<PAGE>
MERRIMAN MERRIMAN INVESTMENT TRUST
FLEXIBLE BOND FUND 1200 Westlake Ave N, Suite 700
Seattle, WA 98109
MERRIMAN 1-800-423-4893
GROWTH & INCOME FUND 1-206-285-8877
www.merrimanfunds.com
MERRIMAN
CAPITAL APPRECIATION INVESTMENT MANAGER
FUND Merriman Investment
Management Company
MERRIMAN 1200 Westlake Ave N, Suite 700
ASSET ALLOCATION Seattle, WA 98109
FUND
CUSTODIAN AND
MERRIMAN TRANSFER AGENT
LEVERAGED GROWTH Firstar Turst Company
FUND PO Box 701
Milwaukee, WI 53201
1-800-224-4743
SEMI-ANNUAL REPORT FUND COUNSEL
Sullivan & Worcester
PERIOD ENDED Boston, Massachusetts
MARCH 31, 1999
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
DONALD E. WEST, Trustee
<PAGE>
Dear Fellow Shareholder:
I'm pleased to report that all five of the Merriman Mutual Funds had positive
performance for the first six months of our current fiscal year, which ends
September 30, 1999.
The U.S. and international markets presented serious challenges to investors
during our first two fiscal quarters. But those quarters also contained some
powerful opportunities for investors who were poised to take advantage of them.
In the final three months of 1998, our first quarter, a steep, unexpected
rebound made it hard for U.S. stock investors to miss. But the first three
months of 1999 were relatively unproductive to investors who diversified, as we
do, far from U.S. large-cap technology and Internet stocks.
To summarize our first-half results, the Merriman Flexible Bond Fund gained 2.1
percent; the Merriman Growth & Income Fund rose 13.9 percent; the Merriman
Capital Appreciation Fund gained 12.3 percent; the Merriman Asset Allocation
Fund was up 8.0 percent; and the Merriman Leveraged Growth Fund rose 22.3
percent. The performance of each fund is discussed in detail later in this
letter.
THE ECONOMY
The U.S. economy remains the strongest in the world, now in its ninth year of
expansion. This is the longest economic advance in American history, fueled
dually by consumer spending on goods and services and business spending on plant
and equipment. Unemployment and inflation are both very low by historical
standards. Plentiful jobs, stable prices and the euphoria of rising stock prices
have combined to produce a very high level of consumer confidence.
However, the economic problems that surfaced in Asia in 1997 and later spread
worldwide are far from over. Although the Japanese Nikkei stock index rose 15
percent early in 1999, that country's unemployment hit a post-war high of 4.6
percent, up from about 2 percent in 1992. Argentina, Mexico and Brazil are
struggling, as is the European Union.
THE U.S. STOCK MARKET
While the U.S. economy leads the world, the U.S. stock market gives us
substantial concerns. Increasingly, the "action" in U.S. stocks is limited to a
small group of big blue chips like General Electric and Microsoft and a baffling
array of Internet companies, most of them too young to have ever earned a
profit. In 1998, the Nasdaq Composite Index rose 40 percent, the Dow Jones
Industrial Average was up 17 percent and the Standard & Poor's 500 Index grew 28
percent.
But size mattered. Corporate Giants with market capitalizations of $20 billion
or more climbed an average of 26 percent, while companies capitalized at less
than $250 million fell about 24 percent. The pattern continued in the first
quarter of 1999. Many people don't realize how much a few stocks dominate the
S&P 500 Index and the Nasdaq composite. A mere 10 percent of the stocks in the
S&P 500 Index accounted for 43 percent of the growth of that index last year.
Three companies - Microsoft, Intel and Cisco Systems - account for 29 percent of
the Nasdaq market cap, and 25 large technology companies accounted for 93
percent of the Nasdaq gains last year.
Stated another way, three of every four stocks in the S&P 500 Index were cheaper
in March 1999 than they were in March 1998. While indexes weighted by market
capitalization rise, giving the impression that the overall market is rising,
week after week the list of declines is longer than the list of advances. By
some accounts, the strength of U.S. stocks hasn't been this narrowly focused
since June 1929.
Collectively, stock investors are saying that Microsoft Corp. today is worth 1.4
times as much as the combined 1990 market capitalization values of General
Electric, Intel, Merck, Wal-Mart, Pfizer, Exxon, Coca-Cola, IBM, Cisco and
Microsoft itself.
Investors are saying that America Online, which has millions of subscribers but
no significant profits, is worth more than any of the 10 largest companies in
the U.S. were worth in 1990. But the current mania was illustrated best in an
initial public stock offering in March 1999 of Priceline.com, a company that
lets consumers bid for ultra-cheap airline tickets and hotel rooms. Officially
priced at $16 a share, the stock began trading at $81 and quickly rose to $92.
At that price, this company, which has few physical assets, minimal revenue and
no profit in sight, had a stock market value greater than those of United
Airlines, Continental Airlines and Northwest Airlines, combined.
<PAGE>
We're concerned at how quickly and how thoroughly the Internet has made it easy
for amateurs to speculate from the comfort of their homes while they share
information (and often, misinformation) with other amateur investors. We find it
very distressing that in some circles, recreational day-trading has become an
accepted way to demonstrate bravado. This picture of wildly unreasonable
expectations, with all attention focused on a very narrow base, does not seem
like a solid foundation for the U.S. stock market.
THE OUTLOOK FOR INVESTORS
The U.S. stock market has seemed seriously overvalued for more than four years.
Some investors have simply retreated from stocks to the sidelines in order to
preserve their capital in a crash that they are sure is lurking somewhere just
around the bend. In doing so, they may have achieved peace of mind. But they
have lost the opportunity of participating in very significant gains in the
latter half of this decade.
We continue to believe investors can and should take advantage of such
opportunities, which don't last indefinitely and which don't repeat themselves
every decade. However, we believe that a day of reckoning is coming in the U.S.
stock market. That reckoning could mean swift, stunning losses to investors. The
Standard & Poor's 500 Index would have to lose more than 53 percent before
price-to-earnings ratios and price-to-dividend ratios reached their 70-year
"normal" levels. That is roughly equivalent to the Dow Jones Industrial Average
falling from 10,500 to 4,950. Can you imagine the effect that such a drop would
have on the media? Can you imagine what that would do to the cottage industry of
discount brokerages and Internet bulletin boards that has emerged to cater to
amateur stock-pickers?
