As filed with the Securities and Exchange Commission on April 28, 2000
1940 Act File No. 811-07941
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
MERRIMAC MASTER PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
P.O. Box 501, Cardinal Avenue, George Town, Grand Cayman, Cayman Islands, BWI
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (809) 949-2001
Susan C. Mosher, Secretary
Merrimac Master Portfolio
200 Clarendon Street
Mail Code LEG13
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
Philip H. Newman
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
(i)
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MERRIMAC MASTER PORTFOLIO
EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended (the "1940
Act"). However, beneficial interests in the Registrant are not being registered
under the Securities Act of 1933, as amended (the "1933 Act") since such
interests will be issued solely in private placement transactions which do not
involve any "public offering" within the meaning of Section 4(2) of the 1933
Act. Investments in the Registrant's series may only be made by "accredited
investors" within the meaning of Regulation D under the 1933 Act which
generally includes institutional investors and high net worth individuals. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interests in any series of the
Registrant.
Pursuant to General Instruction B2 of Form N-1A, a registration statement filed
under only the 1940 Act shall consist of the facing sheet of the Form,
responses to all items of Parts A and B except Items 1, 2, 3, 5 and 9 of Part A
thereof, responses to all items of Part C except Items 23(e) and (i)-(k) and
the required signatures, and all other documents that are required or which the
Registrant may file as part of the registration statement.
(ii)
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PART A
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PART A
May l, 2000
Responses to Items 1, 2, 3, 5 and 9 have been omitted pursuant to paragraph (b)
of Instruction B.2. of the General Instructions to Form N-1A.
Item 4. INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
MERRIMAC CASH PORTFOLIO
INVESTMENT OBJECTIVE
The investment objective of the Merrimac Cash Portfolio (the "Cash Portfolio")
is to achieve a high level of current income consistent with preserving
principal and liquidity. In view of the risks inherent in all investments in
securities, there is no assurance that the Portfolio's objective will be
achieved.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
The Cash Portfolio is a series of the Merrimac Master Portfolio (the "Portfolio
Trust"), an open-end management investment company which is treated as a
partnership for federal tax purposes. Allmerica Asset Management, Inc. ("AAM")
acts as sub-adviser to the Cash Portfolio and manages its investment program.
The Cash Portfolio's principal investment strategy is to invest, indirectly
through the Cash Portfolio, its assets in high quality U.S. dollar-denominated,
money market instruments with remaining maturities of 397 calendar days or less
that in the opinion of AAM present minimal credit risk.
The Cash Portfolio may invest in the following U.S. dollar denominated
instruments:
o variable rate obligations;
o commercial paper;
o corporate debt;
o certificates of deposits;
o obligations of the U.S. Government or its agencies or instrumentalities;
o U.S. Treasury bills, notes and bonds,
o variable rate municipal obligation;
o municipal obligations;
o securities of U.S. and foreign banks or thrift organizations (such as
bankers' acceptances, time deposits and certificates of deposits);
o time deposits;
o asset-backed securities;
o other short-term debt securities; and
o repurchase agreements that are collateralized by the securities listed
above.
Further description of these securities is found in APPENDIX A.
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The Securities and Exchange Commission (SEC) has set certain diversification
requirements for money market funds. Generally, these requirements limit a
money market fund's investments in securities of any issuer to no more than 5%
of a fund's assets. Also, strict SEC guidelines do not permit AAM to invest,
with respect to 75% of the Cash Portfolio's assets, greater than 10% of the
Cash Portfolio's assets in securities issued by or subject to guarantees by the
same institution. Purchases of securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities are not counted toward these
limitations.
The Cash Portfolio's investments consist of high-quality securities that
qualify as "first-tier" securities under the SEC rules that apply to money
market funds. In general, a first-tier security is defined as a security that
is:
o issued or guaranteed by the U.S. Government or any agency or
instrumentality thereof;
o rated or subject to a guarantee that is rated in the highest category for
short-term securities by at least two Nationally Recognized Statistical
Rating Organizations (NRSROs), or by one NRSRO if the security is rated
by only one NRSRO;
o unrated but issued by an issuer or guaranteed by a guarantor that has
other comparable short-term obligations so rated; or
o unrated but determined by AAM to be of comparable quality to other
first-tier securities.
