MERRIMAN MERRIMAN INVESTMENT TRUST
FLEXIBLE BOND 1200 Westlake Ave N, Suite 700
FUND Seattle, WA 98109
1-800-423-4893
MERRIMAN 1-206-285-8877
GROWTH & INCOME FUND
INVESTMENT MANAGER
MERRIMAN Merriman Investment
CAPITAL APPRECIATION Management Company
FUND 1200 Westlake Ave N, Suite 700
Seattle, WA 98109
MERRIMAN
ASSET ALLOCATION CUSTODIAN AND
FUND TRANSFER AGENT
Firstar Trust Company
MERRIMAN PO BOX 701
LEVERAGED GROWTH Milwaukee, WI 53201
FUND 1-800-224-4743
FUND COUNSEL
Sullivan & Worcester
Boston, Massachusetts
SEMI-ANNUAL REPORT INDEPENDENT AUDITORS
Tait, Weller & Baker
PERIOD ENDED Philadelphia, Pennsylvania
MARCH 31, 1997
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:
I am pleased to present the March 31, 1997, semi-annual report to shareholders
of the Merriman Mutual Funds. Included for your review are the financial
statement and portfolio of investments for each fund.
ON THE ECONOMY
The strength of the U.S. economy and the prospects for changes in interest rates
continue to dominate most financial markets. Despite strong evidence of that
strength -- and perhaps partly because of that evidence -- investors continue to
act like bulls suddenly turned into chickens. Domestic stock prices reflect
exuberant confidence in corporate prospects, with price/earnings ratios of the
Standard & Poor's 500 Index now approaching 21, about 40 percent above the mean
yearly average since 1977. However, the bulls temporarily fled for cover in the
first quarter of this year when the Federal Reserve raised the federal funds
rate by a quarter of a point. The venerable bull market just could not stand up
to the combination of anticipation of higher interest rates, the Fed's rate hike
itself and the possibility of future rate hikes. After rising 17.3 percent in
1996, the average U.S. equity mutual fund lost 2 percent in the first quarter of
this year.
Higher interest rates are feared by equities investors because they could dampen
business expansion and at the same time make bonds more attractive, luring some
money out of the stock market. Many observers expect more rate hikes later this
year as "preemptive strikes" by the Fed in an attempt to keep the economic
expansion slow, steady and inflation-free. Thus the market's near-term
performance hinges to some extent on investors' expectations of how much
paranoia the Fed will feel about future inflation prospects.
The most recent rate hike is part of a long and mostly successful war the Fed
has waged for almost two decades, a war that reduced inflation from 11 percent
in 1979 to 5 percent by 1983 and to 3 percent in 1991. Recent statistics
indicate inflation is at a 20-year low of about 2.6 percent. The results of this
war have been more than a decade of overall business expansion and falling
interest rates that have been good to bond and equity investors alike.
The economy kept growing early this year, adding 339,000 new jobs in February
alone. With unemployment and inflation lower than they have been in years, and
despite record levels of household debt, consumer confidence is at its highest
levels since the 1960s. That confidence leads to consumer spending, which fuels
the economy, which fuels the market. But the Fed is wary of the danger that an
overheated market can trigger a resurgence of inflation. So far, the Fed is
doing a reasonably good job of walking the tightrope between choking off growth
and allowing inflation to overheat. Forsaking the drama of bold moves, the
agency raises rates slightly when the economy appears too strong and cuts them
slightly when it appears too sluggish.
Most economists expect this year to bring a repeat of 1996's performance:
moderate growth and modest inflation. We expect interest rate adjustments to be
infrequent and small until it becomes apparent which threatens the economy more,
inflation or recession. However, with the majority of the domestic market made
up of stocks selling at record levels, we expect investors to remain skittish.
The resulting volatility will be very unsettling for many investors, and in our
view the threat of a bear market remains very real. Every one of the Merriman
Mutual Funds is managed using defensive strategies to protect against bear
markets and over-reaction by investors to short-term developments.
By comparison to the United States, the other major world economies are in the
doldrums. Recent indicators point to further growth in Japan. But unemployment
is more than 12 percent in France -- the highest since the end of World War II
- -- and more than 10 percent in Germany. The U.S. dollar has soared in value in
recent months, making U.S. goods more expensive in other countries. The
combination of those higher real prices and weak overseas economies will weaken
<PAGE>
some parts of the U.S. economy later this year. Imports, now relatively less
expensive, should increase. That should make Japanese electronics and European
automobiles less expensive for U.S. consumers. But it will also increase the gap
between U.S. imports and exports.
International stock funds, which have significantly lagged their U.S.
counterparts for the last two years, rose 5.8 percent in the six months of
October 1996 through March 1997. A composite group of all U.S. growth,
aggressive growth and small-company funds rose only 1.7 percent during that
period, while the Standard & Poor's 500 Index was up 11.2 percent.
A LOOK AT THE MERRIMAN MUTUAL FUNDS OVER THE LAST SIX MONTHS
MERRIMAN FLEXIBLE BOND FUND
The Merriman Flexible Bond Fund invests in other mutual funds that hold a broad
spectrum of fixed-income securities. When fully invested, management's current
philosophy calls for investments of 40 percent in domestic high-grade corporate
bond funds, 35 percent in international bond funds and 25 percent in domestic
high-yield bond funds. The Fund attempts to be invested in each group during
market advances and in Treasury bills, money market funds and other cash
equivalents during declining markets. For the six months ending March 31, 1997,
the Fund was up 3.43 percent. This compares with a 2.74 percent return for the
same allocation, without market timing, of comparable fund groups tracked by
Morningstar Inc. The Fund's volatility, measured by standard deviation, is
approximately 25 percent lower than that of a mix of domestic and international
bond funds held without timing.
