foregoing
average annual total return figures were determined based on expenses in effect
for the Funds during the covered periods.
THE TRUST
As a Massachusetts business trust, the Trust's operations are governed by its
Declaration of Trust dated January 12, 1987 as amended and restated March 1,
1998 (the "Declaration of Trust"), a copy of which is on file with the office of
the Secretary of State of The Commonwealth of Massachusetts. Unless otherwise
B-10
<PAGE>
required by the Investment Company Act of 1940, as amended, ordinarily it will
not be necessary for the Trust to hold annual meetings of shareholders. As a
result, shareholders may not consider the election of Trustees or the
appointment of independent accountants for the Trust on an annual basis. The
Board of Trustees, however, will call a special meeting of shareholders for the
purpose of electing Trustees if, at any time, less than a majority of Trustees
holding office at the time were elected by shareholders. The Board of Trustees
may remove a Trustee by the affirmative vote of at least a majority of the
remaining Trustees. Under certain circumstances, shareholders may communicate
with other shareholders in connection with requesting a special meeting of
shareholders.
Under Massachusetts law, shareholders of a Massachusetts business trust may,
under certain circumstances, be held personally liable for the obligations of
such trust. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or its Trustees. Moreover, the Declaration
of Trust provides for the indemnification out of Trust property of any
shareholders held personally liable for any obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss beyond his or her investment
because of shareholder liability would be limited to circumstances in which the
Trust itself would be unable to meet its obligations. In light of the nature of
the Trust's business and the nature and amount of its assets, the possibility of
the Trust's liabilities exceeding its assets, and therefore a shareholder's risk
of personal liability, is extremely remote.
The Declaration of Trust further provides that the Trust shall indemnify each of
its Trustees for any neglect or wrongdoing of any advisory board member,
officer, agent, employee, consultant, investment adviser or other adviser,
administrator, distributor or principal underwriter, custodian or transfer,
dividend disbursing, shareholder servicing or accounting agent of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee.
The Declaration of Trust does not authorize the Trust to indemnify any Trustee
or officer against any liability to which he or she would otherwise be subject
by reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
As of April 1, 1998, each of the following persons owned five percent or more of
the voting securities of each such Fund,
- ------------------------------ ------------------------- ----------------------
Name % Total Shares % Total Shares
Clearwater Growth Fund Clearwater Small Cap
Fund
- ------------------------------ ------------------------- ----------------------
Stanley R. Day, Jr.* NA 7.64%
- ------------------------------ ------------------------- ----------------------
W. John Driscoll* 16.30% 14.88%
- ------------------------------ ------------------------- ----------------------
Walter S. Rosenberry III* 8.65% 8.10%
- ------------------------------ ------------------------- ----------------------
Edward R. Titcomb* NA 12.90%
- ------------------------------ ------------------------- ----------------------
John W. Titcomb, Jr.** 5.71% NA
- ------------------------------ ------------------------- ----------------------
Charles A. Weyerhaeuser* 11.95% 8.54%
- ------------------------------ ------------------------- ----------------------
David C. Weyerhaeuser* 5.31% 11.83%
- ------------------------------ ------------------------- ----------------------
David M. Weyerhaeuser** 9.80% 6.57%
- ------------------------------ ------------------------- ----------------------
Frederick T. Weyerhaeuser* 16.15% 23.91%
- ------------------------------ ------------------------- ----------------------
George H. Weyerhaeuser** 24.17% 19.66%
- ------------------------------ ------------------------- ----------------------
Wendy W. Weyerhaeuser** 10.84% NA
- ------------------------------ ------------------------- ----------------------
William T. Weyerhaeuser** 28.90% 21.24%
- ------------------------------ ------------------------- ----------------------
* 332 Minnesota Street, Suite 2100, Saint Paul, Minnesota 55101-1394
** 1145 Broadway, Suite 1500, P.O. Box 1278, Tacoma, Washington 98402
B-11
<PAGE>
As of April 1, 1998 Mr. William T. Weyerhaeuser owned or had the power to vote
more than 25% of the shares of the Clearwater Growth Fund. This holding may be
influential on the outcome of a shareholder vote and may make it more difficult
for shareholders with smaller holdings to affect the outcome of such a vote.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP serves as independent public accountants to the Trust. In
this capacity, KPMG Peat Marwick LLP audits and renders an opinion on the Funds'
financial statements.
