[logo] MERRIMAC FUNDS
February 12, 1997
Dear Shareholder:
We are pleased to provide you with the first annual report of
the Merrimac Cash Fund. The period covered is short - the Fund's November 21,
1996 inception to December, 1996 - but the operating results and Fund growth are
noteworthy.
The investment objective of the Fund is to seek as high a
level of current income as is consistent with the preservation of capital and
liquidity. Investors Bank & Trust Company, the investment adviser to the
Merrimac Master Portfolio, has engaged The Bank of New York as sub-adviser to
carry out a program to accomplish the investment objective.
On behalf of the Board of Trustees of the Merrimac Funds, I
want to thank you for your confidence and participation. We look forward to
serving you in the months and years ahead.
Sean P. Brennan
President
Merrimac Funds
200 Clarendon Street (bullet) Boston, Massachusetts 02116
888.MERRIMAC (bullet) 617.927.8303 fax
<PAGE>
MERRIMAC CASH FUND
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investment in Merrimac Portfolio,
at value (Note 1)..........................................................$1,006,310,145
Deferred organization expense (Note 1)........................................ 68,427
-------------
Total assets........................................................... 1,006,378,572
-------------
Liabilities:
Distribution payable to shareholders.......................................... 2,957,661
Accrued expenses.............................................................. 74,977
-------------
Total liabilities...................................................... 3,032,638
-------------
Net Assets.............................................................................$1,003,345,934
=============
Shares outstanding..................................................................... 1,003,345,934
=============
Net asset value, maximum offer and redemption price per share, based on
875,936,001 and 127,409,933 shares outstanding for the Premium Class
and Institutional Class, respectively................................................$ 1.00
=============
</TABLE>
Statement of Operations
For the Period ended December 31, 1996 (a)
<TABLE>
<S> <C>
Investment income allocated from Portfolio (Note 1):
Interest......................................................................$ 3,572,665
Expenses:
Allocated Portfolio expenses.................................................. 78,760
Accounting, transfer agency, and
administration fees (Note 2)............................................... 6,416
Insurance..................................................................... 4,947
Legal......................................................................... 2,413
Amortization of organization expense (Note 1)................................. 1,573
Audit and tax return preparation fees......................................... 1,207
Printing...................................................................... 1,207
Other......................................................................... 604
-------------
97,127
Shareholder servicing fee
Institutional Class (Note 3)............................................... 28,418
-------------
Total Expenses................................................................ 125,545
-------------
Net investment income......................................................... 3,447,120
-------------
Net increase in net assets from operations.............................................$ 3,447,120
=============
</TABLE>
(a) Fund's commencement of operations occurred on November 21, 1996.
See accompanying notes to financial statements.
<PAGE>
MERRIMAC CASH FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended
December 31,
1996 (a)
-------------
<S> <C>
Operations
Net investment income..................................................$ 3,447,120
--------------
Dividends and distributions to shareholders
Distributions from net investment income - Premium Class............... (2,859,529)
Distributions from net investment income - Institutional Class......... (587,591)
--------------
Total distributions declared to shareholders........................... (3,447,120)
Capital Share Transactions
Proceeds from sales of shares.......................................... 1,072,725,924
Payment for redemption of shares....................................... (69,379,990)
--------------
Net increase in net assets derived from share transactions............. 1,003,345,934
--------------
Net increase in net assets............................................. 1,003,345,934
Net Assets
Beginning of period.................................................... --
--------------
End of period..........................................................$1,003,345,934
==============
</TABLE>
Financial Highlights
Selected per share data for capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Period Ended December 31, 1996 (a)
------------------------------------
Premium Institutional
Class Class
--------------- -------------
<S> <C> <C>
Net asset value, beginning of period................. $1.000 $1.000
--------- ---------
Net investment income................................ 0.006 0.006
Dividends from net investment
income........................................ (0.006) (0.006)
--------- ---------
Net asset value, end of period....................... $1.000 $1.000
========= =========
Net assets, end of period (thousands)................$875,936 $127,410
Total return **...................................... 5.41% 5.16%
Ratios to average net assets (b)**:
Expenses...................................... 0.15% 0.40%
Net investment income......................... 5.41% 5.16%
</TABLE>
- -----------------------
(a) Fund's commencement of operations occurred on November 21, 1996.
(b) Includes the Fund's proportionate share of the Portfolio's net expenses.
** Annualized.
See accompanying notes to financial statements.
