MERRIMAN
INVESTMENT TRUST
MERRIMAN
FLEXIBLE BOND FUND
MERRIMAN
GROWTH & INCOME FUND
MERRIMAN
CAPITAL APPRECIATION
FUND
MERRIMAN
ASSET ALLOCATION
FUND
MERRIMAN
LEVERAGED GROWTH
FUND
SEMI-ANNUAL REPORT
PERIOD ENDED
MARCH 31, 1998
MERRIMAN INVESTMENT TRUST
1200 Westlake Ave N, Suite 700
Seattle, WA 98109
1-800-423-4893
1-206-285-8877
www.merrimanfunds.com
INVESTMENT MANAGER
Merriman Investment
Management Company
1200 Westlake Ave N, Suite 700
Seattle, WA 98109
CUSTODIAN AND
TRANSFER AGENT
Firstar Trust Company
PO Box 701
Milwaukee, WI 53201
1-800-224-4743
FUND COUNSEL
Sullivan & Worcester
Boston, Massachusetts
INDEPENDENT AUDITORS
Tait, Weller & Baker
Philadelphia, Pennsylvania
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>
MERRIMAN INVESTMENT TRUST
Dear Fellow Shareholder:
I am pleased to present the March 31, 1998, 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.
THE ECONOMY
The faltering economies of Southeast Asia are casting a long shadow over the
global economic picture. The International Monetary Fund has said Japan, the
world's second largest economic power, will be challenged to achieve even zero
growth in 1998. This spring, world finance ministers are pressuring Japan to
revive its stagnant economy and absorb more imports, especially from emerging
markets.
The Commerce Department reported that the U.S. trade deficit including goods and
services rose 4.2 percent in February, to $12.1 billion. That is the highest
mark since the government started tracking monthly figures in 1992. The monthly
trade deficit for goods alone hit $17.5 billion in February, an all-time high in
a series of data that goes back more than 100 years. The trade imbalance with
Japan rose 21.4 percent, to $5.3 billion. The January U.S. trade deficit with
newly industrialized countries in Asia was $2.2 billion, nearly three times its
level of one year earlier.
Economists believe the deficit with Asia will rise sharply later this year as
exporters feel the brunt of reduced purchasing power in Asia. In addition, the
rising value of the dollar against Asian currencies makes U.S. goods more
expensive in that region. This is expected to reduce industrial production in
the U.S. And it could depress economic growth and profits in Europe as well.
By contrast, the U.S. economy is marked by essentially full employment, dormant
inflation and extremely high consumer confidence. Travel demand is high,
bringing prosperity to airline and hotel companies. Falling petroleum prices
have reduced costs at many businesses. Housing starts early this year were at
their highest level in more than a decade, and because housing has a huge
multiplier effect in the economy, demand for many goods and services is and
should remain high for much of this year.
However, profit growth has slowed at many U.S. companies, and some economists
believe the growth in real gross domestic product, up 3.8 percent last year,
will slow to about half that level in the second half of 1998. In an indicator
that's good news for workers but not so good for business, wages are expected to
rise by 4 percent this year, more than twice the expected rate of inflation.
The rising stock market has done wonders for many investors and for companies
that provide products and services to investors. The New York Times reported
this spring that U.S. households now have more wealth tied up in stocks than in
home equity. In contrast to their parents, who accumulated wealth after World
War II in the housing market, Baby Boomers are obviously counting on stocks to
finance college for their children and retirement for themselves. There is a
risk that a drop in confidence could prompt many Boomers to desert the market,
possibly wiping out much of the huge demand that has fueled the long bull market
of the 1990s.
YEAR 2000: WHAT WE'RE DOING
You have probably heard of the "Year 2000" problem, also known as Y2K, the
potential difficulty that many computer systems and computer chips will have
identifying dates after December 31, 1999. The problem could affect everything
from credit cards to airliners to home security systems. For an overview of the
problem, its cause and the difficulties in fixing it, see the April issue of our
newsletter Fund Exchange. If you didn't receive a copy, call our office and
we'll send you one.
<PAGE>
This is a serious situation, but we do not expect it to result in major
long-term problems. However, despite everybody's best efforts, we do not expect
every glitch to be identified and repaired before January 1, 2000. Some devices
and some systems will malfunction, and we should expect to experience at least
some inconveniences, frustrations and surprises in the last months of 1999 and
the first months of 2000.
We are not immune to this problem, and we are doing our best to make sure that
all hardware and software we use will work properly in the transition to the new
century and to make sure that our business partners have their own houses in
order. In our company, any software and hardware that cannot be brought into
compliance will be replaced before the year 2000.
We have been closely monitoring the efforts of our custodian and transfer agent,
Firstar Trust Company, and we have every confidence that company will be
successful in complying. As the situation evolves, we will keep you informed. In
the meantime, rest assured that we will do whatever it takes to continue our
operations and provide completely accurate information to our shareholders.
A LOOK AT THE MERRIMAN MUTUAL FUNDS OVER THE PAST SIX MONTHS
PERFORMANCE OVERVIEW
For the six months ended March 31, each of our five funds produced positive
returns. But there was a striking difference between the results in the last
three months of 1997 and the first three of 1998, as the following figures show.
<TABLE>
<CAPTION>
3 MONTHS ENDING 3 MONTHS ENDING 6 MONTHS ENDING
FUND DECEMBER 31, 1997 MARCH 31, 1998 MARCH 31, 1998
<S> <C> <C> <C>
FLEXIBLE BOND -0.2% +2.0% +1.8%
GROWTH & INCOME -4.0% +11.3% +6.9%
CAPITAL APPRECIATION -7.5% +11.0% +2.7%
ASSET ALLOCATION -5.5% +8.2% +2.3%
LEVERAGED GROWTH -10.3% +14.8% +3.0%
</TABLE>
The last quarter of 1997 was marked by wrenching volatility in U.S. markets and
a deepening crisis in Asia. That crisis faded into the background early this
year, and both U.S. and international stock markets defied many predictions by
turning in extremely strong performances in February and March.