In addition, AAM must consider whether a particular investment presents minimal
credit risk.
The current NRSROs are:
o Moody's Investors Service, Inc.;
o Standard & Poor's Ratings Group;
o Fitch's IBCA Investors Service;
o Duff & Phelps; and
o Thomson Bank Watch.
If the rating of a security is downgraded after purchase, AAM will determine
whether it is in the best interest of the Cash Portfolio's shareholders to
continue to hold the security.
While AAM will endeavor to maintain a constant NAV of $1 per share, there is no
assurance that they will be able to do so. The shares are neither insured nor
guaranteed by the U.S. Government. As such, the Cash Portfolio carries some
risk. For example, there is always a risk that the issuer of a security held by
the Cash Portfolio will fail to pay interest or principal when due. The Cash
Portfolio attempts to minimize credit risk by investing only in securities
rated in the highest category for short-term securities, or, if not rated, of
comparable quality, at the time of purchase. Additionally, the Cash Portfolio
will not purchase a security unless AAM has determined that the security
presents minimal credit risk. There is also a risk that rising interest rates
will cause the value of the Cash Portfolio's securities to decline. The Cash
Portfolio attempts to minimize interest rate risk by limiting the maturity of
each security to 397 calendar days or less and maintaining a dollar-weighted
average portfolio maturity for the Cash Portfolio of 90 days or less.
In arriving at a decision to buy or sell a security, factors are balanced such
as credit quality and maturity to purchase the best relative value available in
the market at any given time. While rare, sell decisions are usually based on a
change in credit analysis or to take advantage of an opportunity to reinvest at
a higher yield.
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MERRIMAC TREASURY PORTFOLIO
INVESTMENT OBJECTIVE
The investment objective of the Merrimac Treasury Portfolio (the "Treasury
Portfolio") is to achieve a high level of current income consistent with
preserving principal and liquidity. In view of the risks inherent in all
investments in securities, there is no assurance that the Treasury Portfolio's
objective will be achieved.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
The Treasury Portfolio is a series of the Portfolio Trust, an open-end
management investment company which is treated as a partnership for federal tax
purposes. M&I Investment Management Corp. ("M&I") acts as sub-adviser to the
Treasury Portfolio and manages its investment program.
The Treasury Portfolio's principal investment strategy is to invest its
assets in, U.S. Treasury securities with maturities of 397 calendar days or
less.
The Treasury Portfolio will only invest indirect obligations of the U.S.
Treasury, which are U.S. Treasury bills, notes and bonds and in other money
market mutual funds having the same principal investment strategy. Under
Federal law, the income derived from obligations issued by the U.S. Treasury is
exempt from state income taxes. All states that tax personal income permit
mutual funds to pass through this tax exemption to shareholders, assuming
appropriate state imposed threshold limits have been met. To maximize
tax-effective yield for shareholders, under normal circumstances, the Treasury
Portfolio will only invest in obligations that qualify for the exemption from
state taxation.
While M&I will endeavor to maintain a constant NAV of $1 per share, there is no
assurance that they will be able to do so. The shares are neither insured nor
guaranteed by the U.S. Government. As such, the Treasury Portfolio carries some
risk. There is a risk that rising interest rates will cause the value of the
Treasury Portfolio's securities to decline. M&I attempts to minimize this risk
by limiting the maturity of each security to 397 calendar days or less and
maintaining a dollar-weighted average portfolio maturity for the Treasury
Portfolio of 90 days or less.
In arriving at a decision to buy or sell a security, factors are balanced such
as the Treasury Portfolio's objective of maximizing current income while
maintaining safety and liquidity. M&I evaluates the treasury securities market
daily to determine how to provide the most value to the Treasury Portfolio.
MERRIMAC TREASURY PLUS PORTFOLIO
INVESTMENT OBJECTIVE
The investment objective of the Merrimac Treasury Plus Portfolio (the "Treasury
Plus Portfolio") is to achieve a high level of current income consistent with
preserving principal and liquidity. In view of the risks inherent in all
investments in securities, there is no assurance that the Treasury Plus
Portfolio's objective will be achieved.