B-12
<PAGE>
CLEARWATER INVESTMENT TRUST
Clearwater Growth Fund
Clearwater Small Cap Fund
332 Minnesota Street, Suite 2100
St. Paul, MN 55101
EXECUTIVE OFFICERS: TRUSTEES:
Philip W. Pascoe Samuel B. Carr, Jr.
Chairman of the Board Stanley R. Day, Jr.
Treasurer Philip W. Pascoe
Robert J. Phares
Frederick T. Weyerhaeuser
INVESTMENT MANAGER: CLEARWATER GROWTH FUND
Clearwater Management Co., Inc. SUBADVISOR:
332 Minnesota Street, Suite 2090 Parametric Portfolio Associates
St. Paul, MN 55101 701 Fifth Avenue, Suite 7310
Seattle, WA 98014-7090
CUSTODIAN: CLEARWATER SMALL CAP FUND
Investors Fiduciary Trust Company SUBADVISOR:
801 Pennsylvania Kennedy Capital Management
Kansas City , MO 64105 10829 Olive Boulevard
St. Louis, MO 63141-7739
COUNSEL FOR THE FUNDS: TRANSFER AGENT AND
Hale and Dorr LLP SHAREHOLDER SERVICES:
60 State Street Fiduciary Counselling, Inc.
Boston, MA 02109 332 Minnesota Street, Suite 2100
St. Paul, MN 55101-1394
(612) 228-0935
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1998
B-13
<PAGE>
CLEARWATER INVESTMENT TRUST
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights for Clearwater Growth Fund for
the period from 1988 to 1997.
Financial Highlights for Clearwater Small Cap Fund
for the period from inception (January 31, 1989) to
1997.
Included in Part B:
Incorporated by reference to the annual report of the
Funds, dated December 31, 1997, filed electronically
on February 24, 1998 pursuant to Section 30(b)(2) of
the Investment Company Act of 1940 (Accession No.
000081116-98-000006)
For Clearwater Growth Fund and Clearwater Small Cap
Fund:
Portfolio of Investments, December 31, 1997
Statement of Assets and Liabilities, December 31,
1997
Statement of Operations for the year ended December
31, 1997
Statement of Changes in Net Assets for each of the
two years in the period ended December 31, 1997
Financial Highlights for the years ended December 31,
1997
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits:
1. Declaration of Trust dated January 12, 1987*
1.1 Amendment to Declaration of Trust dated
March 25, 1994*
1.2 Amended and Restated Declaration of Trust
dated March 1, 1998**
C-1
<PAGE>
2. By-Laws*
2.1 Amended and Restated By-Laws dated March 1,
1998**
3. None
4. None
5.1 Management Contract dated May 1, 1994*
5.2 Management Contract, as amended, dated March
1, 1998**
5.3 Subadvisory Contract with SIT Investment
Associates, Inc.for Clearwater Growth Fund
dated May 1, 1994*
5.4 Subadvisory Contract with Parametric
Portfolio Associatesfor Clearwater Growth
Fund dated November 1, 1997**
5.5 Subadvisory Contract with Kennedy Capital
Management for Clearwater Small Cap Fund
dated May 1, 1994*
5.6 Amendment to the Subadvisory Contract with
Kennedy Capital Management for Clearwater
Small Cap Fund dated January 1, 1998**
6. None
7. None
8. Custodian Agreement with Norwest Bank
Minnesota, N.A. dated March 31, 1987*
8.1 Amendment to Custodian Agreement dated
March 27, 1991*
8.2 Amendment to Custodian Agreement dated
November 4, 1992*
8.3 Custodian Agreement with Investors Fiduciary
Trust Company dated September 29, 1997**
8.4 Amendment to the Custodian Agreement dated
March 1, 1998+
9. Investment Company Service Agreement dated
March 2, 1987*
C-2
<PAGE>
9.1 Amendment to Investment Company Service
Agreement dated May 1, 1995*
9.2 Accounting Services Agreement dated April 3,
1995*
10. None
11. Consent of Independent Accountants+
12. None
13. Stock Purchase Agreement dated February 19,
1987*
14. None
15. None
16.1 Computations of Average Annual Total
Return of Clearwater Growth Fund*
16.2 Computations of Average Annual Total
Return of Clearwater Small Cap Fund*
17.1 Financial Data Schedule - Clearwater Growth
Fund+
17.2 Financial Data Schedule - Clearwater Small
Cap Fund+
18. None
19. Powers of Attorney*
19.1 Power of Attorney of Philip W. Pascoe**
19.2 Powers of Attorney+
------------
+ Filed herewith
* Previously filed as exhibits to post-effective
amendment no. 10 to the Registration Statement on
April 29, 1996 and incorporated herein by reference
(File No. 33-12289).