MERRIMAN FLEXIBLE BOND FUND
The Merriman Flexible Bond Fund invests in other mutual funds whose portfolios
include a broad spectrum of fixed-income securities. We seek a mix of
investments that offer the best opportunities for attractive returns with
below-average volatility. The Fund's present policy calls for investments of up
to 40 percent in domestic high-grade corporate and government bond funds, 35
percent in international bond funds and the remaining 25 percent in domestic
high-yield bond funds. When our timing systems indicate declining market trends,
we shift the Fund's assets to Treasury bills, money-market funds and other cash
equivalents.
For the six months ending March 31, 1998, the Fund was up 1.8 percent. This
compares with an average 3.4 percent return for multi-sector bond funds tracked
by Morningstar, Inc. The Fund's volatility is approximately 25 percent lower
than the average multi-sector bond fund.
MERRIMAN GROWTH AND INCOME FUND
The Merriman Growth and Income Fund invests in other mutual funds whose
portfolios include growth-and-income securities, in an effort to achieve
moderate growth. The Fund's present policy calls for investments of up to 65
percent in U.S. equity funds and up to 35 percent in international equity funds.
The Fund uses market timing and fund timing and during periods of declining
markets may shift assets to Treasury bills, money-market funds and other cash
equivalents.
<PAGE>
For the six months ending March 31, 1998, the Fund was up 6.9 percent, compared
with 13.3 percent for growth and income funds tracked by Morningstar. The Fund's
volatility was 28 percent less than the average growth and income fund.
MERRIMAN CAPITAL APPRECIATION FUND
The Merriman Capital Appreciation Fund seeks growth of capital by investing in
other mutual funds whose portfolios include growth, aggressive growth and
small-cap securities. The Fund's present policy calls for investments up to 65
percent in U.S. equity funds and up to 35 percent in international equity funds.
The Fund uses market timing and fund timing in order to shift assets to
money-market funds and other cash equivalents during declining markets.
For the six months ending March 31, 1998, the Fund rose 2.7 percent. This
compared with 10.9 percent for growth funds tracked by Morningstar. The Fund's
volatility was 26 percent less than the average of growth funds.
MERRIMAN ASSET ALLOCATION FUND
The Merriman Asset Allocation Fund invests in other mutual funds whose
portfolios include five major asset groups. The Fund's present policy calls for
investments of up to 30 percent in U.S. equity funds, 30 percent in
international equity funds, 15 percent in U.S. bond funds, 15 percent in
international bond funds and 10 percent in gold funds. The Fund applies market
timing to each asset class and during declining markets, we shift the Fund's
assets to money-market funds and other cash equivalents.
For the six months ending March 31, 1998, the Fund was up 2.3 percent. This
compared with 7.7 percent for asset allocaiton funds tracked by Moringstar. The
Fund's volatility is 0.2 percent higher than the average of asset allocation
funds.
THE MERRIMAN LEVERAGED GROWTH FUND
The Merriman Leveraged Growth Fund invests in a mix of domestic and
international mutual funds similar to that of the Capital Appreciation Fund, and
it uses similar market timing and fund timing models to reduce the risks of
losses that occur in declining markets. During rising markets, the Leveraged
Growth Fund takes a more aggressive approach to seek above-average returns. The
Fund may borrow up to $1 for each $2 of net assets for the purpose of making
additional investments when timing models indicate a high probability of market
gains.
For the six months ending March 31, 1998, the Fund was up 3.0 percent. This
compared with 10.9 percent for growth funds tracked by Morningstar. The Fund's
volatility was 4 percent more than the average of growth funds.
AN UNCERTAIN FUTURE
As productive as it has been for investors, we continue to believe that the U.S.
stock market now poses abnormally high risks. We believe a bear market is likely
in the future, and we think investors need the protection of defensive
strategies like those we use in our funds. In our view, the best defensive
strategies are broad diversification, which reduces volatility, and market
timing, which we believe is a worthwhile tool for preserving capital while
attempting to participate in advancing markets.
As always, we appreciate your confidence in the Merriman Mutual Funds and in our
defensive approach to investing.
