<PAGE>
MERRIMAN MERRIMAN INVESTMENT TRUST
FLEXIBLE BOND FUND 1200 Westlake Ave N., Suite 700
Seattle, WA 98109
MERRIMAN 1-800-423-4893
GROWTH & INCOME FUND 1-206-285-8877
MERRIMAN Investment Manager
CAPITAL APPRECIATION Merriman Invesment
FUND Management Company
1200 Westlake Ave N., Suite 700
MERRIMAN Seattle, WA 98109
ASSET ALLOCATION
FUND Custodian and
Transfer Agent
MERRIMAN Firstar Trust Company
LEVERAGED GROWTH PO Box 701
FUND Milwaukee, WI 53201
1-800-224-4743
ANNUAL REPORT Fund Council
Sullivan & Worcester
PERIOD ENDED Boston, Massachusetts
September 30, 1996
Officers & Trustees
Paul A. Merriman, President and Trustee
William L. Notaro, Executive Vice President,
Secretary, Treasurer, and Trustee
David A. Ederer, Trustee
Ben W. Reppond, Trustee
<PAGE>
Dear Fellow Shareholder:
Many investors and portfolio managers who thought they could predict the markets
were fooled during the fiscal year that ended September 30. Some high flying
managers and funds were humbled, most conspicuously including Jeff Vinik, who
lost his job as manager of the world's largest mutual fund, Fidelity Magellan (a
fund whose record now is closer to average than it has ever been). The Merriman
Mutual Funds also faced major challenges during the year.
During this period, the U.S. economy was characterized by moderate growth, low
inflation, record corporate profits, low unemployment, strong productivity, and
a somewhat bumpy interest rate market. While the economy has been sensitive to
overheating, our expansion has outpaced that of Europe. In Asia, emerging
economies continue to grow more than twice as fast as the industrialized
countries. Meanwhile, Japan is struggling with its longest and deepest slump
since World War II.
The U.S. dollar has strengthened against the Japanese yen and the German mark,
moderating U.S. investors' otherwise strong gains in international investments,
which have now trailed those in the U.S. for three years in a row. Nevertheless,
we continue to believe strongly that international diversification is the best
policy for most investors.
We are often asked what we see ahead for the domestic stock market. As always,
we see compelling arguments to be optimistic. And we see equally compelling
arguments in favor of great caution. There are always legitimate reasons to
expect either higher or lower prices, and the present time is no exception. In
fact, we are observing a classic tug of war between the bulls and bears.
GO BULLS!
If we were drafted to root for the bulls, we'd stress the fact that the Federal
Reserve seems to be successful in engineering a "soft landing" for the economy.
The threat of inflation apparently has been nearly wrung out of the economy,
while productivity improvements and worldwide competition have kept downward
pressure on prices.
One thing is very obvious: U.S. investors are bullish on stocks, pouring money
into equity mutual funds at record rates, encouraged by one of the longest bull
markets of the century. Demographic trends have an enormous effect on the
economy, and some present trends are crystal clear. The Baby Boom generation,
three times as big as any previous generation in U.S. history, isn't expected to
peak in its spending and saving habits until around 2009. Many people believe
this generation of Americans, just now starting to reach their peak earning
years, is about to fuel the greatest economic expansion in history.
In addition, U.S. corporations have done much of the painful pruning needed to
get rid of their inefficient operations. Companies are rewarding employees by
beefing up subsidized savings plans such as 401(k)s. And they're rewarding
shareholders with stock buyback programs, mergers, and in some cases splitting
companies into pieces in the hope that the total value of the separate parts
will exceed that of the whole (AT&T is a major current example). All these are
positive signs for stock prices well into the future.
GO BEARS!
If we had to root for the bears, we'd also find plenty to talk about. Many
cautious investors are still waiting for what they consider inevitable market
corrections to counteract the present rampant optimism. U.S. consumers are
struggling with record levels of debt and record rates of personal bankruptcies.
Savings rates are very low by world standards, real wage increases are minimal
for many people and nonexistent for others. While corporate profits have been
remarkably robust since 1990, that pace simply cannot continue forever, and
weaker profits may lead to lower P/E ratios, multiplying the unpleasant effects
on stock prices.
If Americans continue their heavy investing through retirement plans, that will
exert a strong upward pressure on stock prices. But when optimism has so much
momentum, when continuing miracles are expected as investors' due, even minor
disappointments can bring swift, brutal consequences in the market. Millions of
mutual fund investors have never been through a bear market. When that market
comes, a 10 to 15 percent correction will wring many fair-weather investors out
of the market, possibly forcing fund managers to sell their holdings at
depressed prices. It's not clear who the buyers will be if that happens in any
great volume. <PAGE>
The bears have other strong arguments. For some time, the dividend yields of the
Dow Jones Industrial Average and the Standard & Poor's 500 Index have been at
all-time lows while their price-to-book ratios have been at all-time highs.
However, the real excesses are to be found in the OTC market. The NASDAQ's
astronomical P/E ratio of 40 and dividend yield of only 0.6 percent equal those
of the Japanese stock market before it tumbled by 60 percent.
DOING IT DAILY
Long ago, we stopped trying to take sides between bulls and bears. We do not try
to predict the future. Our approach is to track current trends affecting each
investment in our portfolio, and we do it daily. Our objective is to squeeze out
all possible profits in bull markets while protecting against the major declines
that are likely when the bears take over. We believe the best way to achieve
those objectives is with a combination of patience, a long-term focus, daily
monitoring, and our proprietary market timing systems.
We apply these tools to each of our five mutual funds.
MERRIMAN FLEXIBLE BOND FUND
The Merriman Flexible Bond Fund invests in a broad spectrum of fixed-income
securities that we believe offer the best opportunity to achieve attractive
returns with below-average volatility. The Fund's present investment policy is
to maintain a balance of 35 percent in international bonds, 25 percent in U.S.
high-yield bonds, and the remaining 40 percent in high-grade U.S. government and
corporate bonds. We use our timing systems to help us be invested in each bond
group during market advances and on the sidelines, in Treasury bills, money
funds and other cash equivalents, while markets are declining.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Flexible Bond Fund and the Salomon Big
Index.
Start Date 10-06-88
End Date 09-30-96
Beginning Value $10,000
End Value - Merriman Flexible Bond Fund $18,119
End Value - Salomon Big Index $19,983
Average Annual Total Return of 1YR 5YR Since Inception
Merriman Flexible Bond Fund 7.62% 8.08% 7.74%
During the past year, unexpectedly strong job reports in March and July sparked
one-day drops in the Dow of 171 and 115 points. Those reports also touched off
sharp price drops in U.S. high grade corporate and government bonds. Our timing
models took us out of that arena well in advance of both those plunges.
