[MERRIMAC LOGO]
MERRIMAC SERIES
Semi-Annual Report
June 30, 1999
<PAGE>
[MERRIMAC LOGO]
August 10, 1999
Dear Shareholder:
We are pleased to provide you with the June 30, 1999, Semi-Annual Report of the
Merrimac Series. The funds are part of a master-feeder fund structure under
which each fund invests its assets in a master portfolio having identical
investment objectives. The fund structure is described further in the footnotes
to the enclosed financial statements.
We are pleased to have introduced two new funds during the first half of 1999
and will continue to develop our fund offerings to respond to your needs. The
Merrimac Treasury Plus Series commenced operations on January 22, 1999 and the
Merrimac U.S. Government Series commenced operations on June 29, 1999. As of
June 30, four money market funds are in operation. The Merrimac Cash Series and
the Merrimac U.S. Government Series each invest in master portfolios which are
sub-advised by Allmerica Asset Management, Inc. The Merrimac Treasury Series and
the Merrimac Treasury Plus Series each invest in master portfolios which are
sub-advised by M&I Investment Management Corp.
Thank you for your support and participation. We look forward to continuing to
serve you in the future.
Very truly yours,
/S/ George A. Rio
George A. Rio
President
Merrimac Series
Distributed by:
[LOGO]
FUNDS DISTRIBUTOR INC.
200 Clarendon Street o Boston, Massachusetts o 02116 o 888.MERRMAC
o fax: 617.587.4402
mailing address: P.O. Box 9130 o Boston, Massachusetts o 02117
<PAGE>
Merrimac Series
Statements of Assets and Liabilities
June 30, 1999 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Cash Treasury Treasury Plus U.S. Government
Series Series Series Series
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Assets
Investment in corresponding Portfolio, at value (Note 1) $ 272,234,113 $ 208,139,956 $ 231,025,568 $ 169,412,124
Deferred organization expense (Note 1) 9,550 7,560 - -
Prepaid expenses - 3,500 - -
------------- ------------- ------------- -------------
Total assets 272,243,663 208,151,016 231,025,568 169,412,124
Liabilities
Distributions payable to shareholders 1,106,419 647,046 813,747 39,478
Accrued expenses 246,541 125,419 173,839 3,240
------------- ------------- ------------- -------------
Total liabilities 1,352,960 772,465 987,586 42,718
------------- ------------- ------------- -------------
Net Assets $ 270,890,703 $ 207,378,551 $ 230,037,982 $ 169,369,406
============= ============= ============= =============
Net Assets consist of
Paid in capital $ 270,901,782 $ 207,373,113 $ 230,038,048 $ 169,369,406
Accumulated net realized gain (loss) on investments (11,079) 2,299 (66) -
------------- ------------- ------------ -------------
Total net assets $ 270,890,703 $ 207,375,412 $ 230,037,982 $ 169,369,406
============= ============= ============= =============
Total Net Assets
Premium Class $ 22,685,298 $ 22,522,080 $ - $ -
============= ============= ============= =============
Institutional Class $ 248,205,405 $ 184,853,332 $ 230,037,982 $ 169,369,406
============= ============= ============= =============
Shares of Beneficial Interest Outstanding
Premium Class 22,685,825 22,521,868 - -
============= ============= ============= =============
Institutional Class 248,215,957 184,851,245 230,038,048 169,369,406
============= ============= ============= =============
Net Asset Value, Maximum Offer and Redemption Price per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Merrimac Series
Statements of Operations
(Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Cash Treasury
Series Series
------------------ ------------------
For the Six Months For the Six Months
Ended Ended
June 30, 1999 June 30, 1999
------------------ ------------------
<S> <C> <C>
Net Investment Income Allocated from Portfolio (Note 1)
Interest and dividends $ 5,998,553 $ 3,892,706
Expenses (222,929) (188,166)
------------ -----------
Net investment income from Portfolio 5,775,624 3,704,540
------------ -----------
Fund Expenses
Accounting, transfer agency, and administration fees (Note 4) 11,680 8,532
Legal 3,934 3,081
Insurance 1,124 1,027
Printing 3,934 5,648
Trustees fees and expenses 1,686 2,054
Audit and tax return preparation fees 5,620 5,648
Registration 38,211 27,209
Amortization of organization expenses (Note 1) 1,200 950
Miscellaneous 1,686 5,725
------------ -----------
Total expenses common to all classes 69,075 59,874
Shareholder servicing fee-Institutional Class 273,225 181,529
------------ -----------
Total expenses 342,300 241,403
------------ -----------
Net Investment Income 5,433,324 3,463,137
Net Realized Gain (Loss) on Investments Allocated from Portfolio (14,788) 1,030
------------ -----------
Net Increase in Net Assets from Operations $ 5,418,536 $ 3,464,167
============ ===========
</TABLE>
<TABLE>
<CAPTION>
Treasury Plus U.S. Government
Series Series
---------------- ----------------
For the Period For the Period
January 22, 1999 June 29, 1999
(Commencement of (Commencement of
Operations) Operations)
to June 30, 1999 to June 30, 1999
---------------- ----------------
<S> <C> <C>
Net Investment Income Allocated from Portfolio (Note 1)
Interest and dividends $ 4,971,411 $ 44,698
Expenses (201,420) (1,980)
----------- ---------
Net investment income from Portfolio 4,769,991 42,718
----------- ---------
Fund Expenses
Accounting, transfer agency, and administration fees (Note 4) 10,492 94
Legal 2,659 27
Insurance 1,595 9
Printing 2,659 54
Trustees fees and expenses 1,064 27
Audit and tax return preparation fees 3,723 99
Registration 38,823 626
Amortization of organization expenses (Note 1) - -
Miscellaneous 2,659 54
----------- ---------
Total expenses common to all classes 63,674 990
Shareholder servicing fee-Institutional Class 262,300 2,250
----------- ---------
Total expenses 325,974 3,240
----------- ---------
Net Investment Income 4,444,017 39,478
Net Realized Gain (Loss) on Investments Allocated from Portfolio (66) -
----------- ---------
Net Increase in Net Assets from Operations $ 4,443,951 $ 39,478