Sincerely,
Paul A. Merriman
President
<PAGE>
MERRIMAN FLEXIBLE BOND FUND
Portfolio of Investments
March 31, 1998
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ------------
HIGH GRADE CORPORATE BOND FUNDS: 39.96%
----------------------------------------
294,872 Babson Bond Trust L.T..................................$ 462,949
34,457 Columbia Fixed Income Fund............................. 461,034
31,293 Dreyfus A Bond Trust................................... 461,565
45,337 Fidelity Intermediate Bond Fund........................ 461,079
50,979 T. Rowe Price New Income Fund.......................... 461,357
30,562 Scudder Income Fund.................................... 410,442
51,570 Stein Roe Intermediate Bond Fund....................... 461,031
40,856 Strong Corporate Bond Fund............................. 458,816
-------
Total High Grade Corporate Bond Funds
(Cost $3,630,231)...................................... 3,638,273
---------
HIGH-YIELD CORPORATE BOND FUNDS: 28.16%
----------------------------------------
42,116 Federated High Income Bond Fund........................ 509,605
52,390 Federated High Yield Trust............................. 510,804
34,965 Fidelity Advisor High Yield Fund....................... 459,435
67,239 INVESCO Income High Yield Fund......................... 500,258
48,640 Northeast Investors Trust.............................. 583,682
-------
Total High-Yield Corporate Bond Funds
(Cost $2,332,061)...................................... 2,563,784
---------
INTERNATIONAL BOND FUNDS: 28.74%
---------------------------------
39,819 Benham International Bond Fund......................... 434,824
41,539 Federated Int'l Income Fund Class A.................... 428,272
48,197 Fidelity International Fund............................ 439,555
34,838 G.T. Global High Income Fund Class A................... 458,812
35,534 Scudder Emerging Markets Income Fund................... 415,387
43,991 Scudder International Bond Fund........................ 440,791
-------
Total International Bond Funds
(Cost $2,657,303)...................................... 2,617,641
---------
MONEY MARKET FUNDS: 0.76%
--------------------------
41,271 Am Cent Benham Govt Agency Fund........................ 41,271
27,711 G.T. Global Dollar Fund................................ 27,711
Total Money Market Funds
(Cost $68,982)......................................... 68,982
PRINCIPAL
AMOUNT
---------
SHORT-TERM DEMAND NOTES: 3.20%
-------------------------------
$ 291,800 Johnson Controls, Inc.,
5.2925%, 04/07/98
(Cost $291,800)........................................ 291,800
-------
Total Investment in Securities
(Cost $8,980,377) (a)..........................100.82% 9,180,480
Liabilities in Excess
of other Assets...............................(0.82)% (74,779)
----- -------
NET ASSETS.....................................100.00% $9,105,701
======= ==========
(a)Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation.................................... $ 262,856
Gross unrealized depreciation.................................... (62,753)
---------
Net Unrealized Appreciation...................................... $ 200,103
=========
See Accompanying Notes to Financial Statements
5
<PAGE>
MERRIMAN GROWTH & INCOME FUND
Portfolio of Investments
March 31, 1998
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ------------
DOMESTIC EQUITY FUNDS: 62.11%
------------------------------
17,587 Am Cent Benham Income & Growth Fund....................$ 486,450
14,300 Fidelity Fund.......................................... 480,776
11,111 Fidelity Growth & Income Fund.......................... 476,000
29,824 Founders Blue Chip Fund................................ 229,347
14,970 INVESCO Value Equity Fund.............................. 465,120
17,316 Janus Growth & Income Fund............................. 460,425
21,225 Lexington Growth & Income Fund......................... 482,238
16,103 Neuberger & Berman Guardian Fund....................... 473,417
21,632 SAFECO Equity Fund..................................... 477,640
18,410 Safeco Income Fund..................................... 489,339
15,658 Scudder Growth & Income Fund........................... 477,267
57,473 Value Line Fund........................................ 491,973
11,651 WPG Growth & Income Fund............................... 466,147
-------
Total Domestic Equity Funds
(Cost $5,528,251)...................................... 5,956,139
---------
INTERNATIONAL EQUITY FUNDS: 35.44%
-----------------------------------
22,204 Fidelity Int'l Growth & Income Fund.................... 490,481
53,066 G.T. Global Growth & Income Fund....................... 489,269
28,427 INVESCO European Fund.................................. 531,862
11,278 Janus Worldwide Growth Fund............................ 496,015
22,310 T. Rowe Price European Stock Fund...................... 509,122
13,340 Scudder Global Fund.................................... 423,281
8,815 Scudder International Fund............................. 458,913
-------
Total International Equity Funds
(Cost $3,172,160)...................................... 3,398,943
---------
PRINCIPAL
AMOUNT
---------
SHORT-TERM DEMAND NOTES: 2.44%
--------------------------------
$ 233,800 Pitney Bowes, Inc.,
5.2925%, 04/07/98
(Cost $233,800)........................................ 233,800
-------
Total Investment in Securities
(Cost $8,934,211) (a)..........................99.99% 9,588,882
Other Assets
Less Liabilities...............................0.01% 1,315
----- -----
NET ASSETS....................................100.00% $9,590,197
======= ==========
(a)Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation.................................... $ 698,883
Gross unrealized depreciation.................................... (44,212)
---------
Net Unrealized Appreciation...................................... $ 654,671
=========
See Accompanying Notes to Financial Statements
6
<PAGE>
MERRIMAN CAPITAL APPRECIATION FUND
Portfolio of Investments
March 31, 1998
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ------------
DOMESTIC EQUITY FUNDS: 63.60%
------------------------------
24,973 Am Cent 20th Century Growth Fund.......................$ 690,510
34,144 Am Cent 20th Century Vista Fund........................ 455,135
18,257 Columbia Growth Fund................................... 723,718
12,562 Fidelity Trend Fund.................................... 795,071
