MERRIMAN
Graphic Omitted INVESTMENT TRUST
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 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:
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, 2000.
The last three months of 1999, the first fiscal quarter for us, were quite
productive for most investors, including our funds. However, the first three
months of this year were quite challenging and volatile. We were not immune to
this volatility, but our market timing, fund timing and fund selection let us
take advantage of some good opportunities.
The performance of each fund is discussed in detail later in this letter. Here's
the summary of our first-half results:
- Merriman Flexible Bond Fund: + 2.4%
- Merriman Growth & Income Fund: + 14.7%
- Merriman Capital Appreciation Fund: + 24.4%
- Merriman Asset Allocation Fund: + 13.0%
- Merriman Leveraged Growth Fund: + 33.9%
THE STATE OF THE STOCK MARKET
The first three months of 2000 gave many investors their first demonstration of
the dramatic differences between the 'old economy' of bricks-and-mortar
companies, manufacturers and traditional retailers on the one hand and the 'new
economy' of online, Internet and wireless companies on the other hand.
Most observers were surprised in January when Time-Warner and America Online
announced a merger in which America Online, a relatively new company, will be
the top dog of a publishing and entertainment empire that goes back to the early
1900s.
The new economy is represented in the stock market by the Nasdaq 100 index,
which includes the largest over-the-counter stocks with a heavy weighting in
technology. This index rose 66.5 percent in the six months ended March 31, while
the much broader Standard & Poor's 500 Index rose 16.8 percent.
Until mid-March, the Nasdaq market seemed to be on an upward course without
limits. But without suspending the laws of physics, it was hard to see how this
could continue. Consider these facts:
- - For the Nasdaq index to reach 1,000, it took 1,248 weeks. That's 24 years. -
The index added its next 1,000 points in 156 weeks (three years). - The index
added its next 1,000 points in 60 weeks (14 months).
- - The index added its next 1,000 points in 17 weeks.
- - The index added its next 1,000 points in 10 weeks.
At that rate, the index would have been adding 1,000 points a day by June 15.
Late in March and early in April, reality caught up with the Nasdaq, which
plunged roughly 30 percent in a few weeks. This stunned many investors, who had
begun to think 1999, when dozens of mutual funds had triple-digit returns, was a
normal year.
OTHER CONCERNS
The market's rapid rise has prompted a rash of speculative investments, some of
them made with money borrowed from credit cards. Studies indicate that margin
debt has risen 50 percent in the past six months. This is a cause for concern,
for obvious reasons.
As investors saw dramatically this spring, investment gains can vanish as
quickly as they can materialize. Margin calls are an automatic way to limit
investors' losses. But there's no such built-in discipline with credit card
balances, which can be counted on to persist even after the goods (or
investments) they have purchased are gone.
<PAGE>
WHAT INVESTORS SHOULD DO
We have never wavered in our belief that the way to be a successful investor is
to develop a good plan and stick to it. That's what we do in each of the
Merriman Mutual Funds, and over the long run our approach has paid off.
Much of the "action" in the stock market the past few years has been in
technology stocks. It's true that technology is profoundly changing the world in
which we live. And technology companies have provided some spectacular
investment opportunities in the past decade. We have no doubt there will be more
such opportunities in the future.
But technology has not repealed the basic rules of successful investing. One
rule that has not been repealed is the need for diversification. Investors who
diversify properly do not have to worry much about short-term changes in any
single market sector.
A second rule that has not been repealed is the need to persevere through
difficult periods. We've tried to say this many ways over the years: If you
can't get through the turmoil of the short term, you have little chance of
being a successful investor in the long term.
I'd like to share with you something I wrote in 1998, when the world's financial
markets were in great turmoil.
In the very good times, it seems as if investing is about accepting wealth.
You put down your money, almost like planting it in a garden, and watch it
grow. But in fact, in good times and bad, investing is really about
managing risk and managing your emotions. If you want to be a successful
investor, you have to do at least a decent job at both those tasks.
If I could tape that paragraph onto the front of your refrigerator, I'd do it!
MANAGING EMOTIONS
One excellent place to start managing the emotional side of investing is to be
clear about the facts. Roughly once every two years since 1970 the U.S. stock
market has declined by 10 percent or more. We have seen five declines of that
size in just the past four years. Volatility is a fact of life, and investors
who pretend otherwise usually live to regret it.
An excellent way to manage your emotions is to invest for appropriate time
periods.
- - If you know that you'll need to withdraw money for something like a down
payment on a house or a year of college tuition within the next 12 months,
you should not leave that money exposed to the stock market. The Merriman
Flexible Bond Fund is an excellent place for such money.
- - If your goal is achieving results in five years or 10 or 20, you do
yourself a disservice if you judge your success every day, every week,
every month or even every quarter. If you're a long-term investor, judge
your performance over a period longer than a single year.
MANAGING RISK
At the Merriman Mutual Funds, we manage risk with a passion. Every fund has wide
diversification. And every asset is independently timed with our mechanical
models that are designed to divert investments to cash during times of high
probability of losses. The funds themselves differ widely in their asset classes
and strategies, providing appropriate options for a wide range of investment
needs, from quite conservative to quite aggressive.
As you'll see in our fund-by-fund descriptions, we have achieved respectable
risk-adjusted returns.
OUR 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 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, 2000, according to Morningstar, the average
of U.S. high-grade corporate bond funds and U.S. high-yield bond funds rose 1.4
percent. The Fund appreciated 2.4 percent, compared with a gain of 2.1 percent
for a similar balance of U.S. and international bond funds. According to
Morningstar, the Fund's volatility over the past five years was 51 percent less
than the volatility of a similar balance of U.S. and international bond funds.