=========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Merrimac Series
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Cash Series
----------------------------------------------
For the Period
June 25, 1998
Six Months Ended (Commencement of
June 30, 1999 Operations) to
(Unaudited) December 31, 1998
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 5,433,324 $ 4,424,375
Net realized gain (loss) allocated from Portfolio (14,788) 3,709
-------------- --------------
Net increase in net assets from operations 5,418,536 4,428,084
-------------- --------------
Dividends Declared from Net Investment Income
Premium Class (364,289) (32,029)
Institutional Class (5,069,035) (4,392,346)
-------------- --------------
Total dividends declared (5,433,324) (4,424,375)
-------------- --------------
Fund Share Transactions (Note 6)
Proceeds from shares sold 670,312,984 445,807,182
Proceeds from shares reinvested 199,985 18,202
Payment for shares redeemed (514,834,587) (330,701,984)
-------------- --------------
Net increase in net assets derived from share transactions 155,678,382 115,123,400
-------------- --------------
Net increase in net assets 155,663,594 115,127,109
Net Assets
Beginning of period 115,227,109 100,000
-------------- --------------
End of period $ 270,890,703 $ 115,227,109
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Treasury Series
----------------------------------------------
For the Period
June 25, 1998
Six Months Ended (Commencement of
June 30, 1999 Operations) to
(Unaudited) December 31, 1998
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 3,463,137 $ 1,469,975
Net realized gain (loss) allocated from Portfolio 1,030 1,269
-------------- --------------
Net increase in net assets from operations 3,464,167 1,471,244
-------------- --------------
Dividends Declared from Net Investment Income
Premium Class (543,881) -
Institutional Class (2,919,256) (1,469,975)
-------------- --------------
Total dividends declared (3,463,137) (1,469,975)
-------------- --------------
Fund Share Transactions (Note 6)
Proceeds from shares sold 430,783,427 285,700,675
Proceeds from shares reinvested - -
Payment for shares redeemed (337,730,501) (171,380,488)
-------------- --------------
Net increase in net assets derived from share transactions 93,052,926 114,320,187
-------------- --------------
Net increase in net assets 93,053,956 114,321,456
Net Assets
Beginning of period 114,321,456 -
-------------- --------------
End of period $ 207,375,412 $ 114,321,456
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Treasury Plus U.S. Government
Series Series
---------------- ----------------
For the Period For the Period
January 22, 1999 June 29, 1999
(Commencement of (Commencement of
Operations) Operations)
to June 30, 1999 to June 30, 1999
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 4,444,017 $ 39,478
Net realized gain (loss) allocated from Portfolio (66) -
-------------- --------------
Net increase in net assets from operations 4,443,951 39,478
-------------- --------------
Dividends Declared from Net Investment Income
Premium Class - -
Institutional Class (4,444,017) (39,478)
-------------- --------------
Total dividends declared (4,444,017) (39,478)
-------------- --------------
Fund Share Transactions (Note 6)
Proceeds from shares sold 620,522,252 169,369,406
Proceeds from shares reinvested - -
Payment for shares redeemed (390,484,204) -
-------------- --------------
Net increase in net assets derived from share transactions 230,038,048 169,369,406
-------------- --------------
Net increase in net assets 230,037,982 169,369,406
Net Assets
Beginning of period - -
-------------- --------------
End of period $ 230,037,982 $ 169,369,406
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Merrimac Series
Financial Highlights
(1999 information is unaudited)
===============================================================================
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
Net Asset Distributions Net Asset
Periods Ended Value Net from Net Value
December 31, 1998 Beginning Investment Investment End Total
and June 30, 1999 of Period Income Income of Period Return (A)
- ----------------------------------- --------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Series
Premium Class (1)
1999 $ 1.00 $ 0.0243 $ (0.0243) $ 1.00 4.99%
1998 1.00 0.0275 (0.0275) 1.00 5.41%
Institutional Class (1)
1999 1.00 0.0231 (0.0231) 1.00 4.73%
1998 1.00 0.0262 (0.0262) 1.00 5.15%
Treasury Series
Premium Class (2)
1999 1.00 0.0155 (0.0155) 1.00 4.37%
Institutional Class (1)
1999 1.00 0.0199 (0.0199) 1.00 4.07%
1998 1.00 0.0220 (0.0220) 1.00 4.31%
Treasury Plus Series
Institutional Class (3)
1999 1.00 0.0186 (0.0186) 1.00 4.32%
U.S. Government Series
Institutional Class (4)
1999 1.00 0.0002 (0.0002) 1.00 4.39%
</TABLE>
<TABLE>
<CAPTION>
Annualized Ratios to Average Net Assets/Supplemental Data
-------------------------------------------------------------------------------------------
Net
Expenses Net Assets
Periods Ended Net Before End of
December 31, 1998 Net Investment Waivers and Period
and June 30, 1999 Expenses Income Reimbursements (000s omitted)
- ----------------------------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash Series
Premium Class (1)
1999 0.25% 4.90% -- $ 22,685
1998 0.33% 5.28% 0.34% 100
Institutional Class (1)
1999 0.50% 4.65% -- 248,205
1998 0.58% 5.03% 0.59% 115,127
Treasury Series
Premium Class (2)
1999 0.29% 4.28% -- 22,522
Institutional Class (1)
1999 0.54% 4.03% -- 184,853
1998 0.67% 4.23% -- 114,321
Treasury Plus Series
Institutional Class (3)
1999 0.50% 4.24% -- 230,038
U.S. Government Series
Institutional Class (4)
1999 0.58% 4.39% -- 169,369
</TABLE>
(A) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions are assumed reinvested at the
net asset value on the payable date. Total return is computed on an
annualized basis.
(1) Commenced Operations June 25, 1998.
(2) Commenced Operations February 19, 1999.
(3) Commenced Operations January 22, 1999.
(4) Commenced Operations June 29, 1999.