27,708 Founders Discovery Fund................................ 723,728
85,560 Founders Special Fund.................................. 739,240
59,783 Neuberger Berman Manhattan Fund........................ 733,533
22,070 T. Rowe Price Growth Stock Fund........................ 735,822
14,476 T. Rowe Price New America Fund......................... 750,125
100 T. Rowe Price New Horizon Fund......................... 2,638
28,630 Safeco Growth Fund..................................... 760,123
17,630 Strong Opportunity Fund................................ 735,460
35,522 USAA Growth Fund....................................... 715,414
34,232 Value Line Fund........................................ 718,537
-------
Total Domestic Equity Funds
(Cost $8,491,069)...................................... 9,279,054
---------
INTERNATIONAL EQUITY FUNDS: 34.60%
-----------------------------------
76,669 American Century Int'l Growth Fund..................... 740,626
39,320 Federated Int'l Equity Fund Class A.................... 826,497
41,617 Fidelity Worldwide Fund................................ 767,426
39,928 Invesco European Fund.................................. 747,046
67,609 Invesco Strategic Pacific Basin Fund................... 551,689
21,078 Scudder Global Fund.................................... 668,794
14,329 Scudder International Fund............................. 745,975
-------
Total International Equity Funds
(Cost $4,761,659)...................................... 5,048,053
---------
PRINCIPAL
AMOUNT
---------
SHORT-TERM DEMAND NOTES: 1.82%
-------------------------------
$ 8,300 Johnson Controls, Inc.,
5.2925%, 04/07/98...................................... 8,300
257,400 Pitney Bowes, Inc.,
5.2925% 04/07/98....................................... 257,400
-------
Total Short-Term Demand Notes
(Cost $265,700)........................................ 265,700
-------
Total Investment in Securities
(Cost $13,518,428) (a)........................100.02% 14,592,807
Liabilities in Excess
of Other Assets........................... (0.02)% (2,967)
----- ------
NET ASSETS ...................................100.00% $14,589,840
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation..........................$1,142,386
Gross unrealized depreciation.......................... (68,007)
-------
Net Unrealized Appreciation............................$1,074,379
==========
See Accompanying Notes to Financial Statements
7
<PAGE>
MERRIMAN ASSET ALLOCATION FUND
Portfolio of Investments
March 31, 1998
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ------------
DOMESTIC EQUITY FUNDS: 32.12%
------------------------------
27,114 Am Cent 20th Century Growth Fund.......................$ 749,697
24,956 Am Cent 20th Century Ultra Fund........................ 789,859
92,088 Founders Special Fund.................................. 795,642
16,184 T. Rowe Price New America Fund......................... 838,673
100 T. Rowe Price New Horizons Fund........................ 2,638
38,104 USAA Growth Fund....................................... 767,419
36,826 Value Line Fund........................................ 772,972
-------
Total Domestic Equity Funds
(Cost $4,356,920)...................................... 4,716,900
---------
INTERNATIONAL EQUITY FUNDS: 31.53%
-----------------------------------
45,617 Fidelity European Capital App Fund..................... 821,565
21,434 Fidelity Overseas Fund................................. 794,985
43,084 INVESCO European Fund.................................. 806,100
56,009 G.T. Global Emerging Markets Fund...................... 686,671
22,673 Scudder Global Fund.................................... 719,415
15,415 Scudder International Fund............................. 802,488
-------
Total International Equity Funds
(Cost $4,406,718)...................................... 4,631,224
---------
HIGH GRADE CORPORATE BOND FUNDS: 4.93%
---------------------------------------
175,159 Babson Bond Trust, L.T................................. 275,000
49,684 T. Rowe Price New Income Fund.......................... 449,643
Total High Grade Corporate Bond Funds
(Cost $726,630)........................................ 724,643
HIGH-YIELD CORPORATE BOND FUNDS: 11.67%
----------------------------------------
54,213 Federated High Income Bond Fund........................ 655,981
34,410 INVESCO Income High Yield Fund......................... 256,009
66,827 Northeast Investors Trust.............................. 801,919
...... -------
Total High Yield Corporate Bond Funds
(Cost $1,492,728)...................................... 1,713,909
.......... ---------
INTERNATIONAL BOND FUNDS: 11.90%
---------------------------------
30,312 Federated Int'l Income Fund Class A.................... 312,520
55,950 G.T. Global High Income Fund Class A................... 736,856
59,749 Scudder Emerging Markets Fund.......................... 698,467
-------
Total International Bond Funds
(Cost $1,785,401)...................................... 1,747,843
---------
GOLD FUNDS: 7.43%
------------------
38,794 Am Cent Benham Global Gold Eq Fund..................... 268,454
105,488 Invesco Strategic Portfolio Gold Fund.................. 272,160
78,033 Lexington Gold Fund.................................... 277,016
44,151 USAA Gold Fund......................................... 274,177
-------
Total Gold Funds
(Cost $1,091,807)...................................... 1,091,807
---------
PRINCIPAL
AMOUNT
---------
SHORT-TERM DEMAND NOTES: 0.41%
-------------------------------
$ 59,900 Pitney Bowes, Inc.,
5.2925% 04/07/98
(Cost $59,900)......................................... 59,900
------
Total Investment in Securities
(Cost $13,920,104) (a).........................99.99% 14,686,226
Other Assets
Less Liabilities.............................0.01% 1,755
----- -----
NET ASSETS....................................100.00% $14,687,981
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation..........................$ 883,411
Gross unrealized depreciation.......................... (117,289)
----------
Net Unrealized Appreciation............................$ 766,122
==========
See Accompanying Notes to Financial Statements
8
<PAGE>
Merriman Leveraged Growth Fund
Portfolio of Investments
March 31, 1998
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 92.23%
------------------------------
32,759 Am Cent 20th Century Growth Fund.......................$ 905,776
17,591 Am Cent 20th Century Select Fund....................... 852,300