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IMPLEMENTATION OF INVESTMENT OBJECTIVES
The Treasury Plus Portfolio is a series of the Portfolio Trust, an open-end
management investment company which is treated as a partnership for federal tax
purposes. M&I acts as sub-adviser to the Treasury Plus Portfolio and manages
its investment program.
The Treasury Plus Portfolio's principal investment strategy is to invest its
assets in high-quality, U.S. dollar-denominated Treasury securities with
maturities of 397 calendar days or less.
The Treasury Plus Portfolio will invest at least 65% its total assets in direct
obligations of the U.S. Treasury (U.S. Treasury bills, notes and bonds ) or in
repurchase agreements collateralized by these instruments. It may invest the
remaining of assets in securities issued or guaranteed by the U.S. Government
or its agencies or in repurchase agreements collateralized by these
instruments.
While M&I will endeavor to maintain a constant NAV of $1 per share, there is no
assurance that they will be able to do so. The shares are neither insured nor
guaranteed by the U.S. Government. As such, the Treasury Plus Portfolio carries
some risk. There is a risk that rising interest rates will cause the value of
the Treasury Plus Portfolio's securities to decline. M&I attempts to minimize
interest rate risk by limiting the maturity of each security to 397 calendar
days or less and maintaining a dollar-weighted average portfolio maturity for
the Treasury Plus Portfolio of 90 days or less.
In arriving at a decision to buy or sell a security, factors are balanced such
as the Treasury Plus Portfolio's objective of maximizing current income while
maintaining safety and liquidity. M&I evaluates the government securities
market compared to the repurchase agreement market to determine which provides
the most value to the Treasury Plus Portfolio.
MERRIMAC U.S. GOVERNMENT PORTFOLIO
INVESTMENT OBJECTIVE
The investment objective of the Merrimac U.S. Government Portfolio (the "U.S.
Government Portfolio") is to achieve a high level of current income consistent
with preserving principal and liquidity. In view of the risks inherent in all
investments in securities, there is no assurance that the U.S. Government
Portfolio's objective will be achieved.
IMPLEMENTATION OF INVESTMENT OBJECTIVES
The U.S. Government Portfolio is a series of the Portfolio Trust, an open-end
management investment company which is treated as a partnership for federal tax
purposes. AAM acts as sub-adviser to the U.S. Government Portfolio and manages
its investment program.
The U.S. Government Portfolio's principal investment strategy is to invest its
assets in high-quality, U.S. dollar-denominated money market instruments with
maturities of 397 calendar days or less.
The U.S. Government Portfolio will invest at least 65% of its total assets in
securities issued or guaranteed by the U.S. Government or its agencies. The
U.S. Government Portfolio also may invest in repurchase agreements that are
collateralized by these instruments. Further description of these securities is
found in APPENDIX A.
While AAM will endeavor to maintain a constant NAV of $1 per share, there is no
assurance that they will be able to do so. The shares are neither insured nor
guaranteed by the U.S. Government. As such,
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the U.S. Government Portfolio carries some risk. There is a risk that rising
interest rates will cause the value of the U.S. Government Portfolio's
securities to decline. AAM attempts to minimize interest rate risk by limiting
the maturity of each security to 397 calendar days or less and maintaining a
dollar-weighted average portfolio maturity for the U.S. Government Portfolio of
90 days or less.
In arriving at a decision to buy or sell a security, factors are balanced such
as the U.S. Government Portfolio's objective of maximizing current income while
maintaining safety and liquidity. AAM evaluates the government securities
market compared to the repurchase agreement market to determine which provides
the most value to the U.S. Government Portfolio.