6
<PAGE>
Merrimac Series
Notes to Financial Statements (Unaudited)
---------------------------------------------------------------------------
(1) Significant Accounting Policies
The Merrimac Series (the "Trust") is organized as a Delaware business trust
and is registered under the Investment Company Act of 1940, as an open-end
management investment company. The Merrimac Cash Series (the "Cash
Series"), the Merrimac Treasury Series (the "Treasury Series"), the
Merrimac Treasury Plus Series (the "Treasury Plus Series"), the Merrimac
U.S. Government Series (the "Government Series") and the Merrimac
Short-Term Asset Reserve Series (the "STAR Series") (collectively, the
"Funds") are separate diversified investment portfolios or series of the
Trust. The Funds consist of three classes of shares, the Premium Class, the
Institutional Class and the Investment Class. The Treasury Plus Series
commenced operations on January 22, 1999 and the Government Series
commenced operations on June 29, 1999. The STAR Series is currently
inactive.
The Funds seek to achieve their investment objective by investing all of
their investable assets in the Merrimac Cash Portfolio (the "Cash
Portfolio"), the Merrimac Treasury Portfolio (the "Treasury Portfolio"),
the Merrimac Treasury Plus Portfolio (the "Treasury Plus Portfolio"), and
the Merrimac U.S. Government Portfolio (the "Government Portfolio"),
respectively. The Portfolios are each an open-end investment management
company and a series of the Merrimac Master Portfolio, and are hereinafter
referred to singly as a "Portfolio," and collectively as the "Portfolios."
Each Portfolio seeks to achieve a high level of current income, consistent
with the preservation of capital and liquidity. Each Fund has the same
investment objective as the Portfolio into which it invests. The
performance of each Fund is directly affected by the performance of the
Portfolio into which it invests. The financial statements of the Portfolios
are included elsewhere in this report and should be read in conjunction
with the Funds' financial statements. At June 30, 1999, the investment by
the Cash Series, the Treasury Series, Treasury Plus Series, and the
Government Series represent ownership of proportionate interests of 23.1%,
100%, 100%, and 100%, respectively, of their corresponding portfolios.
The policies of the Funds, except the STAR series, are designed to maintain
a stable net asset value of $1.00 per share. They have adopted certain
investment, valuation, dividend and distribution policies which conform to
general industry practice, to enable them to do so. However, there is no
assurance that they will be able to maintain a stable net asset value.
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their 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.
A. Investment Security Valuations
The Funds record their investment in the Portfolios at value. Valuation of
securities by the Portfolios is discussed in Note 1 of the Portfolios'
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities Transactions and Income
The Portfolios record 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. Each Fund's net investment
income consists of its pro rata share of the net investment income of its
corresponding Portfolio, less all expenses of the Fund determined in
accordance with GAAP.
C. Federal Income Taxes
Each Fund intends to qualify annually as a regulated investment company
under Subchapter M of the Internal Revenue Code, and thus not be subject to
income taxes. To qualify, each Fund must distribute all of its taxable
income for its fiscal year and meet certain other requirements.
Accordingly, no provision for federal income taxes is required.
7
<PAGE>
Merrimac Series
Notes to Financial Statements (Unaudited)
---------------------------------------------------------------------------
D. Deferred Organization Expense
Costs incurred by the Cash Series and Treasury Series in connection with
their organization and initial registration are being amortized on a
straight-line basis over a five year period beginning at the commencement
of operations of each Fund.
E. Expense Allocation
Expenses directly attributable to a Fund are charged to that Fund. Expenses
not directly attributable to a specific Fund are allocated, based on
relative net assets, to each of the Funds.
(2) Dividends and Distributions to Shareholders
Dividends on the shares of the Funds are declared each business day to
shareholders of record on that day, and paid or reinvested as of the last
business day of the month. Distributions of net realized gains, if any, may
be declared annually. Dividends and distributions are determined in
accordance with federal income tax regulations, which may differ from GAAP.
(3) Shareholder Servicing and Distribution Plans
The Trust has adopted a Shareholder Servicing Plan with respect to the
Institutional Class under which certain service organizations may be
compensated for providing shareholder accounting and other administrative
services for their clients. The Institutional Class may pay an annual fee
of up to 0.25% of the value of the assets that an organization services on
behalf of its clients. Under a Distribution Plan, the Investment Class may
pay an annual distribution fee of up to 0.25% of the value of the assets
that an organization invests in the Funds on behalf of its clients. The
Investment Class of each Fund, and the Premium Class of the Treasury Plus
Series, and the Government Series have not yet commenced operations.
(4) Management Fee and Affiliated Transactions
The Merrimac Master Portfolio retains Investors Bank & Trust Company
("Investors Bank") as investment adviser. Allmerica Asset Management, Inc.
("AAM") serves as the sub-adviser to the Cash Portfolio and U.S. Government
Portfolio and M&I Investment Management Corp. ("M&I") serves as sub-adviser
to the Treasury Portfolio and Treasury Plus Portfolio. The Funds pay no
direct fees for such services, but indirectly bear their pro rata share of
the compensation paid by the Portfolios. See Note 2 of the Portfolios'
Notes to Financial Statements which are included elsewhere in this report.
Investors Bank or its subsidiary, IBT Fund Services (Canada), Inc. serves
as administrator, custodian, fund accounting agent, and transfer agent to
the Trust. For these services, Investors Bank and its subsidiary are paid a
monthly fee at an annual rate of 0.01% of the average daily net assets of
each Fund.
Certain trustees and officers of the Trust are directors or officers of
Investors Bank. The Funds do not pay compensation to the trustees or
officers who are affiliated with Investors Bank.