To the surprise of many investors, the 12 months ended September 30 were not
good to long-term government and corporate high-grade bonds. According to
Morningstar, the average bond fund in those markets with portfolios of 15 years
or more produced a total return of only 3.34 percent, less than the yield of
money-market funds. At the same time, high-yield bonds were up 12.93 percent,
giving investors (at least those who bothered to notice) one more reminder of
why it's wise to diversify. We have been continuously invested in U.S.
high-yield bond funds since January 1995. While the international investments of
the Fund experienced several unproductive whiplashes, our investments in
emerging markets funds enjoyed a particularly strong run from April through the
end of our fiscal year.
For the 12 months ending September 30, the Flexible Bond Fund was up 7.62
percent. This compares with a gain of 8.01 percent for the same balance of U.S.
and international bond funds, based on Morningstar's averages for those
categories. According to Morningstar, the Fund's volatility is about 20 percent
less than the average fund in its category, giving shareholders more return for
each unit of risk. Because of this relationship, the Fund recently earned
Morningstar's highest rating, 5 Stars.
MERRIMAN CAPITAL APPRECIATION FUND
The Capital Appreciation Fund pursues growth of capital by investing in mutual
funds seeking U.S. and international growth and aggressive growth as well as
small-cap funds. Our present investment policy maintains a balance of 65 percent
in U.S. equity funds and 35 percent in international funds. As with all our
funds, whenever our timing models indicate the risk of loss is greater than the
potential for gain, we take defensive action and move into money funds or other
cash equivalents. <PAGE>
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Capital Appreciation Fund and the
S&P 500 Index.
Start Date 05/02/89
End Date 09/30/96
Beginning Value $10,000
End Value - Merriman Capital Appreciation Fund $17,213
End Value - S&P 500 Index $26,604
Average Annual Total Return of 1YR 5YR Since Inception
Merriman Capital Appreciation Fund 5.69% 6.86% 7.59%
In the year ended September 30, the Capital Appreciation Fund's total return was
5.69 percent. By comparison, a similar mix of domestic and international equity
funds held without timing returned 11.94 percent. The Fund's underperformance
resulted from a huge sell-off in aggressive growth and technology funds in the
fourth calendar quarter of 1995 and another sell-off in March 1996. In both
cases, our market timing systems produced a whipsaw effect as we tried to
protect the Fund's assets from sharp declines.
However, according to Morningstar, the volatility of the Fund is about 40
percent lower than the average of funds in the growth, aggressive growth,
small-cap, and international equity categories. We believe this makes the
Capital Appreciation Fund an excellent choice for conservative investors seeking
growth of capital with wide diversification.
MERRIMAN LEVERAGED GROWTH FUND
The Leveraged Growth Fund uses the same defensive strategies as the Capital
Appreciation Fund. But during rising markets, this Fund takes a more aggressive
approach in order to seek above-average returns. This Fund may borrow up to $1
for each $2 of net assets in order to make additional investments when our
timing models indicate a high probability of gain.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Leveraged Growth Fund and the S&P 500
Index.
Start Date 05/27/92
End Date 09/30/96
Beginning Value $10,000
End Value - Merriman Leveraged Growth Fund $13,873
End Value - S&P 500 Index $18,581
Average Annual Total Return of 1YR 5YR Since Inception
Merriman Leveraged Growth Fund 6.85% N/A 7.82%
For the 12 months ending September 30, the Fund's total return was 6.85 percent,
compared with a gain of 11.94 percent for a similar mix of domestic and
international equity funds held without timing or leverage. According to
Morningstar, the Fund's volatility is less than 80 percent of the average of
growth, aggressive growth, and small-cap funds.
MERRIMAN GROWTH AND INCOME FUND
The Growth and Income Fund invests primarily in growth-and-income mutual funds,
with 65 percent of assets invested domestically and 35 percent internationally,
as in the Capital Appreciation and Leveraged Growth Funds. For the year ending
September 30, the Fund's total return was 12.18 percent, compared with 11.94
percent for a similar balance of growth-and-income funds tracked by Morning-
star. According to Morningstar, the Fund's volatility is about 45 percent less
than the average of funds in its category.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Growth & Income Fund and the S&P 500
Index.
Start Date 12/29/88
End Date 09/30/96
Beginning Value $10,000
End Value - Merriman Growth & Income Fund $17,685
End Value - S&P 500 Index $31,153
Average Annual Total Return of 1YR 5YR Since Inception
Merriman Growth & Income Fund 12.18% 7.17% 7.63%
This Fund did not suffer to the same extent from the market whipsaws in the
first and second quarters of our fiscal year, largely because the Fund's
portfolio concentrates on large-cap funds. Those funds performed better than the
more aggressive funds held by the Capital Appreciation and Leveraged Growth
Funds. <PAGE>
MERRIMAN ASSET ALLOCATION FUND
The Asset Allocation Fund spreads its investments among five major asset groups
and applies disciplined timing models to each one. Our present policies allocate
30 percent of the Fund's portfolio to U.S. equity funds, 30 percent to
international equity funds, 15 percent to U.S. bond funds, 15 percent to
international bond funds, and 10 percent to gold funds.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Asset Allocation Fund and the S&P 500
Index.
Start Date 05/02/89
End Date 09/30/96
Beginning Value $10,000
End Value - Merriman Asset Allocation Fund $17,083
End Value - S&P 500 Index $26,604
Average Annual Total Return of 1YR 5YR Since Inception
Merriman Asset Allocation Fund 7.41% 7.66% 7.48%
For the year ending September 30, the Fund's total return was 7.41 percent.
According to Morningstar, an untimed portfolio of the same balance of funds
appreciated 11.75 percent. However, the Fund's volatility was about 30 percent
less than such an untimed portfolio.
Although our timing systems often result in underperformance for our funds
during market advances, we continue to believe strongly that investors need
defensive protection from the very real threat of severe corrections, both in
equities and in bonds. It is true that markets always feel safest after they
have made a major advance. However, this is often just the time when those
markets are at the greatest risk.
Our job is to minimize that risk, and we continue to watch each of our
investments every business day. And every day, we are grateful for your
confidence in the Merriman Mutual Funds and in our defensive approach to
investing.