We believe our mechanical, trend-following market timing systems provide the
best protection against such losses, and we manage each of our funds based on
that belief. Meanwhile, we are picking up all the profits we can, not only in
the U.S. market but internationally as well.
We continue to believe that equity investors benefit from having up to 35
percent of their portfolios in funds that hold international stocks. That's one
of the reasons that our funds, like the vast majority of mutual funds, have not
matched the performance of the S&P 500 Index and Nasdaq indexes. However, our
diversification and market timing systems have provided significant and valuable
protection to cautious investors while producing returns that will allow
investors to meet their reasonable objectives. For the three most recent
calendar years, the Merriman Growth & Income Fund and the Merriman Leveraged
Growth Fund have compounded at rates of 16.1 percent and 19.6 percent,
respectively.
FUND PERFORMANCE AGAINST BENCHMARKS
Mutual funds are inevitably compared with the market indexes such as the
Standard & Poor's 500 Index, and in the vast majority of cases, the index wins
the comparisons, at least in recent years. However, we don't measure our success
against any single index, and we think it would be misleading to do so.
The very best benchmark for any investment is the needs and objectives of the
investor. Since that varies with each person, we must look for another way to
measure our results. Aside from the diversification, liquidity and convenience
that are common to mutual funds, there are two ways we add value: fund selection
and timing.
Therefore, we compare the performance of our funds against the universe of
mutual funds of assets types in which we invest, without timing. Because one of
our objectives is to reduce risk, our comparisons include volatility (the lower
the number, the better for investors) as well as investment returns.
Here is how that works out, in real life, for our five funds:
THE MERRIMAN FLEXIBLE BOND FUND invests in a broad spectrum of fixed-income
securities that in our belief offer the best opportunities to achieve attractive
returns with below-average volatility. The Fund's present investment policy is
to maintain, when we are fully invested, a balance of 35 percent in
international bonds, 25 percent in U.S. high-yield bonds and the remaining 40
percent in high-grade U.S. government and corporate bonds. When our timing
systems indicate declining markets, we shift assets to money market instruments
and other cash equivalents.
In the six months ending March 31, 1999, according to Morningstar, the average
U.S. bond fund produced a total return of 1.1 percent. The Fund appreciated 2.1
percent, identical to the gain of 2.1 percent for the same balance of U.S. and
international bond funds, the Appropriate Benchmark for this fund. According to
Morningstar, the Fund's volatility was about 25.6 percent lower than the average
U.S. bond fund and 62.0 percent less than the average international bond fund.
<PAGE>
THE MERRIMAN GROWTH & INCOME FUND invests primarily in growth-and-income funds,
employing the same balance of domestic and international funds, and similar
timing models to preserve capital, as does the Capital Appreciation Fund. For
the six months ending March 31, the Fund's total return was 13.9 percent. A
similar mix of domestic and international funds without timing, the Appropriate
Benchmark for this fund, was up 20.6 percent. Morningstar data indicate the
Fund's volatility was 46.1 percent lower than the average of those funds.
THE MERRIMAN CAPITAL APPRECIATION FUND seeks growth of capital by investing in
U.S. and international growth, aggressive growth and small-cap funds. Our
present investment policy allocates 65 percent of the portfolio to U.S. equity
funds and 35 percent to international equity funds. As with all our funds,
whenever our timing models indicate the risk of loss is greater than the
potential for gain, we take defensive action and move into money market
instruments or other cash equivalents.
In the six months ended March 31, the Fund was up 12.2 percent. A similar mix of
domestic and international funds without timing, the Appropriate Benchmark for
this fund, was up 21.9 percent. According to Morningstar, the volatility of the
Fund was 44.3 percent lower than the average of funds in the growth, aggressive
growth, small-cap and international equity categories. We believe this makes the
Capital Appreciation Fund an excellent choice for investors who seek growth as
well as preservation of capital with wide diversification.
THE MERRIMAN ASSET ALLOCATION FUND spreads its investments among five major
asset groups and applies market timing to each one. The Fund's present
investment policy is to maintain 30 percent of the portfolio in domestic 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.
For the six months ending March 30, the Fund's total return was 8.0 percent.
According to Morningstar, an untimed portfolio of the same balance of funds, the
Appropriate Benchmark for this fund, gained 12.7 percent. The Asset Allocation
Fund's volatility was about 28.6 percent lower than multi-asset global funds
tracked by Morningstar.
THE MERRIMAN LEVERAGED GROWTH FUND'S defensive strategy uses market timing
systems similar to those of the Capital Appreciation Fund and maintains a
similar balance of domestic and international funds. During rising markets, this
Fund takes a more aggressive approach in order to seek above-average returns.
The Fund may borrow up to $1 for every $2 of its net assets in order to make
additional investments when our timing models indicate a high probability of
gain.
For the six months ended March 30, the Fund's total return was 22.3 percent,
compared with a gain of 21.9 percent for a similar mix of domestic and
international equity funds held without timing or leverage, the Appropriate
Benchmark for this fund. According to Morningstar, the Fund's volatility was
about 24.5 percent less than the average of growth, aggressive growth and
small-cap funds and 11.0 percent lower than that of the average international
fund.
IN SUMMARY
While we cannot hope to predict the short term gyrations of the stock and bond
markets, we believe the future is bright for investors with a long-term
perspective and the patience that must go with it. We think the best way
investors can capitalize on that future is through broad diversification. At the
same time we believe the future holds some severe setbacks for unwary investors
who do not take measures to protect their assets.
Our funds employ the best tools we know for taking advantage of the
opportunities and protecting capital one day at a time. We appreciate your
confidence in the Merriman Mutual Funds and our defensive approach to investing.
We are off to a good start in our first six months, and I hope to have a
favorable report for you at the end of our fiscal year.
Sincerely,
Paul A. Merriman
President
<PAGE>
MERRIMAN FLEXIBLE BOND FUND
Portfolio of Investments
March 31, 1999
(Unaudtied)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
HIGH-YIELD CORPORATE BOND FUNDS: 26.37%
----------------------------------------
48,889 Federated High Yield Trust ........................ $ 440,000
38,901 Federated High Income Bond Fund ................... 439,583
38,030 Fidelity Advisor High Yield Fund .................. 447,235
68,545 INVESCO Income High Yield Fund .................... 455,825
41,724 Northeast Investors Trust ......................... 439,774
-------
Total High-Yield Corporate Bond Funds
(Cost $2,173,639).................................. 2,222,417
---------
INTERNATIONAL BOND FUNDS: 20.03%
--------------------------------
51,578 AIM Emerging Markets Debt Fund .................... 423,968
56,883 Fidelity Adv Emerging Mkts Inc Fund ............... 467,009
42,891 Fidelity International Fund ....................... 376,581
40,592 Scudder International Bond Fund ................... 420,941
-------
Total International Bond Funds
(Cost $1,651,879).................................. 1,688,499
---------
MONEY MARKET FUNDS: 50.69%
---------------------------
63,391 AIM Cash Reserves Shares ........................... 63,391
447,633 Am Century Govt Agency Fund ........................ 447,633
416,937 Babson Money Market Fund ........................... 416,937
411,378 Columbia Daily Income Fund ......................... 411,378
387,247 Dreyfus Institutional Money Market Fund ............ 387,247
440,164 Federated Master Trust Fund ........................ 440,164
49,231 Fidelity Cash Reserves Fund ........................ 49,231
416,564 Fidelity US Govt Res Money Mkt Fund ................ 416,564
343,634 Scudder Cash Investment Trust ...................... 343,634
435,032 Scudder US Treasury Money Fund ..................... 435,032
411,147 Stein Roe Cash Reserves Fund ....................... 411,147
450,416 Strong Money Market Fund ........................... 450,416
-------
Total Money Market Funds
(Cost $4,272,774)................................... 4,272,774
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 3.79%
-------------------------------
$ 291,300 Firstar Bank Milwaukee, NA
4.6088%, 12/12/99................................... 291,300
28,400 General Mills, Inc.
4.5438%, 11/09/99................................... 28,400
------
Total Short-Term Demand Notes
(Cost $319,700)..................................... 319,700
-------
Total Investment in Securities
(Cost $8,417,992) (a)...........................100.88% 8,503,390
Liabilities in Excess
of other Assets..................................(0.88)% (74,151)
----- -------
NET ASSETS......................................100.00% $8,429,239
======= ==========
(a) Cost for federal income tax purposes is the same and
net unrealized appreciation consists of:
Gross unrealized appreciation....................... $ 90,539
Gross unrealized depreciation....................... (5,141)
------
Net Unrealized Appreciation......................... $ 85,398
==========
See Accompanying Notes to Financial Statements
5
<PAGE>
MERRIMAN GROWTH & INCOME FUND
Portfolio of Investments
March 31, 1999
(Unaudtied)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 54.47%
------------------------------
15,452 Am Cent Income & Growth Fund ..................... $ 458,312
17,611 Columbia Common Stock Fund ....................... 460,881
11,444 Federated Stock Trust ............................ 433,962
12,735 Fidelity Fund .................................... 493,344
15,400 INVESCO Value Equity Fund ........................ 439,990
15,808 Janus Growth & Income Fund ....................... 517,558
19,247 Lexington Growth & Income Fund ................... 430,171
17,130 SAFECO Equity Fund ............................... 408,216
17,659 Salomon Brothers Inv Fund Class O ................ 395,202
11,930 Stein Roe Balanced Fund .......................... 386,165
50,061 Value Line Income Fund ........................... 514,628
-------
Total Domestic Equity Funds
(Cost $4,529,119)................................. 4,938,429
---------
INTERNATIONAL EQUITY FUNDS: 24.85%
-----------------------------------
45,501 AIM GT Global Growth & Income Fund ............... 366,736
21,249 Fidelity Intl Growth & Income Fund ............... 458,137
10,402 Janus Worldwide Fund ............................. 525,906
45,662 Strong International Stock Fund .................. 472,603
8,583 Scudder International Fund ....................... 429,739
-------
Total International Equity Funds
(Cost $2,036,709)................................. 2,253,121
---------
MONEY MARKET FUNDS: 14.18%
---------------------------
399,758 INVESCO Cash Reserves Fund ....................... 399,758
396,173 Scudder Cash Investment Trust Fund ............... 396,173
489,651 WPG Govt Money Market Fund ....................... 489,651
-------
Total Money Market Funds
(Cost $1,285,582)................................. 1,285,582
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 6.53%
--------------------------------
$ 441,100 Firstar Bank Milwaukee, NA
4.6088%, 12/12/99................................. 441,100
60,900 General Mills, Inc
4.5438%, 11/09/99................................. 60,900
90,700 Pitney Bowes, Inc
4.5438%, 08/03/99................................. 90,700
------
Total Short-Term Demand Notes
(Cost $592,700)................................... 592,700
-------
Total Investment in Securities
(Cost $8,444,110) (a)..........................100.03% 9,069,832
Liabilities in Excess
of other Assets................................(0.03)% (2,841)
----- ------
NET ASSETS.....................................100.00% $9,066,991
======= ==========
(a) Cost for federal income tax purposes is the same and
net unrealized depreciation consists of:
Gross unrealized appreciation..................... $ 692,298
Gross unrealized depreciation (66,576)
-------
Net Unrealized Appreciation....................... $ 625,722
=============
See Accompanying Notes to Financial Statements
6
<PAGE>
MERRIMAN CAPITAL APPRECIATION FUND
Portfolio of Investments
March 31, 1999
(Unaudtied)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 51.25%
------------------------------
14,755 American Century Select Fund ..................... $ 758,685
17,842 American Century Ultra Fund ...................... 657,490
17,136 Columbia Growth Fund ............................. 794,063
14,090 Federated Stock Trust ............................ 534,292
21,253 Fidelity Disciplined Equity Fund ................. 653,750
38,173 INVESCO Dynamics Fund ............................ 655,807
23,923 Scudder Large Co Value Fund ...................... 672,247
10,556 Stein Rowe Growth Stock Fund ..................... 512,301
27,719 USAA Growth Fund ................................. 640,576
41,809 Value Line Special Situations Fund ............... 774,310
-------
Total Domestic Equity Funds
(Cost $6,215,635)................................. 6,653,521
---------
INTERNATIONAL EQUITY FUNDS: 13.16%
-----------------------------------
46,924 Fidelity International Value Fund ................ 659,754
27,615 Founders Worldwide Growth Fund ................... 634,029
55,380 INVESCO Pacific Basin Fund ....................... 414,241
-------
Total International Equity Funds
(Cost $1,485,458)................................. 1,708,024
---------
MONEY MARKET FUNDS: 33.42%
---------------------------
61,141 Am Century Prime Money Mkt Fund .................. 61,141
610,000 AM Cent Capital Preservation Fund ................ 610,000
60,358 Federated Master Trust ........................... 60,358
691,245 Founders Money Market Fund ....................... 691,245
264,237 INVESCO US Govt Money Market Fund ................ 264,237
619,376 Lexington Money Market Trust Fund ................ 619,376
635,080 SAFECO Money Market Fund ......................... 635,080
573,042 Scudder Cash Investment Trust Fund ............... 573,042
823,797 USAA Money Market Fund ........................... 823,797
-------
Total Money Market Funds
(Cost $4,338,276)................................. 4,338,276
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 2.10%
-------------------------------
$ 272,600 Firstar Bank Milwaukee, NA
4.6088%, 12/12/99
(Cost $272,600)................................... 272,600
-------
Total Investment in Securities
(Cost $12,311,969) (a).........................99.93% 12,972,421
Other Assets
Less Liabilities...............................0.07% 8,696
----- -----
NET ASSETS....................................100.00% $12,981,117
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
depreciation consists of:
Gross unrealized appreciation.....................$ 681,434
Gross unrealized depreciation (20,982)
-------
Net Unrealized Appreciation.......................$ 660,452
=============
See Accompanying Notes to Financial Statements
7
<PAGE>
MERRIMAN ASSET ALLOCATION FUND
Portfolio of Investments
March 31, 1999
(Unaudtied)
MARKET VALUE
SHARES (NOTE 2A)
- ------ ---------
DOMESTIC EQUITY FUNDS:26.36%
----------------------------
49,210 Am Century Vista Fund .......................... $ 540,327
20,193 Fidelity Stock Selector Fund ................... 605,178
25,401 Founders Growth Fund ........................... 569,746
16,367 Stein Roe Growth Stock Fund .................... 794,272
15,191 USAA Aggressive Growth Fund .................... 503,285
-------
Total Domestic Equity Funds
(Cost $2,735,506)............................... 3,012,808
---------
INTERNATIONAL EQUITY FUNDS: 25.90%
-----------------------------------
79,134 AIM Developing Markets Fund .................... 675,809
31,950 Federated Intl Equity Fund Class A ............. 642,190
36,991 Fidelity Advisor Overseas Market Fund .......... 668,790
47,468 INVESCO Pacific Basin Fund ..................... 355,063
12,351 Scudder International Fund ..................... 618,407
-------
Total International Equity Fund
(Cost $2,663,257)............................... 2,960,259
---------
HIGH-YIELD CORPORATE BOND FUNDS: 10.54%
----------------------------------------
51,294 Federated High Income Bond Fund ................ 579,627
7,864 INVESCO High Yield Fund ........................ 52,297
54,327 Northeast Investors Trust ...................... 572,606
-------
Total High-Yield Corporate Bond Funds
(Cost $1,180,646)............................... 1,204,530
---------
INTERNATIONAL BOND FUNDS: 13.00%
---------------------------------
72,581 AIM Emerging Markets Debt Fund ................. 596,613
35,840 Fidelity International Fund .................... 314,677
58,808 Scudder Global Bond Fund ....................... 575,145
-------
Total International Bond Funds
(Cost $1,473,377)............................... 1,486,435
---------
MONEY MARKET FUNDS: 22.54%
---------------------------
84,731 AIM Cash Reserves Shares ....................... 84,731
357,824 Am Century Govt Agency Fund .................... 357,824
273,259 Babson Money Market Fund ....................... 273,259
343,342 Federated Money MarketTrust Fund ............... 343,342
8,464 Fidelity Daily Money Market Fund ............... 8,464
157,143 Founders Money Market Fund ..................... 157,143
597,062 INVESCO Cash Reserves Fund ..................... 597,062
234,484 Lexington Money Market Fund .................... 234,484
519,096 USAA Money Market Fund ......................... 519,096
-------
Total Money Market Funds
(Cost $2,575,405)............................... 2,575,405
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 1.80%
-------------------------------
$ 206,050 Firstar Bank Milwaukee, NA
4.6088%, 12/12/99
(Cost $206,050)................................. 206,050
-------
Total Investment in Securities
(Cost $10,834,241) (a).......................100.14% 11,445,487
Liabilities in Excess
of other Assets.............................(0.14)% (16,297)
----- -------
NET ASSETS..................................100.00% $11,429,190
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 619,733
Gross unrealized depreciation (8,487)
------
Net Unrealized Appreciation $ 611,246
===========
See Accompanying Notes to Financial Statements
8
<PAGE>
MERRIMAN LEVERAGED GROWTH FUND
Portfolio of Investments
March 31, 1999
(Unaudtied)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 74.93%
------------------------------
24,704 Am Century Ultra Fund ............................ $ 910,340
67,544 Am Century Vista Fund ............................ 741,629
39,975 Babson Enterprise II Fund ........................ 833,078
21,079 Columbia Growth Fund ............................. 976,797
23,573 Federated Stock Trust ............................ 893,871
28,837 Fidelity Disciplined Equity Fund ................. 887,023
14,859 Fidelity Trend Fund .............................. 902,080
44,204 Founders Growth Fund ............................. 991,503
55,932 INVESCO Dynamics Fund ............................ 960,908
39,502 Robertson Stephens Emerg Grth Fund ............... 1,159,766
18,475 Stein Roe Growth Stock Fund ...................... 896,569
33,415 Stein Roe Young Investors Fund ................... 971,381
30,927 Strong Growth Fund ............................... 767,290
38,657 USAA Growth Fund ................................. 893,356
16,468 Value Line Leveraged Growth Fund ................. 881,881
-------
Total Domestic Equity Funds
(Cost $12,134,872)................................ 13,667,472
----------
INTERNATIONAL EQUITY FUNDS: 27.34%
-----------------------------------
62,831 Fidelity International Value Fund ................ 883,399
41,992 Federated Intl Equity Fund Class A ............... 844,044
48,718 Federated Intl Small Co Fund Class A ............. 973,384
40,576 Founders Worldwide Growth Fund ................... 931,636
67,935 INVESCO Pacific Basin Fund ....................... 508,152
32,606 Scudder Greater Europe Growth Fund................ 846,779
-------
Total International Equity Funds
(Cost $4,473,457)................................. 4,987,394
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 1.71%
-------------------------------
$ 73,200 Firstar Bank Milwaukee, NA
4.6088%, 12/12/99................................. 73,200
238,600 General Mills, Inc.
4.5438%, 11/09/99................................. 238,600
-------
Total Short-Term Demand Notes
(Cost $311,800)................................... 311,800
-------
Total Investment in Securities
(Cost $16,920,129) (a)......................103.98% 18,966,666
Liabilities in Excess
of other Assets.............................(3.98)% (725,952)
----- --------
NET ASSETS..................................100.00% $18,240,714
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
depreciation consists of:
Gross unrealized appreciation $2,079,251
Gross unrealized depreciation (32,714)
-------
Net Unrealized Appreciation $2,046,537
==========
See Accompanying Notes to Financial Statements
9
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1999
(Unaudtied)
<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 $8,417,992, $8,444,110,
$12,311,969, $10,834,241 and $16,920,129,
respectively) (Note 2) $ 8,503,390 $ 9,069,832 $ 12,972,421 $ 11,445,487 $ 18,966,666
Cash (overdraft) (48) (39) 42 (3) (41,300)
Dividends and interest receivable 37,384 11,144 36,752 15,316 14,165
------ ------ ------ ------ ------
Total assets 8,540,726 9,080,937 13,009,215 11,460,800 18,939,531
--------- --------- ---------- ---------- ----------
LIABILITIES
Loan payable to custodian bank (Note 4) - - - - 675,000
Accrued management fees 614 9,597 13,815 12,116 19,213
Other accrued expenses 10,788 4,349 14,283 19,494 4,604
Distributions payable 100,085 - - - -
------- ----- ------ ------ -------
Total liabilities 111,487 13,946 28,098 31,610 698,817
------- ------ ------ ------ -------
NET ASSETS
(Applicable to 834,038, 874,348,
1,328,243, 1,136,627, and 1,476,284
shares of beneficial interest with no
par value, unlimited number of shares
authorized) $ 8,429,239 $ 9,066,991 $ 12,981,117 $ 11,429,190 $ 18,240,714
============ ============ ============ ============= =============
PRICING OF SHARES
Net asset value, offering and redemption
price per share
$ 8,429,239 / 834,038 shares $ 10.11
============
$ 9,066,991 / 874,348 shares $ 10.37
============
$12,981,117 / 1,328,243 shares $ 9.77
===========
$11,429,190 / 1,136,627 shares $ 10.06
=============
$18,240,714 / 1,476,284 shares $ 12.36
=============
NET ASSETS
At March 31, 1999, net assets consisted of:
Paid-in capital $ 8,377,458 $ 8,114,363 $11,731,057 $ 10,563,462 $ 15,093,811
Undistributed net investment income 11,256 - 9,468 31,000 48,602
Accumulated net realized gain (loss) (44,873) 326,906 580,140 223,482 1,051,764
Unrealized appreciation on investments 85,398 625,722 660,452 611,246 2,046,537
------ ------- ------- ------- ---------
$ 8,429,239 $ 9,066,991 $12,981,117 $ 11,429,190 $ 18,240,714
============ ============ =========== ============= =============
</TABLE>
See Accompanying Notes to Financial Statements
10
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
Six Months Ended March 31, 1999
(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 $ 12,187 $ 16,282 $ 11,882 $ 6,304 $ 9,611
Dividends 253,932 128,993 200,313 229,965 305,983
------- ------- ------- ------- -------
Total investment income 266,119 145,275 212,195 236,269 315,594
------- ------- ------- ------- -------
EXPENSES
Management fees (Note 3) 39,514 55,174 82,127 73,994 108,132
Accounting services 9,191 9,919 14,889 13,748 19,250
Custodian fees 1,638 1,995 2,839 3,024 3,416
Transfer agent fees 2,884 3,367 7,364 7,049 6,916
Interest expense (Note 4) - - - - 113,301
Professional services 3,587 3,749 5,338 5,522 6,761
Registration fees 2,612 1,995 4,175 4,466 4,277
Insurance and other 1,703 1,575 2,879 2,923 3,183
Printing 728 774 1,183 1,174 1,502
Trustees fees 125 122 182 240 254
--- --- --- --- ---
Expenses before reimbursement 61,982 78,670 120,976 112,140 266,992
------ ------ ------- ------- -------
Reimbursement by advisor (Note 3) 2,935 - - - -
----- ------ ------- ------- -------
Total expenses 59,047 78,670 120,976 112,140 266,992
------ ------ ------- ------- -------
Net investment income 207,072 66,605 91,219 124,129 48,602
------- ------ ------ ------- ------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions (64,768) (163,424) 143,865 14,844 286,819
Capital gain distributions from
regulated investment companies 29,531 490,042 435,554 208,984 766,768
Net increase (decrease) in unrealized
appreciation of investments (19,697) 744,368 863,796 565,062 2,292,262
------- ------- ------- ------- ---------
Net realized and unrealized gain (loss)
on investments (54,934) 1,070,986 1,443,215 788,890 3,345,849
------- --------- --------- ------- ---------
Net increase in net assets resulting from
operations $ 152,138 $ 1,137,591 $ 1,534,434 $ 913,019 $ 3,394,451
============ ============ =========== ============ =============
</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 ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
----------- ---- ----------- ----
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 207,072 $ 518,347 $ 66,605 $ 236,584
Net realized gain (loss) on investments (64,768) 10,873 (163,424) 1,176,879
Capital gain distributions from regulated
investment companies 29,531 12,656 490,042 426,459
Net increase (decrease) in unrealized appreciation
on investments (19,697) (287,604) 744,368 (1,546,066)
------- -------- ------- ----------
Net increase in net assets resulting from operations 152,138 254,272 1,137,591 293,856
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments - (189,519) (593,861) (2,141,643)
Distributions from net investment income (195,834) (550,400) (110,822) (195,416)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from
capital share transactions (Note 5) 973,000 (1,233,968) 115,858 1,047,075
------- ---------- ------- ---------
Total increase (decrease) 929,304 (1,719,615) 548,766 (996,128)
NET ASSETS
Beginning of period 7,499,935 9,219,550 8,518,225 9,514,353
--------- --------- --------- ---------
End of period* $8,429,239 $7,499,935 $9,066,991 $8,518,225
========== ========== ========== ==========
* Including undistributed net investment income of: $ 11,256 $ 18 $ - $ 41,168
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MERRIMAN CAPITAL MERRIMAN ASSET
APPRECIATION FUND ALLOCATION FUND
----------------- ---------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
----------- ---- ----------- ----
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 91,219 $ 229,448 $ 124,129 $ 516,220
Net realized gain on investments 143,865 1,736,994 14,844 1,276,292
Capital gain distributions from regulated
investment companies 435,554 602,938 208,984 411,558
Net increase (decrease) in unrealized appreciation
on investments 863,796 (3,123,146) 565,062 (2,584,191)
------- ---------- ------- ----------
Net increase (decrease) in net assets resulting
from operations 1,534,434 (553,766) 913,019 (380,121)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on
investments (483,792) (2,717,812) (236,899) (1,744,120)
Distributions from net investment income (67,156) (229,448) (237,477) (631,484)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting
from capital share transactions (Note 5) (646,065) 577,330 (1,177,752) (1,619,333)
-------- ------- ---------- ----------
Total increase (decrease) 337,421 (2,923,696) (739,109) (4,375,058)
NET ASSETS
Beginning of period 12,643,696 15,567,392 12,168,299 16,543,357
---------- ---------- ---------- ----------
End of period* $12,981,117 $12,643,696 $11,429,190 $12,168,299
=========== =========== =========== ===========
* Including undistributed net investment income of: $ 9,468 $ - $ 31,000 $ -
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
12
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<CAPTION>
MERRIMAN LEVERAGED
GROWTH FUND
-----------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
----------- ----
<S> <C> <C>
OPERATIONS:
Net investment income $ 48,602 $ 77,075
Net realized gain on investments 286,819 2,559,464
Capital gain distributions from regulated
investment companies 766,768 1,019,123
Net increase (decrease) in unrealized appreciation
on investments 2,292,262 (4,752,006)
--------- ----------
Net increase (decrease) in net assets resulting
from operations 3,394,451 (1,096,344)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments (937,513) (3,585,901)
Distributions from net investment income - (77,075)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital share
transactions (Note 5) 295,959 2,461,888
------- ---------
Total increase (decrease) 2,752,897 (2,297,432)
NET ASSETS
Beginning of period 15,487,817 17,785,249
---------- ----------
End of period* $18,240,714 $15,487,817
=========== ===========
* Including undistributed net investment income of: $ 48,602 $ -
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
13
<PAGE>
<TABLE>
MERRIMAN LEVERAGED GROWTH FUND
STATEMENT OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
----------- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Dividends and interest received $ 338,680 $ 566,248
Operating expenses paid (274,476) (567,681)
Net (purchases) sales of short-term investments 2,296,365 (613,973)
Purchases of portfolio securities (29,428,909) (60,596,479)
Proceeds from sales of portfolio securities 26,992,849 69,411,863
---------- ----------
Net cash provided by (used for) operating activities (75,491) 8,199,978
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital shares sold 3,782,133 2,917,335
Payments on capital shares redeemed (4,372,808) (3,948,058)
Cash dividends paid * (50,112) (171,132)
Net increase (decrease) in loan payable to
custodian bank 675,000 (7,000,000)
------- ----------
Net cash provided by (used for) financing activities 34,213 (8,201,855)
------ ----------
Net change in cash (41,278) (1,877)
Cash at beginning of period (22) 1,855
--- -----
Cash at end of period $ (41,300) $ (22)
========== ===========
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting
from operations $3,394,451 $(1,096,344)
---------- -----------
Adjustments to reconcile net increase (decrease) in
net assets resulting from operations to net cash
provided by (used for) operating activities:
(Increase) decrease in investment securities (3,485,544) 9,374,830
(Increase) decrease in dividends and interest receivable 23,086 (36,479)
Increase (decrease) in accrued management fees 2,989 (1,474)
Increase (decrease) in other accrued expenses (10,473) (40,555)
------- -------
Total Adjustments (3,469,942) 9,296,322
---------- ---------
Net cash provided by (used for) operating activities $ (75,491) $8,199,978
=========== ==========
</TABLE>
* Non-cash financing activities included herein consist of reinvestment of
distributions to shareholders of $887,401 and $3,491,844, respectively.
See Accompanying Notes to Financial Statements
14
<PAGE>
<TABLE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<CAPTION>
FLEXIBLE BOND FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1999 (a) 1998 1997 1996 1995 1994
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.15 $ 10.74 $ 10.36 $ 10.23 $ 9.94 $ 10.97
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income 0.26 0.63 0.60 0.63 0.55 0.42
Net gains or losses on securities
(realized and unrealized) (0.05) (0.32) 0.38 0.13 0.29 (0.37)
----- ----- ---- ---- ---- -----
Total from investment operations 0.21 0.31 0.98 0.76 0.84 0.05
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.25) (0.67) (0.60) (0.63) (0.55) (0.42)
From realized capital gains - (0.23) - - - (0.66)
----- ----- ----- ----- ----- -----
Total distributions (0.25) (0.90) (0.60) (0.63) (0.55) (1.08)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 10.11 $ 10.15 $ 10.74 $ 10.36 $ 10.23 $ 9.94
======== ======== ======== ======== ======== ========
Total return 2.10% 3.03% 9.64% 7.62% 8.63% 0.36%
Net assets, end of period ($000) $ 8,429 $ 7,500 $ 9,220 $ 8,661 $ 8,592 $ 10,542
Ratio of expenses to average net assets 1.50%*(b) 1.50% 1.46% 1.49% 1.50% 1.50%
Ratio of net income to average net assets 5.24%*(b) 5.93% 5.54% 6.05% 5.17% 3.89%
Portfolio turnover rate 222.59% 206.12% 172.73% 139.77% 291.46% 472.49%
</TABLE>
<TABLE>
GROWTH & INCOME FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1999(a) 1998 1997 1996 1995 1994
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.87 $ 12.96 $ 11.65 $ 11.32 $ 10.86 $ 10.92
-------- --------- -------- -------- -------- --------
Income from investment operations
Net investment income 0.10 0.32 0.19 0.27 0.24 0.11
Net gains or losses on securities
(realized and unrealized) 1.27 (0.17) 2.40 1.02 1.29 (0.04)
---- ----- ---- ---- ---- -----
Total from investment operations 1.37 0.15 2.59 1.29 1.53 0.07
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.15) (0.27) (0.24) (0.27) (0.21) (0.13)
From realized capital gains (0.72) (2.97) (1.04) (0.69) (0.86) -
----- ----- ----- ----- ----- -----
Total distributions (0.87) (3.24) (1.28) (0.96) (1.07) (0.13)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 10.37 $ 9.87 $ 12.96 $ 11.65 $ 11.32 $ 10.86
======== ========= ======== ======== ======== ========
Total return 13.91% 2.99% 24.11% 12.18% 15.41% 0.62%
Net assets, end of period ($000) $ 9,067 $ 8,518 $ 9,514 $ 8,702 $ 9,348 $ 10,701
Ratio of expenses to average net assets 1.79%* 1.75% 1.71% 1.77% 1.76% 1.90%
Ratio of net income to average net assets 1.51%* 2.61% 1.42% 2.33% 2.10% 0.87%
Portfolio turnover rate 117.05% 280.78% 105.11% 133.00% 78.64% 240.27%
</TABLE>
* Annualized
(a) Six months ended March 31, 1999 (Unaudited)
(b) Net of reimbursement of Advisor; ratio of expenses to average net assets
and ratio of net income to average net assets were 1.57% and 5.17%,
respectively, prior to reimbursements.
15
<PAGE>
<TABLE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<CAPTION>
CAPITAL APPRECIATION FUND
(for a share outstanding throughout the period)
Year Ended September 30,
1999 (a) 1998 1997 1996 1995 1994
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.06 $ 12.02 $ 10.93 $ 11.69 $ 10.82 $ 11.63
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income 0.07 0.19 0.06 0.19 0.09 0.19
Net gains or losses on securities
(realized and unrealized) 1.05 (0.74) 2.13 0.37 1.56 (0.38)
---- ----- ---- ---- ---- -----
Total from investment operations 1.12 (0.55) 2.19 0.56 1.65 (0.19)
---- ----- ---- ---- ---- -----
Less distributions:
From investment income (0.06) (0.20) (0.06) (0.22) (0.07) (0.16)
From realized capital gains (0.35) (2.21) (1.04) (1.10) (0.71) (0.46)
----- ----- ----- ----- ----- -----
Total distributions (0.41) (2.41) (1.10) (1.32) (0.78) (0.62)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 9.77 $ 9.06 $ 12.02 $ 10.93 $ 11.69 $ 10.82
======== ======== ======== ======== ======== ========
Total return 12.22% (3.87)% 21.93% 5.69% 16.43% (1.64)%
Net assets end of period ($000) $ 12,981 $ 12,644 $ 15,567 $ 16,665 $ 22,205 $ 25,579
Ratio of expenses to average net assets 1.85%* 1.81% 1.79% 1.84% 1.78% 1.58%
Ratio of net income to average net assets 1.39%* 1.64% 0.58% 1.74% 0.80% 1.70%
Portfolio turnover rate 174.82% 446.18% 114.36% 254.77% 146.40% 344.25%
</TABLE>
<TABLE>
ASSET ALLOCATION FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1999(a) 1998 1997 1996 1995 1994
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 11.88 $ 11.61 $ 11.21 $ 11.22 $ 11.97
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income 0.11 0.40 0.26 0.30 0.25 0.19
Net gains or losses on securities
(realized and unrealized) 0.66 (0.76) 1.27 0.50 0.62 0.15
---- ----- ---- ---- ---- ----
Total from investment operations 0.77 (0.36) 1.53 0.80 0.87 0.34
---- ----- ---- ---- ---- ----
Less distributions:
From investment income (0.08) (0.48) (0.33) (0.16) (0.25) (0.20)
From realized capital gains (0.33) (1.34) (0.93) (0.24) (0.63) (0.89)
----- ----- ----- ----- ----- -----
Total distributions (0.41) (1.82) (1.26) (0.40) (0.88) (1.09)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 10.06 $ 9.70 $ 11.88 $ 11.61 $ 11.21 $ 11.22
======== ======== ======== ======== ======== ========
Total return 7.95% (2.57)% 14.43% 7.41% 8.49% 2.91%
Net assets end of period ($000) $ 11,429 $ 12,168 $ 16,543 $ 17,733 $ 22,632 $ 29,984
Ratio of expenses to average net assets 1.89%* 1.84% 1.78% 1.82% 1.76% 1.56%
Ratio of net income to average net assets 2.10%* 3.63% 2.26% 2.53% 2.11% 1.63%
Portfolio turnover rate 167.83% 351.19% 161.57% 204.55% 288.45% 449.55%
</TABLE>
* Annualized
(a) Six months ended March 31, 1999 (Unaudtied)
16
<PAGE>
<TABLE>
Merriman Mutual Funds
Financial Highlights (continued)
LEVERAGED GROWTH FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<CAPTION>
1999(a) 1998 1997 1996 1995 1994
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.66 $ 14.85 $ 12.30 $ 12.30 $ 10.42 $ 10.41
-------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income (loss) 0.03 0.06 (0.20) (0.08) (0.04) 0.07
Net gains or losses on securities
(realized and unrealized) 2.33 (1.18) 3.33 0.84 2.33 0.03
---- ----- ---- ---- ---- ----
Total from investment operations 2.36 (1.12) 3.13 0.76 2.29 0.10
---- ----- ---- ---- ---- ----
Less distributions:
From investment income - (0.06) - - (0.07) (0.09)
From realized capital gains (0.66) (3.01) (0.58) (0.76) (0.34) -
----- ----- ----- ----- ----- -----
Total distributions (0.66) (3.07) (0.58) (0.76) (0.41) (0.09)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 12.36 $ 10.66 $ 14.85 $ 12.30 $ 12.30 $ 10.42
======== ======== ======== ======== ======== ========
Total return 22.32% (6.71)% 26.66% 6.85% 22.85% 0.91%
Net assets end of period ($000) $ 18,241 $ 15,488 $ 17,785 $ 15,694 $ 9,686 $ 5,459
Ratio of expenses to average net assets (b) 3.08%*(b) 3.13% 4.13% 3.70% 2.82% 2.06%
Ratio of net income (loss) to average
net assets 0.56%*(b) 0.46% (1.52)% (0.78)% (0.68)% 0.62%
Portfolio turnover rate 149.74% 351.46% 130.36% 247.36% 87.50% 379.64%
</TABLE>
* Annualized
(a) Six months ended March 31, 1999 (Unaudtied)
(b) Expenses include interest expense of 1.31%*, 1.38%, 2.36%, 1.95% and 1.01%
for 1999, 1998, 1997, 1996 and 1995, respectively.
INFORMATION RELATING TO OUTSTANDING DEBT DURING THE YEAR SHOWN BELOW.
<TABLE>
<CAPTION>
Average Average 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, 1999 $ 675,000 $2,662,698 1,468,368 $1.81
September 30, 1998 $ - $2,521,205 1,403,276 $1.80
September 30, 1997 $ 7,000,000 $4,295,452 1,250,115 $3.44
September 30, 1996 $ 5,800,000 $2,981,434 1,156,941 $2.58
September 30, 1995 $ 4,000,000 $ 779,589 656,687 $1.19
</TABLE>
See Accompanying Notes to Financial Statements
17
<PAGE>
MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
Merriman Flexible Bond Fund, Merriman Growth & Income Fund, Merriman
Capital Appreciation Fund, Merriman Asset Allocation Fund, and Merriman
Leveraged Growth Fund (the "Funds") are separate series of Merriman Investment
Trust (the "Trust") which is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management company. The Trust was
organized in 1987 as a Massachusetts Business Trust and may issue an unlimited
number of shares of beneficial interest without par value in separate classes of
"funds."
Each fund has specific investment objectives: The objectives of the
Flexible Bond Fund are income, preservation of capital and, secondarily, growth
of capital. The objectives of the Growth & Income Fund are long-term growth of
capital, income and, secondarily, preservation of capital. The objective of the
Capital Appreciation Fund is capital appreciation. The objectives of the Asset
Allocation Fund are high total return consistent with reasonable risk. The
objective of the Leveraged Growth Fund is capital appreciation through the use
of leverage and other investment practices.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed in the preparation of the Trust's financial statements. The policies
are in conformity with generally accepted accounting principles.
A. SECURITY VALUATION. Short-term debt securities are valued at amortized
cost, which approximates market value. Investments in regulated investment
companies (mutual funds) are valued at the net asset value per share.
B. FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income or excise tax provision is
required.
C. INCOME RECOGNITION. Dividend income and distributions to shareholders are
recorded on the "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. 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 report 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.
For the six months ended March 31, 1999, the Advisor made expense reimbursements
in the amount of $2,935 to the Merriman Flexible Bond Fund.
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, 1999 was $675,000.
NOTE 5 - (SEE FOLLOWING)
NOTE 6 - (SEE FOLLOWING)
18
<PAGE>
MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CAPITAL SHARES
At March 31, 1999, 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, 1999 SEPTEMBER 30, MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
----------- ---- ----------- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 186,517 $1,898,301 120,276 $ 1,244,591 44,490 $ 465,094 91,829 $ 921,821
Shares issued in
reinvestment of
distributions....... 8,836 89,425 67,777 691,809 67,030 684,375 247,885 2,284,641
----- ------ ------ ------- ------ ------- ------- ---------
195,353 1,987,726 188,053 1,936,400 111,520 1,149,469 339,714 3,206,462
Shares redeemed (99,880) (1,014,726) (308,064) (3,170,368) (100,391) (1,033,611) (210,649) (2,159,387)
------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase (decrease) 95,473 $ 973,000 (120,011) $(1,233,968) 11,129 $ 115,858 129,065 $1,047,075
====== ========== ======== =========== ====== ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
MERRIMAN CAPITAL APPRECIATION FUND MERRIMAN ASSET ALLOCATION FUND
---------------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
----------- ---- ----------- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.......... 48,424 $ 475,781 62,795 $ 592,751 38,180 $ 384,079 78,757 $ 789,442
Shares issued in
reinvestment of
distributions....... 55,577 543,541 335,412 2,928,073 45,752 457,519 244,854 2,305,794
------ ------- ------- --------- ------ ------- ------- ---------
104,001 1,019,322 398,207 3,520,824 83,932 841,598 323,611 3,095,236
Shares redeemed...... (171,460) (1,665,387) (297,864) (2,943,494) (201,821) (2,019,350) (461,409) (4,714,569)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase (decrease) (67,459) $ (646,065) 100,343 $ 577,330 (117,889) $(1,177,752) (137,798) $(1,619,333)
======= ========== ======= ========== ======== =========== ======== ===========
</TABLE>
MERRIMAN LEVERAGED GROWTH FUND
------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
----------- ----
SHARES VALUE SHARES VALUE
------ ----- ------ -----
Shares sold........... 316,505 $3,781,366 253,147 $2,918,102
Shares issued in
reinvestment of
distributions....... 73,400 887,401 340,688 3,491,844
------ ------- ------- ---------
389,905 4,668,767 593,835 6,409,946
Shares redeemed (366,751) (4,372,808) (338,631) (3,948,058)
-------- ---------- -------- ----------
Net increase.......... 23,154 $ 295,959 255,204 $2,461,888
====== ========== ======= ==========
NOTE 6 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities other than short-term investments and money
market funds for the six months ended March 31, 1999 were as follows:
Purchases Sales
--------- -----
Merriman Flexible Bond Fund...........$ 8,931,196 $ 10,262,594
Merriman Growth & Income Fund.......... 9,490,475 7,812,515
Merriman Capital Appreciation Fund.....16,361,919 16,262,449
Merriman Asset Allocation Fund.........15,427,087 14,616,160
Merriman Leveraged Growth Fund.........29,428,909 26,992,849
19
<PAGE>