8
<PAGE>
Merrimac Series
Notes to Financial Statements (Unaudited)
---------------------------------------------------------------------------
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest for each Fund having a par value of $0.001
per share. Transactions in Fund shares for each class were as follows:
<TABLE>
<CAPTION>
Net Increase in
Shares Sold Shares Reinvested Shares Redeemed Shares
------------- ------------------- ----------------- --------
<S> <C> <C> <C> <C> <C>
Cash Series For the Six 57,762,564 189,648 (35,366,387) 22,585,825
Premium Class Months Ended
June 30, 1999
June 25, 1998 33,618,994 - (33,618,994) -
(Commencement of
Operations) to
December 31, 1998
Cash Series For the Six 612,550,420 10,337 (479,468,200) 133,092,557
Institutional Months Ended
Class June 30, 1999
June 25, 1998 412,188,188 18,202 (297,082,990) 115,123,400
(Commencement of
Operations) to
December 31, 1998
Treasury Series February 19, 1999 72,173,800 - (49,651,932) 22,521,868
Premium Class (Commencement of
Operations) to
June 30, 1999
Treasury Series For the Six 358,609,627 - (288,078,569) 70,531,058
Institutional Months Ended
Class June 30, 1999
June 25, 1998 285,700,675 - (171,380,488) 114,320,187
(Commencement of
Operations) to
December 31, 1998
Treasury Plus January 22, 1999 620,522,252 - (390,484,204) 230,038,048
Series (Commencement of
Institutional Operations) to
Class June 30, 1999
Government June 29, 1999 169,369,406 - - 169,369,406
Series (Commencement of
Institutional Operations) to
Class June 30, 1999
</TABLE>
At June 30, 1999, Investors Bank as agent for its clients, was the record holder
of all outstanding Institutional Class shares of each Fund.
9
<PAGE>
Merrimac Series
Notes to Financial Statements (Unaudited)
---------------------------------------------------------------------------
(6) Investment Transactions
Investments in and withdrawals from the respective Portfolios were as
follows:
<TABLE>
<CAPTION>
Investments in Withdrawals from
Portfolio Portfolio
----------------- ------------------
<S> <C> <C> <C>
Cash Series For the Six Months Ended $ 670,512,969 $ 519,968,480
June 30, 1999
Treasury Series For the Six Months Ended 430,783,427 341,074,982
June 30, 1999
Treasury Plus Series January 22, 1999 620,522,252 394,266,609
(Commencement of
Operations) to
June 30, 1999
Government Series June 29, 1999 169,369,406 -
(Commencement of
Operations) to
June 30, 1999
</TABLE>
10
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================================================
Yield to Expected Par
Security Maturity Maturity Value Value
================================================================================================================================
<S> <C> <C> <C> <C>
Variable Rate Notes* - 33.9%
Bankers Trust Corporation ...................................... 5.07% 07/01/99 $ 10,000,000 $ 9,991,124
Barclays Bank PLC New York ..................................... 4.89% 08/12/99 10,000,000 9,994,923
Bear Stearns Companies ......................................... 5.15% 07/12/99 15,000,000 15,000,000
Bear Stearns Companies ......................................... 5.00% 08/02/99 8,000,000 8,000,000
Bear Stearns Companies ......................................... 5.35% 08/17/99 20,000,000 20,000,000
Beneficial Corporation ......................................... 5.07% 07/12/99 5,000,000 4,999,328
Countrywide Home Loans ......................................... 5.17% 08/25/99 10,100,000 10,104,279
Countrywide Home Loans ......................................... 5.60% 09/08/99 15,000,000 15,046,766
Donaldson Lufkin & Jenrette .................................... 5.25% 07/06/99 33,000,000 33,000,000
General American Life Insurance Company **...................... 5.10% 03/16/00 15,000,000 15,000,000
General American Life Insurance Company **...................... 5.05% 09/10/99 30,000,000 30,000,000
General Electric Capital Corporation ........................... 4.95% 07/13/99 15,000,000 15,000,000
Goldman Sachs Group ............................................ 5.04% 07/01/99 10,000,000 10,000,000
Goldman Sachs Group ............................................ 5.10% 07/13/99 8,000,000 7,999,070
GTE Corporation ................................................ 5.14% 09/13/99 25,000,000 24,984,722
Jackson National Life Insurance Company ........................ 5.13% 07/30/99 40,000,000 40,000,000
J.P. Morgan & Company .......................................... 5.69% 07/07/99 50,000,000 50,037,866
Liberty Lighthouse U.S. Capital ................................ 4.98% 07/19/99 5,000,000 4,999,389
Liberty Lighthouse U.S. Capital ................................ 5.09% 09/09/99 4,000,000 4,000,000
Morgan Stanley, Dean Witter & Co. .............................. 5.43% 09/01/99 4,000,000 4,009,328
National Rural Utilities Cooperative Finance Corporation ....... 5.18% 09/27/99 10,000,000 10,000,000
New England Educational Loan Marketing ......................... 5.20% 09/08/99 7,500,000 7,500,000
PaineWebber Group .............................................. 5.85% 07/21/99 13,000,000 13,000,000
Sigma Finance .................................................. 5.03% 07/01/99 25,000,000 25,000,000
Strategic Money Management Company ............................. 5.29% 09/15/99 11,500,000 11,500,000
--------------
399,166,795
--------------
Commercial Paper - 26.9%
AlliedSignal ................................................... 4.85% 07/12/99 25,000,000 24,962,952
Bankamerica Corporation ........................................ 4.82% 08/16/99 10,000,000 9,938,411
Citibank Credit Card Master Trust .............................. 5.18% 08/23/99 20,000,000 19,847,478
Cooperatve Association of Tractor Dealers ...................... 4.83% 07/19/99 9,700,000 9,676,575
Cooperatve Association of Tractor Dealers ...................... 4.85% 08/26/99 5,100,000 5,061,523
Cooperatve Association of Tractor Dealers ...................... 4.85% 08/27/99 4,600,000 4,564,676
Den Norske Bank ................................................ 4.80% 07/07/99 16,275,000 16,261,980
Den Norske Bank ................................................ 4.91% 12/24/99 15,000,000 14,639,933
Donaldson Lufkin & Jenrette .................................... 4.97% 07/06/99 10,000,000 9,993,097
Donaldson Lufkin & Jenrette .................................... 4.96% 08/23/99 10,000,000 9,926,978
FPL Group ...................................................... 4.88% 08/04/99 16,989,000 16,910,699
FPL Group ...................................................... 4.91% 08/18/99 39,000,000 38,744,680
Goldman Sachs Group ............................................ 4.92% 07/01/99 15,000,000 15,000,000
Heller Financial ............................................... 4.90% 07/26/99 15,000,000 14,948,959