Sincerely,
Paul A. Merriman
President
<PAGE>
Merriman Flexible Bond Fund
Portfolio of Investments
September 30, 1996
Market Value
Shares (Note 2A)
------ ------------
High Grade Corporate Bond Funds: 33.19%
---------------------------------------
281,189 Babson Bond Trust - Long Term .................. $ 424,595
33,475 Columbia Fixed Income Securities Fund .......... 432,159
30,201 Dreyfus A Bond Plus, Inc. ...................... 431,267
41,856 Fidelity Intermediate Bond Fund ................ 418,564
36,101 T. Rowe Price New Income Fund .................. 316,421
32,009 Scudder Income Fund ............................ 423,485
49,806 Stein Roe Intermediate Bond Fund ............... 428,332
-------
Total High Grade Corporate Bond Funds
(Cost $2,874,643) .............................. 2,874,643
---------
High-Yield Corporate Bond Funds: 29.68%
---------------------------------------
45,366 Federated High Income Bond Fund ................ 513,995
55,689 Federated High Yield Trust ..................... 509,551
41,820 Fidelity Advisor High Yield Fund ............... 516,475
71,541 INVESCO Bond High Yield Fund ................... 502,217
48,640 Northeast Investors Trust ...................... 528,232
-------
Total High-Yield Corporate Bond Funds
(Cost $2,305,000) .............................. 2,570,470
---------
International Bond Funds: 35.16%
--------------------------------
36,328 Benham European Govt Bond Fund ................. 427,949
38,219 Federated International Income Fund ............ 431,879
43,367 Fidelity Global Bond Fund ...................... 418,061
29,719 G.T. Global High Income Fund Class A ........... 438,657
42,815 T. Rowe Price International Bond Fund .......... 442,279
36,340 Scudder Emerging Markets Income Fund ........... 467,330
37,644 Scudder International Bond Fund ................ 419,353
-------
Total International Bond Funds
(Cost $2,972,392) .............................. 3,045,508
---------
Principal
Amount
---------
Short-Term Demand Notes: 1.91%
-------------------------------
$82,000 Johnson Controls, Inc.,
5.2160%, 03/03/97............................... 82,000
83,000 Wisconsin Electric Power Company,
5.2356%, 02/14/97............................... 83,000
------
Total Short-Term Demand Notes
(Cost $165,000)................................. 165,000
-------
Total Investment in Securities
(Cost $8,317,035) (a)..........................99.94% 8,655,621
Other Assets
Less Liabilities............................. 0.06% 4,929
---- -----
NET ASSETS....................................100.00% $8,660,550
======= ==========
(a) Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation $ 351,172
Gross unrealized depreciation (12,586)
-------
Net Unrealized Appreciation $ 338,586
=======
See Accompanying Notes to Financial Statements
<PAGE>
Merriman Growth & Income Fund
Portfolio of Investments
September 30, 1996
Market Value
Shares (Note 2A)
------ ------------
Domestic Equity Funds: 61.52%
------------------------------
20,815 Columbia Common Stock Fund...................... $ 435,240
14,691 Fidelity Growth & Income Fund................... 425,735
55,848 Founders Blue Chip Fund......................... 437,845
67,840 GT Global Growth & Income Fund.................. 467,415
19,017 INVESCO Value Equity Fund....................... 443,470
22,609 Janus Growth & Income Fund...................... 448,552
24,277 Lexington Growth & Income Fund.................. 453,746
17,880 Neuberger & Berman Guardian Fund................ 442,522
19,737 T. Rowe Price Growth & Income Fund.............. 427,103
23,434 SAFECO Income Fund.............................. 469,373
23,769 Salomon Brothers Investors Fund................. 452,087
14,610 Strong Total Return Fund........................ 450,275
-------
Total Domestic Equity Funds
(Cost $5,094,420)............................... 5,353,363
---------
International Equity Funds: 33.20%
-----------------------------------
24,838 Fidelity Int'l Growth & Income Fund............. 474,663
27,083 INVESCO European Fund........................... 420,592
15,682 Janus Worldwide Growth Fund..................... 541,201
30,644 T. Rowe Price European Stock Fund............... 508,379
36,344 T. Rowe Price International Stock Fund.......... 491,735
16,406 Scudder Global Fund............................. 452,644
-------
Total International Equity Funds
(Cost $2,436,917)............................... 2,889,214
---------
Money Market Funds: 1.08%
--------------------------
19,380 Fidelity Cash Reserves Fund..................... 19,380
61,048 Lexington Money Market Fund..................... 61,048
13,089 Strong Money Market Fund........................ 13,089
------
Total Money Market Funds
(Cost $93,517).................................. 93,517
------
Principal
Amount
---------
Short-Term Demand Notes: 3.89%
--------------------------------
$ 150,200 Johnson Controls, Inc.,
5.2160%, 03/03/97............................... 150,200
75,000 American Family Financial Services,
5.1956%, 05/16/97............................... 75,000
13,400 Pitney Bowes, Inc.,
5.1946%, 01/31/97............................... 113,400
-------
Total Short-Term Demand Notes
(Cost $338,600)................................. 338,600
-------
Total Investment in Securities
(Cost $7,963,454) (a)..........................99.69% 8,674,694
Other Assets,
Less Liabilities..............................0.31% 27,140
----- ------
NET ASSETS....................................100.00% $8,701,834
======= ==========
(a) Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation $ 711,240
Gross unrealized depreciation 0
-------
Net Unrealized Appreciation $ 711,240
=======
See Accompany Notes to Financial Statements
<PAGE>
Merriman Capital Appreciation Fund
Portfolio of Investments
September 30, 1996
Market Value
Shares (Note 2A)
------ ------------
Domestic Equity Funds: 56.50%
------------------------------
50,391 Founders Growth Fund............................$ 849,598
57,433 T. Rowe Price Capital Appreciation Fund......... 867,811
33,762 T. Rowe Price Growth Stock Fund................. 888,617
37,748 T. Rowe Price New Horizon Fund.................. 909,356
38,550 Scudder Capital Growth Fund..................... 872,767
29,081 Stein Roe Capital Opportunity Fund.............. 902,677
42,018 Strong Discovery Fund........................... 702,129
41,543 20th Century Growth Fund........................ 898,991
28,292 USAA Aggressive Growth Fund..................... 906,204
39,945 USAA Growth Fund................................ 707,828
6,192 WPG Growth Fund................................. 909,907
-------
Total Domestic Equity Funds
(Cost $9,014,386)............................... 9,415,885
---------
International Equity Funds: 38.27%
-----------------------------------
