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Securities Act File No. 33-20420
Investment Company Act File No. 811-5487
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 21 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Post-Effective Amendment No. 21 [X]
MERRIMAN INVESTMENT TRUST
1200 Westlake Avenue North, Seattle, Washington 98109
Telephone (206) 285-8877
AGENT FOR SERVICE:
Paul A. Merriman
1200 Westlake Avenue North, Seattle Washington 98109
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on ______________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ X ] ON JANUARY 31, 2000, PURSUANT TO PARAGRAPH (A)(I)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] ON______________ pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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MERRIMAN INVESTMENT TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Under the Securities Act of 1933
PART A
ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUS
1. Front and Back Cover Pages Cover Pages
2. Risk/Return Summary:Investments, Summary of Investments, Risks
Risks, and Performance & Performance
Investment Objectives
Principal Investment Strategies
Principal Risks
Past Performance
3. Risk/Return Summary: Fee Table Fees and Expenses
4. Investment Objectives, Principal Investment Approach and Risks
Investment Strategies, and Related Implementation of Investment
Objectives
Other Important Strategies
Investment Risks
5. Management's Discussion of Fund Inapplicable (Included
Performance in Annual Report)
6. Management, Organization, and Management of the Funds
Capital Structure
7. Shareholder Information Shareholder Information
How to Purchase Shares
How to Redeem Shares
How to Exchange Shares
Other Shareholder Services
Dividends, Capital Gains and Taxes
8. Distribution Arrangements Inapplicable
9. Financial Highlights Information Financial Highlights
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PART B
ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN S.A.I.
10. Cover Page and Table of Contents Cover Page
Table of Contents
11. Fund History Introduction
12. Description of the Fund and Its Introduction
Investments and Risks Investment Objectives and Policies
Investment Restrictions
13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Holders Inapplicable as to Control Persons
of Securities 5% Shareholders
15. Investment Advisory and Investment Manager
Other Services Management and Other Services
16. Brokerage Allocation and Other Brokerage
Practices
17. Capital Stock and Other Securities Introduction
Redemption of Shares
Dividends and Distributions
Capital Shares and Voting
Exchange Privilege
Redemptions in Kind
18. Purchase, Redemption and Pricing of Dividends and Distributions
Shares Net Asset Value Determination
Redemption of Shares
Capital Shares and Voting
Introduction
19. Taxation of the Fund Additional Tax Information
20. Underwriters Inapplicable
21. Calculation of Performance Data Performance
22. Financial Statements Financial Statements and Reports
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
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Graphic ommited MERRIMAN
INVESTMENT TRUST
FLEXIBLE BOND FUND
PROSPECTUS
January 31, 2000 GROWTH & INCOME FUND
CAPITAL APPRECIATION FUND
ASSET ALLOCATION FUND
LEVERAGED GROWTH FUND
This prospectus contains important information you should
know before investing in our family of defensively managed,
NO LOAD mutual funds.
Throughout this prospectus, Merriman Investment Trust is
referred to as the "Trust," each portfolio of the Trust is
referred to as a "Fund," collectively "Funds." The terms
"we," "us" and "our" refer to the investment manager of the
Funds, Merriman Investment Management Company.
Please read the prospectus carefully and keep it with your
investment records. Please call or e-mail us if you need
more information before you invest. Our toll-free number is
1-800-423-4893. Our web site is www.merrimanfunds.com and
our E-mail address is [email protected].
As with all mutual funds, the Securities and Exchange
Commission has not approved or disapproved these securities
or made a judgement about the accuracy or adequacy of this
prospectus. Anyone who tells you otherwise is committing a
crime.
INSIDE
Summary of Investments, Risks and Performance..............1
Shareholder Information....................................8
Investment Approach and Risks.............................15
Management of the Funds...................................24
Financial Highlights......................................25
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Summary of investments, risks & performance
We know you have investment choices. There are over 9,000
mutual funds from which to choose, many of which may be
right for you. Thank you for taking the time to consider the
Merriman Funds.
Investment Objectives
Flexible Income, preservation of capital
Bond Fund and, secondarily, growth of capital
Growth & Long-term growth of capital, income
Income Fund and, secondarily, preservation of capital
Capital
Appreciation Fund Capital appreciation
Asset High total return
Allocation Fund consistent with reasonable risk
Leveraged Capital appreciation
Growth Fund through the use of leverage and other
investment practices
PRINCIPAL INVESTMENT STRATEGIES
All Merriman Funds invest primarily in the shares of other investment companies,
referred to throughout this prospectus as "mutual funds," "underlying funds," or
"funds."
DEFENSIVE MANAGEMENT, ALL FUNDS
We follow a defensive strategy designed to protect capital
from stock and bond market declines. Sometimes called market
timing, our strategy is to be "in the market" when it is
going up and "out of the market" when it is going down. We
perform technical research and analysis to identify changes
in market trends and respond according to the degree of the
strength or weakness of such trends. We evaluate broad
markets, discrete market sectors, individual mutual funds
and classes of funds separately and may move investments
from one sector or underlying fund or class of funds to
another in response to market shifts. If we are successful
in avoiding market exposure during market declines, you
should experience greater returns than with an equivalent
investment portfolio held through periods of market decline.
BROAD DIVERSIFICATION, ALL FUNDS
Investing primarily in the shares of other mutual funds
complements our defensive strategy by providing broad
diversification. It also enables us to blend a wide range of
investment objectives and approaches, takes advantage of
many portfolio management strengths, skills and talents and
provides access to institutional funds not available to
individual investors. Our screening begins with an analysis
of the investment objectives, policies, and strategies of
many mutual funds. We select funds primarily based upon the
degree to which they will enhance the Fund's ability to
achieve its investment objectives. We use absolute and
risk-adjusted performance evaluations, including relative
strength and volatility, over various time periods and
market cycles, to identify funds for investment. We will
generally invest at least 65% of each Fund's total assets in
funds having investment objectives and strategies consistent
with the respective Fund's objectives.
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TYPES OF INVESTMENTS
FLEXIBLE BOND FUND
The underlying funds included in the Fund's portfolio may
invest in all types of debt securities, including bonds,
notes, mortgage-backed securities, government and government
agency obligations, zero coupon securities, convertible
securities, repurchase agreements and preferred stocks.
Generally, we invest the majority of the Fund's assets in
mutual funds which invest in investment grade corporate
bonds, both domestic and foreign. But we are flexible as to
the mix of portfolio securities with respect to issuer,
type, maturity, and quality.
GROWTH & INCOME FUND
The underlying funds included in the Fund's portfolio will
generally have investment objectives of growth, growth &
income or income. They may invest in common stocks, bonds
and securities convertible into common stocks, both domestic
and foreign.
CAPITAL APPRECIATION FUND
Underlying funds included in the Fund's portfolio will
generally have a growth or aggressive growth oriented
objective. They may invest in common stocks or securities
convertible into common stocks, both domestic and foreign.
We may also invest in funds having other than growth or
aggressive growth objectives if, in our opinion, the
investment would enhance the ability of the Fund to achieve
its objective.
ASSET ALLOCATION FUND
We allocate the Fund's assets among five market segments:
domestic and international equities, domestic and
international fixed income, and precious. We are flexible
with respect to the percentage allocated to each market
segment, but can generally be expected to have the majority
of Fund assets allocated to the equities and fixed income
market segments.
LEVERAGED GROWTH FUND
Except for its use of leverage (borrowing), the investment
policies of the Leveraged Growth Fund are the same as those
of the Capital Appreciation Fund, described above. We may
borrow money for investment purposes. Such borrowing,
commonly known as leverage, amplifies the effect upon net
asset value of increases and decreases in the market value
of the Fund's portfolio. We use leverage in conjunction with
our defensive management strategy when we believe a rising
trend in the stock market, accompanied by little risk of
decline, is strongly indicated. We may borrow up to $1 for
each $2 of net assets.
Principal Risks
In any investment there is a degree of risk which must be
assumed by the investor. Generally to get greater rewards
necessitates taking greater risks. Merriman Funds are no
different. The value of Fund shares will fluctuate and you
could lose money. The Funds are designed for long-term
investors, including tax-deferred retirement plans. Consider
investing if you can accept the risks accompanying the
Funds' defensive approach to stock and bond investing. You
should not invest your short-term savings or emergency
reserve money.
DEFENSIVE MANAGEMENT
The principal risk of the defensive strategy employed by the
Funds is that we could be wrong in our expectations about
market trends and the consequent deployment of Fund assets.
If we are wrong in our expectations, opportunities for gains
or income may be lost or you could lose money.
BROAD DIVERSIFICATION
The Funds invest in shares of mutual funds which engage in a
myriad of strategies and approaches to the investment
markets. By investing in other mutual funds, investors
indirectly pay higher operating costs than if they invested
directly in the underlying funds. We try to mitigate these
double-tiered costs by selecting funds having superior
management skills, better performance potential and lower
operational costs than most.
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We have no control over, and frequently no knowledge of, the
day-to-day operations of underlying funds. Simply put, we
may invest in a fund thinking they will do one thing, when
in fact they may do something entirely different. Thus, we
may lose the benefit we expected and incur risks we did not
anticipate.
There are regulatory restrictions on the percentage
ownership we may take in underlying funds. These limitations
may prevent us from purchasing the mutual funds we consider
most desirable. In certain cases, underlying funds are
permitted to make redemptions in securities rather than in
cash. In such case, we would incur additional brokerage
costs to liquidate the securities so received.
EQUITY SECURITIES
The Growth & Income, Capital Appreciation Asset Allocation
and Leveraged Growth Funds invest in underlying funds which,
in turn, invest in equity securities. Equity securities are
subject to greater volatility than debt securities. While
greater volatility increases risk, it offers the potential
for greater reward. Underlying funds may emphasize
investment in particular sectors of the stock market or on
particular types of companies. Any such emphasis carries
with it increased risks of a special nature related to the
sector or type of company. Funds that use strategies such as
options and futures to protect their investments or increase
their income carry a risk that the prices of the options and
futures do not correlate with the values of the securities
in the fund's portfolio.
FIXED INCOME SECURITIES
The Funds invest in underlying funds which, in turn, invest
in fixed income securities. Risks of investment in such
securities are interest rate risk, credit risk and call
risk. Interest Rate Risk is the potential for bond prices to
fluctuate when interest rates change. When interest rates
rise, bond prices fall. When interest rates fall, bond
prices rise. Credit Risk is associated with a borrower
failing to make payments of interest and principal when due.
Credit risk increases as overall portfolio quality
decreases. Call Risk for corporate bonds (or prepayment risk
for mortgage-backed securities) is the possibility that
borrowers will prepay (call) their debt prior to the
scheduled maturity date, resulting in the necessity to
reinvest the proceeds at lower interest rates. Call risk
generally occurs during declining interest rates and is
greater when an underlying fund is invested in long-term
maturities.
The Flexible Bond Fund and, to a lesser extent, the Growth &
Income and Asset Allocation Funds invest in mutual funds
which, in some cases, may invest up to 100% of their assets
in lower-rated bonds. Lower-rated bonds generally provide
higher yields than higher quality securities, producing
greater interest income for their investors. But lower-rated
bonds are regarded, on balance, as predominately speculative
with respect to the issuer's capacity to pay interest and
principal in accordance with the terms of the obligation.
The Flexible Bond, Asset Allocation and Growth & Income
Funds seek to limit their exposure to lower-rated securities
to 25%, 10% and 5% of their assets, respectively.
Lower-rated securities carry greater risks than investment
grade securities and, to the extent a Fund is invested,
through underlying funds, in lower-rated securities, it will
assume such increased risks.
FOREIGN SECURITIES & CURRENCIES
Underlying funds in which the Funds invest may, in turn,
invest up to 100% of their assets, in the securities of
foreign issuers. Securities issued by foreign companies or
governments present risks beyond those of domestic issuers.
Such risks include political or economic instability,
changes in foreign currency exchange rates, a lower level of
regulation and accountability, and less publicly available
information. Prices of foreign securities may be more
volatile and less liquid than domestic securities.
LEVERAGE
The Leveraged Growth Fund may borrow (use leverage) for
investment purposes and the underlying funds in which all
the Funds invest may use leverage. The use of
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leverage is a speculative technique, involving the payment
of interest and other loan costs. Earnings may not be
sufficient to offset costs, forcing the fund to sell
portfolio securities when it is not advantageous to do so.
This could result in higher than normal portfolio turnover,
which usually generates higher transaction costs and
expenses. Leverage magnifies the borrowing fund's net asset
value per share fluctuation.
Past Performance
The degree to which performance varies from year to year is
one measure of risk. The bar charts below show this
year-to-year performance for the past 10 calendar years for
each Fund. The tables below the bar charts compare each
Fund's performance over time to a broad-based securities
market index. The Flexible Bond Fund is compared to the
Salomon Broad Investment Grade (BIG) Index, an unmanaged
index of domestic investment grade bonds. The other Funds
are compared to the Standard & Poor's 500 Index, an
unmanaged stock index of the 500 largest publicly traded
companies. Both the bar charts and the tables below assume
reinvestment of dividends and distributions. Remember that
past performance is not necessarily an indication of how the
Funds will perform in the future.
Note: A graph appears at this location in the text.
Flexible Bond Fund
Year-by Year Total Return (%) As of 12/31 each year
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
8.45 6.12 13.32 4.55 14.45 -2.86 14.58 7.57 5.78 4.25
The total return for the year-to-date through September 30, 1999 was +1.69%
Best Quarter Q2 '89 +7.12% Worst Quarter Q1 '92 -4.02%
Average Annual Total Return As of 12/31/98
1 Year 5 Years 10 Years
Flexible Bond Fund 4.25% 5.71% 7.49%
Salomon BIG Index (0.27)% 7.86% 8.16%
Note: A graph appears at this location in the text.
GROWTH & INCOME FUND
Year-by Year Total Return (%) As of 12/31 each year
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.79 3.84 19.19 -1.28 2.76 -0.16 17.69 15.01 13.10 20.35
The total return for the year-to-date through September 30, 1999 was +1.27%
Best Quarter Q4 '98 +12.18% Worst Quarter Q3 '98 -5.28%
Average Annual Total Return As of 12/31/98
1 Year 5 Years 10 Years
Growth & Income Fund 20.35% 12.96% 9.75%
S&P 500 Index 27.79% 25.02% 16.81%
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Note: A graph appears at this location in the text.
CAPITAL APPRECIATION FUND
Year-by Year Total Return (%) As of 12/31 each year
1990 1991 1992 1993 1994 1995 1996 1997 1998
3.13 21.90 4.19 3.64 -0.62 14.85 10.32 9.89 16.80
The total return for the year-to-date through September 30, 1999 was +2.14%
Best Quarter Q4 '98 +12.42% Worst Quarter Q4 '97 -7.48%
Average Annual Total Return As of 12/31/98
1 Year 5 Years 9 Years
Capital Appreciation Fund 16.80% 10.07% 9.11%
S&P 500 Index 27.79% 25.02% 17.89%
Note: A graph appears at this location in the text.
ASSET ALLOCATION FUND
Year-by Year Total Return (%) As of 12/31 each year
1990 1991 1992 1993 1994 1995 1996 1997 1998
1.02 12.28 2.80 18.54 -2.88 10.53 10.47 5.83 10.60
The total return for the year-to-date through September 30, 1999 was +4.10%
Best Quarter Q1 '98 +8.18% Worst Quarter Q4 '97 -5.48%
Average Annual Total Return As of 12/31/98
1 Year 5 Years 9 Years
Asset Allocation Fund 10.60% 6.77% 7.50%
S&P 500 Index 27.79% 25.02% 17.89%
Note: A graph appears at this location in the text.
LEVEAGED GROWTH FUND
Year-by Year Total Return (%) As of 12/31 each year
1993 1994 1995 1996 1997 1998
3.75 -0.15 17.06 11.99 12.22 24.37
The total return for the year-to-date through September 30, 1999 was +3.97%
Best Quarter Q4 '98 +19.58% Worst Quarter Q4 '97 -10.30%
Average Annual Total Return As of 12/31/98
1 Year 5 Years
Leveraged Growth Fund 24.37% 12.80%
S&P 500 Index 27.79% 25.02%
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Fees and Expenses
This table describes the fees and expenses that you may pay
if you buy and hold shares of the Funds.
SHAREHOLDER TRANSACTION EXPENSES
These are fees paid directly from your investment. Many
mutual funds charge their shareholders fees such as sales
commissions, redemption fees and exchange fees. The Merriman
Funds are no-load funds, which means that, in most
circumstances, you will not pay shareholder fees.
Our transfer agent imposes certain service fees: a $12 "wire
fee" if you request that your redemption proceeds be wired
to your bank account; a $5 fee if you request an exchange of
shares by telephone (there is no charge for exchanges made
by mail).
ANNUAL FUND OPERATING EXPENSES
These are expenses that are deducted from Fund assets.
Operating expenses include fees for portfolio management,
maintenance of shareholder accounts, shareholder servicing,
accounting and other services. While the Funds pay these
expenses, you bear them indirectly, as the table below
demonstrates.
This table describes the fees and expenses that you may pay
if you buy and hold shares of the Funds.
<TABLE>
<CAPTION>
Flexible Growth & Income Capital Asset Leveraged
Bond Fund Appreciation Allocation Fund Growth
Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Management Fees 1.00% 1.25% 1.25% 1.25% 1.25%
Other Expenses 0.57% 0.54% 0.56% 0.59% 0.52%
Interest Expense - - - - 0.83%
Total Fund
Operating Expense 1.57%* 1.79% 1.81% 1.84% 2.60%
</TABLE>
* Prior to voluntary expense reimbursement from investment manager.
After reimbursement, 1.50%. Voluntary reimbursement may be terminated
at any time.
EXAMPLE
This example is intended to help you compare the cost of
investing in the Merriman Funds with the cost of investing
in other mutual funds.
The example assumes that you invest $10,000 in a Fund for
the time periods indicated and then redeem all of your
shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based upon these
assumptions your costs would be as follows:
<TABLE>
<CAPTION>
Flexible Growth & Capital Asset Leveraged
Bond Income Appreciation Allocation Growth
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 16 $ 18 $ 18 $ 19 $ 26
3 Years 50 56 57 58 81
5 Years 86 97 98 100 138
10 Years 187 211 213 216 293
</TABLE>
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SHAREHOLDER INFORMATION
HOW TO PURCHASE SHARES
GETTING HELP
You may receive help opening accounts from the Trust by
calling toll-free, 1-800-423-4893, by E-mail at
[email protected] or by writing to the Trust at 1200
Westlake Avenue N, Suite 700, Seattle, WA 98109.
PRICING OF SHARES
The value of Fund shares rises and falls constantly. There
are no sales commissions charged to investors, which means
that 100% of your money is used to buy shares at the Fund's
net asset value. Net asset value is based upon the market
value of the portfolio securities owned by the Fund. The per
share price of your purchase is determined at the next
calculation of net asset value after your purchase order is
received by the transfer agent in proper order. Net asset
value is calculated at the close of trading of the New York
Stock Exchange (currently 4:00 p.m., New York time) on each
day that the Exchange is open for trading.
ACCOUNT MINIMUMS AND GENERAL PRICING
The minimum initial investment in each Fund is $5,000
($2,000 for IRA accounts; no minimum for Automatic
Investment Plan accounts). (Some broker-dealers, such as
Charles Schwab & Company, may accommodate investors who wish
to invest less than $5,000.) Subsequent investments must be
at least $100.
You may purchase shares by mail with payment by check, or by
telephone with payment by bank wire or Automated Clearing
House (ACH) transfer. You may also place orders through a
broker-dealer, who may charge you a fee for its services.
Individual Retirement Accounts, corporate or self-employed
retirement plans and Systematic Withdrawal Plans generally
require special or supplemental application forms to open
accounts. Payment for shares purchased should accompany the
Account Application or purchase order as described herein.
Payment must be made in U.S. dollars. Checks must be drawn
on U.S. Banks. Third party checks will not be accepted.
A Social Security or Taxpayer Identification Number (TIN)
must be supplied and certified on the Account Application
Form before an account can be established, unless you have
applied for a TIN and the application so indicates. If you
fail to furnish the Trust with a correct TIN, the Trust is
required to withhold taxes at the rate of 31% on all
distributions and redemption proceeds.
If your payment is not received or you pay with a check or
ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses
(including a $20 fee) incurred by a Fund or the transfer
agent. It is the policy of the Funds not to accept
applications under circumstances or in amounts considered
disadvantageous to shareholders. For example, if an
individual previously tried to purchase shares with a bad
check, or the proper social security or tax identification
number is omitted, the Fund reserves the right not to accept
future applications from such individual. The U. S. Postal
Service or other independent delivery services are not
agents of the Funds. Therefore, deposit in the mail or with
such services, or receipt at the transfer agent's post
office box, of purchase applications or redemption requests
does not constitute receipt by the transfer agent or the
Trust.
PURCHASE BY MAIL
To open an account by mail, complete and sign the Account
Application form accompanying the Prospectus. Be sure to
indicate in which Fund(s) you wish your investment to buy
shares, and make your check payable to that Fund. The
application and your check should be mailed to Merriman
Mutual Funds, c/o Firstar Mutual Fund Services, LLC, 3rd
Floor, PO Box 701, Milwaukee, Wisconsin 53201-0701. The
foregoing address should also be used for all written
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shareholder communication to the transfer agent unless you
are using an express or overnight delivery service. Mail
orders for subsequent investments should include, when
possible, the Additional Investment Form which is attached
to your Fund confirmation statement. Otherwise, be sure to
identify the Fund and your account in your letter.
Overnight and express delivery services do not deliver to
Post Office boxes. Please follow the instructions for
regular mail orders, but use the following address to insure
prompt delivery: Merriman Mutual Funds, c/o Firstar Mutual
Fund Services, LLC, 3rd Floor, 615 E. Michigan Street,
Milwaukee, WI 53202.
PURCHASE BY TELEPHONE WITH PAYMENT BY BANK WIRE
To establish a new account or add to an existing account by
bank wire, please call Firstar Mutual Fund Services, LLC,
1-800-224-4743, before wiring funds, to advise them of your
forthcoming investment, the dollar amount, the account
registration, and to obtain a confirmation number. This will
insure prompt and accurate handling of your investment.
Please instruct your bank to use the following wiring
instructions:
WIRE TO: Firstar Bank Milwaukee, N.A.,
777 E. Wisconsin Avenue, Milwaukee, WI 53202
ABA Number 0750-00022
FOR CREDIT TO: Firstar Mutual Fund Services, LLC,
Account No. 112-952-137
FOR FURTHER CREDIT TO: (Fund Name) , (Shareholder Account Number) ,
(Shareholder Name/Registration)
PURCHASE BY TELEPHONE WITH PAYMENT BY ACH TRANSFER
It is important that the bank wire contain all the
information and that Firstar Mutual Fund Services, LLC
receives prior telephone notification to ensure proper
credit. The Fund and its transfer agent are not responsible
for the consequences of delays resulting from the banking or
Federal Reserve wire system, or from incomplete wiring
instructions.
The Automated Clearing House (ACH) system allows you to
purchase shares by an electronic transfer of funds from your
bank checking account, money market account, NOW account or
savings account. ACH transfer may not be used for your
initial share purchase. Please follow the procedures under
"Purchase By Mail" or "Purchase by Telephone with Bank Wire"
for your first purchase. Only bank accounts held at domestic
financial institutions that are ACH members can be used for
ACH purchases. Your shares will be purchased at the net
asset value determined as of the close of regular trading on
the date that the transfer agent receives payment (in
amounts of $100 or more) for shares purchased by electronic
funds transfer through the ACH system. Most transfers are
completed within three business days after your call to
place the order. To preserve flexibility, the Fund may
revise or remove the ability to purchase shares by telephone
or may charge a fee for such service, although currently the
Fund does not expect to charge a fee.
Investors in the Fund may also request by telephone a change
of address, a change of investments made through an
Automated Investment Plan (see below), and a change in the
manner in which dividends are received.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan allows you to purchase shares
by an electronic transfer of funds at regular monthly
intervals from your bank checking account, money market
account, NOW account or savings account. There is no minimum
initial investment when you enroll in the Automatic
Investment Plan. Your account will be debited and shares
will be purchased at regular monthly intervals of your
choosing. You may join the Automatic Investment Plan by
completing that portion of the New Account Application or
filling out a separate Automatic Investment Plan Application
which you may obtain from the Fund or the transfer agent.
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You may cancel your participation in the Plan or change the
amount of purchase or the day each month on which the shares
are purchased at any time by calling 1-800-224-4743 or by
writing to the Fund, c/o Firstar Mutual Fund Services, LLC,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The change or
cancellation will be effective five business days following
receipt.
Each investment through the Automatic Investment Plan must
be at least $100 and not more than $50,000. For you to
participate in the Plan, your bank or other financial
institution must be an Automated Clearing House member. It
will take about 15 days for Firstar to process your
Automatic Investment Plan enrollment. The Fund may modify or
terminate the Automatic Investment Plan at any time or
charge a service fee, although no such fee is currently
contemplated.
STOCK CERTICIFICATES
Certificates will not be issued for your shares unless you
request them. In order to facilitate redemptions and
transfers, most shareholders elect not to receive
certificates. If you lose a certificate, you may incur delay
and expense in replacing it.
HOW TO REDEEM SHARES
GETTING HELP
If you need help redeeming shares or are uncertain of the
requirements for redemption, please contact the transfer
agent, at 1-800-224-4743, or write to the address shown
below under the caption "Redemption by Mail." Knowledgeable,
friendly personnel will be happy to assist you.
PRICING AND TIMING
Because the value of Fund shares rises and falls constantly
based upon the market value of its portfolio securities,
your redemption price per share may be more or less than the
price per share you paid for them. If the transfer agent
receives your redemption order prior to the close of trading
on the New York Stock Exchange (currently 4:00 p.m. New York
time), your shares will be redeemed at the net asset value
calculated as of that business day's close of trading.
Otherwise, your order will redeem shares as of the next
business day's close..
GENERAL REDEPMTIONS AND GUIDELINES
You may redeem (sell) shares by mail or telephone. You may
also redeem your shares through a broker-dealer who may
charge you a fee for its services. To avoid delays in
processing, please follow the policies described below.
Payments to investors redeeming shares which were purchased
by check will not be made until the Trust can verify that
the payment(s) for the purchase has been, or will be
collected. It may take up to twelve (12) days for your check
to clear. Redemption requests from retirement accounts must
indicate an election not to have Federal Tax withheld or
they will be subject to withholding. A Fund may suspend the
right of redemption or postpone the date at times when the
New York Stock Exchange is closed, or under any emergency
circumstances as may be determined by the Securities and
Exchange Commission.
The Funds expect normally to make all redemptions in cash.
Circumstances could arise, however, under which a Fund may
wish to make redemptions "in kind" (in marketable securities
from its portfolio). A shareholder receiving an "in kind"
redemption, would incur brokerage fees upon disposition of
such securities.
The Board of Trustees reserves the right to redeem any
account having a net asset value of less than $2,000 (due to
redemptions, exchanges or transfers, and not due to market
action) upon 60 days' written notice. If the shareholder
brings his account net asset value up to $2,000 or more
during the notice period, the account will not be redeemed.
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Be advised that such redemptions from retirement plans for
which Firstar Mutual Fund Services, LLC serves as Custodian
may be subject to tax withholding.
PAYMENT OF REDEMPTION PROCEEDS
You may have your redemption proceeds sent to you by check,
bank wire or ACH transfer. Proceeds will be sent to you,
typically, within one or two business days, but no later
than seven days after receipt of your redemption request.
There is no charge for check redemptions. If you choose to
have the proceeds wired, the transfer agent will charge your
account $12 to pay for the wire transfer. If you elected the
ACH option on the Account Application Form, you may choose
to have your proceeds sent by electronic funds transfer to
your bank account There is no charge for this service. There
is a $100 minimum for each ACH transfer. It will usually
take 2-3 business days for the redemption proceeds to reach
your bank account.
REDEMPTION BY MAIL
Your regular mail request should be addressed to Merriman
Mutual Funds, c/o Firstar Mutual Fund Services, LLC, PO Box
701, Milwaukee, Wisconsin 53201-0701. Your overnight,
express, certified or registered mail request should be
addressed to Merriman Mutual Funds, c/o Firstar Mutual Fund
Services, LLC, 3rd Floor, 615 E. Michigan Street, Milwaukee,
Wisconsin 53202-5207. Your request must include:
- Your share certificates, if issued;
- Your letter of instruction or a stock assignment
specifying the Fund from which shares are to be
redeemed, the account number, and the number of shares
or dollar amount to be redeemed, signed by all
registered shareholders in the exact names in which
they are registered;
- Signature guarantee(s) (see "Signature Guarantees,"
below); and
- Other supporting legal documents, if required in the
case of estates, trusts, guardianships, custodianships,
corporations, partnerships, pension or profit sharing
plans, and other organizations.