THE MERRIMAN GROWTH AND INCOME FUND invests primarily in growth-and-income
funds. Our present investment policy allocates 65 percent of the portfolio to
U.S. equity funds and 35 percent to international equity funds, when we are
fully invested. Whenever our timing systems 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.
<PAGE>
In the six months ending March 31, 2000, the fund's total return was 14.7
percent. A similar mix of domestic and international funds without timing (the
Appropriate Benchmark for this fund) was up 18.7 percent. Morningstar data
indicate the Fund's volatility over the past five years was 45 percent less than
the volatility of a similar mix of domestic and international 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, when we are fully invested.
Whenever our timing systems 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 ending March 31, 2000, the fund's total return was 24.4
percent. A similar mix of domestic and international funds without timing (the
Appropriate Benchmark for this fund) was up 37.9 percent. Morningstar data
indicate the Fund's volatility over the past five years was 43 percent less than
the volatility of a similar mix of domestic and international funds.
THE MERRIMAN ASSET ALLOCATION FUND spreads its investments among five major
asset groups, applying market timing to each one. The Fund's present investment
policy, when we are fully invested, 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.
In the six months ending March 31, 2000, the Fund rose 13.0 percent. According
to Morningstar, an untimed portfolio of the same balance of funds, (the
Appropriate Benchmark for this fund) rose 7.7 percent. The Fund's volatility
over the past five years was 28 percent less than the volatility of a similar
balance of funds, according to Morningstar.
THE MERRIMAN LEVERAGED GROWTH FUND'S defensive strategy uses market timing
systems similar to those used in the Capital Appreciation Fund and maintain,
when fully invested, a similar balance of U.S. and international equity funds.
During rising markets, the 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 gains.
In the six months ending March 31, 2000, according to Morningstar, the Fund
appreciated 33.9 percent, compared with a gain of 37.9 percent for a similar mix
of domestic and international equity funds held without timing or leverage. The
Fund's volatility over the past five years was 17 percent less than the
volatility of a similar mix of domestic and international funds.
IN SUMMARY
We continue to believe that all of our funds represent excellent strategies for
conservative investors, and we continue to invest our own money in them, right
along with yours. We think they have a great long-term future.
We can't promise what their future investment returns will be. But we can
promise that our funds will continue to employ the best tools available to us to
take advantage of investment opportunities while we manage risk every business
day.
We appreciate your confidence in the Merriman Mutual Funds and in our defensive
approach to investing. We're off to a good start in our first six months, and I
hope to have another 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, 2000
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
INTERNATIONAL BOND FUNDS: 19.94%
---------------------------------
50,125 AIM Emerging Markets Debt Fund Class A............... $ 456,140
46,838 Fidelity Adv Emerging Mkts Inc Fund.................. 485,714
39,906 Fidelity International Fund.......................... 343,991
-------
Total International Bond Funds
(Cost $1,140,000).................................... 1,285,845
---------
MONEY MARKET FUNDS: 77.48%
---------------------------
82,202 AIM Money Market Fund................................ 82,202
376,123 Am Cent-Benham Prime Money Mkt Fund.................. 376,123
414,877 Am Cent-Benham Gov't Agency Fund..................... 414,877
344,354 Columbia Daily Income Fund........................... 344,354
36,354 Dreyfus Institutional Money Market Fund.............. 36,354
347,834 Dreyfus Liquid Assets, Inc........................... 347,834
299,140 Federated Investors Treas Obligations Fund........... 299,140
93,518 Federated Money Market Trust Fund.................... 93,518
342,753 Federated Short Term US Gov't Trust.................. 342,753
345,922 Fidelity Cash Reserves Fund.......................... 345,922
1,976 Fidelity Daily Money Market Portfolio Fund........... 1,976
86,818 Fidelity US Govt Res Money Mkt Fund.................. 86,818
342,695 Rydex US Govt Money Market Fund...................... 342,695
348,175 Scudder Investment Trust Fund........................ 348,175
347,255 Scudder Prime Reserve Money Mkt Shares............... 347,255
342,661 Scudder US Treasury Money Fund....................... 342,661
402,099 Stein Roe Cash Reserves Fund......................... 402,099
442,046 Strong Money Market Fund............................. 442,046
-------
Total Money Market Funds
(Cost $4,996,802).................................... 4,996,802
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 3.56%
-------------------------------
$ 229,300 Firstar Bank Milwaukee, NA
5.8825%, 12/31/2031
(Cost $229,300)...................................... 229,300
Total Investment in Securities
(Cost $6,366,102) (a).........................100.98% 6,511,947
Liabilities in Excess
of Other Assets...............................(0.98)% (63,398)
----- -------
NET ASSETS.....................................100.00% $6,448,549
======= ==========
(a)Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation......................... $ 145,845
Gross unrealized depreciation......................... -
----------
Net Unrealized Appreciation........................... $ 145,845
==========
See Accompanying Notes to Financial Statements
5
<PAGE>
Merriman Growth & Income Fund
Portfolio of Investments
March 31, 2000
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 59.40%
------------------------------
12,164 Am Century Income & Growth Fund...................... $ 416,000
14,508 Columbia Common Stock Fund........................... 462,801
56,640 Dreyfus Founders Growth & Income Fund................ 448,588
21,600 INVESCO Growth & Income Fund......................... 416,225
12,982 Janus Growth & Income Fund........................... 593,399
15,966 Lexington Growth & Income Fund....................... 386,056
11,725 Liberty-Stein Roe Balanced Fund...................... 392,195
23,736 Neuberger & Berman Guardian Fund..................... 456,437
20,576 SAFECO Equity Fund................................... 488,072
22,409 Salomon Brothers Investors Value Fund................ 484,253
13,163 Scudder Growth & Income Fund......................... 352,897
45,455 Value Line Income Fund............................... 478,636
9,734 WPG Growth and Income Fund........................... 410,663
-------
Total Domestic Equity Funds
(Cost $5,545,859).................................... 5,786,222
---------
INTERNATIONAL EQUITY FUNDS: 36.74%
-----------------------------------
45,501 AIM Global Growth & Income Fund Class A.............. 342,621