MERRIMAN ASSET ALLOCATION FUND
The Merriman Asset Allocation Fund attempts to achieve reasonable returns at low
risk using two primary strategies: asset allocation and market timing . In order
to reduce volatility and participate in all major financial markets, the Fund
diversifies its investments among other mutual funds that hold five major asset
groups. When fully invested, management's current philosophy calls for
investments of 30 percent in domestic stock funds, 30 percent in international
stock funds, 15 percent in international bond funds, 7.5 percent in domestic
high-grade corporate bond funds, 7.5 percent in domestic high-yield bond funds
and 10 percent in gold funds. The Fund also attempts to avoid declining markets
through the use of proprietary market-timing models for each asset group. For
the six months ending March 31, 1997, the Fund was up 1.81 percent. This
compared with 1.26 percent for a comparable mix of assets without timing. The
Fund's standard deviation was 6.15, compared with 7.31 for an average of
comparable funds, without timing, tracked by Morningstar.
MERRIMAN GROWTH AND INCOME FUND
The Merriman Growth and Income Fund seeks to achieve moderate growth through
investments in a portfolio of growth-and-income funds. When fully invested,
management's current philosophy calls for investments of 65 percent in U.S.
equity funds and 35 percent in international equity funds. The Fund also uses
timing in an attempt to be invested during market advances and in money-market
funds during market declines. For the six months ending March 31, 1997, the Fund
was up 7.45 percent, compared with 7.69 percent for a group of comparable funds
held without timing. The Fund's standard deviation was 5.64, compared with 10.80
for the comparable funds, without timing, tracked by Morningstar.
MERRIMAN CAPITAL APPRECIATION FUND
The Merriman Capital Appreciation Fund seeks growth through investments in
growth-oriented equity funds and by applying timing in an attempt to be invested
during market advances and in money-market funds during declines. When fully
invested, management's current philosophy calls for investments of 65 percent in
U.S. equity funds and 35 percent in international equity funds. For the six
months ending March 31, 1997, the Fund was up 1.84 percent. A comparable mix of
funds without timing was up 2.00 percent. The Fund's standard deviation was
7.88, compared with 13.11 for an average of comparable funds, without timing,
tracked by Morningstar. <PAGE>
THE MERRIMAN LEVERAGED GROWTH FUND
The Merriman Leveraged Growth Fund seeks to achieve growth by investing in a
similar mix of U.S. and international funds as the Capital Appreciation Fund.
The Fund's defensive strategy is similar to that of our other funds during
declining markets. In addition, when conditions indicate a high probability of
market advances, the Fund may borrow up to $1 for each $2 of net assets for the
purpose of making additional investments. During strong market advances, the
Leveraged Growth Fund will normally produce higher returns than the Capital
Appreciation Fund. During periods when trends are less defined or when the
market is declining, the Fund will normally produce lower returns than the
Capital Appreciation Fund. For the period, the Fund was up 0.22 percent. A
comparable mix of funds without timing or leverage was up 2.00 percent. The
Fund's standard deviation was 10.58, compared with 13.11 for an average of
comparable funds, without timing, tracked by Morningstar.
THE BOTTOM LINE?
FOR THE SIX MONTHS ENDED MARCH 31, OUR FIVE FUNDS PRODUCED RETURNS COMPARABLE TO
FUNDS WITH SIMILAR OBJECTIVES, BUT AT 16 TO 48 PERCENT LESS RISK.
While U.S. equity investments have been very profitable over the past several
years, we continue to believe the market poses an increasing level of risk. We
believe investors need defensive strategies to protect themselves against a
possible bear market. In our view, the best defensive strategies are
diversification and market timing, and we use them in each of our funds.
Market-timing often detracts from short-term performance. But we remain
convinced it is a valuable and worthwhile tool for preserving capital while
attempting to participate in advancing markets. As always, we appreciate your
confidence in the Merriman Mutual Funds and in our defensive approach to
investing.
Sincerely,
Paul A. Merriman
President
<PAGE>
MERRIMAN FLEXIBLE BOND FUND
Portfolio of Investments
March 31, 1997
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
HIGH-YIELD CORPORATE BOND FUNDS: 26.68%
----------------------------------------
45,366 Federated High Income Bond Fund ...........................$ 513,088
55,689 Federated High Yield Trust ................................. 507,880
41,820 Fidelity Advisor High Yield Fund ........................... 501,420
71,541 INVESCO Bond High Yield Fund ............................... 498,640
48,640 Northeast Investors Trust .................................. 542,824
-------
Total High-Yield Corporate Bond Funds
(Cost $2,305,000) ........................................ 2,563,852
---------
INTERNATIONAL BOND FUNDS: 4.70%
--------------------------------
36,340 Scudder Emerging Markets Income Fund ....................... 451,340
-------
Total International Bond Funds
(Cost $426,266)........................................... 451,340
-------
MONEY MARKET FUNDS: 57.40%
---------------------------
431,158 Babson Money Market Fund ................................... 431,158
408,695 Benham Government Agency Fund .............................. 408,695
439,134 Columbia Daily Income Fund ................................. 439,134
437,005 Dreyfus Institutional Money Market Fund .................... 437,005
477,232 Federated Money Market Trust ............................... 477,232
834,018 Fidelity Cash Reserves Fund ................................ 834,018
465,107 G. T. Global Dollar Fund ................................... 465,107