If not directed otherwise, a check for your redemption
proceeds will be sent to your address on record with the
Fund.
REDEMPTION BY TELEPHONE
You may make telephone redemptions (in amounts of $1,000 or
more) unless you declined the privilege on the Account
Application Form. (However, telephone redemption requests
for IRA accounts will not be accepted.) To make a telephone
redemption, call the transfer agent at 1-800-224-4743. The
transfer agent will act upon any telephone instructions it
believes to be genuine, to redeem shares from your account.
Your Account Application Form specifies the person(s), bank,
account number and/or address to receive your redemption
proceeds. Once your account has been opened you may cancel
the privilege by telephone or letter. Written instructions
with signature(s) guaranteed (see "Signature Guarantees,"
below) are required to change the person(s), bank, account
number and/or address designated to receive your redemption
proceeds. Further documentation may be requested from
corporations, executors, administrators, trustees and
guardians. There is no charge for establishing or using this
privilege. You may cancel the privilege at any time by
telephone or letter. To protect you, your redemption
proceeds will only be sent to you at your address of record
or to the bank account or person(s) specified in your
Account Application or Telephone Authorization Form
currently on file with the transfer agent.
RISKS OF TELEPHONE TRANSACTIONS
The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such
procedures may include, among others, requiring some form of
personal identification prior to acting upon telephone
instructions, providing written confirmation of all such
transactions and/or tape recording all telephone
instructions. Assuming procedures such as those listed above
have been followed, the Fund will not be liable for any
loss, cost or expense for acting upon an investor's
telephone instructions or for any unauthorized telephone
redemption. As a result of this policy, the investor will
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bear the risk of any loss unless the Fund has failed to
follow such procedure(s).
You cannot redeem shares by telephone if you hold the stock
certificates representing the shares you are redeeming or if
you paid for the shares with a personal, corporate, or
government check and your payment has been on the transfer
agent's books for less than 12 days. During drastic economic
and market changes, telephone redemption services may be
difficult to implement. If an investor is unable to contact
the transfer agent by telephone, shares may also be redeemed
by following the instructions for redeeming by mail .
SIGNATURE GUARANTEES
A signature guarantee is a widely accepted way to protect
you, the Funds and the transfer agent from fraud, and to be
certain that you are the person who has authorized a
redemption from your account. Signature guarantees are
required for:
- All mail order redemptions,
- Change of registration requests, and
- Requests to establish or change exchange privileges or
telephone redemption service other than through your
initial account application.
The Funds reserve the right to require a signature guarantee
under other circumstances. The Funds will honor signature
guarantees from acceptable financial institutions such as
banks, savings and loan associations, trust companies,
credit unions, brokers and dealers, registered securities
associations and clearing agencies. A signature guarantee
may not be provided by a notary public. The signature
guarantee must appear either:
- On the written request for redemption,
- On a separate instrument of assignment ("stock power")
which should specify the total number of shares to be
redeemed, or
- On all stock certificates tendered for redemption and,
if shares held for you by the transfer agent are also
being redeemed, on the letter or stock power.
HOW TO EXCHANGE SHARES
Shareholders may exchange, by mail or telephone, shares (in
amounts worth $1,000 or more) of one Merriman Fund for
shares of any other Merriman Fund or of any of three Firstar
money market funds described below. There is no fee for
exchanges made by mail, but the transfer agent will charge
your account a $5.00 exchange fee every time you make an
exchange by telephone. To make an exchange, simply call the
transfer agent at 1-800-224-4743 prior to 4:00 p.m. Eastern
Time. Your exchange will take effect as of the next
determination of net asset value per share of each fund
involved (usually at the close of the New York Stock
Exchange, currently 4:00 p.m., on each day the exchange is
open for business).
Once an exchange request is made, either in writing or by
telephone, it may not be modified or canceled. The Trust
reserves the right to limit the number of exchanges or to
otherwise prohibit or restrict a shareholder(s) from making
exchanges at any time, should the Trustees determine that it
would be in the best interest of our shareholders to do so.
A shareholder(s) will be given at least 10 days written
notice prior to imposing restrictions or prohibition on
Exchange Privileges. An exchange, for tax purposes,
constitutes the sale of the shares of one fund and the
purchase of those of another; consequently, the sale will
usually involve either a capital gain or loss to the
shareholder for Federal income tax purposes. During drastic
economic and market changes, telephone exchange services may
be difficult to implement. The exchange privilege is only
available in states where the exchange may legally be made.
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For further information about the Firstar Funds, call the
transfer agent at 1-800-224-4743, or write to Firstar Mutual
Fund Services, LLC, Mutual Fund Services - 3rd Floor, PO
Box 701, Milwaukee, Wisconsin 53201-0701.
The Firstar Money Market Funds made available to Merriman
Fund shareholders under this Exchange Privilege are: Firstar
U.S. Government Money Market Fund, Firstar Money Market Fund
and Firstar Tax-Exempt Money Market Fund. They are not
affiliated with the Merriman Funds or the Investment
Manager, but are made available as a convenience to Merriman
Fund shareholders desiring to invest a portion of their
assets in money market instruments. The Investment Manager
has entered into a Servicing Agreement with Firstar Funds,
Inc. whereby the Investment Manager receives 2/10 of 1% of
the average daily net value of shares of any fund offered by
Firstar Funds, Inc. which are beneficially owned by
shareholders of the Merriman Funds in return for providing
support services to said shareholders on behalf of Firstar.
OTHER SHAREHOLDER SERVICES
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan provides for regular monthly
or quarterly checks to be sent to you (or your designee).
Shareholders owning shares of any Merriman Fund with a value
of $10,000 or more may establish a Systematic Withdrawal
Plan. A shareholder may receive monthly or quarterly
payments, in amounts of not less than $50 per payment, by
authorizing the transfer agent to redeem the necessary
number of shares either monthly or quarterly in order to
make the payments requested. Proceeds may either be mailed
to you or moved to your bank account by ACH transfer.
Transfers by ACH generally take up to three business days to
reach your bank account. Share certificates for the shares
being redeemed must be held for you by the transfer agent.
If the recipient is other than the registered shareholder,
the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees"). Corporations or
other legal entities should call the transfer agent for
special instructions. There is no charge for the use of this
plan. Shareholders should be aware that such systematic
withdrawals could deplete or use up entirely the initial
investment and may result in realized long-term or
short-term capital gains or losses. The Systematic
Withdrawal Plan may be terminated at any time by the Trust
upon 60 days written notice or by a shareholder upon written
notice to the transfer agent. An application may be obtained
from the transfer agent by telephone at 1-800-224-4743. A
signature guarantee is required to convert an existing
account to systematic withdrawal.
INDIVIDUAL RETIREMENT ACCOUNTS AND OTHER RETIREMENT PLANS
Plan forms for the regular deductible IRA, Roth
nondeductible IRA, Simplified Employee Pension-Individual
Retirement Accounts ("SEP-IRA") and Savings Incentive Match
Plans ("SIMPLE") are furnished by the Trust to enable
shareholders and employers to set aside tax-deferred
investments in Merriman Funds. There is no charge to
establish an IRA with the Merriman Funds. A $12.50 annual
maintenance fee per account (maximum of $25 for multiple
Merriman Fund IRA accounts) is charged by Firstar Mutual
Fund Services, LLC, who acts as IRA Custodian. A $15 fee
applies for each transfer to a Successor Custodian, each
distribution to a participant and for each refund of an
excess contribution. Shareholders who have an IRA or other
retirement plan must indicate on their redemption request
whether or not to withhold Federal income tax. Redemption
requests must indicate an election not to have Federal tax
withheld or they will be subject to withholding. If you are
uncertain of the redemption requirements, please contact
Firstar Mutual Fund Services, LLC in advance at
1-800-224-4743. In addition to the plans mentioned above,
Fund accounts may also be opened by all kinds of
tax-deferred retirement plans. For assistance in opening or
establishing tax-deferred retirement accounts, please call
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the Trust at 1-800-423-4893. Trust personnel will be happy
to assist investors in establishing tax-deferred plans,
including those which permit investments in vehicles other
than the Merriman Funds.
TOLL-FREE INFORMATION LINES
The Funds provide toll-free information lines, staffed
during business hours for your convenience. Friendly,
experienced personnel answer your questions, solve problems
and provide current price quotes. For information about
opening accounts, retirement plans, requests for
prospectuses and account applications, call between 10 a.m.
and 7 p.m. Eastern Time, 800-423-4893. For information about
existing accounts, telephone exchanges and redemptions and
for assistance with investing by wire, call between 9 a.m.
and 8 p.m. Eastern Time, 800-224-4743
SHAREHOLDER FEES
Shareholders will be notified in writing at least 60 days
prior to the Fund(s) putting any new or increased fee into
effect. All fees disclosed in the Prospectus which are
charged to shareholders by the transfer agent are subject to
change without notice. In addition to the fees disclosed
elsewhere in the Prospectus, the transfer agent charges $20
for any Stop Payment (of a liquidation or distribution
check) ordered by a Shareholder. Also, for account history
research of transactions or other items which occurred in or
previous to the second calendar year previous to the date of
the request, the transfer agent charges a fee of $5 per
research item.
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Shareholders will receive dividends from net investment
income, if any, quarterly for the Flexible Bond Fund and
annually for the other Funds. The Funds will also distribute
net realized capital gains, including short-term gains, if
any, during November or December. All dividend and capital
gain distributions are automatically reinvested in
additional shares of the Fund at the then current net asset
value. You may receive dividends and/or capital gains
distributions in cash rather than shares of the Fund by so
indicating on the Account Application Form or by notifying
the Trust. Dividends and capital gains distributions are
paid in cash or reinvested as of the "ex-date", which is
normally the day following the record date.
With respect to cash distributions, shareholders can
authorize another person or entity to receive such
distributions. The name and address of the intended
recipient should be clearly indicated in the Account
Application Form or on a signed statement accompanying the
Application Form.
Dividends and distributions are paid on a per-share basis.
At the time of such a payment, therefore, the value of each
share will be reduced by the amount of the payment. Keep in
mind that if you purchase shares shortly before the payment
of a dividend or the distribution of capital gains, you will
pay the full price for the shares and then receive some
portion of the price back as a taxable dividend or
distribution.
TAX CONSEQUENCES
The Funds intend to make distributions that may be taxable
to shareholders, whether received in cash or reinvested in
additional Fund shares. Dividends from net investment income
and short-term capital gains will ordinarily be taxable to
shareholders as ordinary income. Long-term capital gains
distributions are taxable as long-term capital gains
regardless of how long shares of the Fund have been held.
Shareholders will receive Federal tax information regarding
dividends and capital gains distributions after the end of
each year. Dividends and capital gains distributions may
also be subject to state and local taxes. Shareholders are
urged to consult their attorneys or tax advisers regarding
specific questions as to Federal, state or local taxes.
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Borrowing by the Leveraged Growth Fund may cause some of its
portfolio securities to be treated as "debt-financed."
Dividends paid to corporate shareholders from earnings on
such securities would be ineligible for the 70%
dividends-received deduction which might otherwise be
available to corporate shareholders.
Exchanges and redemptions are taxable events for Federal
income tax purposes; accordingly, capital gains or losses
may be realized.
Income (including dividends and distributions of short-term
capital gains) received by a Fund from underlying funds,
interest received on money market instruments, and net
short-term capital gains received by the Fund on the sale of
underlying fund shares, will be distributed by the Fund and
will be taxable to shareholders at ordinary income tax
rates. Investors in the Fund may experience a greater tax
liability than would result if they invested directly in the
underlying funds.
Distributions of long-term capital gains received by a Fund
from underlying funds, as well as net long-term capital
gains realized by a Fund from the sale (or redemption) of
underlying fund shares or other securities held by a Fund
for more than one year, will be distributed by the Fund and
will be taxable to shareholders as long-term capital gains
(even if the shareholder has held the shares for less than
six months). However, if a shareholder who has received a
capital gains distribution suffers a loss on the sale of his
shares not more than six months after purchase, the loss
will be treated as a long-term capital loss to the extent of
the capital gains distribution received.
For purposes of determining the character of income received
by a Fund when an underlying fund distributes long-term
capital gains to the Fund, the Fund will treat the
distribution as a long-term capital gain, even if it has
held shares of the underlying fund for less than one year.
However, any loss incurred by the Fund on the sale of that
underlying fund's shares after holding them for less than
six months will be treated as a long-term capital loss to
the extent of the gain distribution.
INVESTMENT APPROACH AND RISKS
The investment objectives and policies of each Fund, unless otherwise stated,
may be changed by the Board of Trustees of the Trust without the prior consent
of shareholders. Shareholders would be given sixty days notice in writing,
however, prior to a material departure from the stated objectives and policies.
Should such a change be implemented, the resulting investment objectives and
policies may be different from those the shareholders considered appropriate for
their needs at the time of investment in the Fund. There can be no assurance
that a Fund's investment objective will be achieved.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
We follow a disciplined, systematic approach to the investment markets which
couples broad diversification with market timing. We believe that our approach
will result in less volatility and greater long-term total returns than by an
approach which emphasizes individual stock selection in a portfolio held through
periods of market growth and decline.
DEFENSIVE MANAGEMENT
ALL FUNDS
All the Funds employ a defensive strategy designed to reduce
exposure to "market risk," the investment risk associated
with general stock and bond market declines. In other words,
we try to anticipate stock and bond market trends in order
to be "in the market" when it is going up and "out of the
market" when it is going down. This is sometimes called
market timing. When we anticipate rising market cycles, we
fully invest Fund assets in the market. To preserve capital
we liquidate portfolio investments into money market
instruments when we anticipate market declines. We adjust
the degree to which we respond to anticipated market trends
based upon our analysis of the strength or weakness of such
trends. Because various market sectors may not move in the
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same direction or with the same intensity at the same time,
we may move Fund investments from weaker sectors into
stronger ones. For temporary defensive purposes, if we
determine that there is a substantial risk of a broad market
decline because of adverse market, economic, political or
other conditions, we could retreat from the market
completely and invest 100% of a Fund's assets in money
market instruments.
FIXED INCOME PORTFOLIOS
FLEXIBLE BOND FUND
AND PORTSION OF THE
GROWTH & INCOME FUND AND
ASSET ALLOCATION FUNDS
Underlying funds in the fixed income portfolios invest,
generally, in debt securities, both domestic and foreign,
having maturities from 5 to 25 years. We invest aggressively
in such mutual funds when interest rates are expected to be
stable or in a declining trend. We shift to shorter maturity
mutual funds or money market instruments when interest rates
are expected to be in a rising trend. The reason for this is
that the market value of debt securities generally increases
when interest rates decline and decreases when interest
rates rise. By being fully invested when interest rates are
declining or stable, we believe that the production of
interest income will be maximized, and the potential for
capital growth will be present as the market value of
portfolio securities rises. Conversely, by holding only
short-term maturities and money market instruments when
interest rates are rising, decreases in the market value of
fixed income portfolio investments can be avoided while
interest income continues to be earned on the money market
investments. We evaluate bond market sectors and individual
mutual funds separately and may move investments from one
sector or underlying fund to another in response to market
and interest rate trend shifts.
EQUITY PORTFOLIOS
CAPITAL APPRECIAION,
LEVERAGED GROWTH
AND PORTIONS OF THE
GROWTH & INCOME AND
ASSET ALLOCATION FUNDS
Underlying funds in the equity portfolios invest, generally,
in common stocks and securities convertible into common
stocks, both domestic and foreign. We will fully invest in
qualifying mutual funds when we anticipate a generally
rising trend in the equities market accompanied by little
risk of decline. But when we believe there is a risk of
market decline, we will adjust the portfolio to preserve
capital by liquidating market investments into money market
instruments. There are thousands of equity-oriented mutual
funds available, offering a multitude of investment
objectives and approaches. They cover various market sectors
and their management styles and performance histories vary
greatly. Some funds excel in rising markets, others in
stable or declining markets. We analyze and respond to the
various equity sectors separately. Thus, we could be fully
invested in one or more sectors or individual mutual funds,
while liquidating others. Our equity analysis evaluates
various technical data such as stock and stock index price
changes, market volume, momentum and other relevant
technical and economic data.
PROPRIETARY ANALYTICAL MODELS
We use an interrelated group of proprietary, econometric
analytical models to control the timing of portfolio
transactions. These models analyze diverse market technical
data to assist us in projecting trend changes in market
prices. Simply put, they generate buy and sell signals. The
models are used to analyze broad markets or discrete market
sectors. Even individual mutual funds may be monitored and
technically evaluated by the models. We may respond to buy
and sell signals generated for broad markets as well as for
discrete sectors or individual mutual funds. None of the
models recommend or select specific securities for purchase
or sale by the Funds, but the models are designed to detect
trend changes in market price movement.
BROAD DIVERSIFICATION
ALL FUNDS
In an effort to gain broad diversification, all Funds invest
primarily in the shares of other investment companies. These
include "open-end" and "closed-end" funds, or unit
investment trusts. Open-end funds, which will comprise the
majority of Fund investments, continuously sell their shares
to the public and will purchase (redeem) their shares from
shareholders. "Closed-end" funds and unit investment trusts
are typically traded on the open market and do not
continuously sell and redeem their shares. Mutual funds give
us several advantages over direct investment in individual
securities:
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- Broader diversification.
- An excellent complement to the Funds' defensive
management strategy.
- A wide range of investment approaches, with over 9,000
funds in operation.
- Many professional portfolio management strengths,
skills and talents.
- Access to institutional funds not available to
individual investors.
All other factors being equal, we will prefer open-end
mutual funds which do not charge sales commissions or
redemption fees over other alternatives. But when we believe
the potential investment merits outweigh the added
transaction costs, we may invest in open-end mutual funds
that charge sales commissions or redemption fees and may
also purchase closed-end mutual funds or unit investment
trusts, in transactions involving customary brokerage fees.
Wherever possible, we will take advantage of volume
purchasing or other investment programs which reduce or
eliminate such transaction costs. The mutual funds in which
the Funds invest may incur distribution expenses in the form
of "12b-1 fees."
Under normal conditions, we will invest at least 65% of each
Fund's total assets in mutual funds having investment
objectives and strategies consistent with the respective
Fund's objectives. But we may invest in mutual funds which
do not share similar investment objectives as the Fund
making the investment. We select mutual funds primarily
based upon the degree to which we believe they will enhance
the Fund's ability to achieve its investment objectives.
There are many factors which can account for the significant
variation in investment performance from one mutual fund to
another--even those having similar investment objectives and
investing in the same category or class of assets. The level
of risk a fund assumes, the capabilities of its management
and, to a lesser extent, its level of operating expense may
each account for substantial differences in investment
results over any given period of time. Some fund managers,
for example, have demonstrated capabilities to excel above
their peers in rising markets, while some do better in
falling or stagnant markets. Those willing to take greater
risk can generally be expected to outperform their more
conservative peers in rising market periods, but are also
likely to lose value more rapidly during falling market
periods. Excellent performance based upon risk assumption
and management skill can be lost through high operating or
sales expense.
Our screening begins with an analysis of the investment
objectives, policies, and strategies of many mutual funds.
Acceptable candidates are then subjected to absolute and
risk-adjusted performance evaluation over various time
periods and market cycles. Each candidate is compared to
peer funds in their respective asset class. Volatility is
evaluated for each fund and class of funds. The portfolio
composition of each fund, as reported through sources like
Morningstar(R), is subjected to technical and fundamental
analyses as deemed appropriate. To a lesser extent, the
current investment outlook of fund management, to the extent
obtainable through fund literature and interviews with fund
portfolio managers, is evaluated. Strength of management,
size, and shareholder services offered are among other
factors we evaluate in selecting suitable mutual funds for
inclusion in a Fund's portfolio. All funds must be
registered in the United States, and we will not invest more
than 25% of a Fund's total assets in any one underlying fund
or in funds which concentrate their investments in any one
industry.
TYPES OF INVESTMENTS
FLEXIBLE BOND FUND
The underlying funds included in the Fund's portfolio may
invest in all types of debt securities, including bonds,
notes, mortgage-backed securities, government and government
agency obligations, zero coupon securities, convertible
securities, repurchase agreements and preferred stocks.
Generally, we seek to have the majority of the Fund's assets
invested in mutual funds which invest in U.S. Government
Securities or Investment Grade corporate bonds (those rated
in the four highest ratings categories by Standard & Poor's
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Corporation ("S&P") (AAA, AA, A and BBB) or Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A and Baa)).
But we are flexible as to the mix of portfolio securities
with respect to issuer, type, maturity, and quality. We
invest in those segments of the fixed-income market which,
in our opinion, afford the greatest opportunities to achieve
the Fund's objectives. From time to time we may emphasize
long, intermediate or short maturities, higher or lower
yields or quality, U.S. government, domestic or foreign
market segments. To the extent information is available to
us relating to the portfolio composition of the funds in
which we invest, we will limit investments in Lower-Rated
debt securities (those rated BB or below by S&P or Ba or
below by Moody's) to no more than 25% of the Fund's total
assets, and in the securities of foreign issuers to no more
than 35% of total assets. Under normal conditions, the Fund
will have at least 65% of its assets invested in funds which
invest primarily in fixed income securities.
GROWTH & INCOME FUND
The underlying funds included in the Fund's portfolio will
generally have investment objectives of growth, growth &
income and/or income. They may invest in common stocks,
bonds and securities convertible into common stocks, both
domestic and foreign. They may emphasize large or small
capitalization securities, securities traded on securities
exchanges or over-the-counter, and higher quality or lower
quality securities. We will include funds in the Fund's
portfolio which, in our opinion, offer the best available
prospects when taken as a whole for long-term growth of
capital and income.
CAPITAL APPRECIATION FUND
Underlying funds included in the Fund's portfolio will
generally have a growth or aggressive growth oriented
objective. They may invest in common stocks or securities
convertible into common stocks, both domestic and foreign.
They may emphasize large or small capitalization securities
traded on securities exchanges or over-the-counter. We may
also invest in funds having other than growth or aggressive
growth objectives if, in our opinion, the investment would
enhance the ability of the Fund to achieve its objective of
capital appreciation. As one example, "interest rate
sensitive" securities (or mutual funds investing therein)
may offer greater opportunities for capital appreciation
during periods of declining interest rates than many growth
oriented stocks. An investment is "interest rate sensitive"
if its market value is affected by changes in market
interest rates. Current income, while it may result from
some of the investment strategies we use, will not be
considered as a significant factor in the selection of
securities for investment. Under normal conditions, the Fund
will have at least 65% of its assets invested in mutual
funds which invest primarily for growth or capital
appreciation.
ASSET ALLOCATION FUND
We allocate the Fund's assets among five market segments:
domestic and international equities, domestic and
international fixed income, and precious metals (the
precious metals segment includes the securities of companies
principally engaged in mining, processing or distributing
precious metals and other precious metals). We are flexible
with respect to the percentage allocation to each market
segment, but can generally be expected to have the majority
of Fund assets allocated to the equities and fixed income
market segments. By allocating Fund investments in this
manner, the Fund will not be exposed to the same degree of
market risk as a fund which, for example, invests in only
one of the foregoing market segments. Assets allocated to a
particular market segment will be invested in the shares of
one or more mutual funds which invest primarily in such
segment. We believe that such diversification will reduce
risks to the Fund and its shareholders. Defensive management
strategies will be applied separately as to each segment of
the Fund's portfolio.
LEVERAGED GROWTH FUND
Except for its use of leverage, or borrowing, as described
below, the investment policies of the Leveraged Growth Fund
are the same as those of the Capital Appreciation Fund,
described above.
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The Fund may borrow money for investment purposes as we deem
appropriate. Such borrowing, commonly known as leverage,
exaggerates the effect upon net asset value of increases and
decreases in the market value of the Fund's portfolio.
Accordingly, we will use leverage, in conjunction with our
defensive management strategy, only when we believe a rising
trend in the stock market, accompanied by little risk of
decline, is strongly indicated. We may pledge the Fund's
portfolio securities to secure such loans and lenders will
have recourse only against the Leveraged Growth Fund. The
Investment Company Act of 1940, as amended (the "1940 Act"),
requires the Fund to maintain continuous asset coverage
(that is, total assets including loans, less liabilities
exclusive of loans) of 300% of the amount borrowed. Simply
stated, we may borrow up to $1 for each $2 of net assets.
OTHER IMPORTANT STRATEGIES
ACTIVE TRADING
ALL FUNDS
The Funds' strategy of defensive management results in
active trading. The Funds have no restrictions on portfolio
turnover, which will normally range from 100% to 300%. (A
100% turnover rate would occur, for example, if all of the
securities in a Fund are replaced within a period of one
year.) Our strategy during volatile market conditions could
occasionally produce turnover rates exceeding 300%. High
portfolio turnover may result in greater capital gains (and
taxes on those gains) than with less active portfolios. To
the extent a Fund invests in mutual funds involving sales
commissions, redemption or brokerage fees, higher
transaction costs would impact shareholder returns. The
volatility of the stock markets and interest rates, together
with the defensive management strategy employed by the
Funds, may involve selling portfolio securities within
twelve months of their purchase which could result in
short-term gains and/or losses.
MONEY MARKET INSTRUMENTS
ALL FUNDS
Each Fund may invest in money market instruments as an
interest-earning substitute for cash even up to 100% of
their assets for temporary defensive purposes. Underlying
funds may also hold money market instruments, and underlying
money market funds invest exclusively in money market
instruments.
Money market instruments mature in thirteen months or less
from the date of purchase and may include any of the U.S.
Government Securities listed under "Fixed Income
Investments," below, bankers acceptances and certificates of
deposit of domestic branches of U.S. banks. Also included
are repurchase agreements ("Repos") and variable amount
demand master notes ("Master Demand Notes") which, at the
time of purchase, will be rated in the top two quality
grades by Moody's Investors Services, Inc. or Standard and
Poor's Corporation or, if not rated, will be of equivalent
quality in our judgment. Mutual funds investing at least 80%
of their assets in money market instruments, or which hold
themselves out to be money market funds, are included in the
definition of money market instruments.
MASTER
DEMAND NOTES
Master Demand Notes are unsecured debt obligations of U.S.
corporations which are redeemable upon demand. Master Demand
Notes permit a fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between
the fund and the issuing corporation. We will purchase
Master Demand Notes only through the Master Demand Note
program of the Funds' custodian bank, who acts as
administrator thereof. Because they are direct arrangements
between a fund and the issuing corporation, there is no
secondary market for the notes. However, they are redeemable
at face value, plus accrued interest, at any time. Our
investment in the Master Demand Notes of any given issuer,
together with any other securities of such issuer, will be
limited to 5% of a Fund's total assets. Underlying funds may
invest up to 100% of their assets in Master Demand Notes.
19
<PAGE>
FIXED INCOME INVESTMENTS
FLEXIBLE BOND,
GROWTH & INCOME AND
ASSET ALLCOATION FUNDS
U.S. GOVERNMENT SECURITIES. Underlying funds may invest in
U.S. Government Securities which include, for our purposes,
the following securities: (1) U.S. Treasury obligations of
various interest rates, maturities and issue dates, such as:
U.S. Treasury bills (mature in one year or less when
issued), U.S. Treasury notes (mature in one to seven years
when issued), and U.S. Treasury bonds (mature in more than
seven years when issued), the payments of principal and
interest of which are all backed by the full faith and
credit of the U.S. Government; (2) obligations issued or
guaranteed by U.S. Government agencies or instrumentalities,
some of which are backed by the full faith and credit of the
U.S. Government, e.g., obligations of the Government
National Mortgage Association ("GNMA"), the Farmers Home
Administration ("FmHA") and the Export-Import Bank; some of
which do not carry the full faith and credit of the U.S.
Government but which are supported by the right of the
issuer to borrow from the U.S. Government, e.g., obligations
of the Tennessee Valley Authority, the U.S. Postal Service,
the Federal National Mortgage Association ("FNMA"), and the
Federal Home Loan Mortgage Corporation ("FHLMC"); and some
of which are backed only by the credit of the issuer itself,
e.g., obligations of the Student Loan Marketing Association,
the Federal Home Loan Banks and the Federal Farm Credit
Bank; and (3) any of the foregoing purchased subject to
repurchase agreements. Obligations of GNMA, FNMA and FHLMC
may include direct pass-through "Certificates," representing
undivided ownership interests in pools of mortgages. Such
Certificates are guaranteed as to payment of principal and
interest (but not as to price and yield) by the U.S.
Government or the issuing agency. To the extent we can
ascertain the portfolio composition of underlying funds, we
limit each Fund's investment in such Certificates to 5% of
the Fund's total assets.