Item 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
MANAGEMENT
INVESTMENT ADVISER
The Cash Portfolio, the Treasury Portfolio, the Treasury Plus Portfolio and the
U.S. Government Portfolio (each a "Portfolio" and collectively, the
"Portfolios") have each retained the services of Investors Bank & Trust Company
("Investors Bank") as investment adviser. Investors Bank continuously reviews
and supervises each Portfolio's investment program. Investors Bank discharges
its responsibilities subject to the supervision of, and policies established by
the Board of Trustees. Investors Bank's business address is 200 Clarendon
Street, Boston, Massachusetts 02116. Investors Bank began acting as an
investment adviser at the commencement of operations of the Cash Portfolio
(November 21, 1996). The Portfolios each pay Investors Bank a unitary fee for
services as Investment Adviser, Administrator, Custodian, Fund Accountant and
Transfer Agent. The fee is computed at an annual rate of 0.17% of average net
assets of each such Portfolio.
The investment adviser and sub-advisers may pay out of their respective fees a
transaction, service, administrative, or other similar fee charged by a
financial intermediary, or other financial representative with respect to the
purchase or sale of shares of each Fund. The financial intermediaries also may
impose requirements on the purchase or sale of shares that are different from,
or in addition to, those imposed by each Fund, including requirements as to the
minimum initial and subsequent investment amounts.
INVESTMENT SUB-ADVISERS
AAM serves as investment sub-adviser to the Cash Portfolio and the U.S.
Government Portfolio. AAM manages the Cash Portfolio and the U.S. Government
Portfolio, selects investments and places all orders for the purchase and sale
of the Cash Portfolio and the U.S. Government Portfolio's securities, subject
to the general supervision of, and policies established by the Board of
Trustees and Investors Bank. The business address of AAM is 440 Lincoln Street,
Worcester, Massachusetts 01653. AAM has been providing investment advisory
services since it was established in 1993 as an indirect, wholly-owned
subsidiary of Allmerica Financial Corporation. AAM receives a fee from
Investors Bank (and not from the Cash Portfolio or the U.S. Government
Portfolio) for its services as investment sub-adviser. Prior to September 1,
1998, The Bank of New York acted as investment sub-adviser for the Cash
Portfolio.
M&I serves as investment sub-adviser to the Treasury Portfolio and the Treasury
Plus Portfolio. M&I manages the Treasury Portfolio and the Treasury Plus
Portfolio, selects investments and places all orders for the purchase and sale
of the Treasury Portfolio and the Treasury Plus Portfolio's securities, subject
to the general supervision of, and policies established by the Board of
Trustees and Investors Bank. The
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business address of M&I is 1000 North Water Street, Milwaukee, Wisconsin 53202.
M&I has been providing investment advisory services since it was established in
1973 as a first tier wholly-owned subsidiary of Marshall & Isley Corporation, a
publicly held bank holding company. M&I receives fees from Investors Bank (and
not from the Treasury Portfolio or the Treasury Plus Portfolio) for its
services as investment sub-adviser.
Item 7. SHAREHOLDER INFORMATION
PRICING OF PORTFOLIO INTERESTS
An investment in any Portfolio may be made without a sales load. Securities are
valued at amortized cost, which the Trustees of the Portfolios have determined
in good faith constitutes fair value for the purposes of complying with the
1940 Act. A Business Day is any day on which both the New York Stock Exchange
and the New York Federal Reserve Bank are open. This valuation method will
continue to be used until such time as the Trustees of the Portfolios determine
that it does not constitute fair value for such purposes.
PURCHASE OF PORTFOLIO INTERESTS
Beneficial interests in each Portfolio are issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in each Portfolio may only be made by
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities which are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
There is no minimum initial or subsequent investment in the Portfolios.
However, since the Portfolios intend to be as fully invested at all times as is
reasonably practicable in order to enhance the yield on their assets,
investments must be made in federal funds (i.e., monies credited to the account
of a Portfolio's custodian bank by a Federal Reserve Bank).
Each Portfolio reserves the right to cease accepting investments at any time or
to reject any investment order.
REDEMPTION OF PORTFOLIO INTERESTS
Shares of a Portfolio are not registered under the 1933 Act and are sold in
reliance upon an exemption from registration. Shares may not be transferred or
resold without registration under the 1933 Act, except pursuant to an exemption
from registration. However, shares may be redeemed on any Business Day.
MASTER FEEDER FUNDS
"Feeder" funds invest exclusively in their corresponding "master" portfolios
with identical investment objectives. The master portfolio may accept
investments from multiple feeder funds, which bear the master portfolio's
expenses in proportion to their assets.