<PAGE>
Merrimac Funds
Merrimac Cash Fund
Notes to Financial Statements
(1) Significant Accounting Policies:
The Merrimac Funds (the "Trust") was organized as a Delaware business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Merrimac Cash Fund (the "Fund") is
a separate diversified investment portfolio or series of the Trust. The Fund
consists of two classes of shares, the Merrimac Cash Fund Premium Class (the
"Premium Class") and the Merrimac Cash Fund Institutional Class (the
"Institutional Class")
The Fund invests all of its investable assets in the Merrimac Cash
Portfolio (the "Portfolio"), a series of the Merrimac Master Portfolio (the
"Portfolio Trust"), which is organized as a New York trust, and has the same
investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (100% at December 31, 1996). The performance of the Fund is directly
affected by the performance of the Portfolio. The Portfolio seeks to achieve a
high level of current income, consistent with the preservation of capital and
liquidity. The financial statements of the Portfolio are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
It is the policy of the Fund to maintain a net asset value of $1.00 per
share; the Fund has adopted certain investment, valuation, dividend and
distribution policies which conform to general industry practice, to enable it
to do so. However, there is no assurance that the Fund will be able to maintain
a stable net asset value.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting principles
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
<PAGE>
A. Investment security valuations-
The Fund records its investment in the Portfolio at value. Valuation of
securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes to
Financial Statements, which are included elsewhere in this report.
B. Securities transactions and income-
The Portfolio records securities transactions as of the trade date.
Interest income, including the accretion of discount or the amortization of
premium, is recognized when earned. Gains or losses on sales of securities are
calculated on the identified cost basis. The Fund's net investment income
consists of its pro rata share of the net investment income of the Portfolio,
less all expenses of the Fund determined in accordance with GAAP.
C. Federal income taxes-
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and thus not be subject to income
taxes to the extent that it distributes all of its taxable income for its fiscal
year and meets certain other requirements. Accordingly, no provision for Federal
income taxes was required.
D. Deferred organization expense-
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized on a straight-line basis over a five year
period beginning at the commencement of operations.
E. Expense allocation-
Expenses directly attributable to a class are charged to that class.
Expenses not directly attributed to a specific class are allocated, based on
relative net assets, to each of the classes.
(2) Dividends and Distributions to Shareholders:
Dividends on the shares of the Fund are declared each business day to
shareholders of record at noon (New York time) on that day, and paid and
reinvested on the last business day of the month. Distributions of net realized
gains to shareholders, if any, are declared annually and recorded on the
ex-dividend date. Dividends and distributions are determined in accordance with
Federal income tax regulations, which may differ from GAAP.
(3) Shareholder Servicing Plan:
The Trust has adopted a Sharholder Servicing Plan under which certain
service organizations may be compensated for providing shareholder accounting
and other administrative services for their clients. The Institutional Class
will pay an annual fee of 0.25% of the value of the assets that a service
organization contributes to the Trust on behalf of their clients.
<PAGE>
(4) Management Fee and Affiliated Transactions:
The Portfolio retains Investors Bank & Trust Company ("Investors Bank") as
investment adviser. The Bank of New York ("BNY") serves as the Portfolio's
sub-adviser. The Fund pays no direct compensation for such services, but
indirectly bears its pro rata share of the compensation paid by the Portfolio.
See Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
Investors Bank serves as administrator, custodian and transfer agent of the
Fund. IBT Fund Services (Canada) Inc., a subsidiary of Investors Bank, provides
fund accounting for the Fund. For these services, Investors Bank is paid a
monthly fee at an annual rate of 0.01% of the average daily net assets of the
Fund.
Certain of the trustees and officers of the Trust are directors or officers
of Investors Bank. The Fund pays no compensation to its trustees who are
affiliated with the investment adviser or to its officers, all of whom receive
remuneration for their services to the Fund from the investment adviser.
(5) Investment Transactions:
The Fund's investments in and withdrawals from the Portfolio for the period
from November 21, l996 to December 31, 1996 aggregated $1,072,725,924 and
$69,379,990, respectively.
(6) Shares of Beneficial Interest:
The Declaration of Trust permits the trustees to issue an unlimited number
of shares of beneficial interest having a par value of $0.001 per share.
Transactions in Fund shares for each Class were as follows:
Premium Class Institutional Class
------------- -------------------
Proceeds from Shares Sold 916,936,001 155,789,923
Payment for Shares Redeemed (41,000,000) (28,379,990)
----------- ------------
Net increase in shares 875,936,001 127,409,933
=========== ============
At December 31, 1996, 100% of the Fund's outstanding shares are held of
record by Investors Bank and BNY, as agents for their respective clients.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To The Board of Trustees
and Shareholders of
Merrimac Cash Fund
We have audited the accompanying statement of assets and liabilities of the
Merrimac Cash Fund, one of the series comprising The Merrimac Funds (the
"Trust"), as of December 31, 1996, and the related statements of operations,
changes in net assets and financial highlights for the period from November 21,
1996, (commencement of operations) to December 31, 1996. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit 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. 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 audit provides 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 the
Merrimac Cash Fund at December 31, 1996, the results of its operations, the
changes in net assets and its financial highlights for the period from November
21, 1996 (commencement of operations) to December 31, 1996, in conformity with
generally accepted accounting principles.