Heller Financial ............................................... 4.90% 08/30/99 15,000,000 14,877,500
Lexington Parker Capital ....................................... 5.18% 08/03/99 15,000,000 14,928,775
Omnicom Finance ................................................ 5.25% 08/16/99 20,000,000 19,865,833
Pegasus Four Limited ........................................... 4.88% 07/26/99 5,587,000 5,568,066
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================================================
Yield to Expected Par
Security Maturity Maturity Value Value
================================================================================================================================
<S> <C> <C> <C> <C>
Pegasus Three Limited .......................................... 4.88% 07/26/99 $ 2,800,000 $ 2,790,511
Pegasus Three Limited .......................................... 4.95% 08/23/99 10,345,000 10,269,611
Pegasus Two Limited ............................................ 5.09% 07/01/99 6,000,000 6,000,000
Pegasus Two Limited ............................................ 4.88% 07/26/99 3,725,000 3,712,376
Prudential Corporation PLC ..................................... 4.85% 07/12/99 14,000,000 13,979,253
Westways Funding III Limited ................................... 4.97% 07/07/99 14,600,000 14,587,906
--------------
317,057,772
--------------
Corporate Debt - 20.9%
Aetna Services ............................................. 5.66% 11/29/99 10,000,000 10,000,000
African Development Bank ................................... 5.07% 07/30/99 11,700,000 11,715,418
AT&T Capital Corporation ................................... 5.16% 01/21/00 7,500,000 7,557,254
Bank One Corporation ....................................... 5.18-5.40% 07/01/99 11,000,000 11,000,000
Bankers Trust Corporation .................................. 5.07-5.62% 07/30/99 24,750,000 24,775,219
Bear Stearns Companies ..................................... 5.52% 06/20/00 3,000,000 3,029,232
Bear Stearns Companies ..................................... 5.31-5.40% 09/15/99 17,540,000 17,619,427
Caterpillar Financial Service Corporation .................. 5.39% 07/01/99 1,000,000 1,000,000
CIT Group .................................................. 5.18% 08/09/99 5,000,000 5,004,686
Countrywide Home Loans ..................................... 5.14-5.21% 11/16/99 12,800,000 12,953,577
Fleet Financial Group ...................................... 5.13% 12/15/99 8,000,000 8,124,823
Fleet Mortgage Corporation ................................. 5.13-5.32% 09/15/99 6,442,000 6,459,047
Fleet Mortgage Corporation ................................. 5.37% 05/11/00 5,000,000 5,036,374
Ford Motor Credit Company .................................. 5.32% 09/15/99 1,000,000 1,002,155
General Electric Capital Corporation ....................... 5.39% 08/23/99 11,000,000 11,018,635
General Motors Acceptance Corporation ...................... 4.95-5.32% 09/09/99 4,000,000 4,016,766
Goldman Sachs Group ........................................ 5.17% 02/07/00 20,000,000 20,000,000
Key Bank NA ................................................ 5.17% 03/24/00 10,000,000 9,996,841
Morgan Stanley, Dean Witter & Co. .......................... 5.22% 09/01/99 1,575,000 1,580,924
Norwest Financial .......................................... 5.31% 09/15/99 2,000,000 2,003,598
PaineWebber Group .......................................... 5.58-5.67% 03/01/00 15,730,000 15,871,145
PaineWebber Group .......................................... 6.03% 05/30/00 3,000,000 3,001,470
Prudential Funding ......................................... 5.27% 04/20/00 10,000,000 10,051,179
Salomon Smith Barney ....................................... 5.31% 10/01/99 9,000,000 9,020,755
Sigma Finance .............................................. 5.24% 03/01/00 10,000,000 10,000,000
Texaco Capital Corporation ................................. 5.18% 11/01/99 2,500,000 2,522,893
Transamerica Financial Corporation ......................... 5.12% 11/18/99 7,000,000 7,080,422
Travelers Property Casualty Corporation .................... 5.23% 10/01/99 5,000,000 5,012,424
Wells Fargo & Company ...................................... 5.36% 03/31/00 10,000,000 9,996,608
--------------
246,450,872
--------------
U.S. Government Agency Obligations - 6.1%
Federal Home Loan Bank ..................................... 4.75% 08/03/99 15,000,000 15,000,000
Federal Home Loan Bank ..................................... 5.13% 08/18/99 1,035,000 1,036,218
Federal National Mortgage Association ...................... 4.84% 07/01/99 35,000,000 35,000,000
Federal National Mortgage Association ...................... 4.77% 11/12/99 11,223,000 11,023,736
Student Loan Marketing Association ......................... 5.41% 07/07/99 10,000,000 10,000,000
--------------
72,059,954
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
================================================================================================================================
Yield to Expected Par
Security Maturity Maturity Value Value
================================================================================================================================
<S> <C> <C> <C> <C>
Certificates of Deposit - 4.7%
Commerzbank AG ............................................. 5.19% 02/25/00 $ 10,000,000 $ 9,998,108
European American Bank ..................................... 5.31% 05/12/00 10,000,000 9,997,502
Merita Bank PLC ............................................ 5.20% 02/07/00 20,000,000 20,000,000
Unibank .................................................... 4.93% 09/09/99 15,000,000 15,001,206
--------------
54,996,816
--------------
Municipal Obligations - 3.3%
Richmond County Development Authority, Georgia ............. 5.82% 06/01/00 14,000,000 13,978,679
Virginia State Housing Develpoment Authority ............... 5.25% 08/05/99 25,000,000 24,996,374
--------------
38,975,053
--------------
Time Deposits - 2.7%
Norwest Bank ............................................... 5.25% 07/01/99 32,000,000 32,000,000
--------------
Asset Backed Securities - 0.6%
Fidelity Equipment Lease Trust ............................. 5.16% 05/16/00 4,399,911 4,399,912
First Sierra Receivables ................................... 5.22% 01/12/00 3,118,425 3,118,425
--------------
7,518,337
--------------
TOTAL INVESTMENTS, at amortized cost - 99.1% 1,168,225,599
Other Assets and Liabilities (net) - 0.9% 10,698,697
--------------
TOTAL NET ASSETS - 100.0% $1,178,924,296
==============
</TABLE>
Notes to the Schedule of Investments:
* Variable rate securities - maturity dates on these securities reflect the
next interest rate reset date or, when applicable, the put date or final
maturity date. Yield to maturity for these securities is determined on the
date of the most recent interest rate change.