68,615 Am Cent 20th Century Vista Fund........................ 914,641
21,577 Columbia Growth Fund................................... 855,303
30,878 Fidelity Disciplined Equity Fund....................... 907,516
35,239 Founders Discovery Fund................................ 920,440
101,167 Founders Special Fund.................................. 874,086
70,652 Neuberger Berman Manhattan Fund........................ 866,902
56,390 T. Rowe Price Capital Appreciation Fund................ 884,759
27,274 T. Rowe Price Growth Stock Fund........................ 909,312
17,009 T. Rowe Price New America Fund......................... 881,422
100 T. Rowe Price New Horizon Fund......................... 2,638
33,433 Safeco Growth Fund..................................... 887,655
27,437 SteinRoe Capital Opportunity Fund...................... 921,058
23,658 SteinRoe Growth Stock Fund............................. 909,869
27,578 SteinRoe Special Fund.................................. 881,103
19,980 Strong Opportunity Fund................................ 829,583
44,391 USAA Growth Fund....................................... 894,034
40,456 Value Line Fund........................................ 849,181
53,359 Value Line Special Situations Fund..................... 909,244
-------
Total Domestic Equity Funds
(Cost $15,674,812).....................................16,856,822
-----------
INTERNATIONAL EQUITY FUNDS: 44.53%
-----------------------------------
94,697 Am Century Int'l Growth Fund........................... 914,771
47,363 Fidelity Worldwide Fund................................ 873,382
38,173 Founders Worldwide Growth Fund......................... 910,044
64,170 INVESCO European Small Co. Fund........................ 946,507
88,046 Lexington WW Emerging Markets Fund..................... 900,712
27,249 Scudder Global Fund.................................... 864,599
36,866 Scudder Greater Euro Growth Fund....................... 950,415
16,928 Scudder Intenational Fund.............................. 881,269
76,908 Strong International Stock Fund........................ 898,283
-------
Total International Equity Funds
(Cost $7,782,448)...................................... 8,139,982
---------
PRINCIPAL
AMOUNT
---------
SHORT-TERM DEMAND NOTES: 0.82%
-------------------------------
$ 149,400 Pitney Bowes, Inc.,
5.2925%, 04/07/98
(Cost $149,400)........................................ 149,400
-------
Total Investment in Securities
(Cost $23,606,660) (a)......................137.58% 25,146,204
Liabilities in Excess
of Other Assets...........................(37.58%) (6,868,323)
------ ----------
NET ASSETS..................................100.00% $ 18,277,881
======= ============
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation..........................$1,706,130
Gross unrealized depreciation.......................... (166,586)
----------
Net Unrealized Appreciation............................$1,539,544
==========
See Accompanying Notes to Financial Statements
9
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1998
(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 $8,980,377, $8,934,211,
$13,518,428, $13,920,104 and $23,606,660,
respectively) (Note 2) $9,180,480 $9,588,882 $14,592,807 $ 14,686,226 $ 25,146,204
Cash 15 - 20,688 20,353 -
Dividends and interest receivable 49,111 11,608 3,494 10,808 6,842
Receivable for fund shares sold - 3,836 - - 22,430
---------- ---------- ----------- ------------ ------------
Total assets 9,229,606 9,604,326 14,616,989 14,717,387 25,175,476
---------- ---------- ----------- ------------ ------------
LIABILITIES
Loan payable to custodian bank - - - - 6,810,000
Accrued management fees 7,826 9,978 15,160 15,517 18,630
Other accrued expenses 975 4,151 11,989 13,889 68,965
Distributions payable 115,104 - - - -
---------- ---------- ----------- ------------ ------------
Total liabilities 123,905 14,129 27,149 29,406 6,897,595
---------- ---------- ----------- ------------ ------------
NET ASSETS
(Applicable to 858,420, 936,542, 1,507,294, 1,442,298
and 1,553,310 shares of beneficial interest with no
par value, unlimited number of shares authorized) $9,105,701 $9,590,197 $14,589,840 $14,687,981 $18,277,881
========== ========== =========== =========== ===========
PRICING OF SHARES
Net asset value, offering and redemption price
per share
$ 9,105,701 / 885,420 shares $ 10.28
==========
$ 9,590,197 / 936,542 shares $ 10.24
============
$14,589,840 / 1,507,294 shares $ 9.68
===========
$14,687,981 / 1,442,298 shares $ 10.18
============
$18,277,881 / 1,553,310 shares $ 11.77
===========
NET ASSETS
At March 31, 1998, net assets consisted of:
Paid-in capital $8,903,011 $ 8,772,312 $13,418,865 $ 13,631,636 $15,846,260
Undistributed net investment income - 8,900 - 49,750 -
Accumulated net realized gain 2,587 154,314 96,596 240,473 892,077
Unrealized appreciation on investments 200,103 654,671 1,074,379 766,122 1,539,544
---------- ----------- ----------- ------------ -----------
$9,105,701 $ 9,590,197 $14,589,840 $ 14,687,981 $18,277,881
========== =========== =========== ============ ===========
See Accompanying Notes to Financial Statements
</TABLE>
10
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
Six Months Ended March 31, 1998
(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 $ 5,519 $ 9,855 $ 10,871 $ 12,348 $ 14,840
Dividends 383,207 273,201 331,434 544,875 481,854
---------- ---------- ---------- ---------- ----------
Total investment income 388,726 283,056 342,305 557,223 496,694
---------- ---------- ---------- ---------- ----------
EXPENSES
Management fees (Note 3) 45,268 56,626 87,640 93,177 102,665
Accounting services 9,472 9,357 14,117 15,830 16,892
Custodian fees 1,612 1,378 2,106 2,210 2,535
Transfer agent fees 3,449 4,048 9,792 9,446 7,564
Interest expense (Note 4) - - - - 133,868
Professional services 2,825 2,913 4,644 4,892 5,343
Registration fees 2,392 1,924 4,433 4,667 3,900
Insurance and other 1,650 1,619 3,079 3,685 3,406
Printing 748 748 1,332 1,443 1,456
Trustees fees 137 127 217 252 260
---------- ---------- ---------- ---------- ----------
Total expenses 67,553 78,740 127,360 135,602 277,889
---------- ---------- ---------- ---------- ----------
Net investment income 321,173 204,316 214,945 421,621 218,805
---------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain from security transactions 19,935 736,524 1,349,076 1,280,213 2,247,025
Capital gain distributions from regulated investment