21,249 Fidelity Intl Growth & Income Fund................... 647,895
23,966 INVESCO European Fund................................ 669,858
4,899 Janus Worldwide Fund................................. 418,673
8,583 Scudder International Fund........................... 599,251
45,662 Strong International Stock Fund...................... 900,457
-------
Total International Equity Funds
(Cost $2,456,710).................................... 3,578,755
---------
MONEY MARKET FUNDS: 0.73%
--------------------------
558 Federated MasterTrust Fund........................... 558
71,230 Value Line Cash Fund................................. 71,230
------
Total Money Market Funds
(Cost $71,788)....................................... 71,788
------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 3.10%
--------------------------------
$ 288,600 Firstar Bank Milwaukee, NA
5.8825%, 12/31/2031.................................. 288,600
13,000 Wisconsin Electric Power Company
5.7704%, 12/31/2031.................................. 13,000
------
Total Short-Term Demand Notes
(Cost $301,600)...................................... 301,600
-------
Total Investment in Securities
(Cost $8,375,957) (a) .........................99.97% 9,738,365
Other Assets
Less Liabilities...............................0.03% 2,914
----- -----
NET ASSETS....................................100.00% $9,741,279
======= ==========
(a)Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation........................ $ 1,495,623
Gross unrealized depreciation........................ (133,215)
---------
Net Unrealized Appreciation.......................... $ 1,362,408
===========
See Accompanying Notes to Financial Statements
6
<PAGE>
Merriman Capital Appreciation Fund
Portfolio of Investments
March 31, 2000
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 61.45%
------------------------------
28,175 American Century Vista Fund.......................... $ 768,608
20,175 Columbia Special Fund................................ 776,546
60,326 Dreyfus Founders Mid-Cap Growth Fund................. 583,355
20,172 Federated Stock Trust................................ 710,245
35,613 INVESCO Endeavor Fund................................ 963,341
30,000 INVESCO Small Co Growth Fund......................... 630,605
14,562 Liberty-Stein Roe Young Investors Fund............... 557,449
37,911 Neuberger Berman Manhattan Fund...................... 790,064
15,879 Rydex Series Trust-Nova Fund......................... 665,795
14,225 Scudder Development Fund............................. 714,642
27,778 USAA Growth Fund..................................... 700,833
27,683 Value Line Fund...................................... 760,728
-------
Total Domestic Equity Funds
(Cost $7,874,258).................................... 8,622,211
---------
INTERNATIONAL EQUITY FUNDS: 26.39%
-----------------------------------
61,248 Am Cent-Benham Intl Growth Fund...................... 956,696
27,615 Dreyfus Founders Worldwide Growth Fund............... 726,262
46,924 Fidelity Aggressive Intl Value Fund.................. 926,283
15,842 INVESCO European Fund................................ 442,771
37,651 Lexington Worldwide Emerging Mkts Fund............... 651,740
-------
Total International Equity Funds
(Cost $2,689,671).................................... 3,703,752
---------
MONEY MARKET FUNDS: 4.36%
--------------------------
29,988 Am Cent-Benham Prime Money Mkt Fund.................. 29,988
7,286 Neuberger Berman Cash Reserves Fund.................. 7,286
354,864 USAA Money Market Fund............................... 354,864
220,199 Value Line Cash Fund................................. 220,199
Total Money Market Funds
(Cost $612,337)...................................... 612,337
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 7.82%
-------------------------------
$ 2,200 General Mills, Inc.
5.7375%, 12/31/2031.................................. 2,200
485,200 American Family, Inc.
5.7704%, 12/31/2031.................................. 485,200
610,300 Firstar Bank Milwaukee, NA
5.8825%, 12/31/2031.................................. 610,300
-------
Total Short-Term Demand Notes
(Cost $1,097,700).................................... 1,097,700
---------
Total Investment in Securities
(Cost $12,273,966)........................(a).100.02% 14,036,000
Liabilities in Excess
of Other Assets..............................(0.02)% (3,838)
----- ------
NET ASSETS ...................................100.00% $14,032,162
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation........................ $1,838,156
Gross unrealized depreciation........................ (76,122)
-------
Net Unrealized Appreciation.......................... $1,762,034
==========
See Accompanying Notes to Financial Statements
7
<PAGE>
Merriman Asset Allocation Fund
Portfolio of Investments
March 31, 2000
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 29.12%
------------------------------
20,000 American Century Vista Fund.......................... $ 545,605
13,164 Fidelity Stock Selector Fund......................... 437,046
8,120 Liberty-Stein Roe Growth Stock Fund.................. 520,766
13,792 Rydex Series-Trust Nova Fund......................... 578,309
11,781 Scudder Development Fund............................. 591,888
21,081 USAA Growth Fund..................................... 531,870
-------
Total Domestic Equity Funds
(Cost $3,091,094).................................... 3,205,484
---------
INTERNATIONAL EQUITY FUNDS: 31.44%
-----------------------------------
31,950 Federated Intl Equity Fund........................... 1,060,413
31,310 Fidelity Advisor Emerging Mkts Inc Fund.............. 324,680
36,991 Fidelity Advisors Overseas Mkts Fund................. 883,335
11,814 INVESCO European Fund................................ 330,209
12,351 Scudder International Fund........................... 862,337
-------
Total International Equity Funds
(Cost $2,229,447).................................... 3,460,974
---------
INTERNATIONAL BOND FUNDS: 11.28%
---------------------------------
33,835 AIM Emerging Mkts Debt Fund ......................... 307,895
37,468 American Cent-Intl Bond Fund......................... 380,675
64,166 Fidelity International Bond Fund..................... 553,113
-------
Total International Bond Funds
(Cost $1,207,862).................................... 1,241,683
---------
MONEY MARKET FUNDS: 24.39%
---------------------------
618,286 Dreyfus Founders Money Market Fund................... 618,286
353,733 INVESCO Cash Reserves Fund........................... 353,733
515,823 INVESCO US Govt Money Mkt Fund....................... 515,823
235,818 Lexington Money Market Trust......................... 235,818
263,093 Liberty-Stein Roe Cash Reserves Fund................. 263,093
570,073 Rydex US Govt Money Market Fund...................... 570,073
17,555 USAA Money Market Fund............................... 17,555
110,000 USAA Treasury Money Market Fund...................... 110,000
-------
Total Money Market Funds
(Cost $2,684,381).................................... 2,684,381
---------
PRINCIPAL
AMOUNT
------
SHORT-TERM DEMAND NOTES: 3.80%
-------------------------------
$ 38,700 General Mills, Inc.
