<PAGE>
MERRIMAN
Graphic Omitted INVESTMENT TRUST
MERRIMAN MERRIMAN INVESTMENT TRUST
FLEXIBLE BOND FUND 1200 Westlake Ave N, Suite 700
Seattle, WA 98109
1-800-423-4893
MERRIMAN 1-206-285-8877
GROWTH & INCOME FUND 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 Mutual Fund Services, LLC
FUND PO Box 701
Milwaukee, WI 53201
1-800-224-4743
ANNUAL REPORT FUND COUNSEL
Sullivan & Worcester
YEAR ENDED Boston, Massachusetts
SEPTEMBER 30, 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:
The Merriman Mutual Funds completed another fiscal year on September 30, 1999,
and I am pleased to report that all of our funds produced positive returns for
the period. The performance of each fund during the year is detailed later in
this letter. To summarize: the Merriman Flexible Bond Fund produced a total
return of 2.7 percent; the Merriman Growth and Income Fund rose 13.6 percent;
the Merriman Capital Appreciation Fund was up 14.8 percent; the Merriman Asset
Allocation Fund was up 11.7 percent; and the Merriman Leveraged Growth Fund was
up 24.3 percent.
MANAGING RISKS
At the heart of our investing philosophy is the management of risk, and on the
following pages you'll find a description of how we use market-timing to do
that. Managing risk is a universal human experience. We manage risk when we
walk, for instance being sure to keep our balance, to look before we walk across
a street, walk off a curb or descend a flight of stairs. We manage risks when
we're driving, watching out for others and constantly balancing our need for
safety with our need for progress.
Investment risks always exist, whether they are ignored or confronted. Very few
investors give risk management the serious consideration that it deserves. The
great bull market of the past few years has perhaps fooled many people into
thinking that double-digit annual returns are not only normal but essentially a
birthright. I speak to thousands of investors every year, and it's obvious that
most of them like to focus their thoughts and their investment decisions on high
returns that they hope to achieve. Relatively few have thought systematically
and seriously about the risks they incur in seeking those returns. And fewer
still have a concrete plan for how they will respond to the inevitable losses
that are part of any long-term investment strategy.
At Merriman Mutual Funds, we take risk management very seriously, and I want to
share some of our thinking with you. The biggest risk investors face is having
their money in the wrong type of asset. Common types of assets include bonds,
stocks, real estate, precious metals, futures contracts and the like. This risk
extends to choices within each asset type. For instance, within the general
category of stocks, the major choices that make the most difference are U.S.
companies vs. international ones, small companies vs. large ones, value stocks
vs. growth stocks.
One of our fundamental beliefs is that wide global diversification is the best
course for most investors, and we apply it in each of our funds. We all know
that the Standard & Poor's 500 Index has been a high-performing asset class for
the past five years. And we all know (or we should know) that it hasn't always
been that way and it won't always be that way in the future. Yet many investors
cannot resist the lure of recent performance, and they are taking more risk than
they realize by keeping most or all of their equity investments in large U.S.
equities - which in the early 1970s experienced a greater than 40 percent loss
before turning around.
Accordingly, all our fund portfolios are highly diversified. One result is that
our results are never as good as that of the top performing asset class. But
this reduces our funds' volatility and exposure to the risk of a bear market in
any single asset class.
Once an investor achieves proper diversification, there remain only two
significant risk factors left to deal with: market risk and event risk. MARKET
RISK is the possibility that an entire asset class may be affected by some trend
such as a recession, a change of political leadership or a widespread financial
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crisis such as the one that hit many Asian countries in 1998. Event risk is the
possibility that a market downturn will be triggered by some sudden event such
as an assassination, a war or a natural disaster.
Our funds manage market risk through the use of mechanical market-timing
systems. While such systems are imperfect and cannot eliminate all temporary
losses, we believe our systems have been and will continue to be effective in
protecting investors from the largest losses.
Protection against event risk is another matter. No timing system can warn in
advance of a sudden collapse of a government or a natural or man-made disaster.
By definition, such events (and their aftermath) occur without warning. However,
market timing may have the added benefit of being the most effective possible
shield against event risk because investors who use timing could happen to be
out of the market when the event occurs.
Our funds use a combination of timing entire asset classes such as U.S. bonds
and equities, and individual fund timing, which is applied to many of the funds
in which we invest. Because of all this timing, for the majority of the time at
least some of each of our funds' assets are in cash or cash equivalents. This
tends to reduce our performance during bull markets. But it provides investors
with an extra measure of protection that they can't find anywhere else. And it
tends to reduce our funds' volatility.
THE OUTLOOK
We are often asked for our views of the months and quarters just ahead, and our
answers are all the same: We aren't qualified to forecast the future, and we
don't try to do so.
We understand the reasons many investors are bullish, and they have much
validity. Inflation is extremely low. Interest rates are under control. The U.S.
economy continues to grow. Overall, the world is at peace, and many national
economies are evolving. Technology is rapidly creating new products and
services. Medical care is improving rapidly. Productivity is increasing.
We also understand why many investors are bearish, and we think they have much
validity. By historical standards such as book value and earnings per share,
U.S. stock prices are seriously overpriced. Escalating demand for Internet
stocks sometimes seems to be based more on phantom hopes than on solid business
models. The current wave of Baby Boom investors that is pouring retirement funds
into the stock market has never experienced a prolonged bear market and may be
shocked into panic selling when one occurs. The U.S. stock market indexes have
become overly dependent on a relatively small number of large technology stocks
such as Microsoft and Intel.
We are neither bears nor bulls. We believe that in the long term, the world's
equity markets will continue their upward climb, eventually rewarding patient
investors who are willing to assume the risks of uncertainty. But at the same
time we believe the current market levels are so high that they are filled with
potential danger. We are certain that major bear markets lie ahead, though we
cannot predict when or how they will hit.
The investments of the Merriman Mutual Funds are not managed based on any
particular view of the future. Instead, we are trend-followers with a mechanical
investment strategy that is designed to make money and preserve capital
whichever way the market turns.
MARKET TIMING - DIFFERENT FROM THE AVERAGES
Our funds have globally diversified portfolios and they use timing to move into
and out of the markets and the funds in which they invest. Because of that,
their performance is not directly comparable to that of the popular untimed
indexes such as the Dow Jones Industrial Average, the S&P 500 and EAFE.
<PAGE>
This presents a challenge to you as an investor: What is the proper benchmark by
which such funds should be measured? There is no perfect answer. The charts that
accompany this letter compare the performance of our equity Funds with the
Standard and Poor's 500 Index and our Flexible Bond Fund with the Salomon BIG
Index, both popular, broad-based indexes.
However, we think the best comparison for each of our funds is the performance,
without timing, of mutual funds that invest in the same asset classes as the
funds in our portfolios. The best data we have is from Morningstar, which tracks
thousands of mutual funds. Using that data, we use what we call an Appropriate
Benchmark for each of our funds, as follows:
Our Capital Appreciation and Leveraged Growth funds each allocate up to 65
percent of their assets to U.S. equity funds and up to 35 percent to
international equity funds. (Within each allocation, investments are switched
between equity funds and cash, according to our timing systems.) The Appropriate
Benchmark for these two funds is the performance of a theoretical portfolio,
always fully invested, composed of equal parts of U.S. growth, aggressive growth
and small-cap funds (with 65 percent weighting for the whole) and foreign equity
funds, with 35 percent weighting.
The Appropriate Benchmark for the Growth & Income Fund is a portfolio made up of
U.S. growth and income funds and foreign stock funds, weighted 65 percent and 35
percent, respectively.
The Appropriate Benchmark for the Asset Allocation Fund is a theoretical
portfolio, always fully invested and weighted as follows: foreign stock funds,
30 percent; U.S. growth funds, 10 percent; U.S. aggressive growth funds, 10
percent; U.S. small-cap funds, 10 percent; U.S. corporate high-yield bond funds,
10 percent; U.S. corporate high-quality bond funds, 5 percent; international
bond funds, 15 percent; specialty precious metals funds, 10 percent.
The Appropriate Benchmark for the Flexible Bond Fund is a theoretical portfolio,
always fully invested and weighted as follows: U.S. corporate high-quality bond
funds, 40 percent; U.S. corporate high-yield bond funds, 25 percent; world bond
funds, 35 percent.
The reason we use timing is that bull markets can quickly erase months or even
years of gains. Our top priority is to manage this risk in order to defend
investors' capital while striving to achieve favorable returns.
However, in prolonged bull markets, timing inevitably underperforms a
buy-and-hold approach. There are two reasons for that. First, timing has no way
to "add value" to a rising market. Even when all signals indicate buy, the timer
who is 100 percent invested has no advantage over the buy-and-hold investor who
is 100 percent invested.
Second, bull markets are punctuated with temporary declines, some of which
inevitably trigger one or more timing models into cautionary sell signals. At
the moment of such a signal, there is absolutely no way to know whether it
indicates the start of a real bear market or whether it will turn out to be only
a false alarm.
There is no reliable way that timers can avoid such counterproductive trades.
This is why our equity funds have underperformed the markets during the strong
bull market of the past few years.
As a shareholder in the Merriman Mutual Funds, I don't like this performance
penalty any more than anyone else. But I regard it as a necessary cost of
protecting my capital from major declines. It is somewhat akin to the cost of
insuring my home. I'd rather not pay the insurance premium. But I know that a
fire or some other disaster is possible, and I'd much rather buy insurance than
assume all the risk myself.
Likewise as an investor, I'd much rather pay the underperformance penalty, and
protect my investments from a bear market, than leave myself exposed without a
defensive strategy. And personally I am certain that a bear market is more
likely to threaten my portfolio than a fire is likely to threaten my home.
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HOW WE MANAGE THESE FUNDS
As an investor, I want long-term results. Yet I want to know my assets are being
actively protected every moment the markets are open. We believe our
shareholders deserve nothing less than that. While our investment focus is on
long-term results, we manage our funds in the short-term. Every business day, we
track current market trends that affect every asset in our portfolio, and we are
always ready to act on any new signals from our timing models to guide us as we
attempt to maximize gains and minimize losses.
MERRIMAN FLEXIBLE BOND FUND
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 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.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Flexible Bond Fund and the Salomon Big
Index.
Start Date 10-06-88
End Date 09-30-99
Beginning Value $10,000
End Value - Merriman Flexible Bond Fund $19,468
End Value - Salomon Big Index $21,914
Average Annual Total Return of
Merriman Flexible Bond Fund 1YR 5YR 10YR Since Inception
2.71% 6.28% 6.88% 7.00%
In the 12 months ending September 30 the Fund appreciated 2.7 percent. According
to Morningstar, an untimed portfolio of the same balance of funds (the
Appropriate Benchmark for this fund), would have gained 2.8 percent. According
to Morningstar, the Fund's volatility over the past five years was 45 percent
less than that of the Appropriate Benchmark.
MERRIMAN GROWTH AND INCOME FUND
The Growth and 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 12 months ending September 30, the Fund's total return was up 13.6 percent.
A similar mix of domestic and international funds without timing, (the
Appropriate Benchmark for this fund) was up 24.7 percent. According to
Morningstar data, the Fund's volatility over the past five years was 44 percent
less than that of the Appropriate Benchmark.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Growth and Income Fund and the Stand-
ard & Poors 500 Index.
Start Date 12-29-88
End Date 09-30-99
Beginning Value $10,000
End Value - Merriman Growth & Income Fund $23,260
End Value - S&P 500 Index $47,245
Average Annual Total Return of
Merriman Growth & Income Fund 1YR 5YR 10YR Since Inception
13.61% 13.45% 8.80% 9.20%
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MERRIMAN CAPITAL APPRECIATION FUND
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.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Capital Appreciation Fund and the
Standard & Poors 500 Index.
Start Date 05-02-89
End Date 09-30-99
Beginning Value $10,000
End Value - Merriman Capital Appreciation Fund $22,042
End Value - S&P 500 Index $47,245
Average Annual Total Return of
Merriman Capital Appreication Fund 1YR 5YR 10YR Since Inception
14.83% 10.61% 8.22% 8.40%
In the year ended September 30, the Fund was up 14.8 percent. A similar mix of
domestic and international funds without timing, (the Appropriate Benchmark for
this fund) was up 33.4 percent. According to Morningstar, the Fund's volatility
over the past five years was 46 percent less than that of the Appropriate
Benchmark.
MERRIMAN ASSET ALLOCATION FUND
The 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.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Asset Allocation Fund and the Stand-
ard & Poors 500 Index.
Start Date 05-02-89
End Date 09-30-99
Beginning Value $10,000
End Value - Merriman Asset Allocation Fund $20,183
End Value - S&P 500 Index $47,245
Average Annual Total Return of
Merriman Asset Allocation Fund 1YR 5YR 10YR Since Inception
11.69% 7.72% 7.27% 10.20%
For the year ending September 30, the Fund's total return was up 11.7 percent.
According to Morningstar data, an untimed portfolio of the same balance of
funds, (the Appropriate Benchmark for this fund) would have gained 21.8 percent.
The Asset Allocation Fund's volatility over the past five years was 25 percent
less than that of multi-asset global funds tracked by Morningstar.
<PAGE>
MERRIMAN LEVERAGED
GROWTH FUND
The 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.
NOTE: A graph appears at this location in the text comparing the change in value
of a $10,000 investment in the Merriman Leveraged Growth Fund and the Stand-
ard & Poors 500 Index.
Start Date 05-27-92
End Date 09-30-99
Beginning Value $10,000
End Value - Merriman Leveraged Growth Fund $20,381
End Value - S&P 500 Index $36,352
Average Annual Total Return of
Merriman Leveraged Growth Fund 1YR 5YR Since Inception
24.33% 14.03% 10.18%
For the 12 months ended September 30, the Fund's total return was up 24.3
percent, compared with a gain of 33.4 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 over
the past five years was 23 percent less than that of the Appropriate Benchmark.
IN SUMMARY
While U.S. stocks have provided rich rewards for investors in recent years, we
do not believe that most investors, especially the many who began their
investment experience in the 1990s, are prepared psychologically for the serious
losses that could occur in a prolonged bear market. This lack of preparation is
likely to lead many people into untimely, emotional investment decisions that
will compound whatever damage their portfolios suffer as a result of market
swings.
In our view, broad diversification, coupled with automatic, mechanical timing,
is the best way investors can avoid such untimely decisions and minimize market
risks while they attempt to preserve and grow their capital. We appreciate your
confidence in the Merriman Mutual Funds and in our defensive approach to
investing. We will continue to closely watch each of your investments every
business day, and we hope to have another favorable report for you next year.
Sincerely,
Paul A. Merriman
President
<PAGE>
MERRIMAN FLEXIBLE BOND FUND
Portfolio of Investments
September 30, 1999
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
INTERNATIONAL BOND FUNDS: 35.37%
------------------------- ------
50,125 AIM Emerging Markets Debt Fund Class A ........... $403,008
38,104 Am Cent-Benham Intl Bond Fund .................... 414,947
40,117 Federated Intl Income Fund Class A ............... 402,378
46,838 Fidelity Adv Emerging Mkts Inc Fund .............. 405,152
48,179 Fidelity International Fund ...................... 417,709
40,241 Scudder Global Bond Fund ......................... 378,665
39,821 Scudder International Bond Fund .................. 399,005
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Total International Bond Funds
(Cost $2,803,353)................................. 2,820,864
---------
MONEY MARKET FUNDS: 46.96%
---------------------------
82,202 AIM Cash Reserve Fund............................. 82,202
395,987 Am Cent-Benham Gov't Fund......................... 395,987
396,315 Columbia Daily Income Fund........................ 396,315
384,707 Dreyfus Institutional Money Market Fund........... 384,707
817,630 Federated Money Market Trust Fund................. 817,630
398,576 Federated Short Term US Gov't Trust Fund.......... 398,576
12,445 Fidelity Cash Reserves Fund....................... 12,445
1,976 Fidelity Daily Money Market Portfolio Fund........ 1,976
404,281 Fidelity US Govt Res Money Mkt Fund............... 404,281
406,995 Stein Roe Cash Reserves Fund...................... 406,995
444,527 Strong Money Market Fund.......................... 444,527
-------
Total Money Market Funds
(Cost $3,745,641)................................. 3,745,641
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PRINCIPAL
AMOUNT
SHORT-TERM DEMAND NOTES: 17.91%
$384,800 American Family, Inc.
5.0234%, 12/31/2031.............................. 384,800
391,600 Firstar Bank Milwaukee, NA
5.13%, 12/31/2031................................ 391,600
236,000 General Mills, Inc.
4.985%, 12/31/2031............................... 236,000
351,800 Pitney Bowes, Inc.
4.985%, 12/31/2031............................... 351,800
64,100 Warner Lambert, Inc.
5.0230%, 12/31/2031.............................. 64,100
------
Total Short-Term Demand Notes
(Cost $1,428,300)................................ 1,428,300
---------
Total Investment in Securities
(Cost $7,977,294) (a)........................100.24% 7,994,805
Liabilities in Excess
of other assets............................. (0.24)% (18,716)
----- -------
NET ASSETS...................................100.00% $7,976,089
======= ==========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation............... $ 25,133
Gross unrealized depreciation............... (7,622)
------
Net Unrealized Appreciation................. $ 17,511
=========
See Accompanying Notes to Financial Statements
8
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MERRIMAN GROWTH & INCOME FUND
Portfolio of Investments
September 30, 1999
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 14.76%
------------------------------
59,701 Founders Blue Chip Fund ......................... $426,866
27,638 INVESCO Growth & Income Fund .................... 425,352
12,982 Janus Growth & Income Fund ...................... 441,252
-------
Total Domestic Equity Funds
(Cost $1,313,723)................................ 1,293,470
---------
INTERNATIONAL EQUITY FUNDS: 26.40%
-----------------------------------
45,501 AIM Global Growth & Income Fund Class A ............ 346,716
21,249 Fidelity International Growth Fund ................. 527,835
23,966 INVESCO European Fund .............................. 410,303
8,583 Scudder International Fund ......................... 480,808
45,662 Strong International Stock Fund .................... 547,489
-------
Total International Equity Funds
(Cost $2,023,731)................................... 2,313,151
---------
MONEY MARKET FUNDS: 52.50%
---------------------------
414,986 Am Cent Benham Govt Agency Fund .................... 414,986
443,525 Columbia Daily Income Fund ......................... 443,525
400,558 Federated Money Market Trust Fund .................. 400,558
9,692 INVESCO Cash Reserves Fund.......................... 9,692
432,979 Janus Gov't Money Market Fund ...................... 432,979
391,653 Lexington Money Market Fund ........................ 391,653
411,279 SAFECO Money Market Fund ........................... 411,279
383,784 Scudder Investment Trust Fund ...................... 383,784
394,343 Solomon Brothers Cash Mgmt Fund .................... 394,343
395,947 Stein Roe Cash Reserves Fund ....................... 395,947
446,490 Value Line Cash Fund ............................... 446,490
474,423 Weiss Peck Money Market Fund ....................... 474,423
-------
Total Money Market Funds
(Cost $4,599,659)................................... 4,599,659
---------
Principal
Amount
Short-Term Demand Notes: 6.33%
$354,800 Firstar Bank Milwaukee, NA
5.13%, 12/31/2031................................... 354,800
199,900 Warner Lambert Inc.
5.023%, 12/31/2031.................................. 199,900
-------
Total Short-Term Demand Notes
(Cost $554,700)..................................... 554,700
-------
Total Investment in Securities
(Cost $8,491,813) (a)............................99.99% 8,760,980
Other Assets
Less Liabilities................................ 0.01% 676
---- ---
NET ASSETS......................................100.00% $8,761,656
======= ==========
(a) Cost for federal income tax purposes is the same and net unrealized
depreciation consists of:
Gross unrealized appreciation..............$ 361,107
Gross unrealized depreciation.............. (91,940)
-------
Net Unrealized Appreciation................$ 269,167
=============
See Accompanying Notes to Financial Statements
9
<PAGE>
MERRIMAN CAPITAL APPRECIATION FUND
Portfolio of Investments
September 30, 1999
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 25.36%
------------------------------
13,297 Columbia Growth Fund ........................... $596,492
28,281 Founders Growth Fund ........................... 609,163
35,613 INVESCO Endeavor Fund .......................... 649,943
15,637 Scudder Securities Trust Dev Fund .............. 613,425
30,743 Value Line Special Situations Fund ............. 636,682
-------
Total Domestic Equity Funds
(Cost $3,140,000)............................... 3,105,705
---------
INTERNATIONAL EQUITY FUNDS: 18.97%
-----------------------------------
61,248 Am Cent-Benham Int'l Growth Fund ............... 651,068
27,615 Founders Worldwide Growth Fund ................. 654,464
46,924 Fidelity International Value Fund .............. 745,156
15,842 INVESCO European Fund .......................... 271,207
-------
Total International Equity Funds
(Cost $2,021,363)............................... 2,321,895
---------
MONEY MARKET FUNDS: 51.47%
---------------------------
658,628 Am Cent-Benham Prime Money Mkt Fund............. 658,628
24,367 Columbia Daily Income Fund...................... 24,367
630,720 Federated Money Market Trust Fund............... 630,720
628,560 Fidelity Cash Reserve Fund...................... 628,560
595,709 Founders Money Market Fund...................... 595,709
532,388 INVESCO Cash Reserves Fund...................... 532,388
668,307 Lexington Money Market Fund..................... 668,308
623,158 Neuberger Cash Reserves Fund.................... 623,158
635,692 Safeco Money Market Fund........................ 635,692
10,000 Scudder U.S. Treasury Fund...................... 10,000
519,963 Stein Roe Cash Reserves Fund.................... 519,963
38,279 USAA Money Market Fund.......................... 38,279
595,324 USAA Treasury Money Market Fund................. 595,324
140,745 Value Line Cash Fund............................ 140,745
-------
Total Money Market Funds
(Cost $6,301,841)............................... 6,301,841
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 4.25%
-------------------------------
$470,000 Firstar Bank Milwaukee, NA
5.13%, 12/31/2031............................... 470,000
49,700 General Mills, Inc
4.985%, 12/31/2031.............................. 49,700
------
Total Short-Term Demand Notes
(Cost $519,700)................................. 519,700
-------
Total Investment in Securities
(Cost $11,982,904).......................(a) 100.05% 12,249,141
Liabilities in Excess
of Other Assets..............................(0.05)% (6,073)
----- ------
NET ASSETS................................ 100.00% $12,243,068
====== ===========
(a) Cost for federal income tax purposes is the same and net unrealized
depreciation consists of:
Gross unrealized appreciation....................$ 332,160
Gross unrealized depreciation.................... (65,923)
-------
Net Unrealized Appreciation......................$ 266,237
===============
See Accompanying Notes to Financial Statements
10
<PAGE>
MERRIMAN ASSET ALLOCATION FUND
Portfolio of Investments
September 30, 1999
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 4.94%
-----------------------------
525,684 Founders Mid-Cap Growth Fund
(Cost $535,000).....................................$ 525,684
--------
INTERNATIONAL EQUITY FUNDS: 24.62%
-----------------------------------
31,950 Federated Intl Equity Fund ......................... 715,674
31,310 Fidelity Advisor Emerging Mkts Inc Fund ............ 270,828
36,991 Fidelity Advisors Overseas Mkts Fund ............... 739,442
11,814 INVESCO European Fund .............................. 202,260
12,351 Scudder International Fund ......................... 691,895
-------
Total International Equity Funds
(Cost $2,229,445).................................. 2,620,099
---------
INTERNATIONAL BOND FUNDS: 12.83%
---------------------------------
33,835 AIM Emerging Mkts Debt Fund Class A ............... 272,030
64,630 Fidelity International Fund ....................... 560,341
53,129 Scudder International Bond Fund ................... 532,348
-------
Total International Bond Funds
(Cost $1,343,316).................................. 1,364,719
---------
GOLD FUNDS: 11.09%
-------------------
75,065 Lexington Gold Fund............................... 270,234
110,843 Rydex Series - Precious Metals Fund............... 591,904
47,882 USAA Gold Fund.................................... 317,937
-------
Total Gold Funds
(Cost $1,005,691)................................. 1,180,075
---------
MONEY MARKET FUNDS: 44.31%
---------------------------
1,189,892 AIM Cash Reser1,189,892s Fund
499,862 Am Cent-Benham Prime Money Mkt Fund ............. 499,862
345,707 Am Cent-Benham Government Fund .................. 345,707
348,669 Federated Money Market Trust Fund ............... 348,669
502,004 Fidelity Cash Reserve Fund ...................... 502,004
55,847 Founders Money Market Fund....................... 55,847
371,733 INVESCO Cash Reserves Fund ...................... 371,733
436,234 INVESCO US Govt Money Mkt Fund .................. 436,234
718,018 Stein Roe Cash Reserves Fund .................... 718,018
246,455 USAA Money Market Fund .......................... 246,455
-------
Total Money Market Funds
(Cost $4,714,421)................................ 4,714,421
---------
PRINCIPAL
AMOUNT
SHORT-TERM DEMAND NOTES: 3.76%
-------------------------------
$ 18,100 American Family, Inc.
5.0234%, 12/31/2031.............................. 18,100
382,900 Firstar Bank Milwaukee, NA,
5.13%, 12/31/2031................................ 382,900
Total Short-Term Demand Notes
(Cost $401,000).................................. 401,000
Total Investment in Securities
(Cost $10,228,873) (a).......................101.55% 10,805,998
Liabilities in Excess
of Other Assets............................(1.55%) (165,110)
----- --------
NET ASSETS...................................100.00% $10,640,888
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation....................$ 586,441
Gross unrealized depreciation.................... (9,316)
------
Net Unrealized Appreciation......................$ 577,125
===============
See Accompanying Notes to Financial Statements
11
<PAGE>
MERRIMAN LEVERAGED GROWTH FUND
Portfolio of Investments
September 30, 1999
MARKET VALUE
SHARES (NOTE 2A)
DOMESTIC EQUITY FUNDS: 29.59%
------------------------------
39,720 Columbia Special Fund .......................... $930,631
42,308 Founders Growth Fund ........................... 911,308
52,731 INVESCO Endeavor Fund .......................... 962,342
32,715 Robertson Stephens Value Plus Fund ............. 891,816
36,811 Strong Growth Fund ............................. 935,000
17,464 Value Line Leveraged Growth Fund ............... 918,410
-------
Total Domestic Equity Funds
(Cost $5,615,060)............................... 5,549,507
---------
INTERNATIONAL EQUITY FUNDS: 32.31%
-----------------------------------
41,992 Federated Intl Equity Fund Class A ............. 940,627
48,718 Federated Intl Small Co Fund Class A ........... 1,347,050
62,831 Fidelity International Value Fund .............. 997,751
40,576 Founders Worldwide Growth Fund ................. 961,662
53,957 INVESCO European Fund .......................... 923,741
32,606 Scudder Greater Euro Growth Fund ............... 889,165
-------
Total International Equity Funds
(Cost $4,873,456)............................... 6,059,996
---------
MONEY MARKET FUNDS: 34.01%
---------------------------
54,063 Columbia Daily Income Fund...................... 54,063
894,884 Federated Money Market Trust Fund .............. 894,884
843,873 Fidelity Cash Reserves Fund .................... 843,873
1,019,967 Founders Money Market Fund ..................... 1,019,967
624,321 INVESCO Cash Reserves Fund ..................... 624,321
295,474 Robertson Stephen Auto Cash Mgmt Fund .......... 295,474
886,645 Stein Roe Cash Reserves Fund ................... 886,645
67,482 Strong Money Market Fund........................ 67,482
860,430 USAA Money Market Fund ......................... 860,430
830,773 Value Line Cash Fund............................ 830,773
-------
Total Money Market Funds
(Cost $6,377,912)............................... 6,377,912
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 4.10%
------------------------ -----
$727,100 Firstar Bank Milwaukee, NA
5.13%, 12/31/2031............................... 727,100
40,400 Warner Lambert, Inc.
5.023%, 12/31/2031.............................. 40,400
------
Total Short-Term Demand Notes
(Cost $767,500)................................. 767,500
-------
Total Investment in Securities
(Cost $17,633,928) (a)....................100.01% 18,754,915
Liabilities in Excess
of other Assets...........................(0.01%) (931)
----- ----
NET ASSETS................................100.00% $ 18,753,984
======= ============
(a) Cost for federal income tax purposes is the same and net unrealized
depreciation consists of:
Gross unrealized appreciation.......................$ 1,208,822
Gross unrealized depreciation....................... (87,835)
-------
Net Unrealized Appreciation.........................$ 1,120,987
============
See Accompanying Notes to Financial Statements
12
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1999
<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 $7,977,294, $8,491,813, $11,982,904,
$10,228,873 and $17,633,928, respectively) (Note 2) $ 7,994,805 $ 8,760,980 $ 12,249,141 $ 10,805,998 $ 18,754,915
Cash (overdraft) (40) 15 (15) (12,094) (161)
Dividends and interest receivable 25,427 17,866 24,075 15,153 19,311
Receivable for investments sold -- 179 -- 1,709 10,847
------ --- ----- ----- ------
Total assets 8,020,192 8,779,040 12,273,201 10,810,766 18,784,912
--------- --------- ---------- ---------- ----------
LIABILITIES
Accrued management fees 5,819 9,061 12,787 11,015 19,462
Other accrued expenses 7,063 8,323 17,346 21,009 11,466
Payable for capital stock repurchased 17,267 -- -- 137,854 --
Distributions payable 13,954 -- -- -- --
------ ----- ----- ------ -----
Total liabilities 44,103 17,384 30,133 169,878 30,928
------ ------ ------ ------- ------
NET ASSETS
(Applicable to 801,029, 847,656, 1,224,968, 1,022,045,
and 1,491,393 shares of beneficial interest with no
par value, unlimited number of shares authorized) $ 7,976,089 $ 8,761,656 $ 12,243,068 $ 10,640,888 $ 18,753,984
============ ============ ============ ============ ============
PRICING OF SHARES
Net asset value, offering and redemption price per share
$ 7,976,089 / 801,029 shares $ 9.96
============
$ 8,761,656 / 847,656 shares $ 10.34
============
$12,243,068 / 1,224,968 shares $ 9.99
============
$10,640,888 / 1,022,045 shares $ 10.41
============
$18,753,984 / 1,491,393 shares $ 12.57
============
NET ASSETS
At September 30, 1999, net assets consisted of:
Paid-in capital $ 8,041,280 $ 7,846,351 $ 10,699,099 $ 9,390,702 $ 15,289,866
Undistributed net investment income 754 -- 109,574 208,142 --
Accumulated net realized gain (loss) (83,456) 646,138 1,168,158 464,919 2,343,131
Unrealized appreciation on investments 17,511 269,167 266,237 577,125 1,120,987
------ ------- ------- ------- ---------
$ 7,976,089 $ 8,761,656 $ 12,243,068 $ 10,640,888 $ 18,753,984
============ ============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
13
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
Year Ended September 30, 1999
<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 $ 40,050 $ 27,031 $ 23,224 $ 19,489 $ 22,787
Dividends 446,178 193,790 403,519 492,691 365,163
------- ------- ------- ------- -------
Total investment income 486,228 220,821 426,743 512,180 387,950
------- ------- ------- ------- -------
EXPENSES
Management fees (Note 3) 80,844 111,256 162,528 143,246 226,149
Accounting services 18,246 20,005 29,650 24,120 39,592
Custodian fees 3,364 4,117 5,715 6,095 7,167
Transfer agent fees 7,114 7,806 12,217 12,662 14,143
Interest expense (Note 4) -- -- -- -- 150,667
Professional services 6,960 7,688 10,632 10,307 14,115
Registration fees 5,101 4,458 8,247 8,467 8,689
Insurance and other 3,377 3,032 4,803 4,345 6,333
Printing 1,405 1,231 1,261 1,198 3,011
Trustees fees 226 232 365 469 547
--- --- --- --- ---
Expenses before reimbursement 126,637 159,825 235,418 210,909 470,413
------- ------- ------- ------- -------
Reimbursement by advisor (Note 3) 5,550 -- -- -- --
----- ------- ------- ------- -------
Total expenses 121,087 159,825 235,418 210,909 470,413
------- ------- ------- ------- -------
Net investment income 365,141 60,996 191,325 301,271 (82,463)
------- ------ ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security transactions (84,374) 148,916 628,899 110,347 1,408,667
Capital gain distributions from regulated
investment companies 10,554 514,131 538,537 354,918 1,018,656
Net increase (decrease) in unrealized appreciation
(depreciation) of investments (87,584) 387,813 469,582 530,941 1,366,712
------- ------- ------- ------- ---------
Net realized and unrealized gain (loss) on investments (161,404) 1,050,860 1,637,018 996,206 3,794,035
-------- --------- --------- ------- ---------
Net increase in net assets resulting from operations $ 203,737 $ 1,111,856 $ 1,828,343 $ 1,297,477 $ 3,711,572
============ ============ ============ ============ ============
</TABLE>
See Accompanying Notes to Financial Statements
14
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Merriman Flexible Merriman Growth &
Bond Fund Income Fund
--------- -----------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 365,141 $ 518,347 $ 60,996 $ 236,584
Net realized gain (loss) on investments (84,374) 10,873 148,916 1,176,879
Capital gain distributions from regulated investment
companies 10,554 12,656 514,131 426,459
Net increase (decrease) in unrealized appreciation on investments (87,584) (287,604) 387,813 (1,546,066)
------- -------- ------- ----------
Net increase in net assets resulting from operations 203,737 254,272 1,111,856 293,856
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments -- (189,519) (585,865) (2,141,643)
Distributions from net investment income (364,405) (550,400) (118,817) (195,416)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from capital
share transactions (Note 6) 636,822 (1,233,968) (163,743) 1,047,075
- ------- ---------- -------- ---------
Total increase (decrease) 476,154 (1,719,615) 243,431 (996,128)
NET ASSETS
Beginning of year 7,499,935 9,219,550 8,518,225 9,514,353
--------- --------- --------- ---------
End of year* $ 7,976,089 $ 7,499,935 $ 8,761,656 $ 8,518,225
=========== =========== =========== ===========
* Including undistributed net investment income of: $ 754 $ 18 $ -- $ 41,168
=========== ========== =========== ===========
</TABLE>
<TABLE>
Merriman Capital Merriman Asset
Appreciation Fund Allocation Fund
----------------- ---------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 191,325 $ 229,448 $ 301,271 $ 516,220
Net realized gain on investments 628,899 1,736,994 110,347 1,276,292
Capital gain distributions from regulated investment
companies 538,537 602,938 354,918 411,558
Net increase (decrease) in unrealized appreciation on investments 469,582 (3,123,146) 530,941 (2,584,191)
------- ---------- ------- ----------
Net increase (decrease) in net assets resulting from operations 1,828,343 (553,766) 1,297,477 (380,121)
Distributions to shareholders:
Distributions from net realized gain on investments (469,197) (2,717,812) (381,247) (1,744,120)
Distributions from net investment income (81,751) (229,448) (93,129) (631,484)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from capital
share transactions (Note 6) (1,678,023) 577,330 (2,350,512) (1,619,333)
- ---------- ------- ---------- ----------
Total decrease (400,628) (2,923,696) (1,527,411) (4,375,058)
NET ASSETS
Beginning of year 12,643,696 15,567,392 12,168,299 16,543,357
---------- ---------- ---------- ----------
End of year* $12,243,068 $12,643,696 $10,640,888 $12,168,299
=========== =========== =========== ===========
* Including undistributed net investment income of: $ 109,574 $ - $ 208,142 $ -
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
15
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<CAPTION>
Merriman Leveraged
Growth Fund
-----------
Year Ended Year Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (82,463) $ 77,075
Net realized gain on investments 1,408,667 2,559,464
Capital gain distributions from regulated investment companies 1,018,656 1,019,123
Net increase (decrease) in unrealized appreciation on investments 1,366,712 (4,752,006)
--------- ----------
Net increase (decrease) in net assets resulting from operations 3,711,572 (1,096,344)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments (937,419) (3,585,901)
Distributions from net investment income - (77,075)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from
capital share transactions (Note 6) 492,014 2,461,888
- ------- ---------
Total increase (decrease) 3,266,167 (2,297,432)
NET ASSETS
Beginning of year 15,487,817 17,785,249
---------- ----------
End of year* $ 18,753,984 $ 15,487,817
============== ===============
* Including undistributed net investment income of: $ - $ -
============= ===============
</TABLE>
See Accompanying Notes to Financial Statements
16
<PAGE>
<TABLE>
MERRIMAN LEVERAGED GROWTH FUND
STATEMENT OF CASH FLOWS
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Dividends and interest received $ 405,890 $ 566,248
Operating expenses paid (470,786) (567,681)
Net purchases of short-term investments (3,802,246) (613,973)
Purchases of portfolio securities (52,185,135) (60,596,479)
Proceeds from sales of portfolio securities 55,488,967 68,392,740
Long-term capital gain distributions received 1,018,656 1,019,123
--------- ---------
Net cash provided by operating activities 455,346 8,199,978
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital shares sold 5,015,242 2,917,335
Payments on capital shares redeemed (5,420,614) (3,948,058)
Cash dividends paid * (50,113) (171,132)
Net increase (decrease) in loan payable to custodian bank - (7,000,000)
---------- ----------
Net cash used for financing activities (455,485) (8,201,855)
-------- ----------
Net change in cash (139) (1,877)
Cash at beginning of year (22) 1,855
--- -----
Cash (overdraft) at end of year $ (161) $ (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 $ 3,711,572 $ (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 (3,273,793) 9,374,830
(Increase) decrease in dividends and interest receivable 17,940 (36,479)
Increase (decrease) in accrued management fees 3,238 (1,474)
Increase (decrease) in other accrued expenses (3,611) (40,555)
------ -------
Total Adjustments (3,256,226) 9,296,322
---------- ---------
Net cash provided by operating activities $ 455,346 $ 8,199,978
============== ===========
</TABLE>
* Non-cash financing activities included herein consist of reinvestment of
distributions to shareholders of $887,306 and $3,491,844, respectively.
See Accompanying Notes to Financial Statements
17
<PAGE>
<TABLE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<CAPTION>
Flexible Bond Fund
(for a share outstanding throughout the year)
Year Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.15 $ 10.74 $ 10.36 $ 10.23 $ 9.94
Income from investment operations
Net investment income 0.46 0.63 0.60 0.63 0.55
Net gains or losses on securities
(realized and unrealized) (0.19) (0.32) 0.38 0.13 0.29
Total from investment operations 0.27 0.31 0.98 0.76 0.84
Less distributions:
From investment income (0.46) (0.67) (0.60) (0.63) (0.55)
From realized capital gains -- (0.23) -- -- --
Total distributions (0.46) (0.90) (0.60) (0.63) (0.55)
Net asset value, end of year $ 9.96 $ 10.15 $ 10.74 $ 10.36 $ 10.23
Total return 2.71% 3.03% 9.64% 7.62% 8.63%
Net assets, end of year ($000) $ 7,976 $ 7,500 $ 9,220 $ 8,661 $ 8,592
Ratio of expenses to average net assets 1.57%* 1.50% 1.46% 1.49% 1.50%
Ratio of net income to average net assets 4.52% 5.93% 5.54% 6.05% 5.17%
Portfolio turnover rate 435.08% 206.12% 172.73% 139.77% 291.46%
* Prior to reimbursement from advisor
</TABLE>
<TABLE>
<CAPTION>
Growth & Income Fund
(for a share outstanding throughout the year)
Year Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.87 $ 12.96 $ 11.65 $ 11.32 $ 10.86
------------ ------------ ------------ ------------ ------------
Income from investment operations
Net investment income 0.08 0.32 0.19 0.27 0.24
Net gains or losses on securities
(realized and unrealized) 1.40 (0.17) 2.40 1.02 1.29
---- ----- ---- ---- ----
Total from investment operations 1.48 0.15 2.59 1.29 1.53
---- ---- ---- ---- ----
Less distributions:
From investment income (0.15) (0.27) (0.24) (0.27) (0.21)
From realized capital gains (0.86) (2.97) (1.04) (0.69) (0.86)
----- ----- ----- ----- -----
Total distributions (1.01) (3.24) (1.28) (0.96) (1.07)
----- ----- ----- ----- -----
Net asset value, end of year $ 10.34 $ 9.87 $ 12.96 $ 11.65 $ 11.32
============ ============ ============ ============ ============
Total return 13.61% 2.99% 24.11% 12.18% 15.41%
Net assets, end of year ($000) $ 8,762 $ 8,518 $ 9,514 $ 8,702 $ 9,348
Ratio of expenses to average net assets 1.79% 1.75% 1.71% 1.77% 1.76%
Ratio of net income to average net assets 0.68% 2.61% 1.42% 2.33% 2.10%
Portfolio turnover rate 276.73% 280.78% 105.11% 133.00% 78.64%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Merriman Mutual Funds
Financial Highlights (continued)
Capital Appreciation Fund
(for a share outstanding throughout the year)
Year Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.06 $ 12.02 $ 10.93 $ 11.69 $ 10.82
------------ ------------- ------------- ------------- -----------
Income from investment operations
Net investment income 0.15 0.19 0.06 0.19 0.09
Net gains or losses on securities
(realized and unrealized) 1.19 (0.74) 2.13 0.37 1.56
---- ----- ---- ---- ----
Total from investment operations 1.34 (0.55) 2.19 0.56 1.65
---- ----- ---- ---- ----
Less distributions:
From investment income (0.06) (0.20) (0.06) (0.22) (0.07)
From realized capital gains (0.35) (2.21) (1.04) (1.10) (0.71)
Total distributions (0.41) (2.41) (1.10) (1.32) (0.78)
----- ----- ----- ----- -----
Net asset value, end of year $ 9.99 $ 9.06 $ 12.02 $ 10.93 $ 11.69
============ ============ ============ =========== ==========
Total return 14.83% (3.87)% 21.93% 5.69% 16.43%
Net assets end of year ($000) $ 12,243 $ 12,644 $ 15,567 $ 16,665 $ 22,205
Ratio of expenses to average net assets 1.81% 1.81% 1.79% 1.84% 1.78%
Ratio of net income to average net assets 1.47% 1.64% 0.58% 1.74% 0.80%
Portfolio turnover rate 310.65% 446.18% 114.36% 254.77% 146.40%
</TABLE>
<TABLE>
<CAPTION>
Asset Allocation Fund
(for a share outstanding throughout the year)
Year Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.70 $ 11.88 $ 11.61 $ 11.21 $ 11.22
------------ ------------- ------------- ------------- -------------
Income from investment operations
Net investment income 0.28 0.40 0.26 0.30 0.25
Net gains or losses on securities
(realized and unrealized) 0.84 (0.76) 1.27 0.50 0.62
---- ----- ---- ---- ----
Total from investment operations 1.12 (0.36) 1.53 0.80 0.87
---- ----- ---- ---- ----
Less distributions:
From investment income (0.08) (0.48) (0.33) (0.16) (0.25)
From realized capital gains (0.33) (1.34) (0.93) (0.24) (0.63)
----- ----- ----- ----- -----
Total distributions (0.41) (1.82) (1.26) (0.40) (0.88)
----- ----- ----- ----- -----
Net asset value, end of year $ 10.41 $ 9.70 $ 11.88 $ 11.61 $ 11.21
============ ============= ============= ============= ============
Total return 11.69% (2.57)% 14.43% 7.41% 8.49%
Net assets end of year ($000) $ 10,641 $ 12,168 $ 16,543 $ 17,733 $ 22,632
Ratio of expenses to average net assets 1.84% 1.84% 1.78% 1.82% 1.76%
Ratio of net income to average net assets 2.63% 3.63% 2.26% 2.53% 2.11%
Portfolio turnover rate 327.72% 351.19% 161.57% 204.55% 288.45%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS (continued)
Leveraged Growth Fund
(for a share outstanding throughout the year)
Year Ended September 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.66 $ 14.85 $ 12.30 $ 12.30 $ 10.42
------------- ------------- ------------- ------------- -----------
Income from investment operations
Net investment income (loss) (0.06) 0.06 (0.20) (0.08) (0.04)
Net gains or losses on securities
(realized and unrealized) 2.63 (1.18) 3.33 0.84 2.33
---- ----- ---- ---- ----
Total from investment operations 2.57 (1.12) 3.13 0.76 2.29
---- ----- ---- ---- ----
Less distributions:
From investment income - (0.06) - - (0.07)
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)
----- ----- ----- ----- -----
Net asset value, end of year $ 12.57 $ 10.66 $ 14.85 $ 12.30 $ 12.30
============= ============= ============ ============ ==========
Total return 24.33% (6.71)% 26.66% 6.85% 22.85%
Net assets end of year ($000) $ 18,754 $ 15,488 $ 17,785 $ 15,69 9,686
Ratio of expenses to average net assets (a) 2.60% 3.13% 4.13% 3.70% 2.82%
Ratio of net income (loss) to average net assets (0.46)% 0.46% (1.52)% (0.78)% (0.68)%
Portfolio turnover rate 307.56 351.46% 130.36% 247.36% 87.50%
</TABLE>
(a) Expenses include interest expense of 0.83%, 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
Year ended End of Year During the Year During the Year During the Year
<S> <C> <C> <C> <C>
September 30, 1999 $ - $1,708,403 1,475,597 $1.16
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>
20
<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 "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 year ended September 30, 1999, the Advisor made expense reimbursements
in the amount of $5,550 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 September 30, 1999 was $0.
NOTE 5 - (SEE FOLLOWING)
NOTE 6 - (SEE FOLLOWING)
21
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MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CAPITAL SHARES
At September 30, 1999, there were an unlimited number of no par value shares of
beneficial interest authorized. Transactions in capital shares were as follows:
<TABLE>
MERRIMAN FLEXIBLE BOND FUND MERRIMAN GROWTH & INCOME FUND
--------------------------- -----------------------------
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............... 211,281 $ 2,149,600 120,276 $ 1,244,591 57,835 $ 605,966 91,829 $ 921,821
Shares issued in
reinvestment of
distributions........... 30,471 306,733 67,777 691,809 67,030 684,375 247,885 2,284,641
241,752 2,456,333 188,053 1,936,400 124,865 1,290,341 339,714 3,206,462
Shares redeemed........... (179,288) (1,819,511) (308,064) (3,170,368) (140,428) (1,454,084) (210,649) (2,159,387)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase (decrease)... 62,464 $ 636,822 (120,011) $(1,233,968) (15,563 ) $ (163,743) 129,065 $ 1,047,075
====== =========== ======== =========== ======= =========== ======= =============
</TABLE>
<TABLE>
MERRIMAN CAPITAL APPRECIATION FUND MERRIMAN ASSET ALLOCATION FUND
---------------------------------- ------------------------------
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.............. 93,407 $ 929,648 62,795 $ 592,751 62,981 $ 636,697 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
------ ------- ------- --------- ------ ------- ------- ---------
148,984 1,473,189 398,207 3,520,824 108,733 1,094,216 323,611 3,095,236
Shares redeemed.......... (319,717) (3,151,212) (297,864) (2,943,494) (341,204) (3,444,728) (461,409) (4,714,569)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase (decrease).. (170,733) $(1,678,023) 100,343 $ 577,330 (232,471) $ (2,350,512) (137,798) $(1,619,333)
======== =========== ======= ============ ======== ============ ======== ===========
</TABLE>
MERRIMAN LEVERAGED GROWTH FUND
------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
SHARES VALUE SHARES VALUE
------ ----- ------ -----
Shares sold........... 414,476 $ 5,025,322 253,147 $ 2,918,102
Shares issued in
reinvestment of
distributions....... 73,400 887,306 340,688 3,491,844
------ ------- ------- ---------
487,876 5,912,628 593,835 6,409,946
Shares redeemed....... (449,613) (5,420,614) (338,631) (3,948,058)
-------- ---------- -------- ----------
Net increase.......... 38,263 $ 492,014 255,204 $ 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 year ended September 30, 1999 were as follows:
Purchases Sales
Merriman Flexible Bond Fund $15,308,966 $17,678,627
Merriman Growth & Income Fund 18,159,714 17,796,874
Merriman Capital Appreciation Fund 27,316,956 31,094,350
Merriman Asset Allocation Fund 25,750,169 27,490,118
Merriman Leveraged Growth Fund 52,185,135 55,488,967
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Trustees and Shareholders of Merriman Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Merriman Investment Trust, consisting of
the Merriman Flexible Bond Fund, Merriman Growth & Income Fund, Merriman Capital
Appreciation Fund, Merriman Asset Allocation Fund, and Merriman Leveraged Growth
Fund as of September 30, 1999, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, the statement of cash flows of Merriman
Leveraged Growth Fund for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Merriman Investment Trust at September
30, 1999, and the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
Merriman Leveraged Growth cash flows for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania Tait, Weller & Baker
October 21, 1999
<PAGE>