406,931 Scudder U.S. Treasury Money Fund ........................... 406,931
428,606 Scudder Cash Investment Trust .............................. 428,606
434,807 Stein Roe Cash Reserves Fund ............................... 434,807
321,295 T. Rowe Price Prime Reserve Fund ........................... 321,295
432,859 T. Rowe Price US Treasury Money Fund ....................... 432,859
-------
Total Money Market Funds
(Cost $5,516,847)........................................... 5,516,847
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 12.05%
--------------------------------
$459,600 American Family Financial Services,
5.2865%, 04/01/97......................................... 459,600
461,200 Johnson Controls Inc.,
5.3200%, 04/01/97......................................... 461,200
111,000 Warner Lambert Co.,
5.2570%, 04/01/97......................................... 111,000
126,900 Wisconsin Electric Power Company,
5.3265%, 04/01/97......................................... 126,900
-------
Total Short-Term Demand Notes
(Cost $1,158,700)......................................... 1,158,700
---------
Total Investment in Securities
(Cost $9,406,813) (a).....................100.83% 9,690,739
Liabilities in excess
of other assets........................ (0.83)% (80,225)
----- -------
NET ASSETS.................................100.00% $9,610,514
====== ==========
(a)Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation...................................... $ 283,926
Gross unrealized depreciation...................................... 0
-------
Net Unrealized Appreciation........................................ $ 283,926
=========
<PAGE>
MERRIMAN GROWTH & INCOME FUND
Portfolio of Investments
March 31, 1997
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
- ------ ---------
DOMESTIC EQUITY FUNDS: 25.97%
------------------------------
19,017 INVESCO Value Equity Fund...................................$ 459,444
17,880 Neuberger & Berman Guardian Fund ............................ 459,508
23,433 SAFECO Income Fund .......................................... 493,041
23,769 Salomon Brothers Investors Fund ............................. 448,285
19,737 T. Rowe Price Growth & Income Fund .......................... 443,682
-------
Total Domestic Equity Funds
(Cost $2,131,839)............................................ 2,303,960
---------
INTERNATIONAL EQUITY FUNDS: 40.04%
-----------------------------------
24,838 Fidelity Int'l Growth & Income Fund ......................... 487,579
67,840 G.T. Global Growth & Income Fund ............................ 504,726
27,083 INVESCO European Fund ....................................... 460,133
15,682 Janus Worldwide Fund ........................................ 558,295
16,406 Scudder Global Fund ......................................... 486,113
30,644 T. Rowe Price European Stock Fund ........................... 553,425
36,344 T. Rowe Price International Stock Fund ...................... 501,547
-------
Total International Equity Funds
(Cost $2,864,036)............................................ 3,551,818
---------
MONEY MARKET FUNDS: 30.86%
---------------------------
396,889 Columbia Daily Income Fund ................................. 396,889
445,615 Fidelity Cash Reserves Fund ................................ 445,615
414,389 Founders Money Market Fund ................................. 414,389
449,005 Janus Cash Equivalents Fund ................................ 449,005
554,741 Lexington Money Market Fund ................................ 554,741
476,558 Strong Money Market Fund ................................... 476,558
-------
Total Money Market Funds
(Cost $2,737,197)........................................... 2,737,197
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 3.15%
--------------------------------
$184,400 Johnson Controls Inc.,
5.3200%, 04/01/97........................................... 184,400
95,200 Wisconsin Electric Power Company,
5.3265%, 04/01/97........................................... 95,200
------
Total Short-Term Demand Notes
(Cost $279,600)............................................. 279,600
-------
Total Investment in Securities
(Cost $8,012,672).....................(a) 100.02% 8,872,575
Liabilities in excess,
of other assets......................... (0.02)% (1,500)
----- ------
NET ASSETS................................ 100.00% $8,871,075
====== ==========
(a) Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation...................................$ 859,903
Gross unrealized depreciation................................... 0
-------
Net Unrealized Appreciation........................................$ 859,903
==========
<PAGE>
MERRIMAN CAPITAL APPRECIATION FUND
Portfolio of Investments
March 31, 1997
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 22.90%
------------------------------
17,269 Salomon Opportunity Fund..................................$ 729,622
38,550 Scudder Large Company Value Fund ......................... 874,309
57,433 T. Rowe Price Capital Appreciation Fund .................. 835,074
33,762 T. Rowe Price Growth Stock Fund .......................... 875,113
748 T. Rowe Price New Horizon Fund ........................... 14,411
------
Total Domestic Equity Funds
(Cost $3,261,626)......................................... 3,328,529
---------
INTERNATIONAL EQUITY FUNDS: 33.59%
-----------------------------------
41,091 Federated Int'l Equity Fund Class A ...................... 684,575
58,661 Fidelity European Capital Appreciation Fund .............. 841,198
39,387 Founders Worldwide Growth Fund ........................... 859,420
27,038 Scudder Global Fund ...................................... 801,138
51,358 Scudder Pacific Opportunity Fund ......................... 861,278
46,163 T. Rowe Price European Stock Fund ........................ 833,698
-------
Total International Equity Funds
(Cost $4,345,811)......................................... 4,881,307