5.7375%, 12/31/2031.................................. 38,700
146,900 Sara Lee Corporation
5.7325%, 12/31/2031.................................. 146,900
300 American Family, Inc.
5.7704%, 12/31/2031.................................. 300
233,100 Firstar Bank Milwaukee, NA,
5.8825%, 12/31/2031.................................. 233,100
-------
Total Short-Term Demand Notes
(Cost $419,000)...................................... 419,000
-------
Total Investment in Securities
(Cost $9,631,784..........................(a) 100.03% 11,011,522
Liabilities in Excess
of Other Assets..............................(0.03%) (3,501)
----- ------
NET ASSETS.....................................100.00% $11,008,021
======= ===========
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation........................ $ 1,442,892
Gross unrealized depreciation........................ (63,154)
-------
Net Unrealized Appreciation.......................... $ 1,379,738
============
See Accompanying Notes to Financial Statements
8
<PAGE>
Merriman Leveraged Growth Fund
Portfolio of Investments
March 31, 2000
(Unaudited)
MARKET VALUE
SHARES (NOTE 2A)
------ ---------
DOMESTIC EQUITY FUNDS: 81.35%
------------------------------
24,495 American Century Ultra Fund.......................... $ 1,202,234
22,195 Columbia Growth Fund................................. 1,225,364
34,288 Columbia Special Fund................................ 1,319,749
50,231 Dreyfus Founders Growth Fund......................... 1,309,515
20,966 Federated Growth Strategy Fund....................... 1,044,335
36,668 Fidelity Stock Selector Fund......................... 1,217,366
37,641 INVESCO Dynamics Fund................................ 1,120,577
60,672 INVESCO Small Co Growth Fund......................... 1,275,327
17,746 Liberty-Stein Roe Growth Stock Fund.................. 1,138,045
62,565 Neuberger Berman Manhattan Fund...................... 1,303,858
20,520 RS Emerging Growth Fund.............................. 1,486,478
34,275 Robertson Stephens Value + Growth Fund............... 1,192,076
17,135 Rydex Series Trust - Nova Fund....................... 718,473
22,138 Scudder Development Fund............................. 1,112,192
29,055 Strong Growth Fund................................... 1,232,533
35,560 Value Line Fund...................................... 977,176
33,586 Value Line Special Situations Fund................... 1,021,337
---------
Total Domestic Equity Funds
(Cost $18,039,161)................................... 19,896,635
----------
INTERNATIONAL EQUITY FUNDS: 34.33%
-----------------------------------
40,576 Dreyfus Founders Worldwide Growth Fund............... 1,067,161
41,992 Federated Intl Equity Fund Class A................... 1,393,723
48,718 Federated Intl Small Co Fund ........................ 1,966,254
62,831 Fidelity Aggressive Intl Value Fund.................. 1,240,277
53,957 INVESCO European Fund................................ 1,508,094
32,606 Scudder Greater Euro Growth Fund..................... 1,222,074
---------
Total International Equity Funds
(Cost $4,873,457).................................... 8,397,583
---------
MONEY MARKET FUNDS: 4.44%
--------------------------
221,630 INVESCO Cash Reserves Fund........................... 221,630
864,523 USAA Money Market Fund............................... 864,523
-------
Total Money Market Funds
(Cost $1,086,153).................................... 1,086,153
---------
PRINCIPAL
AMOUNT
-------
SHORT-TERM DEMAND NOTES: 0.98%
-------------------------------
$ 238,800 Firstar Bank Milwaukee, NA
5.8825%, 12/31/2031
(Cost $238,800)...................................... 238,800
-------
Total Investment in Securities
(Cost $24,237,571) (a)........................121.10% 29,619,171
Liabilities in Excess
of Other Assets..............................(21.10%) (5,161,302)
------ ----------
NET ASSETS....................................100.00% $ 24,457,869
======= ============
(a) Cost for federal income tax purposes is the same and net unrealized
appreciation consists of:
Gross unrealized appreciation........................ $ 5,623,983
Gross unrealized depreciation........................ (242,383)
--------
Net Unrealized Appreciation.......................... $ 5,381,600
============
See Accompanying Notes to Financial Statements
9
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2000
(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 $6,366,102, $8,375,957,
$12,273,966, $9,631,784 and $24,237,571,
respectively) (Note 2) $6,511,947 $9,738,365 $14,036,000 $ 11,011,522 $ 29,619,171
Cash (overdraft) 12 29 1,850 (12) (132,640)
Dividends and interest receivable 24,567 17,953 19,666 24,516 7,484
------ ------ ------ ------ -----
Total assets 6,536,526 9,756,347 14,057,516 11,036,026 29,494,015
--------- --------- ---------- ---------- ----------
Liabilities
Loan payable to custodian bank - - - - 5,000,000
Accrued management fees 4,723 10,465 15,695 11,968 27,854
Other accrued expenses 5,608 4,603 9,659 16,037 8,292
Distributions payable 77,646 - - - -
------ ------ ------ ------ ---------
Total liabilities 87,977 15,068 25,354 28,005 5,036,146
------ ------ ------ ------ ---------
Net Assets
(Applicable to 647,047, 881,647, 1,246,621, 1,001,276,
and 1,616,312 shares of beneficial interest with no