** On August 10, 1999, management of the Portfolio was notified that the
short-term debt ratings of General American Life Insurance Company
("GALIC") had been downgraded by certain rating agencies and management
promptly exercised the Portfolio's seven-day demand rights on the funding
agreement with GALIC scheduled to mature on March 16, 2000. Subsequently,
because of short-term liquidity problems, GALIC was placed under
administrative supervision by the Missouri Department of Insurance. On
August 17, 1999, in anticipation of a default by GALIC, the Portfolio
agreed to extend for thirty days the date for repayment of this refunding
agreement and, in consideration for such extension, received a partial
payment of $1.5 million on August 18, 1999 and an increase in the interest
rate payable on the balance outstanding. Subsequently, it was announced
that Metropolitan Life Insurance Company ("MetLife") and GenAmerican Corp.,
the parent of GALIC, had agreed to terms of a cash purchase of GenAmerican
Corp. by MetLife.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Merrimac Treasury Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Yield to Par
Security Maturity Maturity Value Value
====================================================================================================================================
<S> <C> <C> <C> <C>
U.S. Government Obligations - 89.5%
U.S. Treasury Bond Strip ..................................... 4.79-4.84% 11/15/99 $ 6,000,000 $ 5,894,986
U.S. Treasury Notes .......................................... 4.45-4.63% 07/15/99 14,000,000 14,009,146
U.S. Treasury Notes .......................................... 4.60-4.87% 07/31/99 53,000,000 53,053,567
U.S. Treasury Notes .......................................... 4.65-4.78% 08/15/99 29,000,000 29,042,269
U.S. Treasury Notes .......................................... 4.72-4.78% 08/31/99 21,000,000 21,057,232
U.S. Treasury Notes .......................................... 4.69-4.90% 09/30/99 40,000,000 40,153,400
U.S. Treasury Notes .......................................... 4.73-4.76% 10/15/99 8,000,000 8,028,209
U.S. Treasury Notes .......................................... 4.76% 10/31/99 3,000,000 3,008,392
U.S. Treasury Notes .......................................... 4.77-5.07% 11/15/99 9,000,000 9,031,079
U.S. Treasury Notes .......................................... 4.80% 11/30/99 3,000,000 3,035,592
-------------
186,313,872
-------------
Mutual Funds - 8.7% Shares
------
AIM Treasury Money Market Fund .................................................................... 4,021 4,021
Dreyfus Treasury Prime Cash Fund .................................................................. 9,194,613 9,194,613
Goldman Sachs Liquid Assets Treasury Obligations Fund ............................................. 8,902,384 8,902,384
-------------
18,101,018
-------------
TOTAL INVESTMENTS, at amortized cost - 98.2% 204,414,890
Other Assets and Liabilities (net) - 1.8% 3,725,066
-------------
TOTAL NET ASSETS - 100.0% $ 208,139,956
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Merrimac Treasury Plus Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Yield to Par
Security Maturity Maturity Value Value
====================================================================================================================================
<S> <C> <C> <C> <C>
U.S. Government Obligations - 4.2%
U.S. Treasury Bond Strip ..................................... 4.75% 11/15/99 $ 5,000,000 $ 4,913,556
U.S. Treasury Bond Strip Principle ........................... 4.85% 02/15/00 5,000,000 4,852,185
-------------
9,765,741
-------------
Repurchase Agreements - 95.8%
Goldman Sachs Repurchase Agreement, dated 6/30/99,
due 7/01/99, with a maturity value of $65,008,667 and an
effective yield of 4.80%, collateralized by U.S. Treasury
Obligations with a rate of 5.75%, and a maturity date of 06/30/01
and with an aggregate market value of $66,300,773. 65,000,000 65,000,000
Lehman Brothers Repurchase Agreement, dated 6/30/99,
due 7/1/99, with a maturity value of $20,002,797 and an
effective yield of 4.84%, collateralized by Federal Home Loan
Bank Obligations with rates ranging from 5.35% to 6.73% and
maturities ranging from 7/8/99 to 05/14/08, with an aggregate market
value of $20,390,359. 20,000,000 20,000,000
Merrill Lynch Repurchase Agreement, dated 6/30/99,
due 7/1/99, with a maturity value of $66,273,015 and an effective
yield of 4.75%, collateralized by U.S. Treasury Obligations with
with rates ranging from 8.75% to 9.00% and maturities ranging
from 11/15/18 to 05/15/20, with an aggregate market value
of $67,592,250. 66,264,392 66,264,392
Morgan Stanley Repurchase Agreement, dated 6/30/99,
due 7/1/99, with a maturity value of $70,009,238 and an
effective yield of 4.75%, collateralized by U.S. Treasury
Obligations with a rate of 8.00% and a maturity of 8/15/99,
with an aggregate market value of $71,754,473. 70,000,000 70,000,000
-------------
221,264,392
-------------
TOTAL INVESTMENTS, at amortized cost - 100.0% 231,030,133
Other Assets and Liabilities (net) - 0.0% (4,565)
-------------
TOTAL NET ASSETS - 100.0% $ 231,025,568
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Merrimac U.S. Government Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
===================================================================================================================================
Yield to Par
Security Maturity Maturity Value Value
===================================================================================================================================
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations - 93.9%
Federal Home Loan Bank ........................................... 4.60% 07/01/99 $ 25,000,000 $ 25,000,000
Federal Home Loan Bank ........................................... 5.25% 08/18/99 5,000,000 5,000,000
Federal Home Loan Bank ........................................... 5.31% 09/02/99 20,000,000 20,003,028
Federal Home Loan Bank ........................................... 5.41% 10/15/99 2,000,000 2,004,359
Federal Home Loan Bank ........................................... 5.09% 12/07/99 3,512,000 3,433,047
Federal Home Loan Bank ........................................... 5.60% 03/15/00 2,065,000 2,057,439
Federal Home Loan Bank ........................................... 5.64% 03/30/00 1,000,000 995,317
Federal Home Loan Mortgage Corporation ........................... 5.00% 07/14/99 25,000,000 24,954,860
Federal Home Loan Mortgage Corporation ........................... 5.09% 09/14/99 5,000,000 4,946,979
Federal Home Loan Mortgage Corporation ........................... 5.10% 09/15/99 5,069,000 5,014,424
Federal Home Loan Mortgage Corporation ........................... 5.18% 12/21/99 4,532,000 4,419,186
Federal Home Loan Mortgage Corporation ........................... 5.30% 06/02/00 5,000,000 4,751,931
Federal National Mortgage Association ............................ 5.09% 09/03/99 1,020,000 1,010,770
Federal National Mortgage Association ............................ 5.05% 10/21/99 3,000,000 2,952,867
Federal National Mortgage Association ............................ 5.36% 11/22/99 3,000,000 3,026,189
Federal National Mortgage Association ............................ 5.09% 12/03/99 1,500,000 1,467,127