---------
MONEY MARKET FUNDS: 39.35%
---------------------------
1,633,097 American Century Cash Reserves Fund ...................... 1,633,097
797,521 Founders Money Market Fund ............................... 797,521
782,871 SAFECO Money Market Fund ................................. 782,871
680,700 Strong Money Market Fund ................................. 680,700
150,770 Stein Roe Cash Reserves Fund ............................. 150,770
871,769 T. Rowe Price Prime Reserve Fund ......................... 871,769
801,259 USAA Money Market Fund ................................... 801,259
-------
Total Money Market Funds
(Cost $5,717,987)......................................... 5,717,987
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 4.33%
-------------------------------
$ 300,900 American Family Financial Services,
5.2865%, 04/01/97......................................... 300,900
250,000 Johnson Controls Inc.,
5.3200%, 04/01/97......................................... 250,000
78,100 Sara Lee Corporation,
5.2652% 04/01/97.......................................... 78,100
------
Total Short-Term Demand Notes
(Cost $629,000)........................................... 629,000
-------
Total Investment in Securities
(Cost $13,954,424)..................(a).100.17% 14,556,823
Liabilities in excess
of other assets....................... (0.17)% (24,795)
----- -------
NET ASSETS .............................100.00% $14,532,028
======= ===========
(a) Cost for federal income tax purposes is the same
and net unrealized appreciation consists of:
Gross unrealized appreciation................................... $675,944
Gross unrealized depreciation................................... (73,545)
-------
Net Unrealized Appreciation..................................... $602,399
========
<PAGE>
MERRIMAN ASSET ALLOCATION FUND
Portfolio of Investments
March 31, 1997
Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: .03%
----------------------------
215 T. Rowe Price New Horizons Fund .......................$ 4,138
-----
Total Domestic Equity Funds
(Cost $4,774)........................................... 4,138
-----
INTERNATIONAL EQUITY FUNDS: 31.88%
-----------------------------------
83,449 Fidelity European Capital Appreciation Fund ............ 1,196,665
69,073 INVESCO European Fund .................................. 1,173,550
57,413 INVESCO Strategic Pacific Basin Fund ................... 722,253
34,446 Scudder Global Fund .................................... 1,020,644
63,736 T. Rowe Price European Stock Fund ...................... 1,151,073
---------
Total International Equity Funds
(Cost $4,445,841)....................................... 5,264,185
---------
HIGH YIELD CORPORATE BOND FUNDS: 12.48%
----------------------------------------
54,207 Federated High Income Bond Fund ........................ 613,078
77,029 Federated High Yield Trust ............................. 702,503
66,827 Northeast Investors Trust .............................. 745,785
-------
Total High Yield Corporate Bond Funds
(Cost $1,837,671)...................................... 2,061,366
---------
INTERNATIONAL BOND FUNDS: 3.80%
--------------------------------
50,514 Scudder Emerging Markets Fund .......................... 627,380
-------
Total International Bond Funds
(Cost $590,000)......................................... 627,380
-------
MONEY MARKET FUNDS: 46.44%
---------------------------
801,644 American Century Cash Reserves Fund .................... 801,644
864,095 Am Century Benham Govt Agency Fund ..................... 864,095
618,682 Federated Money Market Fund ............................ 618,682
864,160 Founders Money Market Fund ............................. 864,160
328,743 INVESCO Cash Reserves Fund ............................. 328,743
308,234 Lexington Money Market Fund ............................ 308,234
867,104 SAFECO Money Market Fund ............................... 867,104
395,201 Scudder Investment Trust ............................... 395,201
235,201 Scudder U.S. Treasury Fund ............................. 235,201
21,791 Stein Roe Cash Reserves Fund ........................... 21,791
1,195,808 T. Rowe Price Prime Reserve Fund ....................... 1,195,808
288,137 United Services US Treasury Money Fund ................. 288,137
880,054 USAA Money Market Fund ................................. 880,054
-------
Total Money Market Funds
(Cost $7,668,854)....................................... 7,668,854
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 5.38%
-------------------------------
$ 181,100 American Family Financial Services,
5.2865% 04/01/97........................................$ 181,100
299,500 Johnson Controls Inc.,
5.3200%, 04/01/97....................................... 299,500
398,800 Sara Lee Corporation,
5.2652%, 04/01/97....................................... 398,800
9,000 Wisconsin Electric Power Company,
5.3265%, 04/01/97....................................... 9,000
-----
Total Short-Term Demand Notes
(Cost $888,400)......................................... 888,400
-------
Total Investment in Securities
(Cost $15,435,540)...........................(a) 100.01% 16,514,323
Liabilities in excess
of other assets.............................. (0.01)% (2,107)
----- ------
NET ASSETS......................................100.00% $16,512,216
======= ===========
(a) Cost for federal income tax purposes is the same
and net unrealized appreciation consists of:
Gross unrealized appreciation................................. $1,173,669
Gross unrealized depreciation................................. (94,886)
-------
Net Unrealized Appreciation................................... $1,078,783
==========
<PAGE>
MERRIMAN LEVERAGED GROWTH FUND
Portfolio of Investments
March 31, 1997
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 14.46%
------------------------------
22,205 Federated Stock Trust.......................................$ 735,198