par value, unlimited number of shares authorized) $6,448,549 $9,741,279 $14,032,162 $ 11,008,021 $ 24,457,869
========== ========== =========== ============ ============
Pricing of Shares
Net asset value, offering and redemption price per share
$ 6,448,549 / 647,047 shares $ 9.97
==========
$ 9,741,279 / 881,647 shares $ 11.05
==========
$14,032,162 / 1,246,621 shares $ 11.26
==========
$11,008,021 / 1,001,276 shares $ 10.99
===========
$24,457,869 / 1,616,312 shares $ 15.13
============
Net assets
At March 31, 2000, net assets consisted of:
Paid-in capital $6,499,601 $8,215,347 $10,867,967 $9,160,119 $16,987,357
Undistributed (Accumulated) net investment income (loss) (490) 9,332 2,008 33,287
(72,960)
Accumulated net realized gain (loss) (196,407) 154,192 1,400,153 434,877 2,161,872
Unrealized appreciation on investments 145,845 1,362,408 1,762,034 1,379,738 5,381,600
------- --------- --------- --------- ---------
$6,448,549 $9,741,279 $14,032,162 $11,008,021 $24,457,869
========== ========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
10
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
Six Months Ended March 31, 2000
(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 $ 15,464 $ 7,880 $ 21,833 $ 13,412 $ 25,184
Dividends 195,370 105,276 142,258 167,581 105,285
------- ------- ------- ------- -------
Total investment income 210,834 113,156 164,091 180,993 130,469
------- ------- ------- ------- -------
Expenses
Management fees (Note 3) 36,766 58,813 85,111 68,669 140,967
Accounting services 9,608 10,156 14,183 11,774 21,705
Custodian fees 1,885 2,013 2,583 2,725 3,751
Transfer agent fees 5,124 5,124 6,085 5,865 7,228
Interest expense (Note 4) - - - - 13,100
Professional services 3,303 4,044 5,544 4,996 7,494
Registration fees 2,288 2,411 4,072 4,179 4,026
Insurance and other 1,516 1,376 2,324 2,279 3,275
Printing 595 604 915 915 1,510
Trustees fees 100 150 203 229 373
--- --- --- --- ---
Expenses before reimbursement 61,185 84,691 121,020 101,631 203,429
------ ------ ------- ------- -------
Reimbursement by advisor (Note 3) 6,003 - - - -
----- ------ ------- ------- -------
Total expenses 55,182 84,691 121,020 101,631 203,429
------ ------ ------- ------- -------
Net investment income 155,652 28,465 43,071 79,362 (72,960)
------- ------ ------ ------ -------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) from security transactions (112,951) (64,150) 766,259 151,725 702,411
Capital gain distributions from regulated investment
companies - 218,405 633,967 307,104 1,461,257
Net increase in unrealized appreciation of investments 128,334 1,093,241 1,495,797 802,613 4,260,613
------- --------- --------- ------- ---------
Net realized and unrealized gain on investments 15,383 1,247,496 2,896,023 1,261,442 6,424,281
------ --------- --------- --------- ---------
Net increase in net assets resulting from operations $171,035 $1,275,961 $ 2,939,094 $ 1,340,804 $6,351,321
======== ========== =========== ============ ==========
</TABLE>
See Accompanying Notes to Financial Statements
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
MERRIMAN FLEXIBLE MERRIMAN GROWTH &
BOND FUND INCOME FUND
--------- -----------
SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, YEAR ENDED MARCH 31, YEAR ENDED
2000 SEPTEMBER 30, 2000, SEPTEMBER 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
----------- ---- ----------- ----
Operations:
<S> <C> <C> <C> <C>
Net investment income $ 155,652 $ 365,141 $ 28,465 $ 60,996
Net realized gain (loss) on investments (112,951) (84,374) (64,150) 148,916
Capital gain distributions from regulated investment
companies - 10,554 218,405 514,131
Net increase (decrease) in unrealized appreciation
on investments 128,334 (87,584) 1,093,241 387,813
------- ------- --------- -------
Net increase in net assets resulting from operations 171,035 203,737 1,275,961 1,111,856
Distributions to shareholders:
Distributions from net realized gain on investments - - (646,201) (585,865)
Distributions from net investment income (156,896) (364,405) (19,133) (118,817)
Capital share transactions:
Increase (decrease) in net assets resulting from
capital share transactions (Note 6) (1,541,679) 636,822 368,996 (163,743)
- ---------- ------- ------- --------
Total increase (decrease) (1,527,540) 476,154 979,623 243,431
Net assets
Beginning of period 7,976,089 7,499,935 8,761,656 8,518,225
--------- --------- --------- ---------
End of period* $6,448,549 $7,976,089 $9,741,279 $8,761,656
========== ========== ========== ==========
* Including undistributed (accumulated) net investment
income (loss) of: $ (490) $ 754 $ 9,332 $ -
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MERRIMAN CAPITAL MERRIMAN ASSET
APPRECIATION FUND ALLOCATION FUND
----------------- ---------------
SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, YEAR ENDED MARCH 31, YEAR ENDED
2000 SEPTEMBER 30, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
----------- ---- ----------- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 43,071 $ 191,325 $ 79,362 $ 301,271
Net realized gain on investments 766,259 628,899 151,725 110,347
Capital gain distributions from regulated investment
companies 633,967 538,537 307,104 354,918
Net increase in unrealized appreciation on investments 1,495,797 469,582 802,613 530,941