Boston, Massachusetts
February 21, 1997 Ernst & Young LLP
<PAGE>
MERRIMAC CASH PORTFOLIO
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Yield to
Maturity on
Principal Date of Maturity Value
Amount Description Purchase* Date (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper - 50.0%
$ 10,000,000 Apex Funding . . . . . . . . . . . . . . . . . . . . . . . . .5.42% 01/21/97 $ 9,969,889
10,000,000 Apex Funding . . . . . . . . . . . . . . . . . . . . . . . . .5.82% 01/24/97 9,962,817
20,000,000 Asset Backed Capital Finance . . . . . . . . . . . . . . . . .5.45% 03/06/97 19,806,222
25,000,000 Banner Receivables . . . . . . . . . . . . . . . . . . . . . .5.57% 03/25/97 24,678,951
18,500,000 Barton Capital . . . . . . . . . . . . . . . . . . . . . . . .5.55% 02/28/97 18,334,579
25,000,000 Clipper Receivables . . . . . . . . . . . . . . . . . . . . . 5.62% 01/24/97 24,910,236
10,000,000 Creative Capital . . . . . . . . . . . . . . . . . . . . . . .5.60% 01/17/97 9,975,111
16,065,000 Credit Agricole . . . . . . . . . . . . . . . . . . . . . . . 5.33% 01/24/97 16,010,294
10,000,000 CXC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.60% 02/18/97 9,925,333
25,000,000 Eiger Capital . . . . . . . . . . . . . . . . . . . . . . . . 5.55% 02/21/97 24,803,438
20,000,000 Eureka Securitization . . . . . . . . . . . . . . . . . . . . 5.42% 01/31/97 19,909,667
25,000,000 Galleon Capital . . . . . . . . . . . . . . . . . . . . . . . 5.62% 01/24/97 24,910,236
20,000,000 Gotham Funding . . . . . . . . . . . . . . . . . . . . . . . .5.43% 02/13/97 19,870,283
20,000,000 International Securitization . . . . . . . . . . . . . . . . .5.43% 01/28/97 19,918,550
18,700,000 Jlus Funding . . . . . . . . . . . . . . . . . . . . . . . . .5.45% 03/03/97 18,527,311
25,000,000 Old Line Funding . . . . . . . . . . . . . . . . . . . . . . .5.53% 01/24/97 24,911,674
10,000,000 Orix America . . . . . . . . . . . . . . . . . . . . . . . . .5.42% 02/19/97 9,926,160
10,000,000 Orix America . . . . . . . . . . . . . . . . . . . . . . . . .5.45% 03/27/97 9,871,319
20,561,000 Peacock Funding . . . . . . . . . . . . . . . . . . . . . . . 5.60% 02/13/97 20,423,470
7,062,000 Peacock Funding . . . . . . . . . . . . . . . . . . . . . . . 5.60% 02/24/97 7,002,679
25,000,000 Pooled Accounts Receivable Capital . . . . . . . . . . . . . .5.77% 01/21/97 24,919,861
25,000,000 Premium Funding . . . . . . . . . . . . . . . . . . . . . . . 5.48% 01/27/97 24,901,056
19,787,000 Receivables Capital . . . . . . . . . . . . . . . . . . . . . 5.80% 01/21/97 19,723,242
25,000,000 Retailer Funding . . . . . . . . . . . . . . . . . . . . . . .5.60% 01/30/97 24,887,222
20,000,000 Strategic Asset Funding . . . . . . . . . . . . . . . . . . . 5.45% 02/28/97 19,824,389
25,000,000 Windmill Funding . . . . . . . . . . . . . . . . . . . . . . .5.52% 01/14/97 24,950,167
20,600,000 Wood Street Funding . . . . . . . . . . . . . . . . . . . . . 5.47% 01/27/97 20,518,619
----------
Total Commercial Paper
(cost $503,372,775). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,372,775
----------
Repurchase Agreements - 41.0%
150,000,000 Goldman Sachs Repurchase Agreement, dated
12/31/96, due 1/2/97, with a maturity value of
$150,058,750 and an effective yield of 7.05%,
collateralized by U.S. Government Agency Obligations with
rates ranging from 6.24% to 7.00% with maturity dates
ranging from 4/15/21 to 10/1/26, and with an aggregate
market value of $152,308,173. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000,000
12,472,990 Goldman Sachs Repurchase Agreement, dated 12/31/96, due
1/2/97, with a maturity value of $12,477,494 and an
effective yield of 6.50%, collateralized by U.S. Agency
Obligations with rates ranging from 6.24% to 7.00% with
maturity dates ranging from 4/15/21 to 10/1/26, and with
an aggregate market value of $12,664,922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,472,990
See accompanying notes to financial statements.