Corporate Debt Securities. Underlying funds may invest in
corporate debt securities, which include "Investment Grade"
and "Lower-Rated" debt securities. Investment Grade
securities are those rated in the four highest ratings
categories by Standard & Poor's Corporation ("S&P") (AAA,
AA, A and BBB) or Moody's Investor's Services ("Moody's")
(Aaa, Aa, A and Baa). Lower Rated debt securities (so called
"junk bonds") are securities which are rated BB or below by
S&P or Ba or below by Moody's. Underlying funds may invest
in such lower rated securities. To the extent we can
ascertain the portfolio composition of underlying funds, we
limit the Flexible Bond, Growth & Income and Asset
Allocation Funds investments in Lower-Rated securities to
25%, 10% and 5%, respectively, of the Fund's total assets.
The Statement of Additional Information contains a more
detailed description of Moody's and S&P's ratings.
INVESTMENT RISKS
In any investment there is a degree of risk which must be assumed by the
investor. Generally, reward has a direct relationship to risk. To get greater
rewards means you take greater risks. Like all investments, the Funds involve
risk. Because of risk, the value of Fund shares will fluctuate and you could
lose money. Each of the Funds is designed for long-term investors, including
tax-deferred retirement plans. Consider investing if you can accept the risks
accompanying the Funds' defensive approach to stock and bond investing. You
should not invest your short-term savings or emergency reserve money.
DEFENSIVE MANAGEMENT RISKS
ALL FUNDS
We try to minimize market risk through the defensive
management strategies described in this prospectus. Our
defensive strategies involve the use of analytical tools and
techniques which seek to anticipate changes in market trends
which impact the securities markets in which the Funds'
invest. Based upon our expectation of such trend changes, we
restructure the Funds' investment portfolios to maximize
potential returns or avoid losses. We can not assure you
that we will be consistently accurate in our expectations or
in our subsequent portfolio restructuring. If we are wrong
in our expectations, opportunities for gains or income may
be lost or you could lose money.
20
<PAGE>
BROAD DIVERSIFICATION RISKS
ALL FUNDS
The Funds may own shares of mutual funds which invest up to
100% of their assets in equity securities (including
securities convertible into common stock) or in long or
short-term fixed income securities (debt securities issued,
guaranteed or insured by the U.S. Government, its agencies
or instrumentalities, corporate bonds, preferred stock,
convertible preferred stock, convertible debentures and
money market instruments, including money market mutual
funds). Such securities may be domestic or foreign and of
varying quality. They may concentrate their investments in
one industry and invest up to 15% of their total assets in
illiquid securities. They may lend their portfolio
securities, sell securities short, borrow money, write or
purchase put or call options on securities or stock indices,
or enter into futures contracts and options on futures
contracts. Simply put, they may engage in a myriad of
strategies and approaches to the investment markets.
HIGHER COSTS. Although the Funds will invest in a number of
mutual funds, this practice will not eliminate all risks. By
investing in underlying funds, investors indirectly pay
higher operating costs than if they invested directly in the
underlying funds. To offset higher costs, we attempt to
identify and invest in underlying funds which have
demonstrated superior management skills, better performance
and lower operational costs than most.
LACK OF CONTROL OVER UNDERLYING FUNDS. We have no control
over, or day-to-day knowledge of, the investment decisions
of the underlying funds. For example, it is possible that
the management of one underlying fund may be purchasing a
particular security at or near the same time that the
management of another underlying fund is selling the same
security. This would result in an indirect expense to the
Fund without corresponding economic or investment benefit.
The use of defensive management strategies as related to a
portfolio of mutual funds poses certain correlation
problems. For example, we may invest in an underlying fund
in anticipation of rising market prices while, at the same
time, the underlying fund may be investing defensively. In
such event, the Fund would lose the expected benefit of its
ownership of the underlying fund either for as long as it
retained its investment or until the management of the
underlying fund repositioned its portfolio. Through their
investment in mutual funds, the Funds may indirectly
concentrate their assets in one industry. Such indirect
concentration of a Fund's assets may subject the shares of
the Fund to greater fluctuation in value than would be the
case in the absence of such concentration.
REGULATORY CONSIDERATIONS. A Fund, together with its
affiliates (including the other Funds and the privately
managed accounts of the Investment Manager and its
affiliates), may not invest in an underlying fund if, as a
result, the Fund and its affiliates together own more than
3% of the total assets of the underlying fund. We will
monitor the holdings of each Fund and of any such privately
managed accounts in order to comply with the limitations. An
underlying fund may, under the 1940 Act, elect not to redeem
shares in excess of 1% of such underlying fund's outstanding
shares during any period of less than 30 days. Therefore,
should a Fund hold greater than 1% of an underlying fund's
shares, the holdings in excess of 1% would be considered
illiquid securities and, together with other such
securities, would be subject to fundamental Fund policies
limiting such holdings to 10% of that Fund's total assets.
Because of these limitations, a Fund may not be able to
purchase the shares of certain mutual funds we believe to be
most desirable, but may have to seek alternate investments.
An underlying fund may, under certain conditions, elect to
effect redemptions we order by making payment partially or
wholly in securities from its investment portfolio in lieu
of cash payment ("in kind redemptions"). In such case, a
Fund may retain the securities so received if we believe
that it is advisable, whether or not the purchase of such
securities would be permitted by the investment objectives
and policies of the Fund. The Fund would, of course, incur
brokerage and transaction costs in disposing of the
securities so received.
21
<PAGE>
FIXED INCOME INVESTMENT RISKS
FLEXIBLE BOND,
GROWTH & INCOME AND
ASSET ALLOCATION FUNDS
The Flexible Bond Fund invests primarily, and the Growth &
Income and Asset Allocation Funds invest a portion of their
assets, in mutual funds which, in turn, invest in fixed
income securities. There are three types of risk associated
with fixed income investment: Interest Rate Risk, Credit
Risk and Call Risk.
INTEREST RATE RISK is the potential for bond prices to
fluctuate when interest rates change. When interest rates
rise, bond prices fall. When interest rates fall, bond
prices rise. Interest Rate Risk increases as average
maturity increases. Table 1 illustrates the probable effect
of a 1% change in interest rates on three investment grade
bonds of varying maturities. Thus, to the extent an
underlying fund is invested in long-term maturities, its
interest rate risk will be high. We invest in long-term bond
funds only when we believe interest rates will be stable or
declining.
CREDIT RISK is associated with a borrower failing to make
payments of interest and principal when due. Credit Risk
increases as overall portfolio quality decreases. Thus to
the extent that an underlying fund is invested in high grade
bonds and U.S. Government Securities, it will experience
minimal credit risk, but to the extent it invests in lower
quality bonds, its exposure to increased Credit Risk
increases.
TABLE 1
PERCENT INCREASE (DECREASE) IN THE
PRICE OF A PAR BOND YIELDING 5%
1% INTEREST 1% INTEREST
BOND RATE RATE
MATURITY INCREASE DECREASE
Short
2.5 years -2.29% +2.35%
Intermediate
10 Years -7.43% +8.17%
Long
20 Years -11.55% +13.67%
CALL RISK for corporate bonds (or prepayment risk for
mortgage-backed securities) is the possibility that
borrowers will prepay (call) their debt prior to the
scheduled maturity date, resulting in the necessity to
reinvest the proceeds at lower interest rates. A
close-to-home example of this is when homeowners refinance
their home mortgages when interest rates fall. Call Risk
generally occurs during declining interest rates and is
greater when an underlying fund is invested in long-term
maturities. Thus, the longer an underlying fund's average
portfolio maturity is, accompanied by a decline in
prevailing interest rates, the Call Risk will increase.
LOWER-RATED SECURITIES RISKS
FLEXIBLE BOND,
GROWTH & INCOME AND
ASSSET ALLOCATION FUNDS
The Flexible Bond and, to a lesser extent, the Asset
Allocation and Growth & Income Funds invest in mutual funds
which, in some cases, may invest up to 100% of their assets
in lower-rated bonds. Lower-rated bonds generally provide
higher yields than higher quality securities, producing
greater interest income for their investors. But lower-rated
bonds are regarded, on balance, as predominately speculative
with respect to the issuer's capacity to pay interest and
principal in accordance with the terms of the obligation.
While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major exposures or adverse conditions.
Based upon information obtainable to us pertaining to
portfolio composition of underlying funds, the Flexible
Bond, Asset Allocation and Growth & Income Funds seek to
limit their exposure to lower-rated securities (so called
"junk bonds") to 25%, 10% and 5% of their assets,
respectively. Lower-rated securities carry greater risks
than investment grade securities and, to the extent a Fund
is invested, through underlying funds, in lower-rated
securities, it will assume such increased risks. An economic
downturn or increasing interest rates could have an adverse
affect upon less financially secure issuers' ability to
repay interest and principal and could result in increased
"junk bond" defaults. High yield bonds have been found to be
less sensitive to interest rate changes than investment
grade issues, but more sensitive to adverse economic or
22
<PAGE>
corporate developments. The call risk associated with
lower-rated issues may be increased when the issuer's
financial position improves, because of its potential to
refinance its debt at lower rates, even when market interest
rates are stable. Lower-rated issues may be thinly traded,
which could pose increased difficulty for underlying funds
in valuation, because of less reliable, objective data
available. Each Fund attempts to minimize fixed income risk
through broad diversification. The Growth & Income and Asset
Allocation Funds will not likely be as significantly
affected by adverse bond market events as a Fund which
invests most or all of its assets in fixed income
securities. We will invest, through underlying funds, in
Lower Rated securities only if we believe the investment
opportunity mitigates the assumed risk.
EQUITY INVESTMENT RISKS
GROWTH & INCOME,
CAPITAL APPRECIATION,
ASSET ALLOCATION AND
LEVERAGED GROWTH FUNDS
The Growth & Income, Capital Appreciation, Asset Allocation
and Leveraged Growth Funds invest in underlying funds which,
in turn, invest in equity securities. Equity securities are
subject to fluctuations in the stock market, which has
periods of increasing and decreasing values along with long
periods of lackluster performance. Stocks have greater
volatility than debt securities. While greater volatility
increases risk, it offers the potential for greater reward.
The defensive strategy and broad diversification employed by
the Funds will not eliminate risk.
Underlying funds may emphasize investment in particular
sectors of the stock market or on particular types of
companies. Any such emphasis carries with it increased risks
of a special nature related to the sector or type of
company. Funds that use strategies such as options and
futures to protect their investments or increase their
income carry a risk that the prices of the options and
futures do not correlate with the values of the securities
in the fund's portfolio.
FOREIGN SECURITIES AND CURRENCY RISKS
ALL FUNDS
Underlying funds in which the Funds invest may, in turn,
invest up to 100% of their assets, in the securities of
foreign issuers. These issuers and the foreign securities
markets in which their securities are traded may not be as
highly regulated as domestic issues, there may be less
information publicly available about them and foreign
auditing requirements may not be the same as domestic
requirements. There may be delays in some countries in
settling securities transactions, in some cases up to six
months. In addition, foreign currency exchange rates may
adversely affect an underlying fund's value. Other political
and economic developments, including the possibility of
expropriation, confiscatory taxation, exchange controls or
other governmental restrictions could adversely affect
value. Under the Investment All Funds Company Act of 1940
(the "1940 Act"), a mutual fund may maintain its foreign
securities in the custody of non-U.S. banks and securities
depositories.
In connection with securities traded in a foreign currency,
underlying funds may enter into forward contracts to
purchase or sell an agreed upon amount of a specific
currency at a future date which may be any fixed number of
days from the date agreed upon by the parties. The price
would be set at the time of entering into the contract.
Concurrent with entry into a contract to acquire a foreign
security for a specified amount of a foreign currency, the
fund would purchase, with U.S. dollars, the required amount
of foreign currency for delivery at the settlement date of
the purchase. A similar forward currency transaction would
be made in connection with the sale of foreign securities.
The purpose of such a forward currency transaction is to fix
a firm U.S. dollar price necessary to settle a foreign
securities transaction, and thus to protect against adverse
fluctuation of the exchange relationship between the U.S.
dollar and the foreign currency needed to settle the
particular transaction during the time interval between the
purchase or sale date and settlement date. This time period
is normally between three to fourteen days. Forward currency
transactions are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward currency contract
usually has no deposit requirements and no commissions are
charged. While such contracts tend to limit the risk of
adverse currency exchange rate fluctuations, they also limit
23
<PAGE>
the potential gain which might result from positive exchange
rate fluctuations.
LEVERAGE
LEVERAGED GROWTH FUND
The Leveraged Growth Fund may borrow (use leverage) for
investment purposes. In addition, the underlying funds in
which all the Funds invest may use leverage. The use of
leverage is a speculative technique, involving risks not
assumed by funds which do not employ leverage. The cost of
borrowed money may fluctuate with changing market rates of
interest. The fund using leverage may have to pay commitment
or other fees to maintain lines of credit or may be required
to maintain minimum average loan or deposit balances. The
costs of borrowing may partially or completely offset, or
even be greater than, the return earned on the borrowed
money. In addition, should leverage be employed during
adverse market conditions the fund using leverage could be
forced to sell portfolio securities to make interest or
principal payments at a time when it would not normally
consider it advantageous to do so. This could result in
higher than normal portfolio turnover, which usually
generates higher transaction costs and expenses. When
employed, leveraging will tend to exaggerate the borrowing
fund's net asset value per share fluctuation. Net asset
value per share will increase more when a fund's portfolio
assets increase in value and will decrease more when
portfolio assets decrease in value than would be the case
without leverage. This is because the increased investment
asset base which fluctuates is accompanied by a fixed
obligation in connection with the borrowed money.
The 1940 Act requires the fund using leverage to maintain
continuous asset coverage (that is, total assets including
loans, less liabilities exclusive of loans) of 300% of the
amount borrowed. If market fluctuations or other reasons
cause the required 300% asset coverage to decline, the
leveraged fund may be forced to sell some of its portfolio
holdings within three days in order to reduce the debt and
restore the 300% asset coverage. The timing of such a forced
sale may be disadvantageous from an investment perspective.
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER
Merriman Investment Management Company (Mimco) has been
investment manager of each Fund since Funds of the Trust
were first offered to the public in 1988. Management of the
Funds is Mimco's sole concern. Mimco's address is: 1200
Westlake Avenue North, Suite 700, Seattle, WA 98109. Its
duties include on-going management of the Fund's investment
portfolio and business affairs. In addition, the investment
manager provides certain executive officers to the Trust and
supplies office space and equipment not otherwise provided
by the Funds. The investment manager's compensation during
the last fiscal year, based on each Fund's average net
assets, was 1.00% from the Flexible Bond Fund and 1.25% from
each of the other Funds.
PORTFOLIO MANAGERS
Paul A. Merriman, the President and Chief Executive Officer
of the Investment Manager, founded the Trust in 1987, and
has been the principal officer responsible for the operation
of the computerized technical defensive management
disciplines ("models") employed by the Funds. He is also
founder and President of Merriman Capital Management, Inc.,
an investment advisory firm affiliated with the Investment
Manager from which the Funds will be obtaining defensive
management recommendations.
Mr. William L. Notaro, Executive Vice President and Chief
Operating Officer of the Investment Manager, has been
primarily responsible for managing the Funds' investment
portfolios and for the day-to-day management of the Funds'
operations since the Trust was founded in 1987. Mr. Notaro
is an investment adviser with extensive executive and
operational experience in the securities field.
24
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table for each Fund (on the following page) is intended
to help you understand the Fund's financial performance for the past five years.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Tait, Weller & Baker,
whose report, along with the Funds' financial statements, are included in the
Annual Report, which is available upon request.
<TABLE>
MERRIMAN FLEXIBLE BOND FUND
For a share outstanding throughout each year
<CAPTION>
Years Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.15 $ 10.74 $ 10.36 $ 10.23 $ 9.94
-------- ---------- --------- ---------- --------
Income from investment operations
Net investment income 0.46 0.63 0.60 0.63 0.55
Net gains (losses) on securities
(both realized and unrealized) (0.19) (0.32) 0.38 0.13 0.29
----- ----- ---- ---- ----
Total from investment operations 0.27 0.31 0.98 0.76 0.84
---- ---- ---- ---- ----
Less Distributions
From investment income (0.46) (0.67) (0.60) (0.63) (0.55)
From capital gains - (0.23) - - -
---- ----- ---- ---- ----
Total distributions (0.46) (0.90) (0.60) (0.63) (0.55)
Net asset value, end of year $ 9.96 $ 10.15 $ 10.74 $ 10.36 $ 10.23
======== ========= ========== ========= ========
Total Return 2.71% 3.03% 9.64% 7.62% 8.63%)
Net assets, end of year ($000's) $ 7,976 $ 7,500 $ 9,220 $ 8,661 $ 8,592
Ratio of expenses to average net assets 1.57% 1.50% 1.46% 1.49% 1.50%
Ratio of net investment income to average net
assets 4.52% 5.93% 5.54% 6.05% 5.17%
Portfolio turnover rate 435.08% 206.12% 172.73% 139.77% 291.46%
</TABLE>
<TABLE>
MERRIMAN GROWTH & INCOME FUND
For a share outstanding throughout each year
<CAPTION>
Years Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.87 $ 12.96 $ 11.65 $ 11.32 $ 10.86
-------- --------- --------- --------- ---------
Income from investment operations
Net investment income 0.08 0.02 0.19 0.27 0.24
Net gains (losses) on securities
(both realized and unrealized) 1.40 (0.17) 2.40 1.02 1.29
---- ----- ---- ---- ----
Total from investment operations 1.48 0.15 2.59 1.29 1.53
---- ---- ---- ---- ----
Less Distributions
From investment income (0.15) (0.27) (0.24) (0.27) (0.21)
From capital gains (0.86) (2.97) (1.04) (0.69) (0.86)
----- ----- ----- ----- -----
Total distributions (1.01) (3.24) (1.28) (0.96) (1.07)
----- ----- ----- ----- -----
Net asset value, end of year $ 10.34 $ 9.87 $ 12.96 $ 11.65 $ 11.32
======== ======== ========= ========= =========
Total Return (13.61%) 2.99% 24.11% 11.18% 15.41%
Net assets, end of year ($000's) $ 8,762 $ 8,180 $ 9,514 $ 8,702 $ 9,348
Ratio of expenses to average net assets 1.79% 1.75% 1.71% 1.27% 1.76%
Ratio of net investment income
to average net assets 0.68% 2.61% 1.42% 2.33% 2.10%
Portfolio turnover rate 276.73% 280.78% 105.11% 133.00% 78.64%
</TABLE>
25
<PAGE>
<TABLE>
MERRIMAN CAPITAL APPRECIATION FUND
For a share outstanding throughout each year
<CAPTION>
Years Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.06 $ 12.02 $ 10.93 $ 11.69 $ 10.82
-------- --------- --------- ---------- ---------
Income from investment operations
Net investment income 0.15 0.19 0.06 0.19 0.09
Net gains (losses) on securities
(both realized and unrealized) 1.19 (0.74) 2.13 0.37 (1.56)
---- ----- ---- ---- -----
Total from investment operations 1.34 (0.56) 2.19 0.56 (1.65)
---- ----- ---- ---- -----
Less Distributions
From investment income (0.06) (0.20) (0.06) (0.22) (0.07)
From capital gains (0.36) (2.21) (1.04) (1.10) (0.71)
----- ----- ----- ----- -----
Total distributions (0.41) (2.41) (1.10) (1.32) (0.78)
----- ----- ----- ----- -----
Net asset value, end of year $ 9.99 $ 9.06 $ 12.02 $ 10.93 $ 11.69
======== ======== ========= ========= =========
Total Return 14.83% (3.87)% 21.93% 5.69% 16.43%
Net assets, end of year ($000's) $ 12,243 $ 12,644 $ 15,567 $ 16,665 $ 22,205
Ratio of expenses to average net assets 1.81% 1.81% 1.79% 1.84% 1.78%
Ratio of net investment income
to average net assets 1.47% 1.64% 0.58% 1.74% 0.80%
Portfolio turnover rate 310.65% 446.18% 114.36% 254.77% 146.40%
</TABLE>
<TABLE>
MERRIMAN ASSET ALLOCATION FUND
For a share outstanding throughout each year
<CAPTION>
Years Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.70 $ 11.88 $ 11.61 $ 11.21 $ 11.22
-------- --------- --------- --------- ---------
Income from investment operations
Net investment income 0.28 0.40 0.26 0.30 0.25
Net gains (losses) on securities
(both realized and unrealized) 0.84 (0.76) 1.27 0.50 0.62
---- ----- ---- ---- ----
Total from investment operations 1.12 (0.36) 1.53 0.80 0.87
---- ----- ---- ---- ----
Less Distributions
From investment income (0.08) (0.48) (0.33) (0.16) (0.25)
From capital gains (0.33) (1.34) (0.93) (0.24) (0.63)
----- ----- ----- ----- -----
Total distributions (0.41) (1.82) (1.26) (0.40) (0.88)
----- ----- ----- ----- -----
Net asset value, end of year $ 10.41 $ 9.70 $ 11.88 $ 11.61 $ 11.21
======== ======== ========= ========= =========
Total Return 11.69% 2.57% 14.43% 7.41% 8.49%
Net assets, end of year ($000's) $ 10,641 $ 12,168 $ 16,543 $ 17,733 $ 22,632
Ratio of expenses to average net assets 1.84% 1.84% 1.78% 1.82% 1.76%
Ratio of net investment income
to average net assets 2.63% 3.63% 2.26% 2.53% 2.11%
Portfolio turnover rate 327.72% 351.19% 161.57% 204.55% 288.45%
</TABLE>
26
<PAGE>
<TABLE>
MERRIMAN LEVERAGED GROWTH FUND
For a share outstanding throughout each year
<CAPTION>
Years Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.65 $ 14.85 $ 12.30 $ 12.30 $ 10.42
--------- ---------- --------- --------- ---------
Income from investment operations
Net investment income (0.06) 0.06 (0.20) (0.08) 0.04
Net gains (losses) on securities
(both realized and unrealized) 2.63 (1.18) 3.33 0.84 2.33
---- ----- ---- ---- ----
Total from investment operations 2.57 1.12 3.13 0.76 2.29
---- ---- ---- ---- ----
Less Distributions
From investment income - (0.06) - - (0.07)
From capital gains (0.66) (3.01) (0.58) (0.76) (0.34)
----- ----- ----- ----- -----
Total distributions (0.66) (3.07) (0.58) (0.76) (0.41)
----- ----- ----- ----- -----
Net asset value, end of year $ 12.57 $ 10.66 $ 14.85 $ 12.30 $ 12.30
========= ========= ========== ========= =========
Total Return 24.33% (6.71)% 26.66% 6.85% 22.85%
Net assets, end of year ($000's) $ 18,784 $ 15,488 $ 17,785 $ 15,694 $ 9,686
Ratio of expenses to average net assets (a) 2.60% 3.13% 4.13% 3.70% 2.82%
Ratio of net investment income
to average net assets (0.46)% 0.46% (1.52)% (0.78)% (0.68)%
Portfolio turnover rate 307.56% 351.46% 130.36% 247.36% 87.50%
</TABLE>
(a) Expenses include interest expense of 0.83%, 1.38%, 2.36%, 1.95%, and
1.01% for 1999, 1998, 1997, 1996 and 1995, respectively
Information relating to outstanding debt during the year shown below.
<TABLE>
<CAPTION>
Average Average Average
Amount of Debt Amount of Debt Number of Shares Amount of
Outstanding at Outstanding Outstanding Debt per Share
Year Ended End of Year During the Year During the Year During the Year
---------------------- ------------------ ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
September 30, 1999 - $1,708,403 1,475,597 $1.16
September 30, 1998 - $2,521,205 1,403,276 $1.80
September 30, 1997 $7,000,000 $4,295,452 1,250,115 $3.44
September 30, 1996 $5,800,000 $2,981,434 1,156,941 $2.58
September 30, 1995 $4,000,000 $ 779,589 656,687 $1.19
</TABLE>
27
<PAGE>
ADDITIONAL INFORMATION
The Merriman Investment Trust provides additional information, at no cost, about
the Flexible Bond Fund, the Growth & Income Fund, the Capital Appreciation Fund,
the Asset Allocation Fund and the Leveraged Growth Fund in its Annual and
Semi-Annual Reports to Shareholders and its Statement of Additional Information
(SAI), both of which are incorporated by reference in their entirety into this
Prospectus.
CONACT THE MERRIMAN FUNDS
Call us toll-free 1-800-423-4893 if you want to receive the
SAI and the Funds' annual and semi-annual reports. During
business hours, friendly, experienced personnel will answer your
questions, provide investment forms and applications, assist with
shareholder needs and provide current share prices. After hours,
current prices are provided electronically and you may leave
messages for our service personnel to be addressed the next
business day. You may also write to us:
The Merriman Funds, 1200 Westlake Avenue, North, Suite 700,
Seattle, WA 98109.
Web Site: www.merrimanfunds.com.
E-mail: [email protected].
CONTACT THE S.E.C.
Contact the Securities and Exchange Commission to obtain
information about The Merriman Investment Trust, including the
SAI. The Merriman Investment Trust file can be reviewed and
copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information on the operation of
the public reference room may be obtained by calling the
Commission at 1-800-SEC-0330. Reports and other information about
The Merriman Investment Trust and the Funds are also available on
the Commission's Internet site at http://www.sec.gov, and copies
of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the
Commission, Washington, DC 20549-6009.
Investment Company Act File No. 811-5487
Graphi Ommitted MERRIMAN
INVESTMENT TRUST
28
<PAGE>
<PAGE>
Graphic Omitted MERRIMAN
INVESTMENT TRUST
STATEMENT FLEXIBLE BOND FUND
OF ADDITIONAL GROWTH & INCOME FUND
INFORMATION CAPITAL APPRECIATION FUND
JANUARY 31, 2000 ASSET ALLOCATION FUND
LEVERAGED GROWTH FUND
This Statement of Additional Information is not a
prospectus. A copy of the Funds' prospectus, dated January
31, 2000, is available without charge upon written or
telephone request to The Merriman Investment Trust, as shown
below:
Mail: The Merriman Investment Trust
1200 Westlake Avenue, North, Suite 700
Seattle, WA 98108
Phone: 1-800-423-4893 or 1-206-285-8877
EMAIL: [email protected]
The SAI should be read in conjunction with the prospectus
for an understanding of the Funds. The Annual Report of the
Merriman Investment Trust is incorporated by reference into
the SAI, and is also available free of charge by calling or
writing.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION ..............................................1
INVESTMENT OBJECTIVES AND POLICIES ........................1
Defensive Management ....................................1
Hedging Strategies, Options and Futures Contracts .......1
Options Transactions.....................................2
Futures Contracts and Options on Futures Contracts ......3
Investing in Investment Companies .......................5
Lending Portfolio Securities ............................5
Delayed Delivery and When-Issued Bonds ..................5
Zero Coupon Bonds .......................................6
High Yield Bonds ........................................6
Concentration ...........................................7
Borrowing ...............................................7
Illiquid and Restricted Securities ......................7
Foreign Issuers and Currencies ..........................7
Repurchase Agreements ...................................8
Short Selling ...........................................8
Warrants ................................................8
Other Transactions ......................................9
INVESTMENT RESTRICTIONS ...................................9
SPECIAL SHAREHOLDER SERVICES .............................11
Regular Account ........................................11
Systematic Withdrawal Plan .............................11
Retirement Plans .......................................11
Exchange Privilege .....................................13
Redemptions in Kind ....................................13
Transfer of Registration ...............................13
PURCHASE OF SHARES .......................................13
REDEMPTION OF SHARES .....................................14
NET ASSET VALUE DETERMINATION ............................14
TRUSTEES AND OFFICERS ....................................15
5% SHAREHOLDERS ..........................................16
INVESTMENT MANAGER .......................................16
MANAGEMENT AND OTHER SERVICES ............................17
BROKERAGE ................................................17
ADDITIONAL TAX INFORMATION ...............................18
CAPITAL SHARES AND VOTING ................................18
FINANCIAL STATEMENTS AND REPORTS..........................19
PERFORMANCE...............................................19
APPENDIX .................................................20
i
<PAGE>
INTRODUCTION
This Statement of Additional Information is designed to be read in
conjunction with the Prospectus for a complete understanding of the business of
the Trust and its Funds. Definitions used in the Prospectus have the same
meaning in this SAI.