Each feeder fund and its master portfolio expect to maintain consistent
investment objectives, but if they do not, a fund will withdraw from the master
portfolio, receiving either cash or securities in exchange for its interest in
the master portfolio. The trustees of the trust of a feeder fund would then
consider whether
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a fund should hire its own investment adviser, invest in a different portfolio,
or take other action.
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APPENDIX A
MONEY MARKET INSTRUMENTS. An investment in a Portfolio is subject to interest
rate risk and credit risk of the issuers of the money market instruments. All
money market instruments can change in value when interest rates or an issuer's
creditworthiness changes, or if an issuer or guarantor of a security fails to
pay interest or principal when due.
U.S. GOVERNMENT SECURITIES. The Cash Portfolio, the Treasury Plus Portfolio and
the U.S. Government Portfolio each may invest in U.S. Government Securities.
Not all U.S. Government Securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
agency's right to borrow money from the U.S. Treasury under certain
circumstances. Securities issued by the Federal Home Loan Bank are supported
only by the credit of the agency. There is no guarantee that the U.S.
Government will support these types of securities, and therefore they involve
more risk than "full faith and credit" Government Securities. The Treasury
Portfolio will primarily invest in "full faith and credit" U.S. Government
Securities.
BANKERS' ACCEPTANCES. The Cash Portfolio may invest in bankers' acceptances
which are bills of exchange or time drafts drawn on and accepted by a
commercial bank. They are used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
COMMERCIAL PAPER. The Cash Portfolio may invest in commercial paper, which is
the term used to designate unsecured short-term promissory notes issued by
corporations and other entities. The Cash Portfolio may invest in commercial
paper with maturities which vary from a few days to nine months. The Cash
Portfolio may also purchase U.S. dollar-denominated commercial paper of a
foreign issuer rated in the highest or second highest rating categories by at
least two NRSROs.
SECURITIES LENDING. Each Portfolio may lend up to 33 1/3% of its portfolio of
securities pursuant to agreements requiring that the loan be continuously
secured by cash or equivalent collateral or by a letter of credit or bank
guarantee in favor of the Portfolio at least equal at all times to 100% of the
market value plus accrued interest on the securities lent. The Portfolio will
continue to receive interest on the securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Collateral is
marked to market daily. Loans are subject to termination by the Portfolio or
the borrower at any time and are, therefore, not considered to be illiquid
investments.
TIME DEPOSITS. The Cash Portfolio may invest in time deposits ("TDs"), which
are non-negotiable receipts issued by a bank in exchange for the deposit of
funds. Like a certificate of deposit, a TD earns a specified rate of interest
over a definite period of time; however, it cannot be traded in the secondary
market.
CERTIFICATES OF DEPOSIT. The Cash Portfolio also may invest in certificates of
deposit ("CDs"), which are negotiable interest bearing instruments with a
specific maturity. CDs are issued by banks and thrift institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity.
CORPORATE DEBT OBLIGATIONS. Subject to its respective credit quality and
maturity limitations, the Cash Portfolio may invest in corporate bonds,
including obligations of industrial, utility, banking and other financial
issuers. Corporate bonds are subject to the risk of an issuer's inability to
meet principal and
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interest payments and may also be subject to price volatility due to such
factors as market interest rates, market perception of the credit worthiness of
the issuer and general market liquidity.
ASSET-BACKED SECURITIES. The Cash Portfolio also may invest in asset-backed
securities, which consist of securities secured by company receivables, home
equity loans, truck and auto loans, leases, credit card receivables and other
securities backed by other types of receivables or other assets. Credit support
for asset-backed securities may be based on the underlying assets and/or
provided through credit enhancements such as letters of credit, insurance
bonds, limited issuer guarantees, senior-subordinated structures and over
collateralization. Asset-backed securities are normally traded over-the-counter
and typically have a short-intermediate maturity structure depending on the
paydown characteristics of the underlying financial assets which are passed
through to the security holder. Asset-backed securities may be subject to
prepayment risk, particularly in a period of declining interest rates.