<PAGE>
MERRIMAC CASH PORTFOLIO
Portfolio of Investments (concluded)
December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Yield to
Maturity on
Principal Date of Maturity Value
Amount Description Purchase* Date (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
$150,000,000 Lehman Brothers Repurchase Agreement, dated
12/31/96, due 1/2/97, with a maturity value of $150,058,333
and an effective yield of 7.00%, collateralized by U.S.
Agency Obligations with rates ranging from 0.00%
to 7.72% with maturity dates ranging from 11/25/06 to
7/1/24, and with aggregate market value of $153,002,108 . . . . . . . . . . . . . . . . . . . . .$ 150,000,000
100,000,000 Nikko Securities Repurchase Agreement, dated 12/31/96 due
1/2/97, with a maturity value of $100,038,889 and an
effective yield of 7.00%, collateralized by U.S.
Government Agency Obligations with rates ranging from
6.00% to 7.50% with maturity dates ranging from 12/1/25
to 12/1/26, and with an aggregate market value of $101,920,168. . . . . . . . . . . . . . . . . . 100,000,000
------------
Total Repurchase Agreements
(cost $412,472,990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412,472,990
------------
Certificates of Deposits, Yankee Dollar - 5.0%
10,000,000 Industrial Bank of Japan . . . . . . . . . . . . . . . . . . .5.47% 01/21/97 10,000,000
30,000,000 Norinchukin Bank . . . . . . . . . . . . . . . . . . . . . . .5.90% 01/30/97 30,000,000
10,000,000 Sanwa Bank . . . . . . . . . . . . . . . . . . . . . . . . . .5.48% 01/21/97 10,000,000
------------
Total Certificates of Deposits
(cost $50,000,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000,000
----------
Variable Rate Notes - 4.0%
10,000,000 Bank One . . . . . . . . . . . . . . . . . . . . . . . . . . .5.61% 11/03/97 9,995,525
20,000,000 Bankers Trust . . . . . . . . . . . . . . . . . . . . . . . . 5.69% 12/22/97 19,994,681
10,000,000 Royal Bank . . . . . . . . . . . . . . . . . . . . . . . . . .5.56% 11/14/97 9,991,340
----------
Total Variable Rate Notes
(cost $39,981,546) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,981,546
----------
Total Investments - 100.0%
(cost $1,005,827,311). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,005,827,311
Other assets in excess of liabilities - 0.0% . . . . . . . . . . . . . . . . . . . . . . . . . . 482,834
----------
Net Assets - 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,006,310,145
==========
</TABLE>
* Yield to maturity on date of purchase, except in the case of
Variable Rate Notes, whose yields are determined on date of
last interest rate change.
See accompanying notes to financial statements.
<PAGE>
MERRIMAC CASH PORTFOLIO
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $593,354,321) (Note 1)....................$ 593,354,321
Repurchase agreements, at value and cost.............................. 412,472,990
Interest receivable................................................... 487,659
Deferred organization expense......................................... 58,652
-------------
Total assets................................................... 1,006,373,622
-------------
Liabilities:
Accrued expenses...................................................... 63,477
-------------
Total liabilities.............................................. 63,477
-------------
Net Assets ....................................................................$1,006,310,145
=============
</TABLE>
Statement of Operations
For the Period ended December 31, 1996 (a)
<TABLE>
<S> <C>
Income:
Interest..............................................................$ 3,572,665
Expenses:
Management fee............................................$108,913
Legal........................................................8,031
Insurance....................................................7,802
Audit and tax return preparation fees........................4,589
Portfolio transaction fees...................................3,442
Amortization of organization expense.........................1,348
Other........................................................2,295
--------
136,420
Management fee waived by investment adviser (Note 2).......(57,660) 78,760
-------------
Net investment income................................................. 3,493,905
-------------
Net increase in net assets from operations.....................................$ 3,493,905
=============
</TABLE>
(a) Portfolio's commencement of operations occurred on November 21, 1996.
See accompanying notes to financial statements.