Merriman Investment Trust (the "Trust"), a Massachusetts business trust
organized in 1987, is an open-end, management investment company. The Trust is
designed to provide an opportunity for investors to pool their money to achieve
economies of scale and professional management. The Trust currently issues
shares of five diversified portfolios ("Funds"), and the Board of Trustees may
establish additional portfolios at any time. The Funds are the Merriman Flexible
Bond Fund (the "Flexible Bond Fund"), the Merriman Growth & Income Fund (the
"Growth & Income Fund"), the Merriman Capital Appreciation Fund (the "Capital
Appreciation Fund"), the Merriman Asset Allocation Fund (the "Asset Allocation
Fund") and the Merriman Leveraged Growth Fund (the "Leveraged Growth Fund"). The
Funds' principal strategies, including their election to invest their assets
primarily in the shares of other mutual funds are described in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and key strategies of each Fund, as described in
the prospectus and in further detail herein, may be changed by the Board of
Trustees without approval of shareholders, unless otherwise noted. Shareholders
would be given at least 60 days written notice prior to implementation, however,
should any material change be adopted.
DEFENSIVE MANAGEMENT
As discussed in the Prospectus, the Investment Manager intends to utilize,
primarily, the Merriman Bond Switch Models (the "Bond Models") to assist in the
control of fixed income portfolio transactions, the Merriman Equity Switch
Models ("Equity Models"), the Merriman International Fund Switch Models (the
"International Models") and the Merriman Precious Metals Switch Model (the
"Precious Metals Model") to assist in the control of equity portfolio
transactions. The Models are proprietary products of Merriman Capital
Management, Inc. ("MCMI"), General Partner of the Investment Manager and
controlled by Paul A. Merriman, President and Trustee of the Trust. Use of the
Models by the Investment Manager is in accordance with license agreements
renewable by the Investment Manager for terms ending in the year 2018. The Bond,
Equity and Precious Metals Models have been utilized by MCMI since August, 1983,
and the International Model since January, 1988, to manage investments for
MCMI's clients. Prior to their use, they were "back-tested" with over ten years
of historical data in order to establish their economic viability.
Although the Investment Manager plans to rely on the Models as its primary
defensive management tool for the Funds, the Funds have not adopted policies
requiring such use and the Investment Manager may utilize other models or
strategies with or in place of the Models. Under the license agreements, MCMI is
granted similar flexibility. The Investment Manager believes that, by using such
strategies, superior returns are possible over the long-term by protecting Fund
assets from the risk of declining markets. No assurance can be provided,
however, that either the Models or the Investment Manager will be correct in
their expectations of market trends.
HEDGING STRATEGIES; OPTIONS AND FUTURES CONTRACTS
The Investment Manager may employ, but has not employed and has no present
intention to employ during the current fiscal year, the investment strategy of
hedging. The underlying funds in which the Funds invest may hedge their
portfolios. Hedging strategies involve the purchase and sale of hedging
instruments (options, futures contracts, options on futures contracts and
combinations thereof) in an attempt to protect an investment portfolio from
anticipated adverse market action. Hedging and the hedging instruments described
below are used to generate gains (on the hedging instruments) which offset
losses on other portfolio securities. Should the Funds elect to engage in
hedging strategies in the future, shareholders would be given 60 days notice and
the prospectus would be amended. In addition the Funds would be subject to
certain fundamental limitations in the use of hedging as described in the
Investment Restrictions, page 11.
The use of puts, calls and futures contracts entails risks, including the
possibility that a liquid secondary market may not exist at the time when a fund
may desire to close out an option position. Trading in options and futures
contracts might be halted at times when the securities markets are allowed to
remain open. If a closing transaction cannot be effected because of the lack of
a secondary market, the fund would have to either make or take delivery under
the futures contract or, in the case of a written option, wait to sell the
underlying securities until the option expires or is exercised. Skills needed to
1
<PAGE>
trade options, futures contracts and options thereon are different than those
needed to select equity or fixed income securities.
An additional risk is that price movements in a fund's portfolio will not
correlate perfectly with the price changes in stock indices, futures contracts
and options thereon, and the prices on Government Futures Contracts and options
thereon may not move inversely with interest rates. At best, the correlation
between changes in prices of (a) stock indices, futures contracts and options
thereon ("hedging instruments") and (b) the portfolio securities being hedged
can be only approximate. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for the hedging
instruments and for related securities, including technical influences in the
trading of hedging instruments and differences between the financial instruments
or stocks being hedged and the instruments underlying the standard futures
contracts available for trading. Such differences could be, in the case of
hedging instruments on U.S. Government Securities, interest rate levels,
maturities and credit-worthiness of issuers and, in the case of stock indices
and hedging instruments on stock indices, quality, intrinsic value and
volatility. The hours of trading of futures contracts may not conform to the
hours during which the funds may trade such securities. To the extent that the
futures markets close before or after the U.S. Government Securities, bond or
stock markets, significant price and rate movements can take place in the
intervening time period that cannot be reflected in the market(s) first to
close. Also, additional futures trading sessions may result in significant price
movements, exercises of positions and margin calls at a time when the U.S.
Government Securities and/or stock markets are not open. Consequently, if a fund
has entered into options on stock indices, futures contracts and/or options
thereon to hedge portfolio securities positions there is a risk that the
securities hedged may loose more value than is offset by the hedge instruments,
resulting in a loss to the fund.
OPTIONS TRANSACTIONS
An option is a legal contract giving the purchaser the right to buy (in the
case of a call) or sell (in the case of a put) a specified amount of a specified
security at the specified price at any time before the option expires. In return
for a premium paid to a writer ("seller") of a call the purchaser obtains the
right to purchase the underlying security. The buyer of a put obtains in return
for a premium, the right to sell a specified security to a writer of the put.
Listed options are traded on national securities exchanges that maintain a
continuous market enabling holders or writers to close out their positions by
offsetting sales and purchases. The premium paid to an option writer is a
non-refundable payment for the rights conveyed by the option. A put or call that
is not sold or exercised prior to its expiration becomes worthless. In addition,
there is no assurance that a liquid market will exist on a given exchange in
order for an option position to be closed out, and, if trading is halted in an
underlying security, the trading of options on that security is usually halted
as well. In the event that an option cannot be traded, the only alternatives to
the holder of the option are to exercise it or allow it to expire.
PURCHASING OPTIONS. The potential loss to a fund in purchasing put and call
options is limited to the total of premiums, commissions and transaction costs
paid for the option plus, in the case of a put option, the initial difference,
if any, between the strike price of the put and the market value of the
portfolio security. Underlying funds may purchase put options in an attempt to
protect the value of portfolio securities when there is a risk of a substantial
decline in value. Because holding a put grants a fund the right to sell the
underlying security to the writer of the put at the strike price for a specific
period of time, a fund is protected should the value of the security decline
below the strike price during the term of the put. Puts and calls may also be
purchased by a fund to cover puts and calls it has written.
WRITING OPTIONS. When a fund writes a covered call option, it receives a premium
payment and the purchaser obtains the right to buy the underlying securities
from the fund at a specified strike price for a specified period of time. Thus
the fund gives up the opportunity for gains on the underlying security (above
the strike price) and retains the risk of loss so long as the option remains
open. If the price should rise, the fund would likely be required to sell the
securities to the holder of the call at a price less than the current market
price. A fund would normally write a call option when the price of the
securities underlying the call are expected to decline or remain stable. When
the fund writes a covered put option, it gains a premium payment but, so long as
the option remains open, assumes an obligation to purchase the underlying
security at the strike price from the purchaser of the put, even though the
current price of the security may fall below the strike price. A fund would
normally write a put option when the price of the securities underlying the put
are expected to rise or remain stable. If the price were to decline, the fund
might be required to purchase the underlying securities from the holder of the
put at a price greater than the current market price. So long as the option
writer's obligation remains open, the writer may be assigned an exercise notice
through the Options Clearing Corporation. The writer would, in such case, be
required to deliver, in the case of a call, or take delivery, in the case of a
put, the underlying security against payment of the exercise price. Upon
expiration of the option, the obligation terminates. A fund may purchase options
2
<PAGE>
in closing transactions to terminate its obligations under options it has
written. A closing transaction is the purchase of an option covering the same
underlying security having the same strike price and expiration date (assuming
availability of a secondary market) as the option the fund seeks to "close out."
Once an option is exercised, the writer may not enter into a closing
transaction. If the cost of a closing transaction, plus transaction costs, is
greater than the premium received by the fund upon writing the original option,
the fund will incur a loss in the transaction.
OPTIONS ON TREASURY BONDS AND NOTES. Interest in Treasury Bonds and Notes tends
to center on the most recently auctioned issues. The Exchanges, however, will
not indefinitely continue to introduce new options series with expirations to
replace expiring options on particular issues, but will likely limit new issues
to a limited number of new expirations while allowing old expirations introduced
at the commencement of options trading to run their course. Thus, options
trading on each new series of Bonds or Notes will be phased out and there will
no longer be a full range of expiration dates available for every series on
which options are traded.
OPTIONS ON TREASURY BILLS. Writers of Treasury Bill call options cannot provide
in advance for their potential exercise settlement obligations by acquiring and
holding the exact underlying security, because the deliverable Treasury Bill
changes from week to week.
OPTIONS - SECONDARY MARKET. If a fund, as a covered call option writer, is
unable to effect a closing transaction because a liquid secondary market is not
available at the time the fund desires to effect such a transaction, the fund
will not be able to sell the security underlying the call option until the
option expires or the fund delivers the underlying security upon exercise. There
are several reasons that a liquid secondary market may not exist at any given
time. They include: insufficient trading interest in certain options;
restrictions on certain transactions imposed by an Exchange; trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; interruption of the normal
operations on an Exchange; inadequate facilities of an Exchange or the OCC to
handle trading volume; or a decision by one or more Exchanges to discontinue the
trading of options (or a particular series or class of options), in which event
the secondary market on that Exchange would cease to exist, although outstanding
options on that Exchange that had been issued by OCC as a result of trades on
that Exchange would generally continue to be exercisable in accordance with
their terms.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A "sale" of a futures contract means the acquisition of a contractual
obligation to deliver the securities called for by the contract at a specified
price on a specified date. A "purchase" of a Futures Contract means the
acquisition of a contractual obligation to acquire securities at a specified
price on a specified date. Underlying funds may purchase and sell futures
contracts for the purpose of hedging portfolio securities against the adverse
effects of stock market and/or interest rate movements.
GOVERNMENT FUTURES CONTRACTS. Bond values generally vary inversely with interest
rates, e.g.; as interest rates go up, bond prices decline. A fund might sell a
Government Futures Contract as a hedge against an anticipated increase in
interest rates, and might purchase a futures contract as a temporary substitute
for the actual purchase of portfolio securities it intends to buy. When a fund
purchases a Government Futures Contract, it agrees to take delivery of a
specific type of debt security at a specific future date for a specific price.
When it sells a Government Futures Contract, it agrees to make delivery of a
specific type of debt security at a specific future date for a specific price.
Either obligation may be satisfied or "closed out" by actually taking or making
delivery as agreed, or by entering into an offsetting Government Futures
Contract. At the date hereof, Government Futures Contracts can be purchased and
sold with respect to U.S. Treasury bonds, U.S. Treasury notes and GNMA
Certificates on the Chicago Board of Trade and with respect to U.S. Treasury
bills on the International Monetary Market at the Chicago Mercantile Exchange.
STOCK INDEX FUTURES CONTRACTS. An underlying fund might sell a futures contract
to hedge an anticipated decline in stock market prices, in lieu of, or to
supplement hedging individual securities in the fund's portfolio. Conversely, a
fund might purchase a futures contract in anticipation of a rise in stock market
prices. Stock Index Futures Contracts obligate the seller to deliver (and the
purchaser to take) cash to settle the futures transaction, or to enter into an
offsetting contract. No physical delivery of the underlying stocks in the index
is made. Futures Contracts can be purchased and sold on the Standard & Poor's
500 Index on the Chicago Mercantile Exchange and on the Major Market Index on
the Chicago Board of Trade.
3
<PAGE>
OPTIONS ON STOCK INDICES AND FUTURES CONTRACTS. Underlying funds may also
purchase options on futures contracts and may write (sell) covered options to
buy or sell futures contracts. An option on a futures contract gives the
purchaser, in return for a premium paid, the right to assume a position in the
futures contract (a purchase if the option is a call and a sale if the option is
a put). The writer, if the option is exercised, is required to assume an
offsetting futures position (a sale if a call and a purchase if a put). Exercise
of the option is accompanied by the delivery of the accumulated cash balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the strike price of the option on
the futures contract. A fund may enter into "closing" transactions on futures
contracts and options thereon in order to terminate existing positions.
An underlying fund may purchase or sell options on Government Futures
Contracts. Those currently available include options on futures contracts on
U.S. Treasury Bonds, U.S. Treasury Notes and Cash Settled GNMA's on the Chicago
Board of Trade. Options on Government Futures Contracts are similar to options
on other securities, except that the related investment is a futures contract.
Thus, the buyer of a call option obtains the right to purchase a futures
contract at a specified price during the life of the option, and the buyer of a
put option obtains the right to sell a futures contract at a specified price
during the life of the option. The options are traded on an expiration cycle
based on the expiration cycle of the underlying futures contract.
Underlying funds may engage in options transactions on Stock Indices, Stock
Index futures contracts and certain commodity and currency indices and futures
contracts related to its portfolio securities. Futures contracts can be
purchased and sold with respect to the U.S. Dollar Index on the Financial
Instrument Exchange (a division of the New York Cotton Exchange) and with
respect to the CRB (Commodities Research Bureau) Index on the New York Futures
Exchange. Puts and calls on stock indices and stock index futures contracts are
similar to puts and calls on securities except that all settlements are in cash
and gain or loss depends on changes in the index (and, therefore, on price
movements in the stock market generally) rather than on price movements on
individual securities. When the purchaser buys a call on a stock index or stock
index futures contract, it pays a premium to the seller. If the purchaser then
exercises the call prior to its expiration, the seller is required to pay the
purchaser an amount of cash to settle the call if the closing level of the stock
index or stock index futures contract upon which the call is based is greater
than the strike price of the call. That cash payment is equal to the difference
between the closing price of the index or futures contract and the strike price
of the call times a specified multiple (the "multiplier") which determines the
total dollar value for each point of difference. When the purchaser buys a put
on a stock index or stock index future, it pays a premium and obtains the right
to require the seller, upon the purchaser's exercise of the put, to deliver to
the purchaser an amount of cash to settle the put if the closing level of the
stock index or stock index future upon which the put is based is less than the
exercise price of the put. That cash payment is determined by the multiplier in
the same manner as described above as to calls.
A fund neither pays nor receives money upon the sale of a futures contract.
Instead, when a fund enters into a futures contract, it will initially be
required to deposit with its custodian bank for the benefit of the futures
broker an amount of "initial margin" of cash or U.S. Treasury Bills, which
currently ranges from 1/10 of 1% to 4% of the contract amount, depending on the
type of contract. The term "initial margin" in futures transactions is different
from the term "margin" in securities transactions in that futures contract
initial margin does not involve the borrowing of funds by the customer to
finance the transactions. Rather, initial margin is in the nature of a good
faith deposit on the contract which is returned to the fund upon termination of
the futures contract, assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the futures broker are
made on a daily basis as the market price of the futures contract fluctuates.
At any time prior to expiration of the futures contract, a fund may elect
to close its position by taking an offsetting position which will operate to
terminate the fund's position in the futures contract. While futures contracts
on U.S. Government securities provide for the delivery and acceptance of
securities, most futures contracts, including stock index futures contracts, are
terminated by entering into offsetting transactions. Because of the low margin
deposits required, futures trading involves a high degree of leverage. As a
result, a relatively small price movement in a futures contract may result in
immediate and substantial loss, as well as gain, to the investor. For example,
if at the time of purchase, 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the futures
contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit, if
the contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the offsetting securities positions of the portfolio which are being
hedged would, in most cases, substantially alleviate the loss incurred in the
futures contract. In addition, a fund would presumably have sustained comparable
losses if, instead of the futures contract, the fund had invested in the
underlying financial instrument and sold it after the decline. Furthermore, in
the case of a futures contract purchase, in order to be certain that a fund has
sufficient assets to satisfy its obligations under a futures contract, the fund
4
<PAGE>
earmarks to the futures contract money market instruments equal in value to the
current price of the underlying instrument less the margin deposit.
A clearing corporation associated with the commodity exchange on which a
Futures Contract trades assumes responsibility for the completion of
transactions and guarantees that Futures Contracts will be performed.
The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in stock market and/or interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events. A decision of whether, when,
and how to hedge involves skill and judgment, and even a well-conceived hedge
may be unsuccessful to some degree because of unexpected market behavior or
interest rate trends.
LIMITATIONS ON OPTIONS AND FUTURES CONTRACTS. Transactions in options by
underlying funds will be subject to limitations established by each of the
exchanges governing the maximum number of options which may be written or held
by a single investor or group of investors acting in concert, regardless of
whether the options are written or held on the same or different exchanges or
are written or held in one or more accounts or through one or more brokers.
Thus, the number of options which an underlying fund may write or hold may be
affected by options written or held by affiliates of such fund. Position limits
also apply to futures contracts. An exchange may order the liquidation of
positions found to be in excess of these limits, and it may impose certain
sanctions.
INVESTING IN INVESTMENT COMPANIES
As described in the Prospectus, the Funds invest primarily in the shares of
other investment companies (commonly called "mutual funds" and sometimes
referred to herein as "underlying funds"). The mutual funds in which the Funds
invest will be registered in the United States and will be managed by a number
of investment advisors. The Funds believe that this diversification offers the
opportunity to benefit from a variety of investment approaches and strategies
employed by experienced investment professionals over a diverse spectrum of
investment portfolios. The mutual funds in which the Funds invest may have
differing investment objectives, they may invest in bonds, equities, tax-exempt
securities and a variety of other investments. They may seek speculative or
conservative investments or any mixture of these objectives and strategies. The
Funds' Investment Manager is responsible for evaluating, selecting and
monitoring each mutual fund in which the Funds invest.
The mutual funds in which the Funds invest may engage in some or all of the
investment techniques and may invest in some or all of the types of securities
in which the Funds engage or invest. In addition, underlying funds may have less
stringent limitations on investment activities than the Funds. This could
conceivably result in the Funds having a greater exposure to certain risks than
intended. The Funds believe that this risk exposure is effectively reduced by
investing in a diversified portfolio of mutual funds.
The Funds will invest in underlying funds only if such funds will not
invest in oil, gas or other mineral leases, or in real estate or real estate
limited partnership interests.
LENDING PORTFOLIO SECURITIES
In order to earn additional income on its portfolio securities, each Fund
and the underlying funds in which the Funds invest may lend up to 33% of the
value of its portfolio securities to brokers, dealers and other financial
institutions, provided that such loans are callable at any time by the Fund and
are at all times secured by collateral, consisting of cash or U.S. Government
Securities, or any combination thereof, equal to not less than 100% of the
market value, determined daily, of the securities loaned. Although the
limitation on the amount of securities any Fund may lend is a fundamental
policy, the particular practices followed in connection with such loans are not
deemed fundamental and may be changed by the Board of Trustees without the vote
of the Fund's shareholders. While each Fund reserves the right to lend its
portfolio securities, it has not done so in the past and has no present
intention of doing so in the future.
DELAYED DELIVERY AND WHEN-ISSUED SECURITIES
Underlying funds and the Flexible Bond, Growth & Income and Asset
Allocation Funds may purchase or sell U.S. Government Securities on a delayed
delivery basis or may purchase such securities on a when-issued basis. Such
transactions arise when a fund commits to sell or purchase securities with
payment and delivery taking place in the future. The purpose, if done by the
Funds, is to attempt to secure a more advantageous price and/or yield to the
fund at the time of entering into the transaction than could be obtained on a
similar transaction providing for normal settlement. However, the yield on a
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comparable security available when delivery takes place may vary from the yield
on the security at the time that the delayed delivery and when-issued
transaction was entered into. When a fund engages in delayed delivery and
when-issued transactions, the fund relies on the seller or buyer, as the case
may be, to consummate the transaction, and failure to consummate the transaction
may result in the fund missing the price or yield considered to be advantageous.
Normally, such transactions may be expected to settle within three months from
the date the transactions are entered into. However, no payment or delivery
would be made by a Fund until it receives delivery or payment from the other
party to the transaction. The Fund will deposit and maintain, in a segregated
account with the Custodian, cash, U.S. Government securities or other liquid
high-grade debt obligations having a value equal to or greater than the Fund's
purchase commitments; the Custodian will likewise segregate securities sold on a
delayed delivery basis. There is no Fund policy limiting delayed delivery and
when-issued transactions. While the Flexible Bond, Growth & Income and Asset
Allocation Funds reserve the right to purchase Delayed Delivery and When-Issued
securities, they have not done so in the past and have no present intention of
doing so in the current fiscal year.
ZERO COUPON BONDS
The Flexible Bond Fund and Growth & Income Fund may each invest up to 10%,
and underlying funds may invest up to 100%, of their respective total assets in
zero coupon U.S. Government Securities and domestic corporate bonds ("Zeros").
Such securities do not make periodic interest payments, but are purchased at a
discount from their face, or maturity, value. Thus, the holder of a Zero
receives only the right to receive the face value upon maturity. The advantage
of a Zero is that a fixed yield is earned on the invested principal and on all
accretion of the discount from the date of purchase until maturity. A bond which
makes a periodic interest payment, on the other hand, bears the risk that
current interest payments, when received, must be reinvested at then-current
yields, which could be higher or lower than that of the bond originally
purchased. Zero's are subject to greater price volatility than current-interest
bonds during periods of changing interest rates, more so with longer maturities.
A disadvantage of a fund's investment in Zeros is that the fund is obligated to
recognize as interest income, on a current basis, the accretion of the discount
from the date of purchase until the date of maturity or sale, even though no
interest income is actually received in cash on a current basis. The Investment
Manager will therefore invest in Zeros only when it believes that the overall
benefit to shareholders will offset this disadvantage. While the Flexible Bond
and Growth & Income Funds each reserve the right to invest in Zero's, they have
not done so in the past and have no present intention of doing so in the current
fiscal year.
HIGH YIELD BONDS
The Flexible Bond, Growth & Income and Asset Allocation Funds may invest up
to 5% of their assets in high yield bonds, or so-called "junk bonds." The
underlying funds in which the Funds invest may invest up to 100% of their assets
in high yield bonds. Investors should familiarize themselves with the risks of
investing in high yield bonds. (See the Prospectus, "Fixed Income Investments.")
Investors should be aware that the widespread expansion of government, consumer
and corporate debt within our economy has made the corporate sector, especially
cyclically sensitive industries, more vulnerable to economic downturns or
increased interest rates. An economic downturn could severely disrupt the market
for high yield bonds and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest, leading to an increased
risk of default. If the issuer of a bond defaulted, the holder may incur
additional expenses to seek recovery. Periods of economic uncertainty and change
can be expected to result in increased volatility of market prices of high yield
bonds and, consequently, to the extent held by a Fund or underlying funds, the
value of the Fund. High yield bonds structured as zero coupon securities are
affected to a greater extent by interest rate changes and thereby tend to be
more volatile than securities which pay interest periodically.
High yield bonds may contain redemption or call provisions. If an issuer
exercises these in a declining interest rate market, a fund holding such bonds
would have to replace the security with a lower yielding security, resulting in
a decreased return for the shareholders. Conversely, a high yield bond's value
will decrease in a rising interest rate market, as will the net asset value of
any fund holding them. If a fund experiences unexpected net redemptions, it may
be forced to sell its high yield bonds at a time when it would not otherwise
sell them based upon their investment merits, thereby decreasing the total
return expected from the investment. High yield bonds may be subject to market
value fluctuation based upon adverse publicity and investor perceptions (whether
or not based on fundamental analysis), exposing investors to a increased risk of
decreased values and liquidity, especially in a thinly traded market.
There are a number of risks associated with reliance upon the credit
ratings of Moody's and S&P when investing in fixed income investments. Credit
ratings evaluate the safety of principal and interest payments but not the
market value of high yield bonds. Rating agencies may fail to timely change the
credit ratings to reflect subsequent events. Before investing is high yield debt
securities directly, the Investment Manager would perform its own evaluation of
fundamental and other factors establishing and would continuously monitor the
issuers of such bonds actually held in the Funds' portfolio. See the Appendix,
"Description of Bond Ratings".
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While the Flexible Bond, Growth & Income and Asset Allocation Funds reserve
the right to invest directly in high-yield bonds, they have not done so in the
past and have no present intention of doing so in the current fiscal year.
CONCENTRATION
An underlying mutual fund may concentrate its investments in a single
industry (but the Funds limit investment in any one underlying fund to no more
than 25% of the total assets of each Fund). The value of shares of such an
underlying fund may be subject to greater market fluctuation because investment
alternatives within a single industry are more limited than for the market as a
whole.
BORROWING
The Leveraged Growth Fund borrows for investment purposes as described in
the Prospectus. The Flexible Bond, Growth & Income, Capital Appreciation and
Asset Allocation Funds may each borrow up to 5% of its total assets for
extraordinary purposes and up to 33.3% of its total assets to meet redemption
requests which might otherwise require untimely disposition of the Fund's
securities. Underlying funds in which the Funds invest may borrow up to 33.3% of
total assets for the purpose of increasing portfolio holdings. Because of such
leveraging, the effects of market price fluctuations on the portfolio net asset
value of the Leverage Growth Fund and underlying funds will be exaggerated.
Interest and other transaction costs would be incurred in connection with
borrowing.
ILLIQUID AND RESTRICTED SECURITIES
The Funds may invest not more than 10%, and underlying funds not more than
15% (money market funds are limited to 10%) of their respective net assets in
illiquid securities (repurchase agreements maturing in over seven days, certain
over-the-counter options and other securities for which there is no readily
available market, ) and restricted securities (securities which would be legally
restricted from resale). If a fund holding such securities decides to sell them,
a considerable period of time could elapse until it is able to sell them. During
that period, the market value of such securities (and therefore the market value
of the particular fund) could decline.
FOREIGN ISSUERS AND CURRENCIES
Each Fund reserves the right to make direct investments in foreign
securities (up to 5% of its respective total assets). During the past year the
Funds have not made such investments, and each Fund has no present intention of
doing so within the current fiscal year. However, an underlying fund may invest
up to 100% of its assets, in the securities of foreign issuers. These issuers
and the foreign securities markets in which their securities are traded may not
be as highly regulated as domestic issues, there may be less information
publicly available about them and foreign auditing requirements may not be the
same as domestic requirements. There may be delays in some countries in settling
securities transactions, in some cases up to six months. In addition, foreign
currency exchange rates may adversely affect an underlying fund's value. Other
political and economic developments, including the possibility of expropriation,
confiscatory taxation, exchange controls or other governmental restrictions
could adversely affect value. Under the 1940 Act, a mutual fund may maintain its
foreign securities in custody of non-U.S. banks and securities depositories.
In connection with securities traded in a foreign currency, a fund may
enter into forward contracts to purchase or sell an agreed upon amount of a
specific currency at a future date which may be any fixed number of days from
the date agreed upon by the parties. The price would be set at the time of
entering into the contract. Concurrent with entry into a contract to acquire a
foreign security for a specified amount of a foreign currency, the fund would
purchase, with U.S. dollars, the required amount of foreign currency for
delivery at the settlement date of the purchase. A similar forward currency
transaction would be made in connection with the sale of foreign securities. The
purpose of such a forward currency transaction is to fix a firm U.S. dollar
price necessary to settle a foreign securities transaction, and thus to protect
against adverse fluctuation of the exchange relationship between the U.S. dollar
and the foreign currency needed to settle the particular transaction during the
time interval between the purchase or sale date and settlement date. This time
period is normally between three to fourteen days. Forward currency transactions
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward currency
contract usually has no deposit requirements and no commissions are charged.
While such contracts tend to limit the risk of adverse currency exchange rate
fluctuations, they also limit the potential gain which might result from
positive exchange rate fluctuations.
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REPURCHASE AGREEMENTS
Each Fund and the underlying funds may purchase debt securities subject to
repurchase agreements. A repurchase transaction occurs when, at the time a Fund
purchases a security, it also resells it to the vendor (normally a commercial
bank or a broker-dealer) and must deliver the security (and/or securities
substituted for them under the repurchase agreement) to the vendor on an
agreed-upon date in the future. Such securities, including any securities so
substituted, are referred to as the "Resold Securities". The resale price
reflects an agreed-upon market interest rate effective for the period of time
during which the Fund's money is invested in the Resold Securities. The majority
of these transactions run from day to day, and the delivery pursuant to the
resale typically will occur within one to five days of the purchase. A Fund's
risk is limited to the ability of the vendor to pay the agreed-upon sum upon the
delivery date; in the event of bankruptcy or other default by the vendor, there
may be possible delays and expenses in liquidating the instrument purchased,
decline in its value and loss of interest. These risks are minimized when the
Fund holds a perfected security interest in the Resold Securities and can
therefore resell the instrument promptly. Under guidelines issued by the
Trustees, the Investment Manager will carefully consider the credit worthiness
of any vendor of repurchase agreements prior to entering into a repurchase
agreement and will monitor such vendor's credit worthiness during the term of
the repurchase agreement. Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being defined as
"loans" in the Investment Company Act of 1940, as amended (the "1940 Act"). The
return on such "collateral" may be more or less than that from the repurchase
agreement. The market value of the resold securities will be marked to market
daily and monitored so that the value of the "collateral" is at all times at
least equal to the value of the loan, including the accrued interest earned
thereon. All Resold Securities will be held by the Fund's custodian either
directly or through a securities depository. While the Funds limit their direct
repurchase agreement transactions to U.S. Government Securities, underlying
funds may not have such limitations. Lower quality securities underlying a
repurchase agreement transaction would involve potentially greater risk.