--------- ------- ------- -------
Net increase in net assets resulting from operations 2,939,094 1,828,343 1,340,804 1,297,477
Distributions to shareholders:
Distributions from net realized gain on investments (1,168,231) (469,197) (488,871) (381,247)
Distributions from net investment income (150,637) (81,751) (254,217) (93,129)
Capital share transactions:
Increase (decrease) in net assets resulting from capital
share transactions (Note 6) 168,868 (1,678,023) (230,583) (2,350,512)
- ------- ---------- -------- ----------
Total increase (decrease) 1,789,094 (400,628) 367,133 (1,527,411)
Net assets
Beginning of period 12,243,068 12,643,696 10,640,888 12,168,299
End of period* $14,032,162 $12,243,068 $11,008,021 $10,640,888
=========== =========== =========== ===========
* Including undistributed net investment income of: $ 2,008 $ 109,574 $ 33,287 $ 208,142
=========== =========== =========== ===========
</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
MARCH 31, YEAR ENDED
2000 SEPTEMBER 30,
(UNAUDITED) 1999
----------- ----
<S> <C> <C>
OPERATIONS:
Net investment loss $ (72,960) $ (82,463)
Net realized gain on investments 702,411 1,408,667
Capital gain distributions from regulated investment companies 1,461,257 1,018,656
Net increase in unrealized appreciation on investments 4,260,613 1,366,712
--------- ---------
Net increase in net assets resulting from operations 6,351,321 3,711,572
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain on investments (2,344,927) (937,419)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from
capital share transactions (Note 6) 1,697,491 492,014
- --------- -------
Total increase 5,703,885 3,266,167
NET ASSETS
Beginning of period 18,753,984 15,487,817
---------- ----------
End of period* $24,457,869 $ 18,753,984
=========== ============
* Including undistributed (accumulated) net investment
income (loss) of: $ (72,960) $ -
========= ============
</TABLE>
See Accompanying Notes to Financial Statements
13
<PAGE>
MERRIMAN LEVERAGED GROWTH FUND
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1999
----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Dividends and interest received $ 405,890
Operating expenses paid (470,786)
Net purchases of short-term investments (3,802,246)
Purchases of portfolio securities (52,185,135)
Proceeds from sales of portfolio securities 55,488,967
Long-term capital gain distributions received 1,018,656
---------
Net cash provided by operating activities 455,346
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital shares sold 5,015,242
Payments on capital shares redeemed (5,420,614)
Cash dividends paid * (50,113)
Net increase (decrease) in loan payable to custodian bank -
---------
Net cash used for financing activities (455,485)
--------
Net change in cash (139)
Cash at beginning of period (22)
--------
Cash (overdraft) at end of period $ (161)
==========
RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations $ 3,711,572
-----------
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
(Increase) decrease in investment securities (3,273,793)
(Increase) decrease in dividends and interest receivable 17,940
Increase (decrease) in accrued management fees 3,238
Increase (decrease) in other accrued expenses (3,611)
------
Total Adjustments (3,256,226)
----------
Net cash provided by operating activities $ 455,346
==========
</TABLE>
* Non-cash financing activities included herein consist of reinvestment of
distributions to shareholders of $887,306.
See Accompanying Notes to Financial Statements
14
<PAGE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FLEXIBLE BOND FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<S> <C> <C> <C> <C> <C> <C>
2000(a) 1999 1998 1997 1996 1995
------- ---- ---- ---- ---- ----
Net asset value, beginning of period $ 9.96 $ 10.15 $ 10.74 $ 10.36 $ 10.23 $ 9.94
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.23 0.46 0.63 0.60 0.63 0.55
Net gains or losses on securities
(realized and unrealized) 0.01 (0.19) (0.32) 0.38 0.13 0.29
---- ----- ----- ---- ---- ----
Total from investment operations 0.24 0.27 0.31 0.98 0.76 0.84
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.23) (0.46) (0.67) (0.60) (0.63) (0.55)
From realized capital gains - - (0.23) - - -
----- ----- ----- ----- ----- -----
Total distributions (0.23) (0.46) (0.90) (0.60) (0.63) (0.55)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 9.97 $ 9.96 $ 10.15 $ 10.74 $ 10.36 $ 10.23
======= ======= ======= ======= ======= =======
Total return 2.39% 2.71% 3.03% 9.64% 7.62% 8.63%
Net assets, end of period ($000) $ 6,449 $ 7,976 $ 7,500 $ 9,220 $ 8,661 $ 8,592
Ratio of expenses to average net assets 1.68%*(b) 1.57%* 1.50% 1.46% 1.49% 1.50%
Ratio of net income to average net assets 4.27%(b) 4.52% 5.93% 5.54% 6.05% 5.17%
Portfolio turnover rate 400.11% 435.08% 206.12% 172.73% 139.77% 291.46%
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<S> <C> <C> <C> <C> <C> <C>
2000(a) 1999 1998 1997 1996 1995
------- ---- ---- ---- ---- ----
Net asset value, beginning of period $ 10.34 $ 9.87 $ 12.96 $ 11.65 $ 11.32 $ 10.86
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.03 0.08 0.32 0.19 0.27 0.24
Net gains or losses on securities
(realized and unrealized) 1.48 1.40 (0.17) 2.40 1.02 1.29
---- ---- ----- ---- ---- ----