** Previously filed as exhibits to post-effective
amendment no. 12 to the Registration Statement on
February 27, 1998 and incorporated herein by
reference (File No. 33-12289).
Item 25. Persons Controlled by or Under
Common Control with Registrant
The Registrant is not directly or indirectly controlled by or
under common control with any other person.
C-3
<PAGE>
Item 26. Number of Holders of Securities
The following sets forth the approximate number of record
holders of each series of securities of the Registrant as of January 30, 1998:
Title of Class Number of Record Holders
Clearwater Growth Fund 318
Clearwater Small Cap Fund 242
Item 27. Indemnification
Except for the Declaration of Trust, dated January 12, 1987,
as amended and restated March 1, 1998, establishing the Registrant as a trust
under Massachusetts law, there is no contract, arrangement or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified. The Declaration of Trust provides that no Trustee or
officer will be indemnified against any liability to which the Registrant would
otherwise be subject by reason of or for willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties. See the Registrant's
undertaking with respect to indemnification in Item 32 below.
Item 28. Business and Other Connections of Investment Adviser
All of the information required by this item is set forth in
the Forms ADV, as amended, of the Manager and the Subadvisers. The following
sections of such Forms ADV are incorporated herein by reference:
(a) Items 6 and 8 of Part II;
(b) Section 6, Business Background, of each Schedule D.
Item 29. Principal Underwriter
Not applicable
C-4
<PAGE>
Item 30. Location of Accounts and Records
The accounts, books, and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are in the possession of Fiduciary Counselling, Inc., 332
Minnesota Street, Suite 2100, St. Paul, Minnesota 55101-1394.
Item 31. Management Services
The Registrant is a party to three contracts, described in the
Prospectus and Statement of Additional Information, under which it receives
management services from Clearwater Management Co., Inc. and advisory services
from Parametric Portfolio Associates and Kennedy Capital Management.
Item 32. Undertaking
(a) The Registrant undertakes (i) to call special meetings of
any series upon the written request of shareholders owning at least one-fourth
of the outstanding shares entitled to vote thereat and (ii) to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 with respect
to providing its shareholders access to the list of shareholders of record of
the Registrant or the mailing of materials to such shareholders of record
whenever ten or more shareholders meeting the qualifications set forth in
Section 16(c) of the Investment Company Act of 1940 seek the opportunity of
furnishing materials to the other shareholders with a view to obtaining
signatures on a request for a special meeting.
(b) The Registrant hereby undertakes to deliver or cause to be
delivered with the Statement of Additional Information, to each person to whom
the Statement of Additional Information is sent or given, a copy of the
Registrant's report to shareholders furnished pursuant to and meeting the
requirements of Rule 30d-1 from which the specified information is incorporated
by reference, unless such person currently holds securities of the Registrant
and otherwise has received a copy of such report, in which case the Registrant
shall state in the Statement of Additional Information that it will furnish,
without charge, a copy of such report on request, and the name, address and
telephone number of the person to whom such a request should be directed.
(c) The Registrant further undertakes to limit indemnification
of officers and Trustees to the extent set forth in its Declaration of Trust.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness pursuant to Rule 485(b) Under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment No. 13 to such
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Paul and the State of Minnesota, on the 10th
day of April, 1998.
CLEARWATER INVESTMENT
TRUST
By: /s/Philip W. Pascoe
Philip W. Pascoe
Chairman and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 13 to the Registration Statement of Clearwater
Investment Trust has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Date
PRINCIPAL EXECUTIVE, FINANCIAL
AND ACCOUNTING OFFICER:
/s/Philip W. Pascoe April 10, 1998
- ---------------------------------
Philip W. Pascoe
Chairman and Treasurer
THE BOARD OF TRUSTEES:
/s/Samuel B. Carr, Jr*
Samuel B. Carr, Jr.
/s/Stanley R. Day, Jr.*
Stanley R. Day, Jr.