Federal National Mortgage Association ............................ 5.59% 03/23/00 3,500,000 3,498,263
Federal National Mortgage Association ............................ 5.57% 03/27/00 5,740,000 5,740,509
Federal National Mortgage Association ............................ 5.30% 06/15/00 5,000,000 4,742,361
Student Loan Marketing Association ............................... 4.60% 07/01/99 34,000,000 34,000,000
------------
159,018,656
------------
Mutual Funds - 4.4% Shares
---------
Goldman Sachs Financial Square Government Fund ................................................ 7,522,411 7,522,411
------------
TOTAL INVESTMENTS, at amortized cost - 98.3% 166,541,067
Other Assets and Liabilities (net) - 1.7% 2,871,057
------------
TOTAL NET ASSETS - 100.0% $169,412,124
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Merrimac Master Portfolio
Statements of Assets and Liabilities
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Treasury Plus U.S. Government
Cash Portfolio Treasury Portfolio Portfolio Portfolio
--------------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C>
Assets
Investments, at value (Note 1) $ 1,168,225,599 $ 204,414,890 $ 9,765,741 $ 166,541,067
Repurchase Agreements - - 221,264,392 -
Cash 783,144 - - 2,517,091
Interest receivable 10,029,642 3,785,451 29,335 355,946
Deferred organization expense (Note 1) 28,977 3,972 - -
Prepaid assets 115,372 18,641 4,400 -
---------------- -------------- -------------- --------------
Total assets 1,179,182,734 208,222,954 231,063,868 169,414,104
---------------- -------------- -------------- --------------
Liabilities
Management fee payable (Note 2) 177,637 26,560 33,108 1,530
Other accrued expenses 80,801 56,438 5,192 450
---------------- -------------- -------------- --------------
Total liabilities 258,438 82,998 38,300 1,980
---------------- -------------- -------------- --------------
Net Assets Applicable to Investors' Beneficial Interests $ 1,178,924,296 $ 208,139,956 $ 231,025,568 $ 169,412,124
================ ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Merrimac Master Portfolio
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Treasury Plus U.S. Government
Cash Portfolio Treasury Portfolio Portfolio Portfolio
------------------ ------------------ ---------------- ----------------
For the Period For the Period
January 22, 1999 June 29, 1999
For the Six Months For the Six Months (Commencement of (Commencement of
Ended Ended Operations) Operations)
June 30, 1999 June 30, 1999 to June 30, 1999 to June 30, 1999
------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Income
Interest and dividends $ 31,521,528 $ 3,892,706 $ 4,971,411 $ 44,698
------------------ ------------------ ---------------- ----------------
Expenses
Management fee (Note 2) 1,043,757 145,328 178,712 1,530
Trustee fees and expenses 23,474 3,366 2,498 23
Insurance 16,432 2,104 2,044 23
Audit 18,780 11,781 4,315 171
Transaction fees 10,563 6,732 3,179 81
Amortization of organization expense (Note 1) 6,075 763 - -
Legal 8,216 2,945 2,044 36
Miscellaneous 39,907 15,147 8,628 116
------------------ ------------------ ---------------- ----------------
Total expenses 1,167,204 188,166 201,420 1,980
------------------ ------------------ ---------------- ----------------
Net Investment Income 30,354,324 3,704,540 4,769,991 42,718
Net Realized Gain (Loss) on Investments (78,871) 1,030 (66) -
------------------ ------------------ ---------------- ----------------
Net Increase in Net Assets from Operations $ 30,275,453 $ 3,705,570 $ 4,769,925 $ 42,718
================== ================== ================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Merrimac Master Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
====================================================================================================================================
Cash Portfolio Treasury Portfolio
------------------------------------- -------------------------------------
For the Six Months For the Six Months
Ended Ended
June 30, 1999 Year Ended June 30, 1999 Year Ended
(Unaudited) December 31, 1998 (Unaudited) December 31, 1998
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 30,354,324 $ 56,678,458 $ 3,704,540 $ 2,734,550
Net realized gain (loss) on investments (78,871) 13,660 1,030 966
------------------ ----------------- ------------------ -----------------
Net increase in net assets from operations 30,275,453 56,692,118 3,705,570 2,735,516
------------------ ----------------- ------------------ -----------------
Transactions in Investors'
Beneficial Interest
Contributions 3,461,630,529 3,737,889,197 430,783,427 360,772,130
Withdrawals (3,106,181,533) (4,386,229,061) (341,074,982) (322,698,051)
------------------ ----------------- ------------------ -----------------
Net increase (decrease) from investors' transactions 355,448,996 (648,339,864) 89,708,445 38,074,079
------------------ ----------------- ------------------ -----------------
Net Increase (Decrease) in Net Assets 385,724,449 (591,647,746) 93,414,015 40,809,595
Net Assets
Beginning of period 793,199,847 1,384,847,593 114,725,941 73,916,346
------------------ ----------------- ------------------ -----------------
End of period $ 1,178,924,296 $ 793,199,847 $ 208,139,956 $ 114,725,941
================== ================= ================== =================
<CAPTION>
Treasury Plus U.S. Government
Portfolio Portfolio
---------------- ----------------
For the Period For the Period
January 22, 1999 June 29, 1999
(Commencement of (Commencement of
Operations) Operations)
to June 30, 1999 to June 30, 1999
(Unaudited) (Unaudited)
---------------- ----------------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 4,769,991 $ 42,718
Net realized gain (loss) on investments (66) -
---------------- ----------------
Net increase in net assets from operations 4,769,925 42,718
---------------- ----------------
Transactions in Investors'
Beneficial Interest
Contributions 620,522,252 169,369,406
Withdrawals (394,266,609) -
---------------- ----------------
Net increase (decrease) from investors' transactions 226,255,643 169,369,406
---------------- ----------------
Net Increase (Decrease) in Net Assets 231,025,568 169,412,124
Net Assets
Beginning of period - -
---------------- ----------------
End of period $ 231,025,568 $ 169,412,124
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Highlights
(1999 information is unaudited)
<TABLE>
<CAPTION>
====================================================================================================================================
Annualized Ratios to Average Net Assets
----------------------------------------------------------------------
Net Net Assets
Net Expenses End of
Net Investment Before Period
Expenses Income Waiver (000s omitted)
---------------------- ---------------------- ---------------------- ----------------
<S> <C> <C> <C>
Cash Portfolio
1999 (A) 0.19% 4.94% NA $ 1,178,924
1998 0.15% 5.47% 0.19% 793,200
1997 0.16% 5.51% 0.19% 1,384,848
1996 (B) 0.12% 5.45% 0.21% 1,006,310
Treasury Portfolio
1999 (A) 0.22% 4.33% NA 208,140
1998 0.26% 4.74% NA 114,726
1997 (C) 0.29% 5.06% NA 73,916
Treasury Plus Portfolio
1999 (D) 0.19% 4.54% NA 231,026
U.S. Government Securities Portfolio
1999 (E) 0.22% 4.52% NA 169,412
</TABLE>
(A) For six months ended June 30, 1999 (Unaudited).