33,467 Scudder Large Company Value Fund ........................... 759,038
26,635 T. Rowe Price Growth Stock Fund ............................ 690,371
262 T. Rowe Price New Horizons Fund ............................ 5,050
-----
Total Domestic Equity Funds
(Cost $2,113,544)........................................... 2,189,657
---------
INTERNATIONAL EQUITY FUNDS: 47.43%
-----------------------------------
35,113 Federated Int'l Equity Fund Class A ........................ 584,977
55,020 Fidelity European Capital App Fund ......................... 788,992
35,832 Founders Worldwide Growth Fund ............................. 781,858
52,545 G.T. Global Emerging Markets Fund A ........................ 804,992
49,570 INVESCO European Fund ...................................... 842,195
23,690 Janus Worldwide Fund ....................................... 843,359
27,599 Scudder Global Fund ........................................ 817,748
46,856 Scudder Pacific Opportunity Fund ........................... 785,771
51,618 T. Rowe Price European Stock Fund .......................... 932,216
-------
Total International Equity Funds
(Cost $6,208,672)........................................... 7,182,108
---------
MONEY MARKET FUNDS: 34.83%
---------------------------
735,121 Founders Money Market Fund ................................. 735,121
742,598 Neuberger Berman Cash Reserves Fund ........................ 742,598
743,232 SAFECO Money Market Fund ................................... 743,232
830,059 Strong Money Market Fund ................................... 830,059
781,870 T. Rowe Price Prime Reserve Fund ........................... 781,870
713,430 USAA Money Market Fund ..................................... 713,430
728,961 Value Line Cash Fund ....................................... 728,961
-------
Total Money Market Funds
(Cost $5,275,271)........................................... 5,275,271
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 3.63%
-------------------------------
$312,400 American Family Financial Services,
5.2865%, 04/01/97..........................................$ 312,400
197,200 Johnson Controls Inc.,
5.3200%, 04/01/97.......................................... 197,200
39,900 Wisconsin Electric Power Company,
5.3265%, 04/01/97.......................................... 39,900
------
Total Short-Term Demand Notes
(Cost $549,500)............................................ 549,500
-------
Total Investment in Securities
(Cost $14,146,987)........................(a) 100.35% 15,196,536
Liabilities in excess,
of other assets............................... (0.35%) (53,282)
----- -------
NET ASSETS......................................100.00% $ 15,143,254
======= ============
(a) Cost for federal income tax purposes is the same
and net unrealized appreciation consists of:
Gross unrealized appreciation.................................. $1,066,424
Gross unrealized depreciation.................................. (16,875)
-------
Net Unrealized Appreciation.................................... $1,049,549
==========
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1997
(Unaudited)
<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 $9,406,813, $8,012,672,
$13,954,424, $15,435,540 and $14,146,987
respectively) (Note 2) $9,690,739 $8,872,575 $14,556,823 $16,514,323 $15,196,536
Cash - - 30 - 37
Dividends and interest receivable 48,413 17,325 10,309 35,783 10,702
Deferred organization expenses - - - - 284
-------- --------- ---------- ---------- ----------
Total assets 9,739,152 8,889,900 14,567,162 16,550,106 15,207,559
--------- --------- ---------- ---------- ----------
Liabilities
Accrued management fees 8,256 9,609 15,896 17,967 16,268
Other accrued expenses 4,546 9,216 19,238 19,923 48,037
Distributions payable 115,836 - - - -
------- --------- ---------- --------- ----------
Total liabilities 128,638 18,825 35,134 37,890 64,305
------- ------ ------ ------ ------
Net Assets
(Applicable to 926,690, 790,469, 1,447,717,
1,561,545 and 1,288,249 shares of beneficial
interest with no par value, unlimited number
of shares authorized) $9,610,514 $8,871,075 $14,532,028 $16,512,216 $15,143,254
========== ========== =========== =========== ===========
Pricing of Shares
Net asset value, offering and redemption
price per share
$ 9,610,514 / 926,690 shares $ 10.37
==========
$ 8,871,075 / 790,469 shares $ 11.22
==========
$14,532,028 / 1,447,717 shares $ 10.04
===========
$16,512,216 / 1,561,545 shares $ 10.57
===========
$15,143,254 / 1,288,249 shares $ 11.75
===========
Net assets
At March 31, 1997, net assets consisted of:
Paid-in capital $9,361,144 $7,650,912 $13,479,206 $15,237,277 $13,760,156
Undistributed net investment income 30,758 6,583 - 54,736 81,695
Accumulated net realized gain (loss) (65,314) 353,677 450,423 141,420 251,854
Unrealized appreciation on investments 283,926 859,903 602,399 1,078,783 1,049,549
------- ------- ------- --------- ---------
$9,610,514 $8,871,075 $14,532,028 $16,512,216 $15,143,254
========== ========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
Six Months Ended March 31, 1997
(Unaudited)
<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 $ 12,652 $ 7,728 $ 9,320 $ 10,380 $ 4,327
Dividends 348,400 209,798 308,199 468,652 381,377
------- ------- ------- ------- -------
Total investment income 361,052 217,526 317,519 479,032 385,704
------- ------- ------- ------- -------
Expenses
Management fees (Note 3) 45,328 55,527 98,498 108,352 96,577
Accounting services 8,588 9,965 16,294 17,480 16,635
Custodian fees 1,282 1,402 2,630 2,980 3,147
Transfer agent fees 3,950 4,724 12,501 12,360 8,226
Interest expense (Note 4) - - - - 164,865
Professional services 2,405 2,411 4,584 4,926 4,940
Registration fees 2,573 2,311 5,028 5,373 4,350
Insurance and other 1,672 1,638 4,058 4,357 3,007
Printing 683 693 1,397 1,530 1,175
Trustees fees 97 127 228 263 221
Amortization of organization expenses - - - - 866