41,091 Federated International Equity Fund Class A .... 701,011
75,702 Fidelity European Capital App Fund ............. 1,051,508
39,387 Founders Worldwide Growth Fund ................. 854,300
63,102 T. Rowe Price European Stock Fund .............. 1,046,867
97,187 T. Rowe Price New Asia Fund .................... 856,219
37,078 Scudder Global Fund ............................ 1,022,989
51,358 Scudder Pacific Opportunity Fund ............... 844,329
-------
Total International Equity Funds
(Cost $5,853,117)............................... 6,377,223
---------
Money Market Funds: 2.94%
--------------------------
375,881 Lexington Money Market Fund..................... 375,881
113,742 20th Century Cash Reserves Fund................. 113,742
-------
Total Money Market Funds
(Cost $489,623)................................. 489,623
-------
Principal
Amount
---------
Short-Term Demand Notes: 2.21%
-------------------------------
$ 134,400 Johnson Controls, Inc.,
5.216%, 03/03/97................................ 134,400
30,700 American Family Financial Services,
5.1956%, 05/16/97............................... 30,700
203,400 Wisconsin Electric Power Company,
5.2356% 02/14/97................................ 203,400
-------
Total Short-Term Demand Notes
(Cost $368,500)................................. 368,500
-------
Total Investment in Securities
(Cost $15,725,626) (a)........................99.92% 16,651,231
Other Assets
Less Liabilities............................0.08% 13,581
----- ------
NET ASSETS...................................100.00% $16,664,812
======= ===========
(a) Cost for federal income tax purposes is the same
and net unrealized appreciation consists of:
Gross unrealized appreciation................... $1,087,147
Gross unrealized depreciation................... (161,542)
--------
Net Unrealized Appreciation..................... $ 925,605
=======
See Accompanying Notes to Financial Statements
<PAGE>
Merriman Asset Allocation Fund
Portfolio of Investments
September 30, 1996
Market Value
Shares (Note 2A)
------ ---------
Domestic Equity Funds: 26.39%
------------------------------
54,613 Founders Growth Fund ........................... $920,771
38,215 T. Rowe Price New Horizons Fund ................ 920,596
40,385 Scudder Capital Growth Fund .................... 914,328
31,054 Stein Roe Capital Opportunity Fund ............. 963,910
57,060 20th Century Vista Fund ........................ 960,321
-------
Total Domestic Equity Funds
(Cost $4,391,626)............................... 4,679,926
---------
International Equity Funds: 33.69%
-----------------------------------
83,449 Fidelity European Capital Appreciation Fund..... 1,159,113
69,073 INVESCO European Fund........................... 1,072,704
57,413 INVESCO Strategic Basin Fund.................... 837,653
63,736 T. Rowe Price European Stock Fund............... 1,057,381
101,852 T. Rowe Price New Asia Fund..................... 897,315
34,446 Scudder Global Fund............................. 950,373
-------
Total International Equity Funds
(Cost $5,325,840)............................... 5,974,539
---------
High Grade Corporate Bond Funds: 2.13%
---------------------------------------
28,499 Scudder Income Fund............................. 377,042
-------
Total High Grade Corporate Bond Funds
(Cost $377,042)................................. 377,042
-------
High Yield Corporate Bond Funds: 11.53%
----------------------------------------
54,207 Federated High Income Bond Fund................. 614,162
77,029 Federated High Yield Trust...................... 704,813
66,827 Northeast Investors Trust....................... 725,737
-------
Total High Yield Corporate Bond Funds
(Cost $1,837,672)............................... 2,044,712
---------
International Bond Funds: 14.00%
---------------------------------
50,811 Benham European Gov't Bond Fund................. 598,557
56,308 Federated Int'l Income Fund Class A............. 636,278
50,514 Scudder Emerging Markets Fund................... 649,606
53,673 Scudder International Bond Fund................. 597,913
-------
Total International Bond Funds
(Cost $2,417,107)............................... 2,482,354
---------
Money Market Funds: 10.04%
---------------------------
312,691 Benham Government Agency Fund................... 312,691
319,125 Lexington Money Market Fund..................... 319,125
161,938 T. Rowe Price Prime Reserve Fund................ 161,938
21,791 Stein Roe Cash Reserves Fund.................... 21,791
310,406 United Services US Treasury Fund................ 310,406
655,342 USAA Money Market Fund.......................... 655,342
-------
Total Money Market Funds
(Cost $1,781,293)............................... 1,781,293
---------
Principal
Amount
---------
Short-Term Demand Notes: 1.67%
-------------------------------
$ 296,400 Johnson Controls, Inc.,
5.2160% 03/03/97................................$ 296,400
-------
Total Short-Term Demand Notes
(Cost $296,400)................................. 296,400
-------
Total Investment in Securities
(Cost $16,426,980) (a)........................99.45% 17,636,266
Other Assets
Less liabilities............................0.55% 97,056
----- ------
NET ASSETS...................................100.00% $17,733,322
======= ===========
(a) Cost for federal income tax purposes is the same
and net unrealized appreciation consists of:
Gross unrealized appreciation................... $1,217,337
Gross unrealized depreciation................... (8,051)
------
Net Unrealized Appreciation..................... $1,209,286
==========
See Accompany Notes to Financial Statements
<PAGE>
Merriman Leveraged Growth Fund
Portfolio of Investments
September 30, 1996
Market Value
Shares (Note 2A)
------ ---------
Domestic Equity Funds: 85.81%
------------------------------
33,567 Columbia Special Fund...........................$ 800,917
22,205 Federated Stock Trust........................... 741,859
46,182 Founders Growth Fund............................ 778,633
32,089 Founders Discovery Fund......................... 831,103
23,161 Founders Frontier Fund.......................... 824,060
30,145 T. Rowe Price Growth Stock Fund................. 793,408
34,262 T. Rowe Price New Horizons Fund................. 825,377
33,467 Scudder Capital Growth Fund..................... 757,699
18,240 Scudder Development Fund........................ 748,584
26,789 SteinRoe Capital Opportunity Fund............... 831,526
27,392 SteinRoe Growth Stock Fund...................... 788,623
37,092 20th Century Growth Fund........................ 802,671
49,483 20th Century Vista Fund......................... 832,791
25,908 USAA Aggressive Growth Fund..................... 829,840
37,100 USAA Growth Fund................................ 657,410