companies 15,857 434,980 602,938 411,558 1,019,123
Net decrease in unrealized appreciation of
investments (192,596) (772,749) (1,845,422) (1,864,253) (2,966,737)
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments (156,804) 398,755 106,592 (172,482) 299,411
-------- ---------- ---------- ---------- ----------
Net increase in net assets resulting from
operations $ 164,369 $ 603,071 $ 321,537 $ 249,139 $ 518,216
========== ========== ========== =========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
11
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
MERRIMAN FLEXIBLE MERRIMAN GROWTH &
BOND FUND INCOME FUND
----------------- -----------------
SIX MONTHS SIX MONTHS
ENDED ENDED
MARCH 31, YEAR ENDED MARCH 31, YEAR ENDED
1998 SEPTEMBER 30, 1998 SEPTEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 321,173 $ 513,832 $ 204,316 $ 129,552
Net realized gain on investments 19,935 256,067 736,524 870,904
Capital gain distributions from regulated investment
companies 15,857 17,291 434,980 256,262
Net increase (decrease) in unrealized appreciation on
investments (192,596) 54,113 (772,749) 716,179
---------- --------- ---------- ----------
Net increase in net assets resulting from operations 164,369 841,303 603,071 1,972,897
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments (189,558) - (2,141,643) (747,438)
Distributions from net investment income (353,727) (513,096) (195,416) (166,200)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from capital
share transactions (Note 6) 265,067 230,793 1,809,832 (246,740)
---------- --------- ---------- ---------
Total increase (decrease) (113,849) 559,000 75,844 812,519
NET ASSETS
Beginning of period 9,219,550 8,660,550 9,514,353 8,701,834
---------- ---------- ---------- ----------
End of period* $9,105,701 $9,219,550 $9,590,197 $9,514,353
* Including undistributed net investment income of: $ - $ 32,071 $ 8,900 $ -
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MERRIMAN CAPITAL MERRIMAN ASSET
APPRECIATION FUND ALLOCATION FUND
SIX MONTHS SIX MONTHS
ENDED ENDED
MARCH 31, YEAR ENDED MARCH 31, YEAR ENDED
1998 SEPTEMBER 30, 1998 SEPTEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 214,945 $ 89,880 $ 421,621 $ 381,940
Net realized gain on investments 1,349,076 526,544 1,280,213 99,855
Capital gain distributions from regulated investment
companies 602,938 416,968 411,558 339,133
Net increase (decrease) in unrealized appreciation on
investments (1,845,422) 1,994,196 (1,864,253) 1,421,089
---------- ---------- ----------- ----------
Net increase in net assets resulting from operations 321,537 3,027,588 249,139 2,242,017
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments (2,703,217) (1,466,440) (1,888,468) (1,375,201)
Distributions from net investment income (244,043) (89,880) (487,136) (490,612)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from capital
shares transactions (Note 6) 1,648,171 (2,568,688) 271,089 (1,566,169)
----------- ---------- ---------- ----------
Total decrease (977,552) (1,097,420) (1,855,376) (1,189,965)
NET ASSETS
Beginning of period 15,567,392 16,664,812 16,543,357 17,733,322
----------- ----------- ----------- -----------
End of period* $14,589,840 $15,567,392 $14,687,981 $16,543,357
=========== =========== =========== ===========
* Including undistributed net investment income of: $ - $ - $ 49,750 $ 115,264
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MERRIMAN LEVERAGED
GROWTH FUND
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 218,805 $ (242,377)
Net realized gain on investments 2,247,025 209,024
Capital gain distributions from regulated investment
companies 1,019,123 741,886
Net increase (decrease) in unrealized appreciation on
investments (2,966,737) 3,155,486
----------- -----------
Net increase in net assets resulting from operations 518,216 3,864,019
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gains on investments (3,317,075) (710,872)
Distributions from net investment income (345,901) -
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from
capital share transactions (Note 6) 3,637,392 (1,062,025)
----------- -----------
Total increase 492,632 2,091,122
NET ASSETS
Beginning of period 17,785,249 15,694,127
----------- -----------
End of period* $18,277,881 $17,785,249
=========== ===========
* Including undistributed net investment income of: $ - $ -
=========== ============
</TABLE>
See Accompanying Notes to Financial Statements
13
<PAGE>
<TABLE>
<CAPTION>
MERRIMAN LEVERAGED GROWTH FUND
STATEMENTS OF CASH FLOW
SIX MONTHS ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 1997
----------- -----------
INCREASE (DECREASE) IN CASH
<S> <C> <C>
Cash flows from operating activities:
Dividends and interest received $ 490,624 $ 544,041
Operating expenses paid (263,624) (650,899)
Net purchases of short-term investments (21,900) (114,600)
Purchases of portfolio securities (56,179,034) (32,899,636)
Proceeds from sales of portfolio securities 56,187,635 33,692,429
------------ ------------
Net cash provided by operating activities 213,701 571,335
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital shares sold 1,537,462 2,575,686
Payments on capital shares redeemed (1,391,886) (4,315,499)
Cash dividends paid * (171,132) (32,384)
Net increase (decrease) in loan payable to custodian bank (190,000) 1,200,000
------------ ------------
Net cash used for financing activities (215,556) (572,197)
------------ ------------
Net change in cash (1,855) (862)
Cash at beginning of year 1,855 2,717
------------ -----------
Cash at end of year $ - $ 1,855
============ ===========
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 $ 518,216 $ 3,864,019
------------ -----------
Adjustments to reconcile net increase in net assets from operations to net
cash provided by (used for) operating activities:
Increase in investment securities (290,252) (3,428,203)
Increase in receivable for investments sold (22,458) -
(Increase) decrease in dividends and interest receivable (6,070) 125,414
Decrease in deferred organization expenses - 1,151
Increase in accrued management fees 932 1,799
Increase in other accrued expenses 13,333 7,155
----------- -----------
Total adjustments (304,515) (3,292,684)
----------- -----------
Net cash provided by operating activities $ 213,701 $ 571,335
=========== ===========
</TABLE>
* Non-cash financing activities included herein consist of reinvestment of
distributions to shareholders of $3,491,844 and $678,488, respectively.