/s/Robert J. Phares*
Robert J. Phares
/s/Frederick T. Weyerhaeuser*
Frederick T. Weyerhaeuser
*By:/s/Philip W. Pascoe April 10, 1998
-----------------------------
Philip W. Pascoe
Power-of-Attorney
C-6
<PAGE>
Exhibit Index
Exhibit
Number
8.4 Amendment to the Custodian Agreement dated March 1, 1998
11. Consent of Independent Accountants
17.1 Financial Data Schedule - Clearwater Growth Fund
17.2 Financial Data Schedule - Clearwater Small Cap Fund
19.2 Powers of Attorney
C-7
FIRST AMENDMENT
TO CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
THIS FIRST AMENDMENT TO CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT (the
"Amendment") is made and entered into as of March 1, 1998 by and among
CLEARWATER INVESTMENT TRUST ("Client"), a Massachusetts business trust, and
INVESTORS FIDUCIARY TRUST COMPANY, a Missouri trust company ("IFTC").
WITNESSETH:
WHEREAS, Client and IFTC are parties to that certain Custody and Investment
Accounting Agreement dated as of September 29, 1997 (the "Agreement"); and
WHEREAS, Client and IFTC desire to amend and supplement the Agreement upon
the following terms and conditions.
NOW THEREFORE, for and in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Client and IFTC hereby agree that the Agreement
is amended and supplemented as follows:
1. The Security Procedures Selection Form attached to the Agreement shall be
replaced in its entirety by the Security Procedures Selection Form dated
March 1, 1998 attached hereto and incorporated herein by this reference.
2. General Provisions. This Amendment is made in the State of Missouri, and
will at all times and in all respects be construed, interpreted, and
governed by the laws of the State of Missouri, without giving effect to the
conflict of laws provisions thereof. This Amendment may be executed in any
number of counterparts, each constituting an original and all considered
one and the same agreement. This Amendment is intended to modify and amend
the Agreement and the terms of this Amendment and the Agreement are to be
construed to be cumulative and not exclusive of each other. Except as
provided herein, the Agreement is hereby ratified and confirmed and remains
in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized officers to be effective as of the date first above
written.
INVESTORS FIDUCIARY TRUST COMPANY
By:/s/Stephen R. Hilliard
Stephen R. Hilliard, Executive Vice President
CLEARWATER INVESTMENT TRUST
By:/s/Philip W. Pascoe
Philip W. Pascoe, Chairman
<PAGE>
SECURITY PROCEDURES SELECTION FORM March 1, 1998
- ----------------------------------
Please select one or more of the funds transfer security procedures indicated
below.
|_| SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions
that provides telecommunication services for its membership. Participation
is limited to securities brokers and dealers, clearing and depository
institutions, recognized exchanges for securities, and investment
management institutions. SWIFT provides a number of security features
through encryption and authentication to protect against unauthorized
access, loss or wrong delivery of messages, transmission errors, loss of
confidentiality and fraudulent changes to messages. Selection of this
security procedure would be most appropriate for existing SWIFT members.
|_| REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU)
data communications between the Client and/or its agent and IFTC and/or its
agent. Security procedures include encryption and/or the use of a test key
by those individuals authorized as Automated Batch Verifiers or a callback
procedure to those individuals. Clients selecting this option should have
an existing facility for completing CPU-CPU transmissions. This delivery
mechanism is typically used for high-volume business such as shareholder
redemptions and dividend payments.
X TELEPHONE CONFIRMATION (CALL BACK)
This procedure requires Clients to designate individuals as authorized
initiators and authorized verifiers. IFTC will verify that the instruction
contains the signature of an authorized person and prior to execution of
the payment order, will contact someone other than the originator at the
Client's location to authenticate the instruction. Selection of this
alternative is appropriate for Clients who do not have the capability to
use other security procedures.
|_| TEST KEY
Test Key confirmation will be used to verify all non-repetitive funds
transfer instructions received via facsimile or phone. IFTC will provide
test keys if this option is chosen. IFTC will verify that the instruction
contains the signature of an authorized person and prior to execution of
the payment order, will authenticate the test key provided with the
corresponding test key at IFTC. Selection of this alternative is
appropriate for Clients who do not have the capability to use other
security procedures.
X REPETITIVE WIRES
For situations where funds are transferred periodically from an existing
authorized account to the same payee (destination bank and account number)
and only the date and currency amount are variable, a repetitive wire may
be implemented. Repetitive wires will be subject to a $10 million limit. If
the payment order exceeds the $10 million limit, the instruction will be
confirmed by telephone or test key prior to execution. Repetitive wire
instructions must be reconfirmed annually. Clients may establish Repetitive
Wires by following the agreed upon security procedures as described by
Telephone Confirmation (Call Back) or Test Key. This alternative is
recommended whenever funds are frequently transferred between the same two
accounts.