SHORT SELLING
An underlying fund may engage in short selling (the sale of a security it
does not own). In order to make delivery, it "borrows" the needed securities
from a broker and replaces them at a later time by purchasing them in the open
market. The price paid may be more or less than the price received when the
securities were sold short. The broker retains the proceeds from the short sale
to the extent necessary to meet margin requirements, until the securities are
replaced. So long as the short sale is outstanding, any interest and dividends
generated by the borrowed security must be paid to the lender and there may be
other brokerage charges associated with the transaction. In addition, the fund
must deposit and maintain on a daily basis, in a segregated account, an amount
of cash or U.S. Government Securities equal to the difference between (a) the
market value of the securities sold short and (b) the value of the collateral
deposited with the broker in connection with the short sale (not including the
proceeds from the short sale). Up to 80% of a fund's net assets may be so
deposited as collateral for the obligation to replace securities borrowed in
connection with short sales. If the price of a security sold short decreases
between the time of the short sale and replacement of the borrowed security, the
fund would incur a loss. Conversely, the fund will realize a gain if the price
of a security sold short increases between the time of the short sale and
replacement of the borrowed security. A short sale "against the box" occurs when
a fund sells short a security the fund owns long, or if the fund owns securities
convertible into, or exchangeable without further consideration for, the
identical securities as those sold short. Short "against the box" transactions
are generally used to defer realizing gains or losses on securities for federal
income tax purposes. Short sales may be made only in those securities which are
fully listed on a national securities exchange. This provision does not include
the sale of securities if the fund contemporaneously owns or has the right to
acquire securities equivalent in kind and amount to those sold (i.e., short
sales "against the box").
WARRANTS
The Funds do not invest directly in warrants. An underlying fund, however,
may invest in warrants, which are options to purchase equity securities at
specific prices for a specific period of time. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer. If a warrant is not exercised within the specified period of time, it
will become worthless and the fund will lose both the purchase price and the
right to purchase the underlying security. Prices of warrants do not necessarily
move parallel to the prices of the underlying securities. The Funds will invest
in underlying funds only if such funds limit their investments in warrants to
5%, valued at the lower of cost or market, of the value of such funds' net
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assets; included within that amount, up to 2% of such funds' net assets may be
warrants which are not listed on the New York or American Stock Exchanges.
OTHER TRANSACTIONS
The Funds intend to invest primarily in mutual funds as described herein
and in the Prospectus. But they may also, subject to the limitations described
in the Prospectus and this SAI, invest directly in any equity or fixed-income
security that the underlying funds may hold. Such direct investment would be
made only when, in the opinion of the Investment Manager, the expected benefits
would exceed that available by investment in funds.
INVESTMENT RESTRICTIONS
The Funds have adopted the following investment restrictions, some of which
have also been described in the Prospectus. They may not be changed without
approval by holders of a majority of the outstanding voting shares of the Fund.
A "majority" for this purpose, means the lesser of (i) 67% of the Fund's
outstanding shares represented in person or by proxy at a meeting at which more
than 50% of its outstanding shares are represented, or (ii) more than 50% of its
outstanding shares.
As to each Fund, the Fund MAY NOT:
(1) Issue senior securities, borrow money or pledge its assets, except that
each Fund may borrow from banks as a temporary measure for extraordinary or
emergency purposes in amounts (taken at the lower of cost or current value) not
exceeding 5% or, in order to meet redemption requests which might otherwise
require untimely disposition of portfolio securities, 33.3% of its total assets
(not including the amount borrowed) and may pledge its assets to secure such
loans. So long as loans are outstanding, the Fund(s) (except for the Leveraged
Growth Fund) will not purchase any securities. For the purpose of this
restriction, collateral arrangements and initial and variation margin with
respect to the purchase and sale of delayed delivery and when-issued securities,
futures contracts and options are not deemed to be a pledge of assets and
neither such arrangements nor the purchase or sale of futures contracts or
options are deemed to be the issuance of a senior security. In addition to the
foregoing, the Leveraged Growth Fund may borrow for investment purposes as set
forth elsewhere in the Prospectus and Statement of Additional Information;
(2) Make loans of money or securities, except the Fund may (a) purchase
debt obligations in accordance with its investment objectives and policies, (b)
lend its portfolio securities (up to 33% of the value of its total assets) as
permitted under the Investment Company Act of 1940, as amended, and (c) invest
in repurchase agreements (but repurchase agreements having a maturity of longer
than 7 days, together with illiquid assets, are limited to 10% of the Fund's
total assets);
(3) Invest more than 25% of the Fund's total assets in the securities of
any one investment company, except as part of a merger, consolidation of other
acquisition.
(4) Purchase or sell commodities or commodity contracts, real estate or
other interests in real estate except that the Fund may: invest in (a)
securities secured by real estate, securities of companies which invest or deal
in real estate; and (b) futures contracts and options thereon (subject to number
5, below); and
(5) Write, purchase or sell puts, calls or combinations thereof, or
purchase or sell futures contracts or related options, except that, with respect
to the Flexible Bond Fund and the Asset Allocation Fund pertaining to U.S.
Government Securities, all Funds except the Flexible Bond Fund pertaining to
stocks and stock indices and the Asset Allocation Fund pertaining to commodities
and currencies related to its portfolio securities, the Fund may: (a) purchase
put and call options: (b) write covered put and call options provided that the
aggregate value of the obligations underlying the put options will not exceed
50% of the net assets: (c) purchase and sell futures contracts; and (d) purchase
options on futures contracts and sell covered options thereon, provided that the
aggregate premiums paid on all such options which are held at any time do not
exceed 20% of the Fund's net assets and the aggregate margin deposits required
on all such futures contracts or options thereon held at any time do not exceed
5% of the Fund's total assets.
(6) As to 75% of it's total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (U.S. Government Securities are
not subject to this limitation);
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(7) Purchase more than 10% of the outstanding voting securities or of any
class of securities of any one issuer (U.S. Government Securities are not
subject to this limitation);
(8) Invest more than 25% of the value of its total assets in any industry
or group of industries other than investment companies (except that U.S.
Government Securities are not subject to these limitations);
(9) Invest more than 5% of its total assets in securities of issuers (other
than U.S. Government Securities and investment companies) which together with
their predecessors, have a record of less than three years' continuous
operation;
(10) Invest in the securities of any issuer if any of the officers or
trustees of the Trust or its Investment Manager who own beneficially more than
1/2 of 1% of the outstanding securities of such issuer together own more than 5%
of the outstanding securities of such issuer;
(11) Invest in securities which are restricted as to disposition under the
Federal securities laws;
(12) Invest in securities which are considered illiquid, if the total of
such securities would exceed 10% of the Fund's total assets (Investment company
securities are considered illiquid to the extent the Fund owns more than 1% of
an investment company's outstanding shares) (Repurchase agreements maturing in
more than 7 days are considered illiquid for purposes of this restriction) ;
(13) Invest for the purpose of exercising control or management of another
issuer;
(14) Invest in interests in oil, gas or other mineral exploration or
development programs (except the Fund may invest in securities issued by
companies engaged in such businesses);
(15) Underwrite securities issued by others (except to the extent that the
Fund may be deemed to be an underwriter under the Federal securities laws in
connection with the disposition of portfolio securities);
(16) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions, and initial and
variation margin payments in connection with transactions in Futures Contracts
and related options are not considered purchasing securities on margin),
provided, however, that this restriction which is intended to apply to margin
accounts with brokers shall not restrict the Leveraged Growth Fund from
borrowing from banks in accordance with the limitations contained in the
Prospectus under "Investment Restrictions" and elsewhere in the Prospectus and
in the Statement of Additional Information;
(17) Make short sales of securities or maintain a short position, except
short sales "against the box." (A short sale is made by selling a security a
Fund does not own. A short sale is "against the box" to the extent that a Fund
contemporaneously owns or has the right to obtain at no additional cost
securities identical to those sold short.) (The purchase of put options as
described in the prospectus is not a short position for the purposes of this
restriction.);
(18) Participate on a joint or joint and several basis in any trading
account in securities;
(19) Purchase foreign securities in excess of 5% of the Fund's total assets
(ADR's and U.S.-registered investment companies are not considered foreign
securities for this purpose); or
(20) Purchase foreign currencies, except that the Asset Allocation Fund may
engage in transactions in foreign currencies, including options and futures
thereon, but only for hedging purposes with respect to the Fund's portfolio
securities.
Percentage restrictions stated in any investment restriction apply at the
time of investment; if a later increase or decrease in percentage beyond the
specified limits results from a change in securities values or total assets, it
will not be considered a violation. However, in the case of the borrowing
limitation, the Funds will, to the extent necessary, reduce their existing loans
to comply with the limitation
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SPECIAL SHAREHOLDER SERVICES
The Trust offers the following shareholder services;
REGULAR ACCOUNT
The regular account allows for voluntary investments to be made at any
time. Available to individuals, custodians, corporations, trusts, estates,
corporate retirement plans and others, investors are free to make additions and
withdrawals to or from their account as often as they wish. When an investor
makes an initial investment in a Fund, a shareholder account is opened in
accordance with the investor's registration instructions. Each time there is a
transaction in a shareholder account, such as an additional investment or the
reinvestment of a dividend or distribution, the shareholder will receive a
confirmation statement showing the current transaction and all prior
transactions in the shareholder account during the calendar year to date, along
with a summary of the status of the account as of the transaction date.
Shareholder certificates are issued only for full shares and only upon the
specific request of the shareholder. Issuance of certificates representing all
or only part of the full shares in a shareholder account may be requested by a
shareholder.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders owning shares of a Fund with a value of $10,000 or more may
establish a Systematic Withdrawal Plan. A shareholder may receive monthly or
quarterly payments, in amounts of not less than $50 per payment, by authorizing
the Transfer Agent to redeem the necessary number of shares periodically (each
month), or quarterly in the months of January, April, July and October) in order
to make the payments requested. Share certificates for the shares being redeemed
must be held by the Transfer Agent. If a check is used to pay the redemption
proceeds, it will be made payable to the designated recipient and mailed within
7 days of the valuation date. If the designated recipient is other than the
registered shareholder, the signature of each shareholder must be guaranteed on
the application (see "Signature Guarantees" in the Prospectus). A corporation
(or partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. There is no charge for the
use of this plan. Shareholders should be aware that such systematic withdrawals
may deplete or use up entirely their initial investment and may result in
realized long-term or short-term capital gains or losses. The Systematic
Withdrawal Plan may be terminated at any time by the Trust upon thirty day's
written notice or by a shareholder upon written notice to the Transfer Agent.
Applications and further details may be obtained by calling the Transfer Agent
at 1-800-224-4743, or by writing to Merriman Mutual Funds, c/o Firstar Trust
Company, Mutual Funds Services, 3rd Floor, PO Box 701, Milwaukee, WI 53201-0701.
RETIREMENT PLANS
As noted in the Fund's Prospectus, an investment in a Fund's shares may be
appropriate for IRA's, Keogh Plans and corporate retirement plans. Unless
otherwise directed, capital gains distributions and dividends received on Fund
shares held by any of these plans will be automatically reinvested in additional
Fund shares and will be exempt from taxation until distributed from the plans.
Investors who are considering establishing such a plan may wish to consult their
attorneys or tax advisers with respect to individual tax questions. The Trust
intends to offer pre-qualified plans as described herein.
INDIVIDUAL RETIREMENT ACCOUNT (IRA). Shares of the Fund may be purchased as an
investment for an IRA account, including those established by employers as
Simplified Employee Pension-IRAs ("SEP-IRA") or Savings Incentive Match Plans
("SIMPLE") for the benefit of their employees. Information concerning an IRA,
SEP-IRA or SIMPLE retirement plan, fees charged for maintaining such plans, more
detailed information and disclosures made pursuant to requirements of the
Internal Revenue Code ("the Code"), and assistance in opening a plan may be
obtained from the Trust by calling 1-800-423-4893. The following discussion is
intended as a general and abbreviated summary of the applicable provisions of
the Code and related Treasury regulations currently in effect. It should not be
relied upon as a substitute for obtaining personal tax or legal advice.
DEDUCTIBLE IRA. Generally, a person may make deductible contributions out
of earned income to an IRA up to $2,000 each year. However, persons who are
active participants in employer sponsored pension plans ("Employer Plans") are
subject to certain restrictions on deductibility under the Internal Revenue Code
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of 1986, as amended by the Taxpayer Relief Act of 1997 ("the Code"). The
restrictions for the calendar year 1998, applicable to active participants in
Employer Plans, are as follows:
A single person who has an adjusted gross income of $30,000 or more, but
not exceeding $40,000, is allowed to deduct a portion of his IRA contribution.
That portion decreases proportionately to the extent the individual's income
exceeds $30,000. No deduction is allowed where the single person's adjusted
gross income exceeds $40,000.
A married couple filing a joint return with adjusted gross income of
$50,000 or more, but not exceeding $60,000, is also allowed to deduct a portion
of their IRA contributions. That portion decreases proportionately to the extent
the couple's adjusted gross income exceeds $50,000. No deduction is allowed
where the couple's adjusted gross income exceeds $60,000.
A married couple filing jointly where one spouse does not participate and
the other spouse does participate in an Employer Plan, the spouse who does not
participate may deduct IRA contributions up to $2,000, but this deduction is
phased out where the couple's adjusted gross income ranges from $150,000 to
$160,000. No deduction is allowed where the couple's adjusted gross income
exceeds $160,000.
NONDEDUCTIBLE IRA. Individuals may make nondeductible contributions to the
extent they are not eligible to make deductible IRA contributions. The Roth IRA
allows individuals to contribute up to $2,000 ($4,000 for joint filers) annually
out of earned income. Eligibility to contribute to a Roth IRA is phased out as
adjusted gross income rises from $95,000 to $110,000 for single filers and from
$150,000 to $160,000 for joint filers.
ROLLOVER TO A ROTH IRA. Amounts from existing deductible or nondeductible
IRAs may be rolled over to a Roth IRA without the 10% early distribution penalty
described below, unless the Taxpayer's adjusted gross income exceeds $100,000.
However, regular income tax will be due on any existing taxable amounts that are
rolled over from a current IRA.
TAXATION OF IRAS UPON DISTRIBUTION. An investment in Fund shares through
IRA deductible or nondeductible contributions is advantageous because the
deductible contributions, income, dividends and capital gains distributions
earned on your Fund shares are generally not taxable to you as long as the Funds
remain in your IRA, but may be taxable to you when distributed.
Distributions from IRAs are generally taxable as ordinary income when
distributed to the extent of earnings and deductible contributions.
Nondeductible contributions are not taxable. Because Roth IRA distributions are
considered to come from nondeductible contributions first, no tax or penalty
will result until all nondeductible contributions have been withdrawn.
Distributions rolled over into another IRA ("Rollover Contributions") in
accordance with certain rules under Section 408(d)(3) of the Code are tax-free,
as are distributions made in the case of death or disability. In addition,
earnings which accumulated tax-free on a Roth IRA are distributed tax-free to
the extent that they are made with respect to Qualified Distributions. Qualified
Distributions are distributions that are made (1) at least five years after the
first year that a contribution was made to the Roth IRA and (2) after the age of
59-1/2, after the death or disability of an individual, or for qualified
first-time home purchase expenses subject to a $10,000 lifetime maximum.
Most distributions from IRAs made before age 59-1/2 are subject to an early
distribution penalty tax equal to 10% of the distribution (in addition to any
regular income tax which may be due). Nondeductible contributions are not
subject to the penalty. Penalty-free distributions are allowed for up to $10,000
of first-time home buying expenses. Penalty-free distributions are also allowed
for money used to pay qualified higher education expenses (including graduate
level course expenses) of the taxpayer, the taxpayer's spouse, or a child or
grandchild of the taxpayer (or of the taxpayer's spouse). Qualified expenses
include tuition, fees, books, supplies, required equipment, and room and board
at a post-secondary educational institutional. Qualified expenses are reduced by
certain scholarships and veterans' benefits and the excluded income on
qualifying U.S. savings bonds. Penalty-free distributions are also allowed for
Rollover Contributions, in the case of death or disability, made in the form of
certain periodic payments, used to pay certain medical expenses or used to
purchase health insurance for an unemployed individual. You will incur other
penalties if you fail to begin distribution of accumulated IRA amounts by April
1 following the year in which you attain age 70-1/2, but this does not apply to
the Roth IRA..
KEOGH PLANS AND CORPORATE RETIREMENT PLANS. Fund shares may also be
purchased as an investment for Keogh and Corporate Retirement Plans. There are
penalties for premature distributions from a Keogh Plan prior to age 59 1/2,
except in the case of death or disability.
HOW TO ESTABLISH RETIREMENT ACCOUNTS. All the foregoing retirement plan
options require special applications or plan documents. Please call the Trust at
1-800-423-4893 to obtain information regarding the establishment of retirement
plan accounts. In the case of IRA and certain other pre-qualified plans, nominal
12
<PAGE>
fees will be charged in connection with plan establishment, custody and
maintenance, all of which are detailed in plan documents. You may wish to
consult with your attorney or other tax advisor for specific advice concerning
your tax status and plans.
EXCHANGE PRIVILEGE
Shareholders may exchange shares (in amounts of $1,000 or more) of any
Merriman Fund for shares of any other Merriman Fund or for shares of the Firstar
U.S. Government Money Market Fund, the Firstar Money Market Fund or the Firstar
Tax-Exempt Money Market Fund. A current prospectus of the Firstar Funds should
be obtained and read prior to seeking any such exchange. There is a service
charge levied by the Transfer Agent for each exchange made by telephone. There
is no fee if made by mail. The Transfer Agent will redeem sufficient shares in
your account to cover the fee, which currently is $5.00. This fee may be changed
from time to time by the Transfer Agent, but shareholders will be given at least
60 days written notice prior to instituting a fee change. To make an exchange,
an exchange order must comply with the requirements for a redemption or
repurchase order and must specify the value or number of the shares to be
exchanged. Your exchange will take effect as of the next determination of net
asset value per share of each fund involved (usually at the close of business on
the same day). The Trust reserves the right to limit the number of exchanges or
to otherwise prohibit or restrict shareholders from making exchanges at any
time, without notice, should the Trustees determine that it would be in the best
interest of shareholders to do so. For tax purposes an exchange constitutes the
sale of the shares of one fund and the purchase of those of the second fund.
Consequently, the sale will likely involve either a capital gain or loss to the
shareholder for Federal income tax purposes.
REDEMPTIONS IN KIND
No Fund intends, under normal circumstances, to redeem its securities by
payment in kind. It is possible, however, that conditions may arise in the
future which would, in the opinion of the Trustees, make it undesirable for the
Funds to pay for all redemptions in cash. In such case, the Board of Trustees
may authorize payment to be made in portfolio securities. Securities delivered
in payment of redemptions would be valued at the same value assigned to them in
computing the net asset value per share. Shareholders receiving them would incur
brokerage costs when these securities are sold. To protect shareholders, an
irrevocable election has been filed under Rule 18f-1 of the Investment Company
Act of 1940, as amended, wherein the Trust committed itself to pay redemptions
in cash, rather than in kind, to any shareholder of record of either Fund during
any ninety-day period, the lesser of (a) $250,000 or (b) one percent (1%) of the
Fund's net asset value at the beginning of such period.
TRANSFER OF REGISTRATION
To transfer shares to another owner, send a written request to the Transfer
Agent c/o Firstar Trust Company, Mutual Fund Services, 3rd Floor, PO Box 701,
Milwaukee, WI 53201-0701. Your request should include the following: (1) the
Fund name and existing account registration; (2) signature(s) of the registered
owner(s) exactly as the signature(s) appear(s) on the account registration; (3)
the new account registration, address, social security or taxpayer
identification number and how dividends and capital gains are to be distributed;
(4) any stock certificates which have been issued for the shares being
transferred; (5) signature guarantees (See "Signature Guarantees" in the
Prospectus); and (6) any additional documents which are required for transfer by
corporations, administrators, executors, trustees, guardians, etc. If you have
any questions about transferring shares, call or write the Transfer Agent.
PURCHASE OF SHARES
The purchase price of Fund shares is the net asset value next determined
after the order is received. An order received prior to the close of the New
York Stock Exchange ("Exchange") will be executed at the price computed at the
close on the date of receipt; an order received after the close of the Exchange
will be executed at the price computed at the close on the next Business Day.
The Exchange currently closes at 4:00 p.m., New York City time. An order to
purchase shares is not binding on the Trust until the Transfer Agent confirms it
in writing (or unless other arrangements have been made with the Transfer Agent,
for example in the case of orders utilizing wire transfer of funds) and payment
has been received.
The Trust reserves the right in its sole discretion (i) to suspend the
offering of Fund shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of such Fund and its
shareholders, and (iii) to reduce or waive the minimum for initial and
subsequent investments for certain fiduciary accounts such as employee benefit
plans or under circumstances where certain economies can be achieved in sales of
Fund shares.
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<PAGE>
REDEMPTION OF SHARES
The Trust may suspend redemption privileges or postpone the date of payment
(i) during any period that the New York Stock Exchange is closed, or trading on
the Exchange is restricted as determined by the Securities and Exchange
Commission (the "Commission"), (ii) during any period when an emergency exists
as defined by the rules of the Commission as a result of which it is not
reasonably practicable for a Fund to dispose of securities owned by it, or to
fairly determine the value of its assets, and (iii) for such other periods as
the Commission may permit.
No charge is made by the Trust for redemptions although, as disclosed in
the Prospectus, the Trustees could impose a redemption charge in the future. Any
redemption may be more or less than the shareholder's cost depending on the
market value of the securities held by the Fund.
TELEPHONE REDEMPTION PRIVILEGE. The Prospectus describes the procedures the
Funds follow to establish and operate the telephone redemption privilege. To
protect the Funds, their agents and shareholders from liability, the Funds
employ reasonable procedures to help ascertain that the instructions
communicated by telephone are genuine. Among other things, the Transfer Agent
will require the caller to provide verifying information unique to the
shareholder. Such information could include a password or other form of personal
identification. In addition, the call/transaction will be recorded.
NET ASSET VALUE DETERMINATION
Under the Investment Company Act of 1940, as amended, the Trustees are
responsible for determining in good faith the fair value of the securities and
other assets of the Funds, and they have adopted procedures to do so, as
follows. The Net Asset Value of each Fund is determined as of the close of
trading of the New York Stock Exchange (currently 4:00 p.m., New York City time)
on each Business Day. A Business Day means any day, Monday through Friday,
except for the following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Fourth of July, Labor Day, Election Day, Thanksgiving Day and
Christmas. Net asset value per share is determined by dividing the total value
of all Fund securities and other assets, less liabilities, by the total number
of shares then outstanding. Net asset value includes interest on fixed income
securities which is accrued daily.
Securities which are traded over-the-counter and on a stock exchange will
be valued according to the broadest and most representative market. It is
expected that for U.S. Government Securities and other fixed income securities
this ordinarily will be the over-the-counter market. For equity securities this
will ordinarily be the principal exchange on which the security is traded or the
NASDAQ National Market System. Over-the-counter securities that are not traded
on a particular day and fixed income securities are priced at the current quoted
bid price. However, U.S. Government Securities and other fixed income securities
may be valued on the basis of prices provided by an independent pricing service
when such prices are believed to reflect the fair market value of such
securities. The prices provided by a pricing service are determined without
regard to bid or last sale prices but take into account securities prices,
yields, maturities, call features, ratings, institutional size trading in
similar groups of securities and developments related to specific securities.
Stock exchange and NASDAQ securities are priced at the latest quoted sale on the
date of valuation. Short-term debt securities which mature in 60 days or less
are valued at amortized cost if their original term to maturity from the date of
purchase was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their term to maturity from the date of purchase exceeded 60
days, unless the Trustees determine that such valuation does not represent fair
value. Short-term debt securities which mature in more than 60 days are valued
at last sale or current bid quotations. Securities and other assets for which no
quotations are readily available will be valued in good faith at fair value
using methods determined by the Board of Trustees.
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<PAGE>
TRUSTEES AND OFFICERS
The business of the Funds is managed by the Board of Trustees under
Massachusetts law.. The Trustees elect officers who are responsible for the
day-to-day operations of the Funds and who execute policies formulated by the
Trustees. Some officers and Trustees of the Trust are also officers and control
persons of the Funds' investment manager, as shown below.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS HELD PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH THE TRUST DURING PAST 5 YEARS
<S> <C> <C>
DAVID A. EDERER, AGE 57 ** Trustee Since 1974, Managing Partner of D.A. Ederer Company, a private
4919 NE Laurelcrest Lane investment company. In connection therewith, Mr. Ederer serves
Seattle, WA 98105 as an Executive Officer and holds a substantial ownership
position in numerous industrial and service companies.
PAUL A. MERRIMAN, AGE 56 * President and Since 1983, President and Chief Executive Officer of Merriman
1200 Westlake Ave N, Suite 700 Trustee Capital Management, Inc. an investment advisory firm. Since
Seattle, WA 98109 October 1987, General Partner of Merriman Investment
Management Company, the Trust's Investment Manager.
WILLIAM L. NOTARO, AGE 57 * Executive Vice Since 1981, owner of Wm. L. Notaro & Company, a Seattle
2914 Kennewick Place, N.E. President, Investment Advisory firm. Since October 1987, Exec. Vice
Renton, WA 98056 Secretary, President and Chief Operating Officer of Merriman Investment
Treasurer & Trustee Management Company, the Trust's Investment Manager
BEN W. REPPOND, AGE 53 ** Since 1981, President and Chief Executive Officer, the Reppond
6965 N.E. Buck Lake Road Trustee Co., Inc., an insurance brokerage firm.
Hansville, WA 98340
DONALD E. WEST, AGE 68 ** Retired Boeing Company Management Engineer
4655 - 90th Avenue SE Trustee
Mercer Island, WA 98040
</TABLE>
* These Trustees are "interested persons" of the Trust, by virtue of their
positions with the Investment Manager.
** These trustees are members of the Audit Committee.
AS OF OCTOBER 30, 1999, THE TRUSTEES AND OFFICERS OWNED, AS A GROUP, 77,385
SHARES (5.22%) OF THE LEVERAGED GROWTH FUND, 9,518 SHARES (1.13%) OF THE GROWTH
& INCOME FUND AND LESS THAN 1% OF THE OUTSTANDING SHARES OF THE FLEXIBLE BOND
FUND, THE CAPITAL APPRECIATION FUND, AND THE ASSET ALLOCATION FUND.
Trustees and officers of the Trust who are interested persons of the Trust
receive no salary or fees from the Trust. Trustees of the Trust who are not
interested persons of the Trust receive $500 per year plus $100 per meeting of
the Board of Trustees attended by them. For the fiscal year ended September 30,
1999, remuneration of the Trustees and officers, in the aggregate, by the Trust,
was $2,700. The Funds do not provide pension or retirement benefits to the
Trustees and officers. The compensation of the Trustees, which is borne by the
Funds in the ratio of their respective average net assets, for the fiscal year
ended September 30, 1999, was as follows:
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION RECEIVED FROM:
FLEXIBLE GROWTH CAPITAL ASSET LEVERAGED TOTAL
NAME AND POSITION BOND & INCOME APPRECIATION ALLOCATION GROWTH FUND
FUND FUND FUND FUND FUND COMPLEX
<S> <C> <C> <C> <C> <C> <C>
DAVID A. EDERER $117.70 $136.77 $189.87 $162.51 $293.15 $900.00
TRUSTEE
Paul A. Merriman - - - - - -
PRESIDENT & TRUSTEE
William L. Notaro - - - - - -
EXEC. VICE PRESIDENT,
SECRETARY, TREASURER
AND TRUSTEE
BEN W. REPPOND $117.70 $136.77 $189.87 $162.51 $293.15 $900.00
TRUSTEE
DONALD E. WEST $117.70 $136.77 $189.87 $162.51 $293.15 $900.00
TRUSTEE
</TABLE>
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<PAGE>
5% SHAREHOLDERS
The Trust is aware of the following persons who owned, of record or
beneficially, more than 5% of the shares of any Fund as of October 31, 1999:
FLEXIBLE BOND FUND CHARLES SCHWAB & COMPANY, INC. 17.02% RECORD1
SAN FRANCISCO, CALIFORNIA 94104-4122
DONALDSON, LUFKIN & JENRETTE 8.62% RECORD1
PERSHING DIVISION
1 PERSHING PLAZA
JERSEY CITY, NJ 07399-0001
RUTH E. KANE, TRUSTEE 7.28% RECORD &
ALBERT E. KANE TRUST BENEFICIAL
657 OKANOGAN AVE, #431
WENATCHEE, WA 98801-6408
GROWTH & INCOME FUND JAMES L. FISHEL 6.06% RECORD &
ROYCE FISHEL, CO-TRUSTEES BENEFICIAL
ROYCE C. FISHEL TRUST
6420 E VALLEY CT.
NASHVILLE, TN 37205-3533
1 CHARLES SCHWAB & CO., INC., AND DONALDSON, LUFKIN & JENRETTE,
BROKER-DEALERS, HAVE ADVISED THE TRUST THAT NO INDIVIDUAL CLIENT
BENEFICIALLY OWNED SO MUCH AS 5% OF THE Fund.