Prepayments, which occur when unscheduled payments are made on the underlying
debt instruments, may shorten the effective maturities of these securities and
may lower their total returns. Asset-backed securities generally do not have
the benefit of a security interest in collateral that is comparable to mortgage
assets and there is the possibility that recoveries on repossessed collateral
may not be available to support payments on these securities. There is no limit
on the extent to which the Portfolio may invest in asset-backed securities;
however, the Portfolio will only invest in asset-backed securities that carry a
rating in the highest category from at least two NRSROs.
EURODOLLAR AND YANKEE DOLLAR INVESTMENTS. The Cash Portfolio may invest in
Eurodollar and Yankee Dollar instruments. Eurodollar instruments are bonds of
foreign corporate and government issuers that pay interest and principal in
U.S. dollars held in banks outside the United States, primarily in Europe.
Yankee Dollar instruments are U.S. dollar denominated bonds typically issued in
the U.S. by foreign governments and their agencies and foreign banks and
corporations. The Portfolio may invest in Eurodollar Certificates of Deposit
("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee Certificates of Deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit issued
by foreign branches of domestic banks; ETDs are U.S. dollar-denominated
deposits in a foreign branch of a U.S. bank or in a foreign bank; and Yankee
CDs are U.S. dollar-denominated certificates of deposit issued by a U.S. branch
of a foreign bank and held in the U.S. These investments involve risks that are
different from investments in securities issued by U.S. issuers, including
potential unfavorable political and economic developments, foreign withholding
or other taxes, seizure of foreign deposits, currency controls, interest
limitations or other governmental restrictions which might affect payment of
principal or interest.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Portfolio may invest in
when-issued and delayed delivery securities, which are securities purchased for
delivery beyond the normal settlement date at a stated price and yield, thereby
involving the risk that the yield obtained will be less than that available in
the market at delivery. Although the purchase of securities on a when-issued
basis is not considered leveraging, it has the effect of leveraging. When such
a security is purchased, the Custodian will set aside cash or liquid securities
to satisfy the purchase commitment unless the relevant Portfolio has entered
into an offsetting agreement to sell the securities. These segregated
securities will be valued at market and additional cash or securities will be
segregated if necessary so that the market value of the account will continue
to satisfy the purchase commitment. A Portfolio generally will not pay for such
securities or earn interest on them until received. Commitments to purchase
when-issued securities will not, under normal market conditions, exceed 25% of
the Portfolio's total assets, and a commitment will not exceed 90 days. A
Portfolio will only purchase when-issued securities for the purpose of
acquiring portfolio securities and not for speculative purposes. However, a
Portfolio may sell these securities or dispose of the commitment before the
settlement date if it is deemed advisable as a matter of investment
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strategy. The market value of when-issued or delayed delivery securities when
they are delivered may be less than the amount the Portfolios paid for them.
VARIABLE AND FLOATING RATE INSTRUMENTS. Certain of the obligations purchased by
each Portfolio may carry variable or floating rates of interest and may include
variable rate master demand notes. A floating rate security provides for the
automatic adjustment of its interest rate whenever a specified interest rate
changes. A variable rate security provides for the automatic establishment of a
new interest rate on set dates. Variable and floating rate instruments may
include variable amount master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. There may be no active secondary market with respect to a
particular variable or floating rate instrument. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to a
Portfolio will approximate their par value. Further, some of the demand
instruments purchased by a Portfolio derive their liquidity from the ability of
the holder to demand repayment from the issuer or from a third party providing
credit support. The creditworthiness of issuers of variable and floating rate
instruments and their ability to repay principal and interest will be
continuously monitored by each Portfolio's investment adviser or sub-adviser.
REPURCHASE AGREEMENTS. The Cash Portfolio, the Treasury Plus Portfolio and the
U.S. Government Portfolio each may enter into repurchase agreements, which are
agreements by which a person obtains a security and simultaneously commits to
return the security to the seller at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days from the date of
purchase. In substance, a repurchase agreement is a loan by the Portfolio
collateralized with securities. The lending Portfolio's Custodian or its agent
will hold the security as collateral for the repurchase agreement. All
repurchase transactions must be collateralized initially