(B) Commenced Operations November 12, 1996.
(C) Commenced Operations April 2, 1997.
(D) Commenced Operations January 22, 1999.
(E) Commenced Operations June 29, 1999.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Merrimac Master Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
The Merrimac Master Portfolio (the "Portfolio Trust") is 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 ("1940 Act"), as an
open-end management investment company with its principal offices in
the Cayman Islands. The Merrimac Cash Portfolio (the "Cash Portfolio"),
the Merrimac Treasury Portfolio (the "Treasury Portfolio"), the
Merrimac Treasury Plus Portfolio (the "Treasury Plus Portfolio") and
the Merrimac U.S. Government Portfolio (the "Government Portfolio" and
collectively, the "Portfolios") are separate diversified investment
series of the Portfolio Trust.
The following is a summary of significant accounting policies followed
by the Portfolio Trust 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.
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.
Each Portfolio's use of amortized cost is subject to compliance with
certain conditions 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 the original issue and market discount) less premium
amortized on the investments of the Portfolios, 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 Portfolios are accrued daily. All investment income, expenses, and
realized capital gains and losses of the Portfolios are allocated pro
rata to their investors.
C. Federal Income Taxes
Each Portfolio is considered a partnership under the U.S. Internal
Revenue Code. Accordingly, no provision for federal income taxes is
necessary. Each Portfolio also intends to conduct its operations such
that each investor will be able to qualify as a regulated investment
company.
D. Repurchase Agreements
It is the policy of the Portfolio Trust 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 to monitor the daily market value of the repurchase
agreement's underlying investments to ensure the existence of a proper
level of collateral. The Treasury Portfolio does not invest in
repurchase agreements.
E. Deferred Organization Expense
Costs incurred by the Cash Portfolio and the Treasury Portfolio 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 of each Portfolio.
(2) Management Fee and Affiliated Transactions
The Portfolios retain Investors Bank & Trust Company ("Investors Bank")
as investment adviser to continuously review and monitor the
Portfolios' investment program. Investors Bank also serves as custodian
for the Portfolio Trust. Investor's Fund Services (Ireland) Limited, a
subsidiary of Investors Bank, serves as administrator. IBT Fund
Services (Canada) Inc., a subsidiary of Investors Bank, serves as fund
accounting and transfer agent. For these services, Investors Bank and
its subsidiaries are paid a monthly fee at an annual rate of 0.17% of
the average daily assets of the Portfolios.
21
<PAGE>
Merrimac Master Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Allmerica Asset Management, Inc. ("AAM") serves as the sub-adviser to
the Cash Portfolio and the Government Portfolio and M&I Investment
Management Corp. ("M&I") serves as sub-adviser to the Treasury
Portfolio and the Treasury Plus Portfolio. For its services as
investment sub-adviser to the Cash Portfolio and the Government
Portfolio, AAM receives an annual fee, computed and paid monthly by
Investors Bank, based on the average net assets of each Portfolio
according to the following schedule: 0.09% on the first $500,000,000 in
assets; 0.07% on the next $500,000,000 in assets; and 0.06% on assets
exceeding $1,000,000,000. For its services as investment sub-adviser to
the Treasury Portfolio and Treasury Plus Portfolio, M&I receives a
monthly fee by Investors Bank computed at an annual rate of 0.08% of
the average daily net assets of each Portfolio. The Portfolios do not
pay a fee directly to either sub-adviser for such services.
Certain trustees and officers of the Portfolio Trust are directors or
officers of Investors Bank. The Portfolio Trust does not pay
compensation to the trustees or officers who are affiliated with the
investment adviser.
(3) Investment Transactions
Purchases and combined maturities and sales for the respective
Portfolios for the period ended June 30, 1999 were aggregated as
follows:
<TABLE>
<CAPTION>
Combined Maturities
Purchases and Sales
----------------------- -----------------------
<S> <C> <C>
Cash Portfolio $ 8,583,232,180 $ 8,209,824,397
Treasury Portfolio 1,058,172,091 968,176,412
Treasury Plus Portfolio 21,500,391,881 21,270,074,215
Government Portfolio 289,493,976 120,000,000
</TABLE>
(4) Line of Credit
The Portfolios participate in a $100 million line of credit agreement
with a group of banks. Borrowings will be made solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements.
Interest is charged to each portfolio based on its borrowings at an
amount above the Federal Funds rate. In addition, a fee computed at an
annual rate of 0.08% on the daily unused portion of the line of credit
is allocated among the portfolios. There were no borrowings during the
period ended June 30, 1999.
22