23,591 Value Line Leveraged Growth Fund................ 810,114
5,528 WPG Growth Fund................................. 812,292
-------
Total Domestic Equity Funds
(Cost $12,808,693).............................. 13,466,907
----------
International Equity Funds: 50.64%
-----------------------------------
46,627 Federated Int'l Equity Fund Class A............. 795,452
61,917 Fidelity European Capital App Fund.............. 860,026
35,832 Founders Worldwide Growth Fund.................. 777,199
52,545 G.T. Global Emerging Markets Fund Class A....... 771,888
49,570 INVESCO European Fund........................... 769,823
23,690 Janus Worldwide Fund............................ 817,536
51,618 T. Rowe Price European Stock Fund............... 856,339
87,165 T. Rowe Price New Asia Fund..................... 767,924
27,599 Scudder Global Fund............................. 761,447
46,856 Scudder Pacific Opportunity Fund................ 770,308
-------
Total International Equity Funds
(Cost $7,255,361)............................... 7,947,942
---------
Principal
Amount
---------
Short-Term Demand Notes: 0.08%
$ 12,900 American Family Financial Services,
5.1956%, 05/16/97...............................$ 12,900
------
Total Short-Term Demand Notes
(Cost $12,900).................................. 12,900
------
Total Investment in Securities
(Cost $20,076,954) (a)......................136.53% 21,427,749
Other Assets,
Less Liabilities..........................(36.53%)(5,733,622)
------ ----------
NET ASSETS..................................100.00% $15,694,127
======= ===========
(a) Cost for federal income tax purposes is the same
and net unrealized appreciation consists of:
Gross unrealized appreciation................... $1,494,538
Gross unrealized depreciation................... (143,743)
--------
Net Unrealized Appreciation..................... $1,350,795
==========
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1996
<CAPTION>
Merriman Merriman Merriman Merriman
Merriman Growth & Capital Asset Leveraged
Flexible Bond Income Appreciation Allocation Growth
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets
Investments in securities, at market value
(identified cost $8,317,035, $7,963,454,
$15,725,626, $16,426,980 and $20,076,954
respectively) (Note 2) $ 8,655,621 $8,674,694 $16,651,231 $17,636,266 $21,427,749
Cash 15,353 5,353 10,188 15,604 2,717
Dividends and interest receivable 29,287 77,202 63,480 70,114 126,186
Receivable for securities sold 2,869,657 - - 377,042 -
Receivable for fund shares sold - 4,000 200 59,740 700
Deferred organization expenses - - - - 1,151
--------- --------- ---------- ---------- ----------
Total assets 11,569,918 8,761,249 16,725,099 18,158,766 21,558,503
---------- --------- ---------- ---------- ----------
Liabilities
Loan payable to custodian bank - - - - 5,800,000
Accrued management fees 7,044 8,845 16,864 17,927 15,899
Other accrued expenses 9,008 11,142 23,797 25,475 48,477
Payable for securities purchased 2,874,642 - - 377,042 -
Payable for fund shares redeemed 12,713 39,428 19,626 5,000 -
Distributions payable 5,961 - - - -
--------- ------ ------ ------- ---------
Total liabilities 2,909,368 59,415 60,287 425,444 5,864,376
--------- ------ ------ ------- ---------
Net Assets
(Applicable to 835,640, 747,250, 1,524,135, 1,526,903
and 1,275,683 shares of beneficial interest with no
par value, unlimited number of shares authorized) $ 8,660,550 $8,701,834 $16,664,812 $17,733,322 $15,694,127
=========== ========== =========== =========== ===========
Pricing of Shares
Net asset value, offering and redemption price
per share
$ 8,660,550 / 835,640 shares $ 10.36
===========
$ 8,701,834 / 747,250 shares $ 11.65
==========
$16,664,812 / 1,524,135 shares $ 10.93
===========
$17,733,322 / 1,526,903 shares $ 11.61
===========
$15,694,127 / 1,275,683 shares $ 12.30
===========
Net assets
At September 30, 1996, net assets consisted of:
Paid-in capital $ 8,407,633 $7,209,221 $14,368,480 $14,926,715 $13,640,366
Undistributed net investment income 31,335 36,648 - 223,937 -
Accumulated net realized gain (loss) (117,004) 744,725 1,370,727 1,373,384 702,966
Unrealized appreciation on investments 338,586 711,240 925,605 1,209,286 1,350,795
--------- --------- ---------- ---------- ----------
$ 8,660,550 $8,701,834 $16,664,812 $17,733,322 $15,694,127
============ ========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
Year Ended September 30, 1996
<CAPTION>
Merriman Merriman Merriman Merriman
Merriman Growth & Capital Asset Leveraged
Flexible Bond Income Appreciation Allocation Growth
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment income
Interest $ 15,208 $ 14,999 $ 18,851 $ 18,957 $ 15,970
Dividends 635,445 355,548 645,925 842,686 387,920
------- ------- ------- ------- -------
Total investment income 650,653 370,547 664,776 861,643 403,890
------- ------- ------- ------- -------
Expenses
Management fees (Note 3) 86,416 113,042 232,703 248,132 172,334
Accounting services 17,490 18,718 37,803 41,618 25,355
Custodian fees 3,311 3,404 5,067 6,287 5,320
Transfer agent fees 13,046 14,929 41,556 40,406 19,667
Interest expense (Note 4) - - - - 269,359
Professional services 3,583 4,888 10,134 10,451 6,786
Registration fees 3,595 4,077 10,984 11,064 8,423
Insurance and other 43 65 735 10 371
Printing 805 810 1,736 1,922 1,176
Trustees fees 104 194 620 576 421
Amortization of organization expenses - - - - 1,742
------ ------- ------- ------- -------
Total expenses 128,393 160,127 341,338 360,466 510,954
------- ------- ------- ------- -------
Net investment income (loss) 522,260 210,420 323,438 501,177 (107,064)
------- ------- ------- ------- --------
Realized and Unrealized gain (loss)
on investments
Net realized gain from security transactions 11,709 833,675 1,371,325 1,200,254 720,399
Capital gain distributions from regulated investment
companies 2,057 257,241 1,085,491 403,950 679,989
Increase (decrease) in unrealized appreciation of
investments 99,779 (264,367) (1,896,938) (735,043) (64,087)
------ -------- ---------- -------- -------
Net realized and unrealized gain on investments 113,545 826,549 559,878 869,161 1,336,301
------- ------- ------- ------- ---------
Net increase in net assets resulting from
operations $ 635,805 $ 1,036,969 $ 883,316 $ 1,370,338 $1,229,237
=========== =========== =========== =========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
Merriman Flexible Bond Fund Merriman Growth & Income Fund
---------------------------- -----------------------------
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 522,260 $ 477,393 $ 210,420 $ 204,709
Net realized gain on investments 11,709 12,563 833,675 145,339
Capital gain distributions from regulated investment
companies 2,057 - 257,241 55,403