-------- ------- -------- ------- ---
Total expenses 66,578 78,798 145,218 157,621 304,009
------ ------ ------- ------- -------
Net investment income 294,474 138,728 172,301 321,411 81,695
------- ------- ------- ------- ------
Realized and unrealized gain (loss)
on investments
Net realized gain (loss)from security transactions 31,890 108,104 73,843 (209,163) (463,381)
Capital gain distributions from regulated investment
companies 19,800 245,693 389,870 352,400 723,048
Increase (decrease) in unrealized appreciation of
investments (54,660) 148,663 (323,206) (130,503) (301,246)
------- ------- -------- -------- --------
Net realized and unrealized gain (loss
on investments (2,970) 502,460 140,507 12,734 (41,579)
------ ------- ------- ------ -------
Net increase in net assets resulting from
operations $ 291,504 $641,188 $ 312,808 $ 334,145 $ 40,116
========== ======== ========= =========== ========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
MERRIMAN FLEXIBLE BOND FUND MERRIMAN GROWTH & INCOME FUND
---------------------------- -----------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, MARCH 31, 1997, SEPTEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
----------- ---- ----------- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 294,474 $ 522,260 $ 138,728 $ 210,420
Net realized gain on investments 31,890 11,709 108,104 833,675
Capital gain distributions from regulated investment
companies 19,800 2,057 245,693 257,241
Net increase (decrease) in unrealized appreciation
on investments (54,660) 99,779 148,663 (264,367)
------- ------ ------- --------
Net increase in net assets resulting from operations 291,504 635,805 641,188 1,036,969
Distributions to shareholders:
Distributions from net realized gain on investments - - (744,845) (547,218)
Distributions from net investment income (295,051) (521,876) (168,793) (217,137)
Capital share transactions:
Increase (decrease) in net assets resulting from capital
share transactions (Note 6) 953,511 (45,450) 441,691 (919,075)
- ------- ------- ------- --------
Total increase (decrease) 949,964 68,479 169,241 (646,461)
Net assets
Beginning of period 8,660,550 8,592,071 8,701,834 9,348,295
--------- --------- --------- ---------
End of period * $9,610,514 $8,660,550 $8,871,075 $8,701,834
========== ========== ========== ==========
<FN>
* Including undistributed net investment income of: $ 30,758 $ 48 $ 6,583 $ 36,648
</FN>
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Merriman Capital Merriman Asset
Appreciation Fund Allocation Fund
----------------- ---------------
Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1997 September 30, March 31, 1997 September 30,
(Unaudited) 1996 (Unaudited) 1996
----------- ---- ----------- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 172,301 $ 323,438 $ 321,411 $ 501,177
Net realized gain (loss) on investments 73,843 1,371,325 (209,163) 1,200,254
Capital gain distributions from regulated investment
companies 389,870 1,085,491 352,400 403,950
Net decrease in unrealized appreciation on investments (323,206) (1,896,938) (130,503) (735,043)
-------- ---------- -------- --------
Net increase in net assets resulting from operations 312,808 883,316 334,145 1,370,338
Distributions to shareholders:
Distributions from net realized gain on investments (1,384,017) (1,914,315) (1,375,201) (446,499)
Distributions from net investment income (172,301) (385,016) (490,612) (300,168)
Capital share transactions:
Increase (decrease) in net assets resulting from capital
share transactions (Note 6) (889,274) (4,124,143) 310,562 (5,522,839)
-------- ---------- ------- ----------
Total decrease (2,132,784) (5,540,158) (1,221,106) (4,899,168)
Net assets
Beginning of period 16,664,812 22,204,970 17,733,322 22,632,490
---------- ---------- ---------- ----------
End of period * $14,532,028 $16,664,812 $16,512,216 $17,733,322
<FN>
=========== =========== =========== ===========
* Including undistributed net investment income of: $ - $ - $ 54,736 $ 223,937
</FN>
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<CAPTION>
Merriman Leveraged Growth Fund
------------------------------
Six Months Ended Year Ended
March 31, 1997 September 30,
(Unaudited) 1996
----------- ----
<S> <C> <C>
Operations:
Net investment income (loss) $ 81,695 $ (107,064)
Net realized gain (loss) on investments (463,381) 720,399
Capital gain distributions from regulated investment companies 723,048 679,989
Net decrease in unrealized appreciation on investments (301,246) (64,087)
-------- -------
Net increase in net assets resulting from operations 40,116 1,229,237
------ ---------
Distributions to shareholders:
Distributions from net realized gain on investments (710,778) (749,459)
Capital share transactions:
Increase in net assets resulting from
capital share transactions (Note 6) 119,789 5,528,019
------- ---------
Total increase (decrease) (550,873) 6,007,797
Net assets
Beginning of period 15,694,127 9,686,330
---------- ---------
End of period * $15,143,254 $15,694,127
=========== ===========
<FN>
* Including undistributed net investment income of: $ 81,695 $ -
</FN>
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
MERRIMAN LEVERAGED GROWTH FUND
STATEMENTS OF CASH FLOW
<CAPTION>
Six Months Ended Year Ended
March 31, 1997 September 30,
(Unaudited) 1996
----------- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH Cash flows from operating activities:
Dividends and interest received $ 501,188 $ 305,984
Operating expenses paid (303,213) (485,475)
Net (cost of purchase) proceeds from disposition of short-term investments (536,600) 347,785
Purchases of portfolio securities (12,268,171) (58,806,738)
Proceeds from disposition of portfolio securities 18,994,405 52,053,829
---------- ----------
Net cash provided by (used for) operating activities 6,387,609 (6,584,615)
--------- ----------
Cash flows from financing activities:
Proceeds from capital shares sold 1,077,073 7,850,862