INVESTMENT MANAGER
Merriman Investment Management Company (the "Investment Manager") manages
the Funds' investments pursuant to an Investment Management Agreement as
described in the Prospectus. Compensation of the Investment Manager, based upon
the Fund's daily average net assets, is at the following annual rates:
FLEXIBLE BOND FUND ALL OTHER FUNDS
On the First $250 million 1.000% 1.250%
On the next $250 million .875% 1.125%
On all above $500 million .750% 1.000%
In the event that additional series or funds are authorized by the
Trustees, each additional fund would compute investment fees separately. See the
Prospectus for a description of the services provided to the Funds by the
Investment Manager.
Advisory fees paid to the Investment Manager have been as follows:
<TABLE>
<CAPTION>
FISCAL PERIOD FLEXIBLE GROWTH & CAPITAL ASSET LEVERAGED GROWTH
ENDED BOND INCOME APPRECIATION FUND ALLOCATION FUND
SEPTEMBER 30, FUND FUND FUND
<S> <C> <C> <C> <C> <C>
1999 $80,844(1) $111,256 $162,528 $143,246 $226,149
1998 $85,479 $113,251 $174,405 $177,587 $209,381
1997 $92,669 $113,874 $193,036 $210,890 $199,789
</TABLE>
(1) THE INVESTMENT MANAGER MADE EXPENSE REIMBURSEMENTS OF $5,550 TO
THE FLEXIBLE BOND FUND FOR THE YEAR ENDED SEPTEMBER 30, 1999.
ADVISORY FEES PAID WERE $75,294 NET OF SUCH REIMBURSEMENTS.
THE INVESTMENT MANAGER HAS AGREED TO LIMIT EACH FUND's expenses. In the
event that a Fund's expenses exceed such limits, the Investment Manager waives
its fees and/or reimburses such Fund to the extent required to conform to such
limitations. Currently, the maximum expense which each Fund may incur, expressed
as a percentage of average net assets, is 2.5% of the first $30 million, 2% of
the next $70 million, and 1.5% of all over $100 million.
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<PAGE>
THE INVESTMENT MANAGER HAS VOLUNTARILY REDUCED THE EXPENSE LIMIT, BASED
UPON AVERAGE NET ASSETS, TO 2% OF THE FIRST $15 MILLION, 1.5% OF THE NEXT $35
MILLION, AND 1% OF ALL OVER $50 MILLION FOR THE CAPITAL APPRECIATION, ASSET
ALLOCATION, AND GROWTH & INCOME FUNDS, TO 2% OF THE FIRST $15 MILLION, 1.5% OF
THE NEXT $15 MILLION, AND 1% OF ALL OVER $30 MILLION FOR THE LEVERAGED GROWTH
FUND (EXCLUSIVE OF INTEREST EXPENSE), AND TO 1.5% OF THE FIRST $30 MILLION, 1%
OF ALL OVER $30 MILLION FOR THE FLEXIBLE BOND FUND.
Paul A. Merriman is President and Trustee of the Trust. A company he wholly
owns, Merriman Capital Management, Inc., owns a 50% interest, as General
Partner, in the Investment Manager. Only the General Partner has the right to
manage the affairs of the Investment Manager and the limited partners are
considered passive investors. Merriman Investment Management Company, L.P. is a
Washington limited partnership. William L. Notaro, Exec. Vice President of the
Trust, serves in the same capacity for the Investment Manager. Messrs. Merriman
and Notaro, the principal officers and control persons of the Investment Manager
also serve as principal officers and trustees of the Trust. See "Trustees and
Officers" for details.
The Investment Manager provides a continuous investment management program,
furnishes the services and pays the compensation of the executive officers of
the Trust, provides suitable office space, necessary small office equipment,
utilities, general purpose forms and supplies used at the offices of the Trust.
Each Fund will pay all of its own expenses not assumed by the Investment
Manager, including, but not limited to, the following: custodian, stock transfer
and dividend disbursing fees and expenses; clerical employees and junior level
officers of the Trust as and if approved by the Board of Trustees; taxes;
expenses of the issuance and redemption of shares (including stock certificates,
registration and qualification fees and expenses); costs and expenses of
membership and attendance at meetings of certain associations which may be
deemed by the trustees to be of overall benefit to each Fund and its
shareholders; legal and auditing expenses; and the cost of stationery and forms
prepared exclusively for the Funds. General Trust expenses are allocated among
the series, or Funds, on a fair and equitable basis by the Board of Trustees,
which may be based on relative net assets of each Fund (on the date the expense
is paid) or the nature of the services performed and the relative applicability
to each Fund.
MANAGEMENT AND OTHER SERVICES
Tait, Weller & Baker, of Philadelphia, PA, is the independent auditor of
the Trust's financial statements.
Firstar Mutual Fund Services, LLC, Mutual Fund Services-3rd Floor, 615 E
Michigan Street, Milwaukee, WI 53202, serves as custodian for the Funds. As
such it holds all cash and securities of the Fund (either in its possess-
ion or in its favor through "book entry systems" authorized by the Trustees
in accordance with the Investment Company Act of 1940, as amended),
collects all income and effects all securities transactions on behalf of
the Funds. Firstar Mutual Fund Services, LLC also serves as Shareholder
Servicing Agent for the Funds. As such, it effects all transactions in
shareholder accounts, maintains all shareholder records and pays income
dividends and capital gains distributions as directed by the Board of
Trustees.
Firstar Mutual Fund Services, LLC also serves as Fund Accounting Servicing
Agent As such, it provides portfolio accounting services, expense accrual
and payment services, Fund valuation and financial reporting services,
tax accounting services and compliance control services. Firstar Mutual
Fund Services, LLC compensation, as Fund Accounting Servicing Agent, is
$25,000 for each Fund plus the cost of quotation services subscriptions.
Such compensation, for the fiscal years ended September 30, 1999, 1998,
and 1997was $131,613, $132,834 and $134,048, respectively.
BROKERAGE
It is the Trust's intention to seek the best price and execution for all
portfolio securities transactions. The Investment Manager (subject to the
general supervision of the Board of Trustees) directs the execution of the
Fund's portfolio transactions. The Trust has adopted a policy which prohibits
the Investment Manager from effecting Fund portfolio transactions with any
broker-dealer related or affiliated with any Trustee, officer or director of the
Trust or its Investment Manager or any interested person of such person.
Normally, most of the Fund's portfolio transactions will be investments in other
investment companies in which no brokerage commissions or dealer mark-ups are
incurred. With respect to securities traded only in the over-the counter market,
orders will be executed on a principal basis with primary market makers in such
securities except where better prices or executions may be obtained on an agency
basis or by dealing with other than a primary market maker. While there is no
formula, agreement or undertaking to do so, the Investment Manager may allocate
a portion of the Funds' brokerage commissions to persons or firms providing the
Investment Manager with investment recommendations, statistical or research
services useful to the daily operation of the Trust. The Funds regard such
services, customarily only available in return for brokerage business, as one of
the many steps involved in keeping abreast of the information generally
circulated among institutional investors by broker-dealers. While this
information is useful in varying degrees, it is of indeterminable value. Such
17
<PAGE>
services received on the basis of transactions for one Fund may also be used by
the Investment Manager for the benefit of the other Fund or any other client it
may have. Conversely, a Fund may benefit from such transactions effected for the
benefit of the other Fund or of other clients. The Investment Manager may
consider sales of Fund shares as a factor in the selection of brokers to execute
portfolio transactions for a Fund, subject to best execution. It is the policy
of the Trust not to pay higher brokerage commissions to any broker in
consideration of research services provided than it would pay to a broker not
providing such services.
No brokerage commissions were paid during the past three fiscal years by
any Fund.
ADDITIONAL TAX INFORMATION
Each Fund is qualified and intends to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code). Failure to qualify would subject a Fund to federal income
tax on its income and capital gains. As a qualified regulated investment
company, a Fund will not be subject to federal income tax to the extent it
distributes its net taxable income and its net capital gains to its
shareholders. In order to qualify for tax treatment as a regulated investment
company under the code, each fund will be required, among other things, to
distribute annually at least 90% of its taxable income other than its net
capital gains to shareholders (the "90% Test").
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year. Each Fund
intends to make sufficient distributions of its ordinary taxable income and
capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax.
Each Fund, including any additional fund(s) which might be created by the
Trustees, is treated as a separate tax entity for Federal Income Tax purposes.
DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income and
distributions of any capital gains will be taxable to shareholders (except for
shareholders who are exempt from paying taxes on their income), whether received
in cash or invested in additional Fund shares. For corporate shareholders, the
70% dividends received deduction, if applicable, may apply to distributions
received from all Funds except the Leveraged Growth Fund. As to dividends
received from the Leveraged Growth Fund, a substantial portion of the
distributions should be eligible for the dividends received deduction for
corporate shareholders. Eligibility for the deduction, however, is: (i) reduced
to the extent that the Fund's shares with respect to which the dividends are
received are treated as "debt-financed;" and (ii) eliminated if the Fund's
shares are determined to have been held for less than 46 days. Amounts
qualifying for the deduction are incredible in adjusted alternative minimum
taxable income and may require corporate shareholders to reduce their basis in
the event distributions are treated as "extraordinary dividends."
A dividend or capital gains distribution paid shortly after shares have
been purchased, although in effect a return of investment, is subject to federal
income taxation. Dividends from net investment income, along with capital gains,
will be taxable to shareholders, whether received in cash or shares and no
matter how long you have held Fund shares, even if they reduce the net asset
value of shares below your cost and thus in effect result in a return of a part
of your investment. The Fund will send shareholders information each year on the
tax status of dividends and disbursements.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related Treasury Regulations currently in effect. For
the complete provisions, reference should be made to the pertinent Code sections
and Treasury Regulations. The Code and Regulations are subject to change by
legislative or administrative action at any time. Investors should consult with
their own advisers for the effect of any state or local taxation and for more
complete information on federal taxation.
CAPITAL SHARES AND VOTING
Shares of each Fund, when issued, are fully paid and non-assessable and
have no preemptive or conversion rights. Each outstanding share, of whatever
Fund, is entitled to one vote for each full share of stock and a fractional vote
for each fractional share of stock, on all matters which concern the Trust as a
whole. On any matter submitted to a vote of shareholders, all shares of the
Trust then issued and outstanding and entitled to vote, irrespective of the
Fund, shall be voted in the aggregate and not by Fund; except (i) when required
by the Investment Company Act of 1940, as amended, shares shall be voted by
individual Fund; and (ii) when the matter does not affect any interest of a
particular Fund, then only shareholders of the affected Fund or Funds shall be
entitled to vote thereon. Examples of matters which affect only a particular
Fund could be a proposed change in the fundamental investment objectives of that
Fund or approval of the investment management agreement.
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<PAGE>
The shares of the Funds will have non-cumulative rights, which means that
the holders of more than 50% of the shares voting for the election of trustees
can elect all of the trustees if they choose so. The Declaration of Trust
provides that, if elected, the Trustees will hold office for the life of the
Trust, except that: (1) any Trustee may resign or retire; (2) any Trustee may be
removed with or without cause at any time: (a) by a written instrument, signed
by at least two-thirds of the number of Trustees prior to such removal; (b) by
vote of shareholders holding not less than two-thirds of the outstanding shares
of the Trust, cast in person or by proxy at a meeting called for that purpose;
or (c) by a written declaration signed by shareholders holding not less than
two-thirds of the outstanding shares of the Trust and filed with the Trust's
custodian. In case a vacancy or an anticipated vacancy shall for any reason
exist, the vacancy shall be filled by the affirmative vote of a majority of the
remaining Trustees, subject to the provisions of Section 16(a) of the 1940 Act.
Otherwise there will normally be no meeting of shareholders for the purpose of
electing Trustees, and none of the Funds are expected to have an annual meeting
of shareholders.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders for the purpose of
voting on the removal of one or more Trustees. Shareholders holding not less
than ten percent (10%) of the shares then outstanding may require the Trustees
to call such a meeting and the Trustees are obligated to provide certain
assistance to shareholders desiring to communicate with other shareholders in
such regard (e.g.; providing access to shareholder lists, etc.).
FINANCIAL STATEMENTS AND REPORTS
The books of each Fund will be audited at least once each year by
independent auditors. Financial Statements of each Fund, as of September 30,1999
(together with the report of the independent auditors), are included in the
Trust's Annual Reports to Shareholders, respectively, and are incorporated
herein by reference. Shareholders will receive annual audited and semi-annual
(unaudited) reports when published, and will receive written confirmation of all
confirmable transactions in their account. A copy of the Annual and Semi-Annual
Reports are available free of charge and will accompany the Statement of
Additional Information whenever it is requested by a shareholder or prospective
investor.
PERFORMANCE
The Funds may, from time to time, advertise certain total return
information. The total return of the Funds for a period is computed by
subtracting the net asset value per share at the beginning of the period from
the net asset value per share at the end of the period (after adjusting for the
reinvestment of any income dividends and capital gain distributions), and
dividing the result by the net asset value per share at the beginning of the
period. In particular, the average annual total return of the Funds ("T") is
computed by using the redeemable value at the end of a specified period of time
("ERV") of a hypothetical initial investment of $1,000 ("P") over a period of
time ("n") according to the formula P (1+T)n = ERV. The average annual total
return for each Fund for the indicated period ended on September 30, 1999, is
set forth below:
FUND ONE YEAR FIVE YEAR TEN YEAR
NAME PERIOD PERIOD PERIOD
FLEXIBLE BOND FUND 2.71% 6.28% 6.88%
GROWTH & INCOME FUND 13.61% 13.45% 8.80%
CAPITAL APPRECIATION FUND 14.83% 10.61% 8.22%
ASSET ALLOCATION FUND 11.69% 7.72% 7.27%
LEVERAGED GROWTH FUND 24.33% 14.03% 10.18%(1)
(1) Since inception of the Leveraged Growth Fund, May 1992.
Performance quotations should not be considered as representative of the
Funds' performance for any specified period in the future.
The Funds' performance may be compared in sales literature to the
performance of other mutual funds having similar objectives or to standardized
indices or other measures of domestic, international or global investment
performance. In particular, the Funds may compare their performance to the S & P
500 Index, which is generally considered to be representative of the performance
of unmanaged common stocks that are publicly traded in the U.S. securities
markets. The Flexible Bond Fund may compare its performance to the Salomon Broad
Investment Grade (BIG) Index, representative of the performance of unmanaged
domestic investment grade bonds.
Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service or by one or more newspapers,
newsletters or financial periodicals.
Performance comparisons may be useful to investors who wish to compare the
Funds' past performance to that of other mutual funds and investment products.
Of course, past performance is not a guarantee of future results.
19
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS
EXCERPTS FROM MOODY'S INVESTORS SERVICE, INC.'S DESCRIPTION OF ITS BOND RATINGS:
Aaa-judged to be of the best quality. They carry the smallest degree of
investment risk; Aa-judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high-grade bonds;
A-posses many favorable investment attributes and are to be considered 'upper
medium-grade obligations'; Baa-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; Ba-judged to have speculative elements; their future cannot be
considered as well assured; B-generally lack characteristics of a desirable
investment; Caa-are of poor standing. Such issues may be in default or there may
be present elements of danger with respect to payment of principal or interest;
Ca-speculative in a high degree; often in default; C-lowest rated class of
bonds; regarded as having extremely poor prospects.
Moody's also supplies numerical indicators-1,2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking and 3 indicates a ranking
toward the lower end of the category.
EXCERPTS FROM STANDARD & POOR'S CORPORATION'S DESCRIPTION OF ITS BOND RATINGS:
AAA-highest grade obligations. Capacity to pay interest and repay principal is
extremely strong; AA-also qualify as high grade obligations. A very strong
capacity to pay interest and repay principal and differs from AAA issues only in
a small degree; A-regarded as upper medium grade. A strong capacity to pay
interest and repay principal although somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rating categories; BBB-regarded as having adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories. This group is the lowest which
qualifies for commercial bank investment; BB, B, CCC, CC-predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with terms of the obligations; BB indicates the lowest degree of
speculation and CC the highest.
S&P applies indicators "+", no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
20
<PAGE>
<PAGE>
PART C
MERRIMAN INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
<PAGE>
ITEM 23. EXHIBITS
(a) Restated Declaration of Trust - Incorporated by reference,
Post-Effective Amendment No. 15, filed April 11, 1997, Accession No.
0000830274-97-000001.
(b) BY-LAWS - ENCLOSED
(c) Instruments Defining the Rights of Security Holders See Declaration
of Trust, Articles VI, VII and VIII, Incorporated by reference, Post-
Effective Amendment No. 15, filed April 11, 1997, Acession No.
0000830274-97-000001.
See By Laws, Articles I, VI and VII, Enclosed as Exhibit (b) of this
filing.
(d) Investment Management Agreement - Incorporated by reference,
Post-Effective Amendment No. 15, filed April 11, 1997, Accession No.
0000830274-97-000001.
(e) Underwriting Contracts - None, Not Applicable.
(f) Bonus or Profit Sharing Contracts - None, Not Applicable
(g) CUSTODIAN AGREEMENT - ENCLOSED.
(h) OTHER MATERIAL CONTRACTS -
(1) SHAREHOLDER SERVICES AGREEMENT - ENCLOSED.
(2) FUND ACCOUNTING SERVICES AGREEMENT - ENCLOSED.
(3) POWERS OF ATTORNEY - ENCLOSED.
(i) LEGAL OPINION - ENCLOSED.
(j) CONSENT OF INDEPENDENT AUDITORS - ENCLOSED
(k) Omitted Financial Statements - Annual Report to Shareholders,
September 30, 1999 - Incorporated by reference, Filed November 23,
1999, Accession No. 0000830274-99-000012
(l) Initial Capital Agreements - None, Not Applicable.
(m) Rule 12b-1 Plan - None, Not Applicable.
(n) FINANCIAL DATA SCHEDULE - ENCLOSED
(o) Rule 18f-3 Plan - None, Not Applicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
There are no persons controlled by or under common control with the
Registrant.
ITEM 25. INDEMNIFICATION
Article VIII of the Trust's Declaration of Trust provides for
indemnification of certain persons acting on behalf of the Trust.
Article VIII, Section 8.1 states, "The Trustees and officers of the Trust,
in incurring any debts, liabilities or obligations, or in limiting or omitting
any other actions for or in connection with the Trust, are or shall be deemed to
be acting as Trustees or officers of the Trust and not in their own capacities,"
and further states that, "subject to Section 8.4 hereof, no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other Person in connection with
the assets or affairs of the Trust or of any Fund, unless only that arising from
his own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or the discharge of his
functions."
Section 8.2 states concerning a Trustee's liability, "Subject to Section
8.4 hereof, a Trustee shall be liable for his own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law. Subject to the foregoing, (i)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant or Contracting Party, nor
shall any Trustee be responsible for the act or omission of any other Trustee;
(ii) the Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust and their duties as
Trustees, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice; and (iii) in discharging
their duties, the Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees by any officer appointed by them, any independent public accountant,
and (with respect to the subject matter of the contract involved) any officer,
partner or responsible employee of a Contracting Party. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties."
Concerning indemnification by the Trust, or Fund of the Trust, section 8.4
states, "Subject to the limitations set forth in this Section 8.4, the Trust
shall indemnify (from the assets of the Fund or Funds to which the conduct in
question relates) each of its Trustees and officers, including Persons who serve
at the Trust's request as directors, officers or trustees of another
<PAGE>
organization in which the Trust has any interest as a shareholder, creditor or
otherwise (referred to hereinafter, together with such Person's heirs,
executors, administrators or other legal representatives, as a "Covered Person")
against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable belief that his action
was in or not opposed to the bet interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office (either and both of the conduct
described in clauses (i) and (ii) above being referred to hereinafter as
"Disabling Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by a court or
other body before whom the proceeding was brought that such Covered Person was
not liable by reason of Disabling Conduct, (ii) dismissal of a court action or
an administrative proceeding against such Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based upon a
review of the facts, that such Covered Person was not liable by reason of
Disabling Conduct by (a) vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as the quoted phrase is defined in
Section 2(a)(19) of the 1940 Act nor parties to the action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened (such quorum of such Trustees being referred to hereinafter as the
"Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the Fund
or Funds to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that the Covered
Person shall have undertaken to repay the amounts so paid if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VIII and if (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of the Disinterested Trustees, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be
entitled to indemnification hereunder."
Regarding compromise payments, the Declaration of Trust states, "As to any
matter disposed of by a compromise payment by any Covered Person referred to in
Section 8.4 hereof, pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other expenses shall be
provided unless such indemnification shall be approved (i) by a majority of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Disinterested Trustees pursuant to clause (ii) shall
not prevent the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with either of such clauses as indemnification if
such Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that such
Covered Person's action was in or not opposed to the best interests of the Trust
or to have been liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office."
Finally, Section 8.6 states that, "The right of indemnification provided by
this Article VIII shall not be exclusive of or affect any of the rights to which
any Covered Person may be entitled. Nothing contained in this Article VIII shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other Persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such Person."
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons by the
Trust's Declaration of Trust and By-Laws, or otherwise, the Trust has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses incurred or
paid by a director, officer or controlling person of the Trust in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Trust will, unless, in the opinion of its counsel, the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Trust reserves the right to purchase Professional Indemnity insurance
coverage, the terms and conditions of which would conform generally to the
standard coverage available to the investment company industry. Such coverage
for the Trust would generally include losses incurred on account of any alleged
negligent act, error or omission committed in connection with the operation of
the Trust, but excluding losses incurred arising out of any dishonest,
fraudulent, criminal or malicious act committed or alleged to have been
committed by the Trust. Such coverage for trustees and officers would generally
include losses incurred by reason of any actual or alleged breach of duty,
neglect, error, misstatement, misleading statement or other act of omission
<PAGE>
committed by such person in such a capacity, but would generally exclude losses
incurred on account of personal dishonesty, fraudulent breach of trust, lack of
good faith or intention to deceive or defraud, or willful failure to act
prudently. Similar coverage by separate policies may be afforded the investment
manager and its directors, officers and employees. Notwithstanding the
foregoing, no insurance will be purchased which protects or purports to protect
any officer or trustee for actions constituting willful misfeasance, bad faith,
gross negligence or reckless disregard of duties.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See Part B, "Trustees and Officers," for the activities and affiliations of
the officers and directors of the Investment Adviser. Currently, the Investment
Adviser's sole business is to serve the Trust, principally as its investment
adviser.
ITEM 27. PRINCIPAL UNDERWRITERS
None - Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All account books and records not normally held by the Custodian,
Shareholder Servicing Agent and Fund Accounting Services Agent are held by the
Trust in the care of Paul A. Merriman, 1200 Westlake Avenue, North, Seattle,
Washington 98109.
ITEM 29. MANAGEMENT SERVICES
The substantive provisions of a Fund Accounting Services Agreement between
the Registrant and Firstar Trust Company, are discussed in Part B hereof. The
Agreement is referred to herein as Exhibit 9(B).
ITEM 30. UNDERTAKINGS
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual (and
semi-annual, if applicable) report to shareholders, upon request and without
charge.
The Registrant, if requested to do so by the holders of at least 10% of the
Registrant's outstanding shares, undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of a trustee or trustees
and further undertakes to assist in communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement, Post-Effective Amendment No. 21, to be signed on its behalf by the
undersigned, duly authorized, in the City of Seattle, and State of Washington on
the 26 day of November, 1999.
MERRIMAN INVESTMENT TRUST
BY: /S/ PAUL A. MERRIMAN
Paul A. Merriman
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/S/ DAVID A. EDERER * TRUSTEE 11/26/99
David A. Ederer Date
/S/ PAUL A. MERRIMAN TRUSTEE AND PRESIDENT 11/26/99
Paul A. Merriman Date
/S/ WILLIAM L. NOTARO TRUSTEE, EXECUTIVE VICE PRESIDENT, 11/26/99
William L. Notaro Secretary and Treasurer Date
/S/ BEN W. REPPOND * TRUSTEE 11/26/99
Ben W. Reppond Date
/S/ DONALD E. WEST * TRUSTEE 11/26/99
Donald E. West Date
* SIGNED BY PAUL A. MERRIMAN UNDER POWERS OF ATTORNEY DATED 2/22/88, 12/7/98.
<PAGE>
EXHIBITS
MERRIMAN INVESTMENT TRUST
FORM N-1A
INDEX OF EXHIBITS
(Numbers coincide with Item 23 of Form N-1A)
(b) BY-LAWS - ENCLOSED
(g) CUSTODIAN AGREEMENT - ENCLOSED.
(h) OTHER MATERIAL CONTRACTS -
(1) SHAREHOLDER SERVICES AGREEMENT - ENCLOSED.
(2) FUND ACCOUNTING SERVICES AGREEMENT - ENCLOSED.
(3) POWERS OF ATTORNEY - ENCLOSED.
(i) LEGAL OPINION - ENCLOSED.
(j) CONSENT OF INDEPENDENT AUDITORS - ENCLOSED
(n) FINANCIAL DATA SCHEDULE - ENCLOSED
<PAGE>
EXHIBIT (B)
BY-LAWS
<PAGE>
MERRIMAN INVESTMENT TRUST
BYLAWS
------
TABLE OF CONTENTS
-----------------
Page
RECITALS ........................................................ 1
- --------
ARTICLE I SHAREHOLDERS AND SHAREHOLDERS' MEETINGS................. 1
- --------- ---------------------------------------
Section 1.1 Meetings................................................ 1
Section 1.2 Presiding Officer; Secretary............................ 1
Section 1.3 Authority of Chairman of
Meeting to Interpret Declaration
and ByLaw............................................. 1
Section 1.4 Voting; Quorum.......................................... 2
Section 1.5 Inspectors.............................................. 2
Section 1.6 Shareholders' Action in Writing......................... 2
ARTICLE II TRUSTEES AND TRUSTEES' MEETINGS......................... 2
- ---------- -------------------------------
Section 2.1 Number of Trustees...................................... 2
Section 2.2 Regular Meetings of Trustees............................ 3
Section 2.3 Special Meetings of Trustees............................ 3
Section 2.4 Notice of Meetings...................................... 3
Section 2.5 Quorum; Presiding Officer............................... 3
Section 2.6 Participation by Telephone.............................. 4
Section 2.7 Location of Meetings.................................... 4
Section 2.8 Votes................................................... 4
Section 2.9 Rulings of Chairman..................................... 4
Section 2.10 Trustees' Action in Writing............................. 4
Section 2.11 Resignations............................................ 4
<PAGE>
-ii-
ARTICLE III OFFICERS................................................ 4
- ----------- --------
Section 3.1 Officers of the Trust................................... 4
Section 3.2 Time and Terms of Election.............................. 4
Section 3.3 Resignation and Removal................................. 5
Section 3.4 Fidelity Bond........................................... 5
Section 3.5 Chairman of the Trustees................................ 5
Section 3.6 Vice Chairmen........................................... 5
Section 3.7 President............................................... 5
Section 3.8 Vice Presidents......................................... 5
Section 3.9 Treasurer and Assistant Treasurer....................... 6
Section 3.10 Controller and Assistant Controllers.................... 6
Section 3.11 Secretary and Assistant Secretaries..................... 6
Section 3.12 Substitutions........................................... 7
Section 3.13 Execution of Deeds, etc................................. 7
Section 3.14 Power to Vote Securities................................ 7
ARTICLE IV COMMITTEES 7
- ----------- ------------
Section 4.1 Power of Trustees to Designate Committees............... 7
Section 4.2 Rules for Conduct of Committee Affairs.................. 8
Section 4.3 Trustees may Alter, Abolish, etc., Committees........... 8
Section 4.4 Minutes; Review by Trustees............................. 8
<PAGE>
-iii-
ARTICLE V SEAL.................................................... 8
- --------- ----
ARTICLE VI SHARES.................................................. 9
- ---------- ------
Section 6.1 Issuance of Shares...................................... 9
Section 6.2 Uncertificated Shares................................... 9
Section 6.3 Share Certificates...................................... 9
Section 6.4 Lost, Stolen, etc., Certificates........................ 10
Section 6.5 Record Transfer of Pledged Shares....................... 10
ARTICLE VII AMENDMENTS.............................................. 10
- ----------- ----------
Section 7.1 By-Laws Subject to Amendment............................ 10
Section 7.2 Notice of Proposal to
Amend By-Laws Required................................. 10
<PAGE>
BYLAWS BYLAWS
OF
MERRIMAN INVESTMENT TRUST
These ARTICLES are the BYLAWS of MERRIMAN INVESTMENT TRUST , a trust with
transferable shares established under the laws of The Commonwealth of
Massachusetts (the "Trust"), pursuant to an Agreement and Declaration of Trust
of the Trust (the "Declaration") made the 19th day of December, 1987, and filed
in the office of the Secretary of the Commonwealth. These Bylaws have been
adopted by the Trustees pursuant to the authority granted by Section 3.1 of the
Declaration.