<PAGE>
|_| STANDING INSTRUCTIONS
Funds are transferred by IFTC to a counter party on the Client's
established list of authorized counter parties. Only the date and the
dollar amount are variable. Clients may establish Standby Instructions by
following the agreed upon security procedures as described by Telephone
Confirmation (Call Back) or Test Key. This option is used for transactions
that include but are not limited to Foreign Exchange Contracts, Time
Deposits and Tri-Party Repurchase Agreements.
|_| AUTOMATED CLEARING HOUSE (ACH)
IFTC or its agent receives an automated transmission from a Client for the
initiation of payment (credit) or collection (debit) transactions through
the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. The transmission is sent from the
Client's or its agent's system to IFTC's or its agent's system with
encryption.
The individual signing below must be authorized to sign contract on behalf
of each of the clients named in Schedule A attached. The execution of
payment orders under the selected Security Procedures is governed by IFTC's
Funds Transfer Operating Guidelines, which are incorporated by reference.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
Jay Narverud Rick Holm
- ---------------------------------- -----------------------------------
Name Name
332 Minnesota St., Suite 2100 332 Minnesota St., Suite 2100
- ---------------------------------- -----------------------------------
Address
St. Paul, MN 55101-1394 St. Paul, MN 55101-1394
- ---------------------------------- -----------------------------------
City/State/Zip Code City/State/Zip Code
612-215-4428 612-215-4414
- ---------------------------------- -----------------------------------
Telephone Number Telephone Number
612-227-0776
- ----------------------------------
Facsimile Number
- ----------------------------------
SWIFT Number
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Clearwater Investment Trust:
We consent to the use of our report incorporated by reference herein and to the
reference to our Firm under the heading "INDEPENDENT PUBLIC ACCOUNTANTS" in Part
B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/31/97 ANNUAL REPORT TO SHAREHOLDERS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CLEARWATER GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 64154251
<INVESTMENTS-AT-VALUE> 116074499
<RECEIVABLES> 87717
<ASSETS-OTHER> 1832
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 116164048
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9304793
<TOTAL-LIABILITIES> 9304793
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54939981
<SHARES-COMMON-STOCK> 5047760
<SHARES-COMMON-PRIOR> 5252780
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (975)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51920249
<NET-ASSETS> 106859255
<DIVIDEND-INCOME> 749020
<INTEREST-INCOME> 198921
<OTHER-INCOME> 0
<EXPENSES-NET> 1012399
<NET-INVESTMENT-INCOME> (64458)
<REALIZED-GAINS-CURRENT> 8928506
<APPREC-INCREASE-CURRENT> 16922059
<NET-CHANGE-FROM-OPS> 25786107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 8987082
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24071
<NUMBER-OF-SHARES-REDEEMED> 230550
<SHARES-REINVESTED> 1459
<NET-CHANGE-IN-ASSETS> 12937107
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57061
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1012399
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1013399
<AVERAGE-NET-ASSETS> 103523596
<PER-SHARE-NAV-BEGIN> 17.88
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 5.08
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.78
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.17
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE 12/31/97 ANNUAL REPORT TO SHAREHOLDERS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> CLEARWATER SMALL CAP FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 36706842
<INVESTMENTS-AT-VALUE> 48369167
<RECEIVABLES> 446941
<ASSETS-OTHER> (42426)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48773682
<PAYABLE-FOR-SECURITIES> 758060
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7177213
<TOTAL-LIABILITIES> 7935273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29166125
<SHARES-COMMON-STOCK> 2679104
<SHARES-COMMON-PRIOR> 2571795
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9958
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11662326
<NET-ASSETS> 40838409
<DIVIDEND-INCOME> 347182
<INTEREST-INCOME> 121556
<OTHER-INCOME> 0
<EXPENSES-NET> 534172
<NET-INVESTMENT-INCOME> (65434)
<REALIZED-GAINS-CURRENT> 7097859
<APPREC-INCREASE-CURRENT> 6508576
<NET-CHANGE-FROM-OPS> 13541001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 7022467
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 144088
<NUMBER-OF-SHARES-REDEEMED> 36779
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8064877
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 18195
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 534172
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 534172
<AVERAGE-NET-ASSETS> 39622652
<PER-SHARE-NAV-BEGIN> 12.74
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 5.14
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.62
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.24
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
I, the undersigned trustee of Clearwater Investment Trust, a Massachusetts
business trust, do hereby severally constitute and appoint Philip W. Pascoe and
Joseph P. Barri and each of them acting singly to be my true, sufficient and
lawful attorneys, with full power to each of them and each of them acting singly
to sign for me, in my name in the capacity indicated below, the Amendment to the
Registration Statement on Form N-1A to be filed by Clearwater Investment Trust
under the Investment Company Act of 1940 and under the Securities Act of 1933
with respect to the offering of its shares of beneficial interest, and any and
all subsequent amendments to such Registration Statement and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated, to enable Clearwater Investment
Trust to comply with the Investment Company Act of 1940 and the Securities Act
of 1933 and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any and all amendments of said Registration
Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on the date set opposite
my signature.
