| MoniResearch Corporation |
PO Box 1907 |
Woodland, WA |
Steve Shellans
President |
|
Phone and Fax
1-800-615-6664 |
July 7, 2007
Merit Advisors, Inc.
13905 Quail Pointe Drive, Ste A
Oklahoma City, OK 73134
Gentlemen:
At your request, we have back tested your traditional high yield bond model by applying its buy and sell signals to the Lipper High Yield Index. Although the signals were applied to a variety of high yield mutual funds in real time over the years, the application of these signals to the Lipper Index must be considered hypothetical.
1 - The account was assumed to be funded with $100,000 on June 30, 1997, ten years ago.
2 - Whenever you show a buy signal, the entire proceeds of the account were invested in the
Lipper High Yield Index on that day.
3 - Whenever you show a sell signal, the entire proceeds of the account were invested in 91-day
T-Bills. This rate is typical of money market funds.
4 - For analysis purposes, all positions were considered to be liquidated on June 30, 2007.
5 - A management fee of 1.6% per year was used, assessed quarterly in arrears. Therefore, the
performance shown is net of Merit's management fees.
6 - No initial sales charge was assessed and no provision for taxes was made.
The following table summarizes your timed results, compared to a buy/hold strategy.
| |
Compound Avg ROR |
Average
Switches
per Year |
% of Time Aggressive |
MRN Risk- Adjusted ROR |
Ulcer Index |
Ending Account Balance |
| B/H |
4.79% |
0 |
100 |
2.36% |
46.7 |
$159,654 |
| Merit |
9.93% |
9.1 |
59.8 |
9.85% |
1.5 |
257,757 |
| |
Alpha |
Beta |
Avg Mo. Return |
STD Dev |
Sharpe Ratio |
R |
R-Squared |
| B/H |
0.00 |
1.00 |
0.41% |
7.54 |
0.16 |
|
|
| Merit |
5.62 |
0.43 |
0.80% |
4.59 |
1.35 |
0.74 |
0.55 |
MoniResearch Corporation (MRC) has been tracking the performance of money managers for 25 years and during this period we have examined hundreds of customer statements. Since March 1986, MRC has published the MoniResearch Newsletter, a publication devoted to tracking the performance of market timers and tactical asset allocators. The personal credentials of the president of MRC include a Bachelor of Science degree from MIT, a Master of Science degree in Computer science from the Stevens Institute of Technology and over 30 years’ experience. MRC’s work has appeared in the Wall Street Journal, Barron’s, Money Magazine, Financial Planning Magazine, Financial Planning on Wall Street, The Journal of Portfolio Management, The Journal of financial Planning, Institutional Investor and many other lay and professional publications.
Sincerely,
Steve Shellans
President
=============================================================================
|