Net increase (decrease) in unrealized appreciation on
investments 99,779 242,467 (264,367) 975,607
------- ------- -------- -------
Net increase in net assets resulting from operations 635,805 732,423 1,036,969 1,381,058
Distributions to shareholders:
Distributions from net realized gain on investments - - (547,218) (772,792)
Distributions from net investment income (521,876) (481,041) (217,137) (183,504)
Capital share transactions:
Decrease in net assets resulting from capital
share transactions (Note 5) (45,450) (2,201,254) (919,075) (1,777,320)
- ------- ---------- -------- ----------
Total increase (decrease) 68,479 (1,949,872) (646,461) (1,352,558)
Net assets
Beginning of year 8,592,071 10,541,943 9,348,295 10,700,853
--------- ---------- --------- ----------
End of year* $8,660,550 $8,592,071 $8,701,834 $9,348,295
========== ========== ========== ==========
* Including undistributed net investment income of: $ 31,335 $ 30,951 $ 36,648 $ 43,365
========== ========== =========== ==========
</TABLE>
<TABLE>
Merriman Capital Merriman Asset
Appreciation Fund Allocation Fund
----------------- ---------------
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 323,438 $ 183,702 $ 501,177 $ 519,782
Net realized gain on investments 1,371,325 696,597 1,200,254 150,214
Capital gain distributions from regulated investment
companies 1,085,491 131,629 403,950 64,624
Net increase (decrease) in unrealized appreciation on
investments (1,896,938) 2,343,249 (735,043) 1,105,563
---------- --------- -------- ---------
Net increase in net assets resulting from operations 883,316 3,355,177 1,370,338 1,840,183
Distributions to shareholders:
Distributions from net realized gain on investments (1,914,315) (1,568,532) (446,499) (1,493,203)
Distributions from net investment income (385,016) (143,190) (300,168) (522,635)
Capital share transactions:
Decrease in net assets resulting from capital
share transactions (Note 5) (4,124,143) (5,017,157) (5,522,839) (7,175,623)
---------- ---------- ---------- ----------
Total decrease (5,540,158) (3,373,702) (4,899,168) (7,351,278)
Net assets
Beginning of year 22,204,970 25,578,672 22,632,490 29,983,768
---------- ---------- ---------- ----------
End of year* $16,664,812 $22,204,970 $17,733,322 $22,632,490
=========== =========== =========== ===========
* Including undistributed net investment income of: $ - $ 61,578 $ 223,937 $ 22,928
========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
Merriman Leveraged Growth Fund
------------------------------
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1996 1995
---- ----
<S> <C> <C>
Operations:
Net investment loss $ (107,064) $ (48,768)
Net realized gain on investments 720,399 180,865
Capital gain distributions from regulated investment
companies 679,989 84,827
Net increase (decrease) in unrealized appreciation on
investments (64,087) 1,414,882
-------- ---------
Net increase in net assets resulting from operations 1,229,237 1,631,806
Distributions to shareholders:
Distributions from net realized gains on investments (749,459) (227,723)
Capital share transactions:
Increase in net assets resulting from
capital share transactions (Note 5) 5,528,019 2,822,845
- --------- ---------
Total increase 6,007,797 4,226,928
Net assets
Beginning of year 9,686,330 5,459,402
--------- ---------
End of year* $15,694,127 $ 9,686,330
=========== ===========
* Including undistributed net investment income of: $ - $ -
========== ==========
</TABLE>
See Accompany Notes to Financial Statements
<PAGE>
<TABLE>
MERRIMAN LEVERAGED GROWTH FUND
STATEMENTS OF CASH FLOW
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1996 1995
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH Cash flows from operating activities:
Dividends and interest received $ 305,984 $ 103,585
Operating expenses paid (485,475) (170,054)
Net proceeds from disposition of short-term investments 347,785 5,175,724
Purchases of portfolio securities (58,806,738) (16,666,208)
Proceeds from disposition of portfolio securities 52,053,829 5,020,702
---------- ---------
Net cash used for operating activities (6,584,615) (6,536,251)
---------- ----------
Cash flows from financing activities:
Proceeds from capital shares sold 7,850,862 3,834,146
Payments on capital shares redeemed (3,042,113) (1,292,318)
Cash dividends paid * (21,443) (5,551)
Net increase in loan payable to custodian bank 1,800,000 4,000,000
--------- ---------
Net cash provided by financing activities 6,587,306 6,536,277
--------- ---------
Net change in cash 2,691 26
Cash at beginning of period 26 -
--------- ---------
Cash at end of period $ 2,717 $ 26
========== ==========
Reconciliation of net increase in net assets resulting from
operations to net cash used for operating activities:
Net increase in net assets resulting from operations $1,229,237 $1,631,806
---------- ----------
Adjustments to reconcile net increase in net assets from
operations to net cash used for operating activities:
Increase in investment in securities (7,741,424) (8,179,975)
Increase in dividends and interest receivable (97,905) (21,137)
Decrease in deferred organization expenses 1,742 1,737
Increase in accrued management fees 5,993 9,910
Increase in other accrued expenses 17,742 21,408
--------- ---------
Total adjustments (7,813,852) (8,168,057)
---------- ----------
Net cash used for operating activities $(6,584,615) $(6,536,251)
=========== ===========
<FN>
* Non-cash financing activities included herein consist of reinvestment of
distributions to shareholders of $728,016 and $223,529, respectively.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
Merriman Mutual Funds
Financial Highlights
Flexible Bond Fund
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.23 $ 9.94 $ 10.97 $ 10.78 $ 10.19
------- ------ ------- ------- -------
Income from investment operations
Net investment income 0.63 0.55 0.42 0.52 0.66
Net gains or losses on securities
(realized and unrealized) 0.13 0.29 (0.37) 0.65 0.59
------- ------ ------- ------- -------
Total from investment operations 0.76 0.84 0.05 1.17 1.25
------- ------ ------- ------- -------
Less distributions:
From investment income (0.63) (0.55) (0.42) (0.52) (0.66)
From realized capital gains - - (0.66) (0.46) -
------- ------ ------- ----- -----
Total distributions (0.63) (0.55) (1.08) (0.98) (0.66)
------- ------ ------- ----- -----
Net asset value, end of period $ 10.36 $ 10.23 $ 9.94 $ 10.97 $ 10.78
======= ======= ====== ======= =======
Total return 7.62% 8.63% 0.36% 11.61% 12.65%
Net assets end of period ($000) $ 8,661 $ 8,592 $10,542 $12,917 $11,175
Ratio of expenses to average net assets 1.49% 1.50% 1.50% 1.54% 1.51%
Ratio of net income to average net assets 6.05% 5.17% 3.89% 4.91% 6.26%
Portfolio turnover rate 139.77% 291.46% 472.49% 272.87% 2.92%
</TABLE>