Signature Date
/s/Stanley R. Day, Jr. February 25, 1998
- ---------------------------------------------
Stanley R. Day, Jr., Trustee
I, the undersigned trustee of Clearwater Investment Trust, a Massachusetts
business trust, do hereby severally constitute and appoint Philip W. Pascoe and
Joseph P. Barri and each of them acting singly to be my true, sufficient and
lawful attorneys, with full power to each of them and each of them acting singly
to sign for me, in my name in the capacity indicated below, the Amendment to the
Registration Statement on Form N-1A to be filed by Clearwater Investment Trust
under the Investment Company Act of 1940 and under the Securities Act of 1933
with respect to the offering of its shares of beneficial interest, and any and
all subsequent amendments to such Registration Statement and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated, to enable Clearwater Investment
Trust to comply with the Investment Company Act of 1940 and the Securities Act
of 1933 and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any and all amendments of said Registration
Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on the date set opposite
my signature.
Signature Date
/s/Samuel B. Carr, Jr. February 25, 1998
- ---------------------------------------------
Samuel B. Carr, Jr., Trustee
POWER OF ATTORNEY
I, the undersigned trustee of Clearwater Investment Trust, a Massachusetts
business trust, do hereby severally constitute and appoint Philip W. Pascoe and
Joseph P. Barri and each of them acting singly to be my true, sufficient and
lawful attorneys, with full power to each of them and each of them acting singly
to sign for me, in my name in the capacity indicated below, the Amendment to the
Registration Statement on Form N-1A to be filed by Clearwater Investment Trust
under the Investment Company Act of 1940 and under the Securities Act of 1933
with respect to the offering of its shares of beneficial interest, and any and
all subsequent amendments to such Registration Statement and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated, to enable Clearwater Investment
Trust to comply with the Investment Company Act of 1940 and the Securities Act
of 1933 and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any and all amendments of said Registration
Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on the date set opposite
my signature.
Signature Date
/s/Robert J. Phares February 25, 1998
- ---------------------------------------------
Robert J. Phares, Trustee
POWER OF ATTORNEY
I, the undersigned trustee of Clearwater Investment Trust, a Massachusetts
business trust, do hereby severally constitute and appoint Philip W. Pascoe and
Joseph P. Barri and each of them acting singly to be my true, sufficient and
lawful attorneys, with full power to each of them and each of them acting singly
to sign for me, in my name in the capacity indicated below, the Amendment to the
Registration Statement on Form N-1A to be filed by Clearwater Investment Trust
under the Investment Company Act of 1940 and under the Securities Act of 1933
with respect to the offering of its shares of beneficial interest, and any and
all subsequent amendments to such Registration Statement and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated, to enable Clearwater Investment
Trust to comply with the Investment Company Act of 1940 and the Securities Act
of 1933 and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any and all amendments of said Registration
Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on the date set opposite
my signature.
Signature Date
/s/Frederick T. Weyerhaeuser February 25, 1998
- ---------------------------------------------
Frederick T. Weyerhaeuser, Trustee
POWER OF ATTORNEY
I, the undersigned trustee of Clearwater Investment Trust, a Massachusetts
business trust, do hereby severally constitute and appoint Philip W. Pascoe and
Joseph P. Barri and each of them acting singly to be my true, sufficient and
lawful attorneys, with full power to each of them and each of them acting singly
to sign for me, in my name in the capacity indicated below, the Amendment to the
Registration Statement on Form N-1A to be filed by Clearwater Investment Trust
under the Investment Company Act of 1940 and under the Securities Act of 1933
with respect to the offering of its shares of beneficial interest, and any and
all subsequent amendments to such Registration Statement and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated, to enable Clearwater Investment
Trust to comply with the Investment Company Act of 1940 and the Securities Act
of 1933 and all requirements of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
said attorneys or each of them to any and all amendments of said Registration
Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on the date set opposite
my signature.
Signature Date
/s/Philip W. Pascoe February 25, 1998
- ---------------------------------------------
Philip W. Pascoe, Trustee