Payments on capital shares redeemed (1,635,072) (3,042,113)
Cash dividends paid * (32,290) (21,443)
Net increase (decrease) in loan payable to custodian bank (5,800,000) 1,800,000
---------- ---------
Net cash provided by (used for) operating activities (6,390,289) 6,587,306
---------- ---------
Net change in cash (2,680) 2,691
Cash at beginning of period 2,717 26
----- --
Cash at end of period $ 37 $ 2,717
=========== ==========
Reconciliation of net increase in net assets resulting from operations to net
cash provided by (used for) operating activities:
Net increase in net assets resulting from operations $ 40,116 $1,229,237
----------- ----------
Increase (decrease) in investment in securities 6,231,213 (7,741,424)
Increase (decrease) in dividends and interest receivable 115,484 (97,905)
Decrease in deferred organization expenses 867 1,742
Increase in accrued management fee 369 5,993
Increase (decrease) in other accrued expenses (440) 17,742
---- ------
Total adjustments 6,347,493 (7,813,852)
--------- ----------
Net cash provided by (used for) operating activities $ 6,387,609 $(6,584,615)
=========== ===========
<FN>
* Non-cash financing activities included herein consist of reinvestment of
distributions to shareholders of $678,488 and $728,016, respectively.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<CAPTION>
Flexible Bond Fund
(for a share outstanding throughout the period)
Year Ended September 30,
------------------------
1997(a) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.36 $10.23 $9.94 $10.97 $10.78 $10.19
------ ------ ----- ------ ------ ------
Income from investment operations
Net investment income 0.34 0.63 0.55 0.42 0.52 0.66
Net gains or losses on securities
(realized and unrealized) 0.02 0.13 0.29 (0.37) 0.65 0.59
---- ---- ---- ----- ---- ----
Total from investment operations 0.36 0.76 0.84 0.05 1.17 1.25
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.35) (0.63) (0.55) (0.42) (0.52) (0.66)
From realized capital gains - - - (0.66) (0.46) -
----- ----- ----- ----- ----- ------
Total distributions (0.35) (0.63) (0.55) (1.08) (0.98) (0.66)
----- ----- ----- ----- ----- -----
Net asset value, end of period $10.37 $10.36 $10.23 $ 9.94 $10.97 $10.78
====== ====== ====== ====== ====== ======
Total return 3.39% 7.62% 8.63% 0.36% 11.61% 12.65%
Net assets end of period ($000) $9,611 $8,661 $8,592 $10,542 $12,917 $11,175
Ratio of expenses to average net assets 1.47%* 1.49% 1.50% 1.50% 1.54% 1.51%
Ratio of net income to average net assets 6.49%* 6.05% 5.17% 3.89% 4.91% 6.26%
Portfolio turnover rate 7.84% 139.77% 291.46% 472.49% 272.87% 2.92%
</TABLE>
<TABLE>
<CAPTION>
Growth & Income Fund
--------------------
(for a share outstanding throughout the period)
Year Ended September 30,
1997(a) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.65 $ 11.32 $ 10.86 $ 10.92 $ 11.58 $ 11.37
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.19 0.27 0.24 0.11 0.11 0.19
Net gains or losses on securities
(realized and unrealized) 0.65 1.02 1.29 (0.04) 0.44 0.21
---- ---- ---- ----- ---- ----
Total from investment operations 0.84 1.29 1.53 0.07 0.55 0.40
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.23) (0.27) (0.21) (0.13) (0.09) (0.19)
From realized capital gains (1.04) (0.69) (0.86) - (1.12) -
----- ----- ----- -----
Total distributions (1.27) (0.96) (1.07) (0.13) (1.21) (0.19)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 11.22 $ 11.65 $ 11.32 $ 10.86 $ 10.92 $ 11.58
======= ======= ======= ======= ======= =======
Total return 7.45% 12.18% 15.41% 0.62% 4.86% 3.52%
Net assets end of period ($000) $ 8,871 $ 8,702 $ 9,348 $10,701 $ 16,778 $21,554
Ratio of expenses to average net assets 1.77%* 1.77% 1.76% 1.90% 1.69% 1.60%
Ratio of net income to average net assets 3.12%* 2.33% 2.10% 0.87% 0.93% 1.64%
Portfolio turnover rate 22.74% 133.00% 78.64% 240.27% 200.67% 90.71%
<FN>
(a) Six Months Ended March 31, 1997 (Unaudited)
* Annualized
</FN>
</TABLE>
<PAGE>
<TABLE>
Merriman Mutual Funds
Financial Highlights (continued)
<CAPTION>
Capital Appreciation Fund
(for a share outstanding throughout the period)
Year Ended September 30,
------------------------
1997(a) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.93 $ 11.69 $ 10.82 $ 11.63 $ 11.52 $ 11.43
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.13 0.19 0.09 0.19 - 0.27
Net gains or losses on securities
(realized and unrealized) 0.08 0.37 1.56 (0.38) 1.29 0.09
---- ---- ---- ----- ---- ----
Total from investment operations 0.21 0.56 1.65 (0.19) 1.29 0.36
---- ---- ---- ----- ---- ----
Less distributions:
From investment income (0.13) (0.22) (0.07) (0.16) (0.04) (0.27)
From realized capital gains (0.97) (1.10) (0.71) (0.46) (1.14) -
----- ----- ----- ----- -----
Total distributions (1.10) (1.32) (0.78) (0.62) (1.18) (0.27)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 10.04 $ 10.93 $ 11.69 $ 10.82 $ 11.63 $ 11.52
======= ======= ======= ======= ======= =======
Total return 1.84% 5.69% 16.43% (1.64)% 11.69% 3.14%
Net assets end of period ($000) $14,532 $16,665 $22,205 $25,579 $39,037 $43,704
Ratio of expenses to average net assets 1.84%* 1.84% 1.78% 1.58% 1.51% 1.46%
Ratio of net income to average net assets 2.19%* 1.74% 0.80% 1.70% 0.04% 2.48%
Portfolio turnover rate 28.67% 254.77% 146.40% 344.25% 241.90% 122.09%
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation Fund
(for a share outstanding throughout the period)
Year Ended September 30,
------------------------
1997(a) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.61 $ 11.21 $ 11.22 $ 11.97 $ 10.74 $ 10.82
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.22 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 0.22 0.80 0.87 0.34 1.86 0.23
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.33) (0.16) (0.25) (0.20) (0.10) (0.31)
From realized capital gains (0.93) (0.24) (0.63) (0.89) (0.53) -
----- ----- ----- ----- -----