<TABLE>
Growth & Income Fund
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.32 $ 10.86 $ 10.92 $ 11.58 $ 11.37
------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.27 0.24 0.11 0.11 0.19
Net gains or losses on securities
(realized and unrealized) 1.02 1.29 (0.04) 0.44 0.21
------- ------- ------- ------- -------
Total from investment operations 1.29 1.53 0.07 0.55 0.40
------- ------- ------- ------- -------
Less distributions:
From investment income (0.27) (0.21) (0.13) (0.09) (0.19)
From realized capital gains (0.69) (0.86) - (1.12) -
------- ------- ------- ------- -------
Total distributions (0.96) (1.07) (0.13) (1.21) (0.19)
------- ------- ------- ------- -------
Net asset value, end of period $ 11.65 $ 11.32 $ 10.86 $ 10.92 $ 11.58
======= ======= ======= ======= =======
Total return 12.18% 15.41% 0.62% 4.86% 3.52%
Net assets end of period ($000) $ 8,702 $ 9,348 $10,701 $16,778 $21,554
Ratio of expenses to average net assets 1.77% 1.76% 1.90% 1.69% 1.60%
Ratio of net income to average net assets 2.33% 2.10% 0.87% 0.93% 1.64%
Portfolio turnover rate 133.00% 78.64% 240.27% 200.67% 90.71%
</TABLE>
<PAGE>
<TABLE>
Merriman Mutual Funds
Financial Highlights (continued)
Capital Appreciation Fund
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.69 $ 10.82 $ 11.63 $ 11.52 $ 11.43
------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.19 0.09 0.19 - 0.27
Net gains or losses on securities
(realized and unrealized) 0.37 1.56 (0.38) 1.29 0.09
------- ------- ------- ------- -------
Total from investment operations 0.56 1.65 (0.19) 1.29 0.36
------- ------- ------- ------- -------
Less distributions:
From investment income (0.22) (0.07) (0.16) (0.04) (0.27)
From realized capital gains (1.10) (0.71) (0.46) (1.14) -
------- ------- ------- ------- -------
Total distributions (1.32) (0.78) (0.62) (1.18) (0.27)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.93 $ 11.69 $ 10.82 $ 11.63 $ 11.52
======= ======= ======= ======= =======
Total return 5.69% 16.43% (1.64)% 11.69% 3.14%
Net assets end of period ($000) $ 16,665 $22,205 $25,579 $39,037 $43,704
Ratio of expenses to average net assets 1.84% 1.78% 1.58% 1.51% 1.46%
Ratio of net income to average net assets 1.74% 0.80% 1.70% 0.04% 2.48%
Portfolio turnover rate 254.77% 146.40% 344.25% 241.90% 122.09%
</TABLE>
<TABLE>
Asset Allocation Fund
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.21 $ 11.22 $ 11.97 $ 10.74 $ 10.82
------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.30 0.25 0.19 0.10 0.31
Net gains or losses on securities
(realized and unrealized) 0.50 0.62 0.15 1.76 (0.08)
------- ------- ------- ------- -------
Total from investment operations 0.80 0.87 0.34 1.86 0.23
------- ------- ------- ------- -------
Less distributions:
From investment income (0.16) (0.25) (0.20) (0.10) (0.31)
From realized capital gains (0.24) (0.63) (0.89) (0.53) -
------- ------- ------- ------- -------
Total distributions (0.40) (0.88) (1.09) (0.63) (0.31)
------- ------- ------- ------- -------
Net asset value, end of period $ 11.61 $ 11.21 $ 11.22 $ 11.97 $ 10.74
======= ======= ======= ======== =======
Total return 7.41% 8.49% 2.91% 18.11% 2.13%
Net assets end of period ($000) $ 17,733 $22,632 $29,984 $ 29,492 $26,508
Ratio of expenses to average net assets 1.82% 1.76% 1.56% 1.52% 1.52%
Ratio of net income to average net assets 2.53% 2.11% 1.63% 0.85% 2.87%
Portfolio turnover rate 204.55% 288.45% 449.55% 225.96% 132.56%
</TABLE>
<PAGE>
<TABLE>
Merriman Mutual Funds
Financial Highlights (continued)
Leveraged Growth Fund
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1996 1995 1994 1993 1992**
---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.30 $ 10.42 $ 10.41 $ 10.04 $ 10.00
------- ------- ------- ------- -------
Income from investment operations
Net investment income (loss) (0.08) (0.04) 0.07 0.06 0.04
Net gains on securities
(realized and unrealized) 0.84 2.33 0.03 0.37 -
------- ------- ------- ------- -------
Total from investment operations 0.76 2.29 0.10 0.43 0.04
------- ------- ------- ------- -------
Less distributions:
From investment income - (0.07) (0.09) (0.06) -
From realized capital gains (0.76) (0.34) - - -
------- ------- ------- ------- -------
Total distributions (0.76) (0.41) (0.09) (0.06) -
------- ------- ------- ------- -------
Net asset value, end of period $ 12.30 $ 12.30 $ 10.42 $ 10.41 $ 10.04
======= ======= ======= ======= =======
Total return 6.85% 22.85% 0.91% 4.32% 0.40%
Net assets, end of period ($000) $15,694 $ 9,686 $ 5,459 $ 5,879 $ 3,577
Ratio of expenses to average net assets (A) 3.70% 2.82% 2.06% 2.03% 2.08%*
Ratio of net income (loss) to average
net assets (0.78)% (0.68)% 0.62% 0.65% 1.09%*
Portfolio turnover rate 247.36% 87.50% 379.64% 130.68% 0.00%
</TABLE>
* Annualized
** Operations commenced May 27, 1992
(A) Expenses include interest expense of 1.95% and 1.01% for 1996 and 1995,
respectively
<TABLE>
Information relating to outstanding debt during the fiscal periods shown below.
<CAPTION>
Average Average Number
Amount of Debt Amount Of Debt of Shares Average Amount of
Outstanding at Outstanding Outstanding Debt per Share
Period ended End of Period During the Period During the Period During the Period
- ------------ ------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
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>
<PAGE>
Merriman Investment Trust
Notes to Financial Statements
Note 1 - Organization
Merriman Flexible Bond Fund, Merriman Growth & Income Fund, Merriman Capital
Appreciation Fund, Merriman Asset Allocation Fund, and Merriman Leveraged Growth
Fund (the "Funds") are separate series of Merriman Investment Trust (the
"Trust") which is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management company. The Trust was organized
in 1987 as a Massachusetts Business Trust and may issue an unlimited number of
shares of beneficial interest without par value in separate classes of "funds."
Each fund has specific investment objectives: The objectives of the Flexible
Bond Fund are income, preservation of capital, and secondarily, growth of
capital. The objectives of the Growth & Income Fund are long-term growth of
capital, income and, secondarily, preservation of capital. The objective of the
Capital Appreciation Fund is capital appreciation. The objectives of the Asset
Allocation Fund are high total return consistent with reasonable risk. The
objective of the Leveraged Growth Fund is capital appreciation through the use
of leverage and other investment practices.
Note 2 - Significant Accounting
Policies The following is a summary of significant accounting policies
consistently followed in the preparation of the Trust's financial statements.
The policies are in conformity with generally accepted accounting principles.