All words and terms capitalized in these Bylaws, unless otherwise defined
herein, shall have the same meanings as they have in the Declaration.
ARTICLE I
---------
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
---------------------------------------
SECTION 1.1 MEETINGS. A meeting of the Shareholders of the Trust shall be
held whenever called by the Trustees and whenever election of a Trustee or
Trustees by Shareholders is required by the provisions of the 1940 Act. Meetings
of Shareholders shall also be called by the Trustees when requested in writing
by Shareholders holding at least ten percent (10%,) of the Shares then
outstanding for the purpose of voting upon removal of any Trustee, or if the
Trustees shall fail to call or give notice of any such meeting of Shareholders
for a period of thirty (30) days after such application, then Shareholders
holding at least ten percent (10%) of the Shares then outstanding may call and
give notice of such meeting. Notice of Shareholders' meetings shall be given as
provided in the Declaration.
SECTION 1.2 PRESIDING OFFICER; SECRETARY. The Chairman of the Trustees, or
in his absence theVice Chairman or Chairmen, if any, in the order of their
seniority or as the Trustees shall otherwise determine, and in the absence of
the Chairman and all Vice Chairmen, if any, the President, shall preside at each
Shareholders' meeting as chairman of the meeting, or in the absence of the
Chairman, all Vice Chairmen and the President, the Trustees present at the
meeting shall elect one of their number as chairman of the meeting. Unless
otherwise provided for by the Trustees, the Secretary.of the Trust shall be the
secretary of'all meetings of Shareholders and shall record the minutes,thereof.
SECTION 1.3 AUTHORITY OF CHAIRMAN OF MEETING TO INTERPRET DECLARATION AND
BY-LAWS. At any Shareholders' meetIng the chairman of the meeting shall be
empowered to determine the construction or interpretation of the Declaration or
these ByLaws, or and part thereof or hereof, and his ruling shall be final.
<PAGE>
2
SECTION 1.4 VOTING; QUORUM. At each meeting of Shareholders, except as
otherwise provided by the Declaration, every holder of record of Shares entitled
to vote shall be entitled to a number of votes equal to the number of Shares
standing in his name on the Share register of the Trust. Shareholders may vote
by proxy and the form of any such proxy may be prescribed from time to time by
the Trustees. As provided in the Declaration, a quorum shall exist if the
holders of fifty percent (50%) of the outstanding Shares of the Trust entitled
to vote without regard to Series, are present in person or by proxy, but any
lesser number shall be sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters which may be
binding upon the Trustees pursuant to Section 7.1 of the Declaration. On other
matters, votes of Shareholders need not be taken by ballot unless otherwise
provided for by the Declaration or by vote of the Trustees, or as required by
the 1940 Act, but the chairman of the meeting may in his discretion authorize
any matter to be voted upon by ballot.
SECTION 1.5 INSPECTORS. At any meeting of Shareholders, the chairman of the
meeting may appoint one or more Inspectors of Election or Balloting to supervise
the voting at such meeting or any adjournment thereof. If Inspectors are not so
appointed, the chairman of the meeting may, and on the request of any
Shareholder present or represented and entitled to vote shall, appoint one or
more Inspectors for such purpose. If appointed, Inspectors shall take charge of
the polls and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be required by law.
SECTION 1.6 SHAREHOLDERS' ACTION IN WRITING. Nothing in this Article I
shall limit the power of the Shareholders to take any action without a meeting
by means of written instruments as permitted by Section 7.6 of the Declaration.
ARTICLE II
----------
TRUSTEES AND TRUSTEES' MEETINGS
-------------------------------
SECTION 2.1 NUMBER OF TRUSTEES. There shall initially be one (1) Trustee,
and the number of Trustees shall thereafter be such number as shall be fixed
from time to time by a vote.adopted by a Majority of the Trustees.
<PAGE>
3
SECTION 2.2 REGULAR MEETINGS OF TRUSTEES. Regular meetings of the Trustees
may be held without call or notice at such places and at such times as the
Trustees may from time to time determine; provided, that notice of such
determination, and of the time, place and purposes of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance with Section 2.4
hereof.
SECTION 2.3 SPECIAL MEETINGS OF TRUSTEES. Special meetings of the Trustees
may be held at any time and at any place when called by the Chairman of the
Trustees, any Vice Chairman, the President or the Treasurer or by two (2) or
more Trustees, or if there shall be fewer than three (3) Trustees, by any
Trustee; provided, that notice of the time, place and purposes thereof is given
to each Trustee in accordance with Section 2.4 hereof by the Secretary or an
Assistant Secretary or by the officer or the Trustees calling the meeting.
SECTION 2.4 NOTICE OF MEETINGS. Notice of any regular or special meeting of
the Trustees shall be sufficient if given orally or in writing to each Trustee,
and if sent by mail at least five (5) days, or by telegram at least twenty-four
(24) hours, before the meeting, addressed to his usual or last known business or
residence address, or if delivered to him in person or communicated by telephone
at least twenty-four (24) hours before the meeting. Notice of a special meeting
need not be given to any Trustee who was present at an earlier meeting, not more
than thirty-one (31) days prior to the subsequent meeting, at which the
subsequent meeting was called. Notice of a meeting may be waived by any Trustee
by written waiver of notice, executed by him before or after the meeting, and
such waiver shall be filed with the records of the meeting. Attendance by a
Trustee at a meeting shall constitute a waiver of notice, except where a Trustee
attends a meeting for the purpose of protesting prior thereto or at its
commencement the lack of notice.
SECTION 2.5 QUORUM; PRESIDING OFFICER. At any meeting of the Trustees, a
Majority of the Trustees shall constitute a quorum. Any meeting may be adjourned
from time to time by a majority of the votes cast upon the question, whether or
not a quorum is present, and the meeting may be held as adjourned without
further notice. Unless the Trustees shall otherwise elect, generally or in a
particular case, the Chairman of the Trustees, if any, or in his absence the
Vice Chairman or Vice Chairmen, if any, in the order of their seniority or as
the Trustees shall otherwise determine, or in the absence of the Chairman and
all Vice Chairmen, if any, and if he shall be a Trustee, the President, shall
preside at each meeting of the Trustees as chairman of the meeting.
<PAGE>
4
SECTION 2.6 PARTICIPATION BY TELEPHONE. One or more of the Trustees may
participate in a meeting thereof or of any Committee of the Trustees by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
SECTION 2.7 LOCATION OF MEETINGS. Trustees' meetings may be held at any
place, within or without Massachusetts.
SECTION 2.8 VOTES. Voting at Trustees' meetings may be conducted orally, by
show of hands, or, if requested by any Trustee, by written ballot. The results
of all voting shall be recorded by the Secretary in the minute book.
SECTION 2.9 RULINGS OF CHAIRMAN. All other rules of conduct adopted and
used at any Trustees' meeting shall be determined by the chairman of such
meeting, whose ruling on all procedural matters shall be final.
SECTION 2.10 TRUSTEES' ACTION IN WRITING. Nothing in this Article II shall
limit the power of the Trustees to take action without a meeting by means of a
written instrument, as provided in Section 4.2 of the Declaration.
SECTION 2.11 RESIGNATIONS. Any Trustee may resign at any time by written
instrument signed by him and delivered to the Chairman, the President or the
Secretary or to a meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some other time.
ARTICLE III
-----------
OFFICERS
--------
SECTION 3.1 OFFICERS OF THE TRUST. The officers of the Trust shall consist
of a President, a Treasurer and a Secretary, and may include a Chairman of the
Trustees, one or more Vice Chairmen, Vice Presidents, Assistant Treasurers and
Assistant Secretaries, and such other officers as the Trustees may designate.
Any person may hold more than one office. Except for the Chairman and and Vice
Chairmen, no officer need be a Trustee.
SECTION 3.2 TIME AND TERMS OF ELECTION. The President, the Treasurer and
the Secretary shall be elected by the Trustees at their first meeting. All other
officers of the Trust may be elected or appointed at any meeting of the
<PAGE>
5
Trustees. Officers of the Trust shall hold office for any term, or indefinitely,
as determined by the Trustees, and shall be subject to removal, with or without
cause, at any time by the Trustees.
SECTION 3.3 RESIGNATION AND REMOVAL. Any officer may resign at any time by
giving written notice to the Trustees. Such resignation shall take effect at the
time specified therein, and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective. If the office
of any officer or agent becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office or otherwise, the Trustees may
choose a successor, who shall hold office for the unexpired term in respect of
which such vacancy occurred. Except to the extent expressly provided in a
written agreement with the Trust, no officer resigning or removed shall have any
right to any compensation for any period following such resignation or removal,
or any right to damage on account of such removal.
SECTION 3.4 FIDELITY BOND. The Trustees may, in their discretion, direct
any officer appointed by them to furnish at the expense of the Trust a fidelity
bond approved by the Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5 CHAIRMAN OF THE TRUSTEES. Unless the Trustees otherwise
provide, the Chairman of the Trustees shall preside at all meetings of the
Shareholders and of the Trustees and shall have such other powers and duties as
the Trustees may prescribe.
SECTION 3.6 VICE CHAIRMEN. If the Trustees shall elect one or more Vice
Chairmen, the Vice Chairman or if there shall be more than one, such Vice
Chairmen in the order of their seniority or as otherwise designated by the
Trustees, shall preside at meetings of the Shareholders and of the Trustees, and
shall exercise such other powers and duties of the Chairman as the Trustees
shall determine.
SECTION 3.7 PRESIDENT. The President shall be the chief executive officer
of the Trust, shall have general charge and supervision of the business,
property and affairs of the Trust and such other powers and duties as the
Trustees shall prescribe.
SECTION 3.8 VICE PRESIDENTS. In the absence or disability of the President,
the Vice President or, if there shall be more than one, the Vice Presidents in
the order of their seniority or as otherwise designated by the Trustees, shall
exercise all of the powers and duties of the President. The Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments in the name of the Trust, and shall do and perform
such other duties as the Trustees or the President shall direct.
<PAGE>
6
SECTION 3.9 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall be the
chief financial officer of the Trust, and shall have the custody of the Trust
Property, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit all moneys and
other valuable effects in the name and to the credit of the Trust in such
depositories as may be designated by the Trustees, taking proper vouchers for
such disbursements, and shall have such other duties and powers as may be
prescribed from time to time by the Trustees or the President, and shall render
to the Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Trust. if no
Controller is elected, the Treasurer shall also have the duties and powers of
the Controller, as provided in these ByLaws. Any Assistant Treasurer shall have
such duties and powers as shall be prescribed from time to time by the Trustees
or the Treasurer,-and shall be responsible to and shall report to the Treasurer.
In the absence or disability of the Treasurer, the Assistant Treasurer or, if
there shall be more than one, the Assistant Treasurers in the order of their
seniority or as otherwise designated by the Trustees, shall have the powers and
duties of the Treasurer.
SECTION 3.10 CONTROLLER AND ASSISTANT CONTROLLERS. If a Controller is
elected, he shall be the chief accounting officer of the Trust, and shall be in
charge of its books of account and accounting records and of its accounting
procedures, and shall have such duties and powers as are commonly incident to
the office of a controller and such other duties and powers as may be prescribed
from time to time by the Trustees. The Controller shall be responsible to and
shall report to the Trustees, but in the ordinary conduct of the Trust's
business, shall be under the supervision of the Treasurer. Any Assistant
Controller shall have such duties and powers as shall be prescribed from time to
time by the Trustees or the Controller, and shall be responsible to and shall
report to the Controller. In the absence or disability of the Controller, the
Assistant Controller or, if there shall be more than one, the Assistant
Controllers in the order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Controller.
SECTION 3.11 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall, if
and to the extent requested by the Trustees, attend all meetings of the
Trustees, any Committee of the Trustees and/or the Shareholders and record all
votes and the minutes of proceedings in a book to be kept for that purpose, and
shall give or cause to be given notice of all meetings of the Trustees, any
Committee of the Trustees, and of the Shareholders, and shall perform such other
duties as may be prescribed by the Trustees. The Secretary, or in his absence
<PAGE>
7
any Assistant Secretary, shall affix the Trust's seal to any instrument
requiring it, and when so affixed, it shall be attested by the signature of the
Secretary or an Assistant Secretary. The Secretary shall be the custodian of the
Share records and all other books, records and papers of the Trust (other than
financial) and shall see that all books, reports, statements, certificates and
other documents and records required by law are properly kept and filed. In the
absence or disability of the Secretary, the Assistant Secretary or, if there
shall be more than one, the Assistant Secretaries in the order of their
seniority or as otherwise designated by the Trustees, shall have the powers and
duties of the Secretary.
SECTION 3.12 SUBSTITUTIONS. In case of the absence or disability of any
officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer, or to any Trustee.
SECTION 3.13 EXECUTION OF DEEDS, ETC. Except as the Trustees may generally
or in particular cases otherwise authorize or direct, all deeds, leases,
transfers, contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by the Chairman, the President, one of the Vice
Presidents or the Treasurer.
SECTION 3.14 POWER TO VOTE SECURITIES. Unless otherwise ordered by the
Trustees, the President, Chairman of the Trustees, Vice Presidents, if any, or
the Treasurer shall have full power and authority on behalf of the Trust to give
proxies for, and/or to attend and to act and to vote at, any meeting of
stockholders of any corporation in which the Trust may hold stock, and at any
such meeting any such officer or his proxy shall possess and may exercise any
and all rights and powers incident to the ownership of such stock which, as the
owner thereof, the Trust might have possessed and exercised if present. The
Trustees, by resolution from time to time, or, in the absence thereof, the
President, Chairman of the Trustees, Vice Presidents, if any, or the Treasurer,
may confer like powers upon any other person or persons as attorneys and proxies
of the Trust.
ARTICLE IV
----------
COMMITTEES
----------
SECTION 4.1 POWER OF TRUSTEES TO DESIGNATE COMMITTEES. The Trustees, by
vote of a Majority of the Trustees, may elect from their number an executive
committee and any other committees and may delegate thereto some or all of their
<PAGE>
8
powers except those which by law, by the Declaration or by these ByLaws may not
be delegated; provided, that no committee shall be empowered to elect the
Chairman of the Trustees, the President, the Treasurer or the Secretary, to
amend the ByLaws, to exercise the powers of the Trustees under this Section 4.1
or under Section 4.3 .hereof, or to perform any act for which the action of a
Majority of the Trustees is required by law, by the Declaration or by these
ByLaws. The members of any such Committee shall serve at the pleasure of the
Trustees.
SECTION 4.2 RULES FOR CONDUCT OF COMMITTEE AFFAIRS. Except as otherwise
provided by the Trustees, each Committee elected or appointed pursuant to this
Article IV may adopt such standing rules and regulations for the conduct of its
affairs as it may deem desirable, subject to review and approval of such rules
and regulations by the Trustees at the next succeeding meeting of the Trustees,
but in the absence of any such action or any contrary provisions by the
Trustees, the business of each Committee shall be conducted, so far as
practicable,-in the same manner as provided herein and in the Declaration for
the Trustees.
SECTION 4.3 TRUSTEES MAY ALTER, ABOLISH, ETC., COMMITTEES. The Trustees may
at any time alter or abolish any Committee, change the membership of any
Committee, or revoke, rescind or modify any action of any Committee or the
authority of any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any third parties.
SECTION 4.4 MINUTES; REVIEW BY TRUSTEES. Any Committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.
ARTICLE V
---------
SEAL
----
The seal of the Trust shall consist of a flat-faced circular die with the
word "Massachusetts," together with the name of the Trust, the words "Trust
Seal," and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
<PAGE>
9
ARTICLE VI
----------
SHARES
------
SECTION 6.1 ISSUANCE OF SHARES. The Trustees may issue Shares of any or all
Series either in certificated or uncertificated form, they may issue
certificates to the holders of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series, require the surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership of
Shares for such Series.
SECTION 6.2 UNCERTIFICATED SHARES. For any Series of Shares for which the
Trustees issue Shares without certificates, the Trust or the Transfer Agent may
either issue receipts therefor or may keep accounts upon the books of the Trust
for the record holders of such Shares, who shall in either case be deemed, for
all purposes hereunder, to be the holders of such Shares as if they had received
certificates therefor and shall be held to have expressly assented and agreed to
the terms hereof and of the Declaration.
SECTION 6.3 SHARE CERTIFICATES. For any Series of Shares for which the
Trustees shall issue Share certificates, each Shareholder of such Series shall
be entitled to a certificate stating the number of Shares owned by him in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the Chairman or a Vice Chairman, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Trust. Such signatures may be facsimiles if the
certificate is countersigned by the Transfer Agent, or by a registrar, other
than a Trustee, officer or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on such certificate shall
cease to be such officer before such certificate is issued, it may be issued by
the Trust with the same effect as if he were such officer at the time of its
issue.
SECTION 6.4 LOST, STOLEN, ETC., CERTIFICATES. If any certificate for
certificated Shares shall be lost, stolen, destroyed or mutilated, the Trustees
may authorize the issuance of a new certificate of the same tenor and for the
same number of Shares in lieu thereof. The Trustees shall require the surrender
of any mutilated certificate in respect of which a new certificate is issued,
and may, in their discretion, before the issuance of a new certificate, require
the owner of a lost, stolen or destroyed certificate, or the owner's legal
<PAGE>
10
representative, to make an affidavit or affirmation setting forth such facts as
to the loss, theft or destruction as they deem necessary, and to give the Trust
a bond, in such reasonable sum as the Trustees direct, in order to indemnify the
Trust.
SECTION 6.5 RECORD TRANSFER OF PLEDGED SHARES. A pledgee of Shares pledged
as collateral security shall be entitled to a new certificate in his name as
pledgee, in the case of certificated Shares, or to be registered as the holder
in pledge of such Shares in the case of uncertificated Shares; provided, that
the instrument of pledge substantially describes the debt or duty that is
intended to be secured thereby. Any such new certificate shall express on its
face that it is held as collateral security, and the name of the pledgor shall
be stated thereon, and any such registration of uncertificated Shares shall be
in a form which indicates that the registered holder holds such Shares in
pledge. After such issue or registration, and unless and until such pledge is
released, such pledgee and his successors and assigns shall alone be entitled to
the rights of a Shareholder, and entitled to vote such Shares.
ARTICLE VII
-----------
AMENDMENTS
----------
SECTION 7.1 BYLAWS SUBJECT TO AMENDMENT. These ByLaws may be altered,
amended or repealed, in whole or in part, at any time by vote of the holders of
a majority of the Shares (or whenever there shall be more than one Series of
Shares, of the holders of a majority of the Shares of each Series) issued,
outstanding and entitled to vote. The Trustees, by vote of a Majority of the
Trustees, may alter, amend or repeal these ByLaws, in whole or in part,
including ByLaws adopted by the Shareholders, except with respect to any
provision hereof which by law, the Declaration or these ByLaws requires action
by the Shareholders. ByLaws adopted by the Trustees may be altered, amended or
repealed by the Shareholders.
SECTION 7.2 NOTICE OF PROPOSAL TO AMEND BYLAWS REQUIRED. No proposal to
amend or repeal these ByLaws or to adopt new ByLaws shall be acted upon at a
meeting unless either (i) such proposal is stated in the notice or in the waiver
of notice, as .the case may be, of the meeting of the Trustees or Shareholders
at which such action is taken, or (ii) all of the Trustees or Shareholders, as
the case may be, are present at such meeting and all agree to consider such
proposal without protesting the lack of notice.
CERTIFICATE OF AMENDMENT
TO THE BY-LAWS
OF
MERRIMAN INVESTMENT TRUST
This is to certify that, at a duly constituted meeting of Trustees held on
the 30th day of November, 1988, the ByLaws of Merriman Investment Trust, as
adopted on February 22, 1988, were amended as follows:
Section 2.12 is hereby added to Article II as follows:
"SECTION 2.12 INDEMNITY INSURANCE. The Trustees may purchase Professional
Indemnity insurance coverage for its Officers and Trustees, the terms and
conditions of which must conform generally to the standard coverage available to
the investment company industry, provided, however, that no such insurance will
be purchased which protects, or purports to protect, any Officer or Trustee for
actions constituting willful misfeasance, bad faith, gross negligence or
reckless disregard of duties."
Attest: By Order of the Board of Trustees
William L. Notaro Paul A. Merriman
- ----------------- ----------------
Secretary President
<PAGE>
EXHIBIT (G)
CUSTODIAN AGREEMENT
<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT MADE ON MAY 29, 1992, BETWEEN MERRIMAN INVESTMENT TRUST, a
Massachusette(business trust Thereinafter called the "Trust"), and FIRST
WISCONSIN TRUST COMPANY, a corporation organized under the laws of the State of
Wisconsin (hereinafter called "Custodian"),
W I T N E S S E T H :
WHEREAS, the Trust desires that its securities and cash shall be hereafter
held and administered by Custodian pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Trust by any two of the
President, a Vice President, the Secretary and the Treasurer of the Trust, or
any other persons duly authorized to sign by the Board of Trustees.
The word "Board" shall mean Board of Trustees of Merriman Investment Trust.
2. NAMES, TITLES AND SIGNATURES OF THE TRUST'S OFFICERS
An officer of the Trust will certify to Custodian the names and signatures
of those persons authorized to sign the officers' certificates described in
Section I hereof, and the names of the members of the Board of Trustees,
together with any changes which may occur from time to time.
ADDITIONAL SERIES. The Merriman Investment Trust is authorized to issue
separate classes of shares of beneficial interest representing interests in
separate investment portfolios. The parties intend that each portfolio
established by the trust, now or in the future, be covered by the terms and
conditions of this agreement. The portfolios currently covered by this agreement
are listed in Exhibit B attached hereto.
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or accounts in the
name of the Trust, subject only to draft or order by Custodian acting pursuant
to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Trust. Custodian shall make payments of cash to, or for the
account of, the Trust from such cash only:
1
<PAGE>
(a) for the purchase of securities for the portfolio of the Trust upon the
delivery of such securities to Custodian, registered in the name of
the Trust or of the nominee of Custodian referred to in Section. 7 or
in proper form for transfer;
(b) for the purchase or redemption of shares of the common stock of the
Trust upon delivery thereof to Custodian, or upon proper instructions
from the Merriman Investment Trust;
(c) for the payment of interest, dividends, taxes, investment adviser's
fees or operating expenses (including, without limitation thereto,
fees for legal, accounting, auditing and custodian services and
expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Trust held by or to be
delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of the
Board of Trustees of the Trust.
Before making any such payment, Custodian shall receive (and may rely upon)
an officers' certificate requesting such payment and stating that it is for a
purpose permitted under the terms of items (a), (b), (c) or (d) of this
Subsection A, and also, in respect of item (e) , upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Trust issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received by Custodian for the account
of the Trust.
C. Custodian shall, upon receipt of proper instructions, make federal funds
available to the Trust as of specified times agreed upon from time to time by
the Trust and the custodian in the amount of checks received in payment for
shares of the Trust which are deposited into the Trust's account.
4. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into which
account(s) may be transferred cash and/or securities.
2
<PAGE>
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any securities of the
Trust held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Trust upon receipt
by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone or
other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their terms into other
securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary securities
for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the
Trust upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b), (d),
(e), (f), and (g), securities or cash receivable in exchange therefore shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g) or (h) of this Section 5 and
also, in respect of item (i) , upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Trust issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.
3
<PAGE>
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Trust, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Trust; (b) collect interest and cash dividends received, with notice to
the Trust, for the account of the Trust; (c) hold for the account of the Trust
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Trust, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Trust's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate, Custodian shall
register all securities, except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued hereunder or in any provision of
any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Trust shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Trust and which may from time to time be
registered in the name of the Trust.
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Trust, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Trust) , but without
indicating the manner in which such proxies are to be voted.
9. TRANSFER TAX AND OTHER Disbursements
The Trust shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
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<PAGE>
Custodian shall execute and deliver such certificates in connection with
securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to exempt
from taxation any exemptable transfers and/or deliveries of any such securities.
10. CONCERNINA Custodian
Custodian shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in writing
between the two parties. Until modified in writing, such compensation shall be
as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon any
certificate herein described or certified copy of any resolution of the Board,
and may rely on the genuineness of any such document which it may in good faith
believe to have been validly executed.
The Trust agrees to indemnify and hold harmless Custodian and its nominee
from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the Trust for such
items. In the event of any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Trust, or in the event that
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Trust shall be security therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust company as a
Subcustodian for all or any part of the Trust's assets, so long as any such bank
or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Two Million
Dollars ($2,000,000) and provided further that, if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
responsible for any losses caused to the Trust by the Subcustodian as fully as
if the Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Trust requires the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Trust agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Trust's assets, except as may
arise from its own negligent action, negligent failure to act or willful
misconduct.
5
<PAGE>
12. REPORTS BY Custodian
Custodian shall furnish the Trust periodically as agreed upon with a
statement summarizing all transactions and entries for the account of Trust.
Custodian shall furnish to the Trust, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, the Trust.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Trust, or by Custodian, on ninety
(90) days notice, given in writing and sent by registered mail to Custodian at
P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Trust at Suite 700, 1200
Westlake Avenue, North, Seattle, Washington 98109-3530, as the case may be. Upon
any termination of this Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Trust to dissolve or to function
without a custodian of its cash, securities and other property, Custodian shall
not deliver cash, securities or other property of the Trust to the Trust, but
may deliver them to a bank or trust company of its own selection, having an
aggregate capital, surplus and undivided profits, as shown by its last published
report of not less than Two Million Dollars ($2,000,000) as a Custodian for the
Trust to be held under terms similar to those of this Agreement, provided,
however, that Custodian shall not be required to make any such delivery or
payment until full payment shall have been made by the Trust of all liabilities
constituting a charge on or against the properties then held by Custodian or on
or against Custodian, and until full payment shall have been made to Custodian
of all its fees, compensation, costs and expenses, subject to the provisions of
Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the consent of the
Trust, authorized or approved by a resolution of its Board of Trustees.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Trustees of the Trust approves by resolution the
use of such central securities clearing agency or securities depository.
15. RECORDS
To the extent that Custodian in any capacity prepares,or maintains any
records required to be maintained and preserved by the Trust pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder, Custodian agrees to make any such records
available to the Trust upon request and to preserve such records for the periods
prescribed in Rule 3la-2 under the Investment Company Act of 1940, as amended.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRST WISCONSIN TRUST COMPANY
Andrea Lydolph By James Tyler
- -------------- -----------
ASSISTANT SECRETARY VICE PRESIDENT
Attest: MERRIMAN INVESTMENT TRUST
Paula A. Bishop By William L. Notaro
- --------------- -----------------
<PAGE>
EXHIBIT A
FIRST WISCONSIN TRUST COMPANY
MUTUAL FUND SERVICES
CUSTODIAL AGENT SERVICE
ANNUAL FEE SCHEDULE
MERRIMAN GOVERNMENT
MERRIMAN BLUE CHIP
MERRIMAN CAPITAL APPRECIATION
MERRIMAN ASSET ALLOCATION
MERRIMAN LEVERAGED GROWTH
CUSTODIAL SERVICES
- Annual Fee based on market value of assets:
$1.00 per $1,000 on the first $5,000,00
$0.50 per $1,000 on the next $5,000,000
$0.25 per $1,000 on the next $40,000,000
$0.20 per $1,000 on the balance
- Minimum annual fee is $1,200
- Investment transactions: purchase, sale, exchange, tender, redemption
(maturity), reciept, delivery:
$17.00 per Book Entry Securities (Depository or
Federal Reserve System)
$25.00 per Definitive Securities (physical)
$75.00 per Euroclear
$ 8.00 per Principal reduction on pass-through certificates
$35.00 per Option/Futures Contract
$12.00 per Variation margin transaction
- Variable amount notes: Used as a short-term investment, variable
amount notes offer safety and prevailing high interest rates:
Our charge, 1/4 of 1%, is deducted from the variable amount note
income at the time it is credited to your account.