Total distributions (1.26) (0.40) (0.88) (1.09) (0.63) (0.31)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 10.57 $ 11.61 $ 11.21 $ 11.22 $ 11.97 $ 10.74
======= ======= ======= ======= ======= =======
Total return 1.81% 7.41% 8.49% 2.91% 18.11% 2.13%
Net assets end of period ($000) $16,512 $17,733 $22,632 $29,984 $29,492 $26,508
Ratio of expenses to average net assets 1.82%* 1.82% 1.76% 1.56% 1.52% 1.52%
Ratio of net income to average net assets 3.71%* 2.53% 2.11% 1.63% 0.85% 2.87%
Portfolio turnover rate 44.99% 204.55% 288.45% 449.55% 225.96% 132.56%
</TABLE>
[FN]
(a) Six Months Ended March 31, 1997 (Unaudited)
* Annualized
[/FN]
<PAGE>
<TABLE>
Merriman Mutual Funds
Financial Highlights (continued)
<CAPTION>
Leveraged Growth Fund
(for a share outstanding throughout the period)
Year Ended September 30,
------------------------
1997(a) 1996 1995 1994 1993 1992**
------- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.30 $ 12.30 $ 10.42 $ 10.41 $ 10.04 $ 10.00
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.06 (0.08) (0.04) 0.07 0.06 0.04
Net gains on securities
(realized and unrealized) (0.03) 0.84 2.33 0.03 0.37 -
----- ---- ---- ---- ----
Total from investment operations 0.03 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 (0.58) (0.76) (0.34) - - -
----- ----- -----
Total distributions (0.58) (0.76) (0.41) (0.09) (0.06) -
----- ----- ----- ----- -----
Net asset value, end of period $ 11.75 $ 12.30 $ 12.30 $ 10.42 $ 10.41 $ 10.04
======= ======= ======= ======= ======= =======
Total return 4.91% 6.85% 22.85% 0.91% 4.32% 0.40%
Net assets end of period ($000) $15,143 $15,694 $ 9,686 $ 5,459 $ 5,879 $ 3,577
Ratio of expenses to average net assets (b) 3.94%* 3.70%* 2.82% 2.06% 2.03% 2.08%*
Ratio of net income to average net assets 1.06%* (0.78)%* (0.68)% 0.62% 0.65% 1.09%*
Portfolio turnover rate 39.07% 247.36% 87.50% 379.64% 130.68% 0.00%
<FN>
(a) Six Months Ended March 31, 1997 (Unaudited)
(b) Expenses include interest expense of 2.13% and 1.95% for 1997 and 1996,
respectively
*Annualized
** Operations commenced May 27, 1992
</FN>
</TABLE>
<TABLE>
INFORMATION RELATING TO OUTSTANDING DEBT DURING THE FISCAL PERIOD 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>
March 31, 1997 - $3,828,984 1,265,462 $3.03
September 30, 1996 $5,800,000 $2,981,434 1,156,941 $2.58
</TABLE>
<PAGE>
MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
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 require-
ments 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 ex-dividend 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 six months ending March 31, 1997.
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 March 31, 1997 was $0. Merriman Investment Trust Notes to
Financial Statements
<PAGE>
MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CAPITAL SHARES
At March 31, 1997, 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
--------------------------- -----------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, MARCH 31, 1997 SEPTEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
----------- ---- ----------- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 178,201 $1,876,447 186,797 $ 1,935,639 30,754 $352,811 35,642 $392,671
Shares issued in
reinvestment of
distributions...... 16,201 170,109 48,199 495,739 81,475 896,229 70,399 751,157
------ ------- ------ ------- ------ ------- ------ -------
194,402 2,046,556 234,996 2,431,378 112,229 1,249,040 106,041 1,143,828
Shares redeemed....... (103,352) (1,093,045) (239,644) (2,476,828) (69,010) (807,349) (184,316) (2,062,903)
-------- ---------- -------- ---------- ------- -------- -------- ----------
Net increase (decrease) 91,050 $953,511 (4,648) $ (45,450) 43,219 $ 441,691 (78,275) $( 919,075)
====== ======== ====== ========== ====== ========= ======= == =======
</TABLE>
<TABLE>
MERRIMAN CAPITAL APPRECIATION FUND MERRIMAN ASSET ALLOCATION FUND
---------------------------------- ------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, MARCH 31, 1997 SEPTEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
----------- ---- ----------- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold .......... 50,845 $539,807 183,143 $ 1,971,809 80,416 $915,689 151,662 $1,691,922
Shares issued in
reinvestment of
distributions ..... 152,931 1,547,663 222,748 2,265,357 171,398 1,818,529 68,147 731,955
------- --------- ------- --------- ------- --------- ------ -------
203,776 2,087,470 405,891 4,237,166 251,814 2,734,218 219,809 2,423,877
Shares redeemed ..... (280,194) (2,976,744) (781,504) (8,361,309) (217,172) (2,423,656) (711,787) (7,946,716)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase (decrease) (76,418) $ (889,274) (375,613) $(4,124,143) 34,642 $ 310,562 (491,978)$(5,522,839)
======= ========== ======== =========== ====== ========== ======== ===========
</TABLE>
<TABLE>
MERRIMAN LEVERAGED GROWTH FUND
------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30,
(UNAUDITED) 1996
----------- ----
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Shares sold........... 88,572 $1,076,373 679,463 $ 7,842,116
Shares issued in
reinvestment of
distributions...... 57,160 678,488 65,476 728,016
------ ------- ------ -------
145,732 1,754,861 744,939 8,570,132
Shares redeemed....... (133,166) (1,635,072) (256,850) (3,042,113)
-------- ---------- -------- ----------
Net increase.......... 12,566 $119,789 488,089 $ 5,528,019
====== ======== ======= ===========
</TABLE>
NOTE 6 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments and money
market funds, for the six months ended March 31, 1997 were as follows:
PURCHASES SALES
--------- -----
Merriman Flexible Bond Fund............... $ 487,293 $ 5,939,953
Merriman Growth & Income Fund............. 1,751,812 4,395,378
Merriman Capital Appreciation Fund........ 3,937,136 11,271,064
Merriman Asset Allocation Fund............ 6,127,416 13,389,253
Merriman Leveraged Growth Fund............ 6,992,899 18,271,358