<PAGE>
MERRIMAC CASH PORTFOLIO
Statement of Changes in Net Assets
Period Ended
December 31,
1996 (a)
----------------
Operations:
Net investment income..............................$ 3,493,905
--------------
Transactions in investors' beneficial interest:
Contributions...................................... 1,072,725,924
Withdrawals........................................ (69,909,684)
--------------
Net increase from investors' transactions....... 1,002,816,240
--------------
Net increase in net assets......................... 1,006,310,145
Net Assets:
Beginning of period................................ --
--------------
End of period......................................$1,006,310,145
==============
Supplementary Data:
Ratios to average net assets **:
Expenses 0.12%
Net investment income 5.45%
Expenses, without waiver 0.21%
===================================================
(a) Portfolio's commencement of operations occurred on November 21, 1996.
** Annualized.
See accompanying notes to financial statements.
<PAGE>
Merrimac Master Portfolio
Merrimac Cash Portfolio
Notes to Financial Statements
(1) Significant Accounting Policies:
The Merrimac Master Portfolio (the "Portfolio Trust") was organized as a
common law trust under the laws of the State of New York and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
diversified, management investment company. The Merrimac Cash Portfolio (the
"Portfolio") is a separate diversified investment series of the Portfolio Trust.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
A. Investment security valuations-
Portfolio securities are valued using the amortized cost method, which
involves initially valuing an investment at its cost and thereafter assuming a
constant amortization to maturity of any premium or discount. This method
results in a value approximating market value. The Portfolio's use of amortized
cost is subject to the Portfolio's compliance with certain conditions as
specified under Rule 2a-7 of the 1940 Act.
B. Securities transactions and income-
Interest income consists of interest accrued and discount earned (including
both original issue and market discount) less premium amortized on the
investments of the Portfolio, accrued ratably to the date of maturity.
Purchases, maturities and sales of money market instruments are accounted for on
the date of transaction. Expenses of the Portfolio are accrued daily.
C. Federal income taxes-
The Portfolio is considered a partnership under the U.S. Internal Revenue
Code. Accordingly, no provision for federal income taxes is necessary. The
Portfolio also intends to conduct its operations such that its investors will be
able to qualify as a Regulated Investment Company.
<PAGE>
D. Repurchase agreements-
It is the policy of the Portfolio to require the custodian bank to take
possession of all securities held as collateral in support of repurchase
agreement investments. Additionally, procedures have been established by the
Portfolio to monitor, on a daily basis, the market value of the repurchase
agreement's underlying investments to ensure the existence of a proper level of
collateral.
E. Deferred organizational expense-
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized, on a straight-line basis through
November 2001.
(2) Management Fee and Affiliated Transactions:
The Portfolio retains Investors Bank & Trust Company ("Investors Bank") as
investment adviser to continuously review and monitor the Portfolio's investment
program. The Bank of New York ("BNY") serves as the Portfolio's sub-adviser. For
its services to the Portfolio, BNY is paid a monthly fee by Investors Bank
computed at an annual rate of .08% of the average daily net assets of the
Portfolio. The Portfolio does not pay a fee directly to BNY for such services.
Investors Bank serves as custodian for the Portfolio. IBT Fund Services
(Ireland) Limited, a subsidiary of Investors Bank, serves as administrator of
the Portfolio. IBT Fund Services (Canada) Inc., a subsidiary of Investors Bank,
serves as fund accounting agent and transfer agent for the Portfolio. For its
services to the Portfolio, Investors Bank is paid a monthly fee at an annual
rate of 0.17% of the average daily net assets of the Portfolio. Investors Bank
and BNY voluntarily reduced their fees to an annual rate of 0.08%, and an annual
rate of 0.04%, respectively, for 1996.
Certain of the trustees and officers of the Trust are directors or officers
of Investors Bank. The Portfolio pays no compensation directly to its trustees
who are affiliated with the investment adviser or to its officers, all of whom
receive remuneration for their services to the Portfolio from the investment
adviser.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees
and Shareholders of
Merrimac Cash Portfolio
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Merrimac Cash Portfolio, a series
of Merrimac Master Portfolio, (the "Trust"), as of December 31, 1996, and the
related statements of operations, changes in net assets and financial highlights
for the period from November 21, 1996 (commencement of operations) to December
31, 1996. 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
audit.
We conducted our audit 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
December 31, 1996, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. 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 audit provides 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 the
Merrimac Cash Portfolio, the results of its operations, the changes in its net
assets and financial highlights for the period from November 21, 1996
(commencement of operations) to December 31, 1996, in conformity with generally
accepted accounting principles.
Boston, Massachusetts
February 21, 1997 Ernst & Young LLP