- Extraordinary Expenses:
Charges based on time and complexity involved.
- Out-of-pocket Expenses:
Charged to the account
- Fees are billed quarterly based on the value at the beginning of the
quarter.
4/92
<PAGE>
EXHIBIT B
The following portfolios are covered by the custodian, transfer agent, and fund
accounting servicing agreements between Merriman Investment Trust and First
Wisconsin Trust Company:
1. Merriman Government Fund
2. Merriman Blue Chip Fund
3. Merriman Capital Appreciation Fund
4. Merriman Asset Allocation Fund
5. Merriman Leveraged Growth Fund
AS STATED ON EXHIBIT A Annual Fee To Be Reduced By 15% For:
Merriman Asset Allocation Fund
Merriman Capital Appreciation Fund
Signed:
William L. Notaro
Andrea Lydolph
<PAGE>
EXHIBIT (H)(1)
SHAREHOLDER SERVICES AGREEMENT
<PAGE>
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this 29th day of May, 1992, by
and between Merriman Investment Trust (hereinafter referred to as the "Trust")
and First Wisconsin Trust Company, a corporation organized under the laws of the
State of Wisconsin (hereinafter referred to as the "Agent").
W I T N E S S E T H:
WHEREAS, the Trust is a series of open-ended management investment
companies which are registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
NOW., THEREFORE, the Trust and the Agent do mutually promise and agree as
follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE Agent
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer agent
and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery, where
appropriate, of payment and supporting documentation to the Trust's
custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Trust's custodian;
D. Pay monies (upon receipt from the Trust's custodian, where relevant)
in accordance with the instructions of redeeming shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
<PAGE>
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost, stolen
or destroyed certificates upon receipt of satisfactory indemnification
or surety bond;
H. Prepare and transmit payments for dividends and distributions declared
by the Trust;
I. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Trust and maintain, pursuant to
Section Rule 17ad-10(e), a record of the total number of shares of the
Trust which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail, receive
and tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Trust; and
0. Provide a Blue Sky System which will enable the Trust to monitor the
total number of shares sold in each state. In addition, the Trust
shall identify to the Agent in writing those transactions and assets
to be treated as exempt from the Blue Sky reporting to the Trust for
each state. The responsibility of the Agent for the Trust's Blue Sky
state registration status is solely limited to the initial compliance
by the Trust and the reporting of such transactions to the Trust.
2. COMPENSATION
The Trust agrees to pay the Agent for performance of the duties listed in
this Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Trust and the Agent.
The Trust agrees to pay all fees and reimbursable expenses within ten (10)
business days following the mailing of the billing notice.
2
<PAGE>
3. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Trust that:
A. It is a trust company duly organized, existing and in good standing
under the laws of Wisconsin;
B. It is duly qualif ied to carry on its business in the state of
Wisconsin;
C. It is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and
E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. REPRESENTATIONS OF THE Trust
The Trust represents and warrants to the Agent that:
A. The Trust sponsors a series of open-ended diversif ied investment
companies under the Investment Company Act of 1940;
B. The Trust is a business trust organized, existing, and in good
standing under the laws of Massachusetts;
C. The Trust is empowered under applicable laws and by its Declaration of
Trust and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Declaration of Trust have
been taken to authorize it to enter into and perform this Agreement;
E. The Trust will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect
to all shares of the Trust being offered for sale.
5. COVENANTS OF Trust and Agent
The Trust shall furnish the Agent a certified copy of the resolution of the
Board of Trustees of the Trust authorizing the appointment of the Agent and the
execution of this Agreement. The Trust shall provide to the Agent a copy of the
Declaration of Trust, bylaws of the Trust, and all amendments.
3
<PAGE>
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Trust and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Trust on and in accordance with its request.
6. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent agrees to use reasonable care and act in good faith in performing
its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or responsible
for delays or errors occurring by reason of circumstances beyond its control,
including acts of civil or military authority, national or state emergencies,
fire, mechanical or equipment failure, flood or catastrophe, acts of God,
insurrection or war. In the event of a mechanical breakdown beyond its control,
the Agent shall take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond the Agent's control. The
Agent will make every reasonable effort to restore any lost or damaged data, and
the correcting of any errors resulting from such a breakdown will be at the
Agent's expense. The Agent agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of Merriman Investment Trust shall be
entitled to inspect the Agent's premises and operating capabilities at any time
during regular business hours of the Agent, upon reasonable notice to the Agent.
The Trust will indemnify and hold the Agent harmless against any and all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's bad faith or negligence, and arising out of or in
connection with the Agent's duties on behalf of the Trust hereunder.
Further, the Trust will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit as a
result of the negligence of the Trust or the principal underwriter (unless
contributed to by the Agent's own negligence or bad faith); or as a result of
the Agent acting upon telephone instructions relating to the exchange or
redemption of shares received by the Agent and reasonably believed by the Agent
to have originated from the record owner of the subject shares; or as a result
of the Agent acting upon any instructions executed or orally communicated by a
duly authorized officer or employee of the Trust, according to such lists of
authorized officers and employees furnished to the Agent and as amended from
time to time in writing by a resolution of the Board of Trustees of the Trust;
or as a result of acting in reliance upon any genuine instrument or stock
certificate signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same.
4
<PAGE>
In order for this section to apply, it is understood that if in any case
the Trust may be asked to indemnify or hold harmless the Agent, the Trust shall
be advised of all pertinent facts concerning the situation in question, and it
is further understood that the Agent will use reasonable care to notify the
Trust promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Trust. The Trust shall have the
option to defend the Agent against any claim which may be the subject of this
indemnification and, in the event that the Trust so elects, the Agent will so
notify the Trust, and thereupon the Trust shall take over complete defense of
the claim and the Agent shall sustain no further legal or other expenses in such
situation for which the Agent shall seek indemnification under this section. The
Agent will in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Agent, except with the Trust's
prior written consent.
7. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where the Agent may be exposed
to civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
ADDITIONAL SERIES. The Merriman Investment Trust is authorized to issue
separate classes of shares of beneficial interest representing interests in
separate investment portfolios. The parties intend that each portfolio
established by the trust, now or in the future, be covered by the terms and
conditions of this agreement. The portfolios currently covered by this agreement
are listed in Exhibit B attached hereto.
8. WISCONSIN LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.
9. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE
A. This Agreement may be amended by the mutual written consent of the
parties.
B. This Agreement may be terminated upon ninety (90) day's written notice
given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.
5
<PAGE>
E. In the event that the Trust gives to the Agent its written intention
to terminate and appoint a successor transfer agent, the Agent agrees
to cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Trust.
Merriman Investment Trust First Wisconsin Trust Company
By: William L. Notaro By: James C. Tyler
----------------- --------------
ATTEST: PAUL A. BISHOP ATTEST: ANDREA LYDOLPH
-------------- --------------
Assistant Secretary
6
<PAGE>
FIRST WISCONSIN TRUST COMPANY
MUTUAL FUND SERVICES
SHAREHOLDER ACCOUNTING SERVICES
MERRIMAN FUNDS
ANNUAL FEE SCHEDULE
MERRIMAN GOVERNMENT & MERRIMAN BLUE CHIP & MERRIMAN LEVERAGE GROWTH
$10.00 per shareholder account on the first 20,000 accounts $ 9.50 per
shareholder accou,nt on the next 40,000 accounts $ 9.00 per shareholder
account on the balance
Merriman Leveraged Growth minimum annual fee $6,000
MERRIMAN CAPITAL APPRECIATION & MERRIMAN ASSET ALLOCATION
$11.00 per shareholder account on the first 20,000 accounts $10.50 per
shareholder account on the next 40,000 accounts $10.00 per shareholder
account on the balance
Plus out-of-pocket expenses, including but not limited to:
- Telphone - toll-free lines
- Postage
- Programming
- Stationery/envelopes
- Mailing
- Insurance
- Proxies
- Retention of records
- Microfilm/fiche of records
- Special reports
- All other out-of-pocket expenses
Fees are billed monthly
4/92
<PAGE>
EXHIBIT B
The following portfolios are covered by the custodian, transfer agent, and fund
accounting servicing agreements between Merriman Investment Trust and First
Wisconsin Trust Company:
1. Merriman Government Fund
2. Merriman Blue Chip Fund
3. Merriman Capital Appreciation Fund
4. Merriman Asset Allocation Fund
5. Merriman Leveraged Growth Fund
<PAGE>
EXHIBIT (H)(2)
FUND ACCOUNTING SERVICES AGREEMENT
<PAGE>
FUND ACCOUNTING SERVICING AGREEMENT
This contract between Merriman Investment Trust, a Massachusetts business trust,
hereinafter called the "Trust," and First Wisconsin Trust Company, a Wisconsin
corporation, hereinafter called "FWTC," is entered into on this 29th day of May,
1992.
WITNESSETH:
WHEREAS, Merriman Investment Trust, is a financial services company
providing investment opportunities through mutual funds to various investors;
WHEREAS, First Wisconsin Trust Company ("FWTC") is in the business of
providing, among other things, mutual fund accounting services to investment
companies;
NOW, THEREFORE, the Trust and FWTC do mutually promise and agree as
follows:
1. SERVICES. FWTC agrees to provide the following mutual fund accounting
services to the Trust:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis using
security trade information communicated from the investment manager on
a timely basis.
(2) For each valuation date, obtain prices from a pricing source
approved by the Board of Trustees and apply those prices to the
portfolio positions. For those securities where market quotations are
not readily available, the Board of Trustees shall approve, in good
faith, the method for determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for the
accounting period.
(4) Determine gain/loss on security sales and identify them as to
short-short, short- or long-term status; account for periodic
distributions of gains or losses to shareholders and maintain
undistributed gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Trust as to methodology, rate or dollar
amount.
(2) Record payments for Fund expenses upon receipt of written
authorization from the Trust.
1
<PAGE>
(3) Account for fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon by FWTC and
the Trust for each of its portfolios.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity as
reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Trust for
each of its portfolios.
(3) Determine net investment income (earnings) for the Trust as
of each valuation date. Account for periodic distributions of earnings
to shareholders and maintain undistributed net investment income
balances as of each valuation date.
(4) Maintain a general ledger for each of the Trust's portfolios
in the form as agreed upon.
(5) For each day the Trust is open as defined in the prospectuses
for each of the portfolios, determine the net asset value of each of
the Trust's portfolios according to the accounting policies and
procedures set forth in the prospectuses for each of the portfolios.
(6) Calculate per share net asset value, per share net earnings,
and other per share amounts reflective of fund operation at such time
as required by the nature and characteristics of each of the Trust's
portfolios.
(7) Communicate, at an agreed upon time, the per share price for
each valuation date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for the investment portfolios
of the Trust to support the tax reporting required for IRS-defined
regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the tax
cost basis defined for each of the Trust's portfolios.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions to the
transfer agent to support tax reporting to the shareholders.
2
<PAGE>
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support financial
statement preparation by making the fund accounting records available
to Merriman Investment Trust, the Securities and Exchange Commission,
and the outside auditors.
(2) Maintain accounting records according to the Investment
Company Act of 1940 and regulations provided thereunder.
2. CHANGES IN ACCOUNTING PROCEDURES. Any resolution passed by the Board of
Trustees that affects accounting practices and procedures under this agreement
shall be effective upon written receipt and acceptance by the FWTC.
3. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC. FWTC reserves the right to
make changes from time to time, as it deems advisable, relating to its services,
systems, programs, rules, operating schedules and equipment, so long as such
changes do not adversely affect the service provided to the Trust under this
Agreement.
4. COMPENSATION. FWTC shall be compensated for providing the services set
forth in this Agreement in accordance with the Fee Schedule attached hereto as
Exhibit A and as mutually agreed upon and amended from time to time.
5. PERFORMANCE OF SERVICE. FWTC shall exercise reasonable care in the
performance of its duties under the Agreement. The Merriman Investment Trust
agrees to reimburse and make FWTC whole for any loss or damages (including
reasonable fees and expenses of legal counsel) arising out of or in connection
with its actions under this Agreement so long as FWTC acts in good faith and is
not negligent or guilty of any willful misconduct.
FWTC shall not be liable or responsible for delays or errors occurring by
reason of circumstances beyond its control, including acts of civil or military
authority, natural or state emergencies, fire, mechanical breakdown, flood or
catastrophe, acts of God, insurrection, war, riots or failure of transportation,
communication or power supply.
In the event of a mechanical breakdown beyond its control, FWTC shall take
all reasonable steps to minimize service interruptions for any period that such
interruption continues beyond FWTC's control. FWTC will make every reasonable
effort to restore any lost or damaged data and the correcting of any errors
resulting from such a breakdown will be at the expense of FWTC. FWTC agrees that
it shall at all times have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use of electrical data
processing equipment to the extent appropriate equipment is available.
Representatives of the Trust shall be entitled to inspect FWTC's premises and
operating capabilities at any time during regular business hours of FWTC, upon
reasonable notice to FWTC.
This indemnification includes any act, omission to act, or delay by FWTC in
reliance upon, or in accordance with, any written or oral instruction it
receives from any duly authorized officer of the Trust.
3
<PAGE>
Regardless of the above, FWTC reserves the right to reprocess and correct
administrative errors at its own expense.
6. NO AGENCY RELATIONSHIP. Nothing herein contained shall be deemed to
authorize or empower FWTC or the Trust to act as agent for any other party to
any other party to this Agreement.
7. OWNERSHIP OF RECORDS. All records prepared or maintained by FWTC on
behalf of the Trust remain the property of the Trust and will be surrendered
promptly on the written request of an authorized officer of the Trust.
8. CONFIDENTIALITY. FWTC shall handle in confidence all information
relating to the Trust's business, which is received by FWTC during the course of
rendering any service hereunder.
9. DATA NECESSARY TO PERFORM SERVICES. The Trust or its agent, which may be
FWTC, shall furnish to FWTC the data necessary to perform the services described
herein at times and in such form as mutually agreed upon.
10. NOTIFICATION OF ERROR. The Trust will notify FWTC of any balancing or
control error caused by FWTC within three (3) business days after receipt of any
reports rendered by FWTC to the Trust, or within three (3) business days after
discovery of any error or omission not covered in the balancing or control
procedure, or within three (3) business days of receiving notice form any
shareholder.
11. ADDITIONAL SERIES. In the event that the Merriman Investment Trust
establishes one or more series of shares with respect to which it desires to
have FWTC render accounting services, under the terms hereof, it shall so notify
FWTC in writing, and if FWTC agrees in writing to provide such services, such
series will be subject to the terms and conditions of this Agreement, and shall
be maintained and accounted for by FWTC on a discrete basis. The portfolios
currently covered by this Agreement are listed in Exhibit B attached hereto.
12. TERM OF AGREEMENT. This Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
13. DUTIES IN THE EVENT OF TERMINATION. In the event that in connection
with termination a Successor to any of FWTC's duties or responsibilities
hereunder is designated by Merriman Investment Trust by written notice to FWTC,
FWTC will promptly, upon such termination and at the expense of Merriman
Investment Trust, transfer to such Successor all relevant books, records,
correspondence and other data established or maintained by FWTC under this
Agreement in a form reasonably acceptable to Merriman Investment Trust (if such
form differs from the form in which FWTC has maintained the same, Merriman
Investment Trust shall pay any expenses associated with transferring the same to
such form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FWTC's personnel in
the establishment of books, records and other date by such successor.
4
<PAGE>
14.CHOICE OF Law. This memorandum of understanding shall be construed in
accordance with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date f irst above
written.
ATTEST: First Wisconsin Trust Company
Andrea Lydolph By James Tyler
- -------------- ------------
Merriman Investment Trust
ATTEST:
Paula A. Bishop By William L. Notaro
- --------------- -----------------
5
<PAGE>
EXHIBIT A
FIRST WISCONSIN TRUST COMPANY
MUTUAL FUND SERVICES
FUND VALUATION AND ACCOUNTING
ANNUAL FEE SCHEDULE
MERRIMAN TIMED CAPITAL APPRECIATION FUND &
MERRIMAN TIMED ASSET ALLOCATION FUND
- Annual fee per fund based on market value of assets:
$25,000 for the first $40,000,000
1/100 of 1% (one basis point) on the balance
- Daily Pricing
$125 per month per fund.
MERRIMAN GOVERNMENT
MERRIMAN BLUE CHIP
MERRIMAN LEVEKAGED GROWTH
- Annual fee per fund based on market value of assets:
$20,000 for first $40,000,000
2/100 of 1% (two basis points) on next $200,000,00 1/100 of 1% (one
basis point) on the balance
$3.50 per month per asset in excess of 50 assets
- Daily Pricing
$0.15 per day per stock
$0.50 per day per bond
- Fees are billed monthly
4/92
<PAGE>
EXHIBIT B
The following portfolios are covered by the custodian, transfer agent, and fund
accounting servicing agreements between Merriman Investment Trust and First
Wisconsin Trust Company:
1. Merriman Government Fund
2. Merriman Blue Chip Fund
3. Merriman Capital Appreciation Fund
4. Merriman Asset Allocation Fund
5. Merriman Leveraged Growth Fund
<PAGE>
EXHIBIT (H)(3)
POWERS OF ATTORNEY
<PAGE>
MERRIMAN INVESTMENT TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of Merriman Investment Trust hearby appoints Paul A. Merriman his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorney shall have full power and
authority to do and perform in the name and on behalf of the undersigned every
act whatsoever requisite or desirable to be done in the premises, as fully and
to all intents and purposes as the undersigned might or could do, the
undersigned hereby ratifying and approving all such acts of such attorney.
IN WITTNESS WHEREOF, the undersigned has executed this instrument this 22
day of February, 1998.
Paul A. Merriman On File
- ------------------------------------- ------------------------------
Witness Signature
William L. Notaro
------------------------------
Name
<PAGE>
MERRIMAN INVESTMENT TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of Merriman Investment Trust hearby appoints Paul A. Merriman his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorney shall have full power and
authority to do and perform in the name and on behalf of the undersigned every
act whatsoever requisite or desirable to be done in the premises, as fully and
to all intents and purposes as the undersigned might or could do, the
undersigned hereby ratifying and approving all such acts of such attorney.
IN WITTNESS WHEREOF, the undersigned has executed this instrument this 22
day of February, 1998.
William L. Notaro On File
- ----------------------------------- ------------------------------
Witness Signature
David A. Ederer
------------------------------
Name
<PAGE>
MERRIMAN INVESTMENT TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of Merriman Investment Trust hearby appoints Paul A. Merriman his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorney shall have full power and
authority to do and perform in the name and on behalf of the undersigned every
act whatsoever requisite or desirable to be done in the premises, as fully and
to all intents and purposes as the undersigned might or could do, the
undersigned hereby ratifying and approving all such acts of such attorney.
IN WITTNESS WHEREOF, the undersigned has executed this instrument this 22
day of February, 1998.
William L. Notaro On File
- ----------------------------------- ------------------------------
Witness Signature
Ben W. Reppond
------------------------------
Name
<PAGE>
MERRIMAN INVESTMENT TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of Merriman Investment Trust hearby appoints Paul A. Merriman his true and
lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorney shall have full power and
authority to do and perform in the name and on behalf of the undersigned every
act whatsoever requisite or desirable to be done in the premises, as fully and
to all intents and purposes as the undersigned might or could do, the
undersigned hereby ratifying and approving all such acts of such attorney.
IN WITTNESS WHEREOF, the undersigned has executed this instrument this 7th
day of December, 1999.
Alexa G. Schubert On File
- ----------------------------------- ------------------------------
Witness Signature
Donald E. West
------------------------------
Name
<PAGE>
EXHIBIT (I)
LEGAL OPINION
<PAGE>
November 22, 1999
Merriman Investment Trust
1200 Westlake Avenue North
Seattle, WA 98109
Ladies and Gentlemen:
This opinion is being delivered to you in connection with your Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, under which
you are registering your shares of beneficial interest, $0.01 par value per
share (the "Shares").
We have made such inquiry of your officers and trustees and have examined
such corporate documents, records and certificates and other documents and such
questions of law as we have deemed necessary for the purposes of this opinion.
In rendering this opinion, we have relied, with your approval, as to all
questions of fact material to this opinion, upon certificates of public
officials and of your officers and have assumed, with your approval, that the
signatures on all documents examined by us are genuine, which facts we have not
independently verified.
Based upon and subject to the foregoing, we are of the opinion that the
Shares will, when sold, be legally and validly issued, fully paid and
nonassessable.
With respect to the opinion stated above, we wish to point out that the
shareholders of a Massachusetts business trust may, under some circumstances, be
subject to assessment at the instance of creditors to pay the obligations of
such trust in the event that its assets are insufficient for the purpose.
We hereby consent to your filing this opinion as an Exhibit to your
Registration Statement on Form N-1A and making it a part thereof. In giving such
consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
Sullivan & Worcester LLP
EXHIBIT (J)
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated October 21, 1999 on the
financial statements and the financial highlights of each of the Funds in the
Merriman Investment Trust. Such financial statements and financial high-
lights appear in the 1999 Annual Report to Shareholders which is included
in the Statement of Additional Information filed in Post-Effective Amendment No.
21 to the Registration Statement on Form N-1A of Merriman Investment Trust.
We also consent to the references to our Firm in the Registration State-
ment and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 26, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT (N)
FINANCIAL DATA SCHEDULES
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> MERRIMAN FLEXIBLE BOND FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 7,977,294
<INVESTMENTS-AT-VALUE> 7,994,805
<RECEIVABLES> 25,427
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> (40)
<TOTAL-ASSETS> 8,020,192
<PAYABLE-FOR-SECURITIES> 17,267
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,836
<TOTAL-LIABILITIES> 44,103
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,041,280
<SHARES-COMMON-STOCK> 801,029
<SHARES-COMMON-PRIOR> 834,038
<ACCUMULATED-NII-CURRENT> 754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (83,456)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,511
<NET-ASSETS> 7,976,089
<DIVIDEND-INCOME> 446,178
<INTEREST-INCOME> 40,050
<OTHER-INCOME> 0
<EXPENSES-NET> 121,087
<NET-INVESTMENT-INCOME> 365,141
<REALIZED-GAINS-CURRENT> (73,820)
<APPREC-INCREASE-CURRENT> (87,584)
<NET-CHANGE-FROM-OPS> 203,737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 364,405
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 211,281
<NUMBER-OF-SHARES-REDEEMED> 179,288
<SHARES-REINVESTED> 30,471
<NET-CHANGE-IN-ASSETS> 476,154
<ACCUMULATED-NII-PRIOR> 18
<ACCUMULATED-GAINS-PRIOR> (9,636)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 80,844
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 126,637
<AVERAGE-NET-ASSETS> 8,079,230
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> (0.19)
<PER-SHARE-DIVIDEND> 0.46
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.96
<EXPENSE-RATIO> 1.57
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MERRIMAN GROWTH & INCOME FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 8,491,813
<INVESTMENTS-AT-VALUE> 8,760,980
<RECEIVABLES> 18,045
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15
<TOTAL-ASSETS> 8,779,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,384
<TOTAL-LIABILITIES> 17,384
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,846,351
<SHARES-COMMON-STOCK> 847,656
<SHARES-COMMON-PRIOR> 874,348
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 646,138
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 269,167
<NET-ASSETS> 8,761,656
<DIVIDEND-INCOME> 193,790
<INTEREST-INCOME> 27,031
<OTHER-INCOME> 0
<EXPENSES-NET> 159,825
<NET-INVESTMENT-INCOME> 60,996
<REALIZED-GAINS-CURRENT> 663,047
<APPREC-INCREASE-CURRENT> 387,813
<NET-CHANGE-FROM-OPS> 1,111,856
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 118,817
<DISTRIBUTIONS-OF-GAINS> 585,865
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,835
<NUMBER-OF-SHARES-REDEEMED> 140,428
<SHARES-REINVESTED> 67,030
<NET-CHANGE-IN-ASSETS> 243,431
<ACCUMULATED-NII-PRIOR> 41,168
<ACCUMULATED-GAINS-PRIOR> 586,148
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 111,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 159,825
<AVERAGE-NET-ASSETS> 8,862,558
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0.15
<PER-SHARE-DISTRIBUTIONS> 0.86
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 1.79
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> MERRIMAN CAPITAL APPRECIATION FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 11,982,904
<INVESTMENTS-AT-VALUE> 12,249,141
<RECEIVABLES> 24,075
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> (15)
<TOTAL-ASSETS> 12,273,201
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,133
<TOTAL-LIABILITIES> 30,133
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,699,099
<SHARES-COMMON-STOCK> 1,224,968
<SHARES-COMMON-PRIOR> 1,328,243
<ACCUMULATED-NII-CURRENT> 109,574
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,168,158
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 266,237
<NET-ASSETS> 12,243,068
<DIVIDEND-INCOME> 403,519
<INTEREST-INCOME> 23,224
<OTHER-INCOME> 0
<EXPENSES-NET> 235,418
<NET-INVESTMENT-INCOME> 191,325
<REALIZED-GAINS-CURRENT> 1,167,436
<APPREC-INCREASE-CURRENT> 469,582
<NET-CHANGE-FROM-OPS> 1,828,343
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 81,751
<DISTRIBUTIONS-OF-GAINS> 469,197
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93,407
<NUMBER-OF-SHARES-REDEEMED> 319,717
<SHARES-REINVESTED> 55,577
<NET-CHANGE-IN-ASSETS> (400,628)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 469,919
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162,528
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 235,418
<AVERAGE-NET-ASSETS> 12,942,260
<PER-SHARE-NAV-BEGIN> 9.06
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 1.19
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 0.35
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> 1.81
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MERRIMAN ASSET ALLOCATION FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 10,228,873
<INVESTMENTS-AT-VALUE> 10,805,998
<RECEIVABLES> 16,862
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> (12,094)
<TOTAL-ASSETS> 10,810,766
<PAYABLE-FOR-SECURITIES> 137,854
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,024
<TOTAL-LIABILITIES> 169,878
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,390,702
<SHARES-COMMON-STOCK> 1,022,045
<SHARES-COMMON-PRIOR> 1,136,627
<ACCUMULATED-NII-CURRENT> 208,142
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 464,919
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 577,125
<NET-ASSETS> 10,640,888
<DIVIDEND-INCOME> 492,691
<INTEREST-INCOME> 19,489
<OTHER-INCOME> 0
<EXPENSES-NET> 210,909
<NET-INVESTMENT-INCOME> 301,271
<REALIZED-GAINS-CURRENT> 465,265
<APPREC-INCREASE-CURRENT> 530,941
<NET-CHANGE-FROM-OPS> 1,297,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 93,129
<DISTRIBUTIONS-OF-GAINS> 381,247
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62,981
<NUMBER-OF-SHARES-REDEEMED> 341,204
<SHARES-REINVESTED> 45,752
<NET-CHANGE-IN-ASSETS> (1,527,411)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 380,901
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 143,246
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 210,909
<AVERAGE-NET-ASSETS> 11,436,090
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.84
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.33
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 1.84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> MERRIMAN LEVERAGED GROWTH FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 17,633,928
<INVESTMENTS-AT-VALUE> 18,754,915
<RECEIVABLES> 30,158
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 161
<TOTAL-ASSETS> 18,784,912
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,928
<TOTAL-LIABILITIES> 30,928
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,289,866
<SHARES-COMMON-STOCK> 1,491,393
<SHARES-COMMON-PRIOR> 1,476,284
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,343,131
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,120,987
<NET-ASSETS> 18,753,984
<DIVIDEND-INCOME> 365,163
<INTEREST-INCOME> 22,787
<OTHER-INCOME> 0
<EXPENSES-NET> 470,413
<NET-INVESTMENT-INCOME> (82,463)
<REALIZED-GAINS-CURRENT> 2,427,323
<APPREC-INCREASE-CURRENT> 1,366,712
<NET-CHANGE-FROM-OPS> 3,711,572
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 937,419
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 414,476
<NUMBER-OF-SHARES-REDEEMED> 449,613
<SHARES-REINVESTED> 73,400
<NET-CHANGE-IN-ASSETS> 3,266,167
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 935,690
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 226,149
<INTEREST-EXPENSE> 150,667
<GROSS-EXPENSE> 470,413
<AVERAGE-NET-ASSETS> 19,464,977
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 2.63
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.66
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.57
<EXPENSE-RATIO> 2.60
</TABLE>