A. Security Valuation. Short-term debt securities are valued at amortized cost,
which approximates market value.Investments in regulated investment companies
(mutual funds) are valued at the net asset value per share.
B. Federal Income Taxes. It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income to its shareholders. Therefore, no
federal income or excise tax provision is required.
C. Income Recognition. Dividend income and distributions to shareholders are
recorded on the exdividend date. Interest income is accrued daily.
D. Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses from security transactions are determined using
the identified cost basis.
E. Dividends and Distributions to Shareholders. Net income and capital gains
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing treatments for post-October losses.
F. Deferred Organization Expenses. All expenses incurred in connection with the
organization and the registration of the Merriman Leveraged Growth Fund were
paid by the Manager and were reimbursed by the Fund. These expenses are being
amortized to operations on a straight line basis over five years.
G. Use of Estimates in Financial Statements. In preparing financial statements
in conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the reported
amounts of income and expenses during the reported period. Actual results may
differ from these estimates.
Note 3 - Investment Management Agreement
Merriman Investment Management Company (the "Manager") receives investment
advisory fees from the Funds. As compensation for its services, the Manager is
paid a fee which is calculated at an annual rate based on the average daily net
assets of each Fund as follows:
Flexible Bond All Other
Fund 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%
The Manager has agreed to limit each Fund's expenses. In the event that a Fund's
expenses exceed any such limitations, the Manager either 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.
The Manager has voluntarily reduced the expense limit to 2% of the first $15
million in net assets, 1.5% on the next $35 million, and 1% of net assets over
$50 million for the Merriman Capital Appreciation Fund, the Merriman Asset
Allocation Fund, and the Merriman Growth & Income Fund, to 2% of the first $15
million in net assets, 1.5% of the next $15 million in net assets, and 1% of net
assets over $30 million for the Merriman Leveraged Growth Fund (exclusive of
interest expense), and to 1.5% on the first $30 million in net assets and 1.0%
of net assets over $30 million for the Merriman Flexible Bond Fund.
There were no reimbursements made for the year ending September 30, 1996.
Certain trustees and officers of the trust are also officers of the Manager.
Note 4 - Bank Line of Credit
The Merriman Leveraged Growth Fund pays $12,000 per year to maintain an
unsecured $6,000,000 bank line of credit; borrowings under this arrangement bear
interest at the bank's prime rate. No compensating balances are required.
Balance outstanding at September 30, 1996 was $5,800,000. Note 5 - (See
Following) Note 6 - Purchases and Sales of Securities Purchases and sales of
specialties, other than short-term investments and money market funds, for the
year ended September 30, 1996 were as follows:
Purchases Sales
Merriman Flexible Bond Fund 9,628,716 9,687,520
Merriman Growth & Income Fund 10,412,923 11,868,446
Merriman Capital Appreciation Fund 38,557,662 45,940,056
Merriman Asset Allocation Fund 34,422,160 41,677,223
Merriman Leveraged Growth Fund 45,975,014 39,284,113
<PAGE>
Merriman Investment Trust
Notes to Financial Statements
Note 5 - Capital Shares
At September 30, 1996, there were an unlimited number of no par value shares of
beneficial interest authorized. Transactions in capital shares were as follows:
<TABLE>
Merriman Flexible Bond Fund Merriman Growth & Income Fund
--------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<CAPTION>
Shares Value Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ............ 186,797 $1,935,639 85,525 $ 858,774 35,642 $ 392,671 27,581 $ 292,106
Shares issued in
reinvestment of
distributions ....... 48,199 495,739 45,669 457,165 70,399 751,157 94,189 948,647
-------- ---------- -------- ---------- -------- ---------- -------- -------
234,996 2,431,378 131,194 1,315,939 106,041 1,143,828 121,770 1,240,753
Shares redeemed ........ (239,644) (2,476,828) (351,861) (3,517,193) (184,316) (2,062,903) (281,992) (3,018,073)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net decrease ........... (4,648) $ (45,450) (220,667) $(2,201,254) (78,275) $ (919,075) (160,222) $(1,777,320)
======== ========== ======== =========== ======== ========== ======== ===========
</TABLE>
<TABLE>
Merriman Capital Appreciation Fund Merriman Asset Allocation Fund
---------------------------------- ------------------------------
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Value Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ ----- ------ -----
Shares sold ........... 183,143 $1,971,809 135,309 $1,440,890 151,662 $1,691,922 231,323 $2,500,130
Shares issued in
reinvestment of
distributions ...... 222,748 2,265,357 169,521 1,696,910 68,147 731,955 190,417 1,976,772
-------- ---------- -------- ---------- -------- ---------- ---------- -----------
405,891 4,237,166 304,830 3,137,800 219,809 2,423,877 421,740 4,476,902
Shares redeemed ....... (781,504) (8,361,309) (768,304) (8,154,957) (711,787) (7,946,716) (1,075,304) (11,652,525)
-------- ---------- -------- ---------- -------- ---------- ---------- -----------
Net decrease .......... (375,613) $(4,124,143) (463,474) $(5,017,157) (491,978) $(5,522,839) (653,564) $(7,175,623)
======== =========== ======== =========== ======== =========== ======== ===========
</TABLE>
<TABLE>
Merriman Leveraged Growth Fund
------------------------------
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1996 1995
---- ----
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold ........... 679,463 $7,842,116 357,815 $3,840,009
Shares issued in
reinvestment of
distributions ...... 65,476 728,016 22,023 223,529
-------- --------- -------- ----------
744,939 8,570,132 379,838 4,063,538
Shares redeemed ....... (256,850) (3,042,113) (116,048) (1,240,693)
-------- ---------- -------- ----------
Net increase .......... 488,089 $5,528,019 263,790 $2,822,845
======== ========== ======== ==========
</TABLE>
<PAGE>
Report of Independent Certified Public Accountants
To The Board of Trustees and Shareholders of
Merriman Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments , of the Merriman Investment Trust, consisting of
the Merriman Flexible Bond Fund, Merriman Growth & Income Fund, Merriman Capital
Appreciation Fund, Merriman Asset Allocation Fund, and Merriman Leveraged Growth
Fund as of September 30, 1996, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, the statement of cash flows of Merriman
Leveraged Growth Fund for each of the two years in the period then ended and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. We conducted our audits
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1996, by correspondence
with the custodian and mutual funds. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the financial
statements and financial highlights referred to above present fairly, in all
material respects, the financial position of each of the respective funds
constituting the Merriman Investment Trust at September 30, 1996, and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years then ended, Merriman Leveraged Growth cash
flows for each of the two years in the period then ended and the financial
highlights for the periods referred to above, in conformity with generally
accepted accounting principles.
Philadelphia, Pennsylvania Tait, Weller & Baker
October 17, 1996