Total from investment operations 1.51 1.48 0.15 2.59 1.29 1.53
---- ---- ---- ---- ---- ----
Less distributions:
From investment income (0.02) (0.15) (0.27) (0.24) (0.27) (0.21)
From realized capital gains (0.78) (0.86) (2.97) (1.04) (0.69) (0.86)
----- ----- ----- ----- ----- -----
Total distributions (0.80) (1.01) (3.24) (1.28) (0.96) (1.07)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 11.05 $ 10.34 $ 9.87 $ 12.96 $ 11.65 $ 11.32
======= ======= ======= ======= ======= =======
Total return 14.72% 13.61% 2.99% 24.11% 12.18% 15.41%
Net assets, end of period ($000) $ 9,741 $ 8,762 $ 8,518 $ 9,514 $ 8,702 $ 9,348
Ratio of expenses to average net assets 1.81%(b) 1.79% 1.75% 1.71% 1.77% 1.76%
Ratio of net income to average net assets 0.61%(b) 0.68% 2.61% 1.42% 2.33% 2.10%
Portfolio turnover rate 116.05% 276.73% 280.78% 105.11% 133.00% 78.64%
</TABLE>
* Prior to reimbursement from advisor
(a) Six months ended March 31, 2000 (Unaudited)
(b) Annualized
15
<PAGE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<S> <C> <C> <C> <C> <C> <C>
2000(a) 1999 1998 1997 1996 1995
------- ---- ---- ---- ---- ----
Net asset value, beginning of period $ 9.99 $ 9.06 $ 12.02 $ 10.93 $ 11.69 $ 10.82
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.04 0.15 0.19 0.06 0.19 0.09
Net gains or losses on securities
(realized and unrealized) 2.35 1.19 (0.74) 2.13 0.37 1.56
---- ---- ----- ---- ---- ----
Total from investment operations 2.39 1.34 (0.55) 2.19 0.56 1.65
---- ---- ----- ---- ---- ----
Less distributions:
From investment income (0.13) (0.06) (0.20) (0.06) (0.22) (0.07)
From realized capital gains (0.99) (0.35) (2.21) (1.04) (1.10) (0.71)
----- ----- ----- ----- ----- -----
Total distributions (1.12) (0.41) (2.41) (1.10) (1.32) (0.78)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 11.26 $ 9.99 $ 9.06 $ 12.02 $ 10.93 $ 11.69
======= ======= ======= ======= ======= =======
Total return 24.43% 14.83% (3.87)% 21.93% 5.69% 16.43%
Net assets end of period($000) $14,032 $12,243 $12,644 $15,567 $16,665 $22,205
Ratio of expenses to average net assets 1.79%(b) 1.81% 1.81% 1.79% 1.84% 1.78%
Ratio of net income to average net assets 0.64%(b) 1.47% 1.64% 0.58% 1.74% 0.80%
Portfolio turnover rate 132.75% 310.65% 446.18% 114.36% 254.77% 146.40%
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<S> <C> <C> <C> <C> <C> <C>
2000(a) 1999 1998 1997 1996 1995
------- ---- ---- ---- ---- ----
Net asset value, beginning of period $ 10.41 $ 9.70 $ 11.88 $ 11.61 $ 11.21 $ 11.22
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income 0.09 0.28 0.40 0.26 0.30 0.25
Net gains or losses on securities
(realized and unrealized) 1.26 0.84 (0.76) 1.27 0.50 0.62
---- ---- ----- ---- ---- ----
Total from investment operations 1.35 1.12 (0.36) 1.53 0.80 0.87
---- ---- ----- ---- ---- ----
Less distributions:
From investment income (0.26) (0.08) (0.48) (0.33) (0.16) (0.25)
From realized capital gains (0.51) (0.33) (1.34) (0.93) (0.24) (0.63)
----- ----- ----- ----- ----- -----
Total distributions (0.77) (0.41) (1.82) (1.26) (0.40) (0.88)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 10.99 $ 10.41 $ 9.70 $ 11.88 $ 11.61 $ 11.21
======= ======= ======= ======= ======= =======
Total return 13.03% 11.69% (2.57)% 14.43% 7.41% 8.49%
Net assets end of period ($000) $11,008 $10,641 $12,168 $16,543 $17,733 $22,632
Ratio of expenses to average net assets 1.86%(b) 1.84% 1.84% 1.78% 1.82% 1.76%
Ratio of net income to average net assets 1.45%(b) 2.63% 3.63% 2.26% 2.53% 2.11%
Portfolio turnover rate 155.01% 327.72% 351.19% 161.57% 204.55% 288.45%
</TABLE>
(a) Six months ended March 31, 2000 (Unaudited)
(b) Annualized
16
<PAGE>
MERRIMAN MUTUAL FUNDS
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
LEVERAGED GROWTH FUND
(for a share outstanding throughout the period)
Year Ended September 30,
<S> <C> <C> <C> <C> <C> <C>
2000(a) 1999 1998 1997 1996 1995
------- ---- ---- ---- ---- ----
Net asset value, beginning of period $ 12.57 $ 10.66 $ 14.85 $ 12.30 $ 12.30 $ 10.42
------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income (loss) (0.05) (0.06) 0.06 (0.20) (0.08) (0.04)
Net gains or losses on securities
(realized and unrealized) 4.19 2.63 (1.18) 3.33 0.84 2.33
---- ---- ----- ---- ---- ----
Total from investment operations 4.14 2.57 (1.12) 3.13 0.76 2.29
---- ---- ----- ---- ---- ----
Less distributions:
From investment income - - (0.06) - - (0.07)
From realized capital gains (1.58) (0.66) (3.01) (0.58) (0.76) (0.34)
----- ----- ----- ----- ----- -----
Total distributions (1.58) (0.66) (3.07) (0.58) (0.76) (0.41)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 15.13 $ 12.57 $ 10.66 $ 14.85 $ 12.30 $ 12.30
======= ======= ======= ======= ======= =======
Total return 33.87% 24.33% (6.71)% 26.66% 6.85% 22.85%
Net assets end of period ($000) $24,458 $18,754 $15,488 $17,785 $15,694 $ 9,686
Ratio of expenses to average net
assets (c) 1.81%(b) 2.60% 3.13% 4.13% 3.70% 2.82%
Ratio of net income (loss) to average
net assets (0.65)%(b) (0.46)% 0.46% (1.52)% (0.78)% (0.68)%
Portfolio turnover rate 115.45% 307.56% 351.46% 130.36% 247.36% 87.50%
</TABLE>
(a) Six months ended March 31, 2000 (Unaudited)
(b) Annualized
(c) Expenses include interest expense of 0.12%(b), 0.83%, 1.38%, 2.36%, 1.95%
and 1.01% for 2000, 1999, 1998, 1997, 1996 and 1995, respectively.