See Accompanying Notes to Financial Statements
14
<PAGE>
<TABLE>
<CAPTION>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
FLEXIBLE BOND FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1998(a) 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.74 $ 10.36 $ 10.23 $ 9.94 $ 10.97 $ 10.78
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.38 0.60 0.63 0.55 0.42 0.52
Net gains or losses on securities
(realized and unrealized) (0.19) 0.38 0.13 0.29 (0.37) 0.65
------- ------- ------- ------- ----- -------
Total from investment operations 0.19 0.98 0.76 0.84 0.05 1.17
------- ------- ------- ------- ---- -------
Less distributions:
From investment income (0.42) (0.60) (0.63) (0.55) (0.42) (0.52)
From realized capital gains (0.23) - - - (0.66) (0.46)
------- ------- ------- ------- ------- ------
Total distributions (0.65) (0.60) (0.63) (0.55) (1.08) (0.98)
------- ------- ------- ------- ------- ------
Net asset value, end of period $ 10.28 $ 10.74 $ 10.36 $ 10.23 $ 9.94 $ 10.97
======= ======= ======= ======= ======= =======
Total return 1.78% 9.64% 7.62% 8.63% 0.36% 11.61%
Net assets end of period ($000) $ 9,106 $ 9,220 $ 8,661 $ 8,592 $10,542 $12,917
Ratio of expenses to average net assets 1.49%* 1.46% 1.49% 1.50% 1.50% 1.54%
Ratio of net income to average net assets 7.08%* 5.54% 6.05% 5.17% 3.89% 4.91%
Portfolio turnover rate 52.09% 172.73% 139.77% 291.46% 472.49% 272.87%
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1998 (a) 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.96 $ 11.65 $ 11.32 $ 10.86 $ 10.92 $ 11.58
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.28 0.19 0.27 0.24 0.11 0.11
Net gains or losses on securities
(realized and unrealized) 0.24 2.40 1.02 1.29 (0.04) 0.44
------- ------- ------- ------- ------- -------
Total from investment operations 0.52 2.59 1.29 1.53 0.07 0.55
------- ------- ------- ------- ------- -------
Less distributions:
From investment income (0.27) (0.24) (0.27) (0.21) (0.13) (0.09)
From realized capital gains (2.97) (1.04) (0.69) (0.86) - (1.12)
------- ------- ------- ------- ------- -------
Total distribution (3.24) (1.28) (0.96) (1.07) (0.13) (1.21)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.24 $ 12.96 $ 11.65 $ 11.32 $ 10.86 $ 10.92
======= ======= ======= ======= ======= =======
Total return 6.85% 24.11% 12.18% 15.41% 0.62 % 4.86%
Net assets end of period ($000) $ 9,590 $ 9,514 $ 8,702 $ 9,348 $10,701 $16,778
Ratio of expenses to average net assets 1.73%* 1.71% 1.77% 1.76% 1.90% 1.69%
Ratio of net income to average net assets 4.49%* 1.42% 2.33% 2.10 % 0.87% 0.93%
Portfolio turnover rate 189.60% 105.11% 133.00% 78.64% 240.27% 200.67%
</TABLE>
(a) Six months ended March 31, 1998 (Unaudited)
* Annualized
15
<PAGE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1998(a) 1997 1996 1995 1994 1993
------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.02 $ 10.93 $ 11.69 $ 10.82 $ 11.63 $ 11.52
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.18 0.06 0.19 0.09 0.19 -
Net gains or losses on securities
(realized and unrealized) (0.11) 2.13 0.37 1.56 (0.38) 1.29
------- ------- ------- ------- ------- -------
Total from investment operations 0.07 2.19 0.56 1.65 (0.19) 1.29
------- ------- ------- ------- ------- -------
Less distributions:
From investment income (0.20) (0.06) (0.22) (0.07) (0.16) (0.04)
From realized capital gains (2.21) (1.04) (1.10) (0.71) (0.46) (1.14)
------- ------- ------- ------- ------- -------
Total distributions (2.41) (1.10) (1.32) (0.78) (0.62) (1.18)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.68 $ 12.02 $ 10.93 $ 11.69 $ 10.82 $ 11.63
======= ======= ======= ======= ======= =======
Total return 2.71% 21.93% 5.69% 16.43% (1.64)% 11.69%
Net assets end of period ($000) $14,590 $15,567 $16,665 $22,205 $25,579 $39,037
Ratio of expenses to average net assets 1.81%* 1.79% 1.84% 1.78% 1.58% 1.51%
Ratio of net income to average net assets 3.06%* 0.58% 1.74% 0.80% 1.70% 0.04%
Portfolio turnover rate 238.11% 114.36% 254.77% 146.40% 344.25% 241.90%
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1998(a) 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.88 $ 11.61 $ 11.21 $ 11.22 $ 11.97 $ 10.74
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.32 0.26 0.30 0.25 0.19 0.10
Net gains or losses on securities
(realized and unrealized) (0.20) 1.27 0.50 0.62 0.15 1.76
------- ------- ------- ------- ------- -------
Total from investment operations 0.12 1.53 0.80 0.87 0.34 1.86
------- ------- ------- ------- ------- -------
Less distributions:
From investment income (0.37) (0.33) (0.16) (0.25) (0.20) (0.10)
From realized capital gains (1.45) (0.93) (0.24) (0.63) (0.89) (0.53)
------- ------- ------- ------- ------- -------
Total distributions (1.82) (1.26) (0.40) (0.88) (1.09) (0.63)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.18 $ 11.88 $ 11.61 $ 11.21 $ 11.22 $ 11.97
======= ======= ======= ======= ======= =======
Total return 2.25% 14.43% 7.41% 8.49% 2.91% 18.11%
Net assets end of period ($000) $14,688 $16,543 $17,733 $22,632 $29,984 $29,492
Ratio of expenses to average net assets 1.82%* 1.78% 1.82% 1.76% 1.56% 1.52%
Ratio of net income to average net assets 5.65%* 2.26% 2.53% 2.11% 1.63% 0.85%
Portfolio turnover rate 165.80% 161.57% 204.55% 288.45% 449.55% 225.96%
</TABLE>
(a) Six months ended March 31, 1998 (Unaudited)
* Annualized
16
<PAGE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
LEVERAGED GROWTH FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1998(a) 1997 1996 1995 1994 1993
------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.85 $ 12.30 $ 12.30 $ 10.42 $ 10.41 $ 10.04
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income (loss) 0.21 (0.20) (0.08) (0.04) 0.07 0.06
Net gains or (losses) on securities
(realized and unrealized) (0.22) 3.33 0.84 2.33 0.03 0.37
------- ------- ------- ------- ------- -------
Total from investment operations (0.01) 3.13 0.76 2.29 0.10 0.43
------- ------- ------- ------- ------- -------
Less distributions:
From investment income (0.29) - - (0.07) (0.09) (0.06)
From realized capital gains (2.78) (0.58) (0.76) (0.34) - -
------- ------- ------- ------- -------
Total distributions (3.07) (0.58) (0.76) (0.41) (0.09) (0.06)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 11.77 $ 14.85 $ 12.30 $ 12.30 $ 10.42 $ 10.41
======= ======= ======= ======= ======= =======
Total return 3.01% 26.66% 6.85% 22.85% 0.91% 4.32%
Net assets end of period($000) $18,278 $17,785 $15,694 $ 9,686 $ 5,459 $ 5,879
Ratio of expenses to average net
assets (b) 3.37%* 4.13% 3.70% 2.82% 2.06% 2.03%
Ratio of net income (loss) to average
net assets 2.65%* (1.52)% (0.78)% (0.68)% 0.62% 0.65%
Portfolio turnover rate 164.27% 130.36% 247.36% 87.50% 379.64% 130.68%
</TABLE>
(a) Six months ended March 31, 1998 (Unaudited)
(b) Expenses include interest expense of 1.62%*, 2.36%, 1.95% and 1.01% for
1998, 1997, 1996 and 1995 respectively.
* Annualized
INFORMATION RELATING TO OUTSTANDING DEBT DURING THE PERIODS SHOWN BELOW.
<TABLE>
<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, 1998 $6,810,000 $2,962,088 1,346,260 $2.20
September 30, 1997 $7,000,000 $4,295,452 1,250,115 $3.44
September 30, 1996 $5,800,000 $2,981,434 1,156,941 $2.58
September 30, 1995 $4,000,000 $779,589 656,687 $1.19
</TABLE>
See Accompanying Notes to Financial Statements
17
<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
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. 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, 1998.
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 $14,000 per year to maintain an
unsecured $7,000,000 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, 1998 was $6,810,000.
NOTE 5 - (SEE FOLLOWING)
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, 1998 were as follows:
Purchases Sales
Merriman Flexible Bond Fund $ 7,618,248 $ 4,132,222
Merriman Growth & Income Fund $11,525,246 $11,823,303
Merriman Capital Appreciation Fund $22,467,631 $23,560,233
Merriman Asset Allocation Fund $17,194,459 $18,567,886
Merriman Leveraged Growth Fund $32,738,138 $31,989,224
18
<PAGE>
MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS, (UNAUDITED)
Note 5 - Capital Shares
At March 31, 1998, there were an unlimited number of no par value shares of
beneficial interest authorized. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
MERRIMAN FLEXIBLE BOND FUND MERRIMAN GROWTH & INCOME FUND
--------------------------- -----------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, MARCH 31, 1998 SEPTEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------- ---- ----------- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 87,050 $ 903,610 280,944 $2,964,179 22,844 $ 228,650 55,591 $ 653,181
Shares issued in
reinvestment of
distributions...... 39,688 405,210 45,339 477,703 247,885 2,284,641 81,475 896,229
------ ------- ------ ------- ------- --------- ------ -------
126,738 1,308,820 326,283 3,441,882 270,729 2,513,291 137,066 1,549,410
Shares redeemed....... (99,892)(1,043,753) (303,348) (3,211,089) (68,341) (703,459) (150,162) (1,796,150)
------- ---------- -------- ---------- ------- -------- -------- ----------
Net increase (decrease) 26,846 $ 265,067 22,935 $ 230,793 202,388 $1,809,832 (13,096) $( 246,740)
====== ========== ====== ========== ======= ========== ======= == =======
</TABLE>
<TABLE>
<CAPTION>
MERRIMAN CAPITAL APPRECIATION FUND MERRIMAN ASSET ALLOCATION FUND
---------------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, MARCH 31, 1998 SEPTEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------- ---- ----------- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold .......... 33,170 $ 313,714 103,803 $1,122,921 53,466 $ 533,883 151,724 $1,719,250
Shares issued in
reinvestment of
distributions ..... 335,412 2,928,073 152,931 1,547,665 244,854 2,305,794 171,398 1,818,529
------- --------- ------- --------- ------- --------- ------- ---------
368,582 3,241,787 256,734 2,670,586 298,320 2,839,677 323,122 3,537,779
Shares redeemed ..... (156,646) (1,593,616) (485,512) (5,239,274) (248,335) (2,568,588) (457,711) (5,103,948)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase (decrease)211,936 $1,648,171 (228,778) $(2,568,688) 49,985 $ 271,089 (134,589) $(1,566,169)
======= ========== ======== =========== ====== ========== ======== ===========
</TABLE>
MERRIMAN LEVERAGED GROWTH FUND
------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30,
(UNAUDITED) 1997
----------- ----
SHARES VALUE SHARES VALUE
------ ----- ------ -----
Shares sold........... 133,723 $1,537,434 201,597 $ 2,574,986
Shares issued in
reinvestment of
distributions...... 340,688 3,491,844 57,160 678,488
------- --------- ------ -------
474,411 5,029,278 258,757 3,253,474
Shares redeemed.......(119,028) (1,391,886) (336,514) (4,315,499)
-------- ---------- -------- ----------
Net increase (decrease)355,383 $ 3,637,392 (77,757) $(1,062,025)
======= =========== ======= ===========
19
<PAGE>
MERRIMAN
INVESTMENT TRUST
1200 WESTLAKE AVENUE NORTH SUITE 700
SEATTLE, WASHINGTON 98109
1-800-423-4893
20
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