Information relating to outstanding debt during the period 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, 2000 $5,000,000 $ 138,612 1,548,617 $0.09
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>
17
<PAGE>
Merriman Investment Trust
NOTES TO FINANCIAL STATEMENTS, (UNAUDITED)
NOTE 1 - ORGANIZATION
Merriman Flexible Bond Fund, Merriman Growth & Income Fund, Merriman
Capital Appreciation Fund, Merriman Asset Allocation Fund, and Merriman
Leveraged Growth Fund (the "Funds") are separate series of Merriman Investment
Trust (the "Trust") which is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management company. The Trust was
organized in 1987 as a Massachusetts Business Trust and may issue an unlimited
number of shares of beneficial interest without par value in separate classes of
"funds."
Each fund has specific investment objectives: The objectives of the
Flexible Bond Fund are income, preservation of capital and, secondarily, growth
of capital. The objectives of the Growth & Income Fund are long-term growth of
capital, income and, secondarily, preservation of capital. The objective of the
Capital Appreciation Fund is capital appreciation. The objectives of the Asset
Allocation Fund are high total return consistent with reasonable risk. The
objective of the Leveraged Growth Fund is capital appreciation through the use
of leverage and other investment practices.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed in the preparation of the Trust's financial statements. The policies
are in conformity with generally accepted accounting principles.
A. SECURITY VALUATION. Short-term debt securities are valued at amortized
cost, which approximates market value. Investments in regulated investment
companies (mutual funds) are valued at the net asset value per share.
B. FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income or excise tax provision is
required.
C. INCOME RECOGNITION. Dividend income and distributions to shareholders are
recorded on the "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, 2000, the Advisor made expense reimbursements
in the amount of $6,003 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, 2000 was $5,000,000.
NOTE 5 - (SEE FOLLOWING)
NOTE 6 - (SEE FOLLOWING)
18
<PAGE>
MERRIMAN INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CAPITAL SHARES
At March 31, 2000, 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, 2000 SEPTEMBER 30, MARCH 31, 2000 SEPTEMBER 30,
UNAUDITED 1999 (UNAUDITED) 1999
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 34,833 $ 348,700 211,281 $2,149,600 23,152 $ 252,231 57,835 $605,966
Shares issued in
reinvestment of
distributions...... 6,824 68,030 30,471 306,733 59,420 647,080 67,030 684,375
----- ------ ------ ------- ------ ------- ------ -------
41,657 416,730 241,752 2,456,333 82,572 899,311 124,865 1,290,341
Shares redeemed.......(195,639) (1,958,409) (179,288) (1,819,511) (48,582) (530,315) (140,428) (1,454,084)
-------- ---------- -------- ---------- ------- -------- -------- ----------
Net increase
(decrease)..........(153,982) $(1,541,679) 62,464 $ 636,822 33,990 $ 368,996 (15,563) $ (163,743)
======== =========== ====== ========== ====== ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
MERRIMAN CAPITAL APPRECIATION FUND MERRIMAN ASSET ALLOCATION FUND
---------------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30, MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold .......... 227,931 $2,503,945 93,407 $ 929,648 16,349 $ 178,761 62,981 $ 636,697
Shares issued in
reinvestment of
distributions ..... 121,358 1,307,020 55,577 543,541 66,390 720,991 45,752 457,519
------- --------- ------ ------- ------ ------- ------ -------
349,289 3,810,965 148,984 1,473,189 82,739 899,752 108,733 1,094,216
Shares redeemed ..... (327,636) (3,642,097) (319,717) (3,151,212) (103,508) (1,130,335) (341,204) (3,444,728)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Net increase
(decrease)......... 21,653 $ 168,868 (170,733) $(1,678,023) (20,769) $(230,583) (232,471) $(2,350,512)
====== ========= ======== =========== ======= ========= ======== ===========
</TABLE>
MERRIMAN LEVERAGED GROWTH FUND
------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2000 SEPTEMBER 30,
(UNAUDITED) 1999
SHARES VALUE SHARES VALUE
------ ----- ------ -----
Shares sold........... 184,837 $2,748,576 414,476 $5,025,322
Shares issued in
reinvestment of
distributions...... 161,858 2,287,057 73,400 887,306
------- --------- ------ -------
346,695 5,035,633 487,876 5,912,628
Shares redeemed.......(221,776) (3,338,142) (449,613) (5,420,614)
-------- ---------- -------- ----------
Net increase.......... 124,919 $1,697,491 38,263 $ 492,014
======= ========== ====== =========
NOTE 6 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities other than short-term investments and
money market funds for the period ended March 31, 2000 were as follows:
Purchases Sales
--------- -----
Merriman Flexible Bond Fund.............$11,674,087 $11,753,641
Merriman Growth & Income Fund............11,853,720 6,946,746
Merriman Capital Appreciation Fund.......15,453,863 10,659,303
Merriman Asset Allocation Fund...........11,550,242 10,091,002
Merriman Leveraged Growth Fund...........32,314,829 21,043,536
19
<PAGE>
GRAPHIC OMITTED MERRIMAN
INVESTMENT TRUST
1200 Westlake Avenue North Suite 700
Seattle, Washington 98109
1-800-423-4893
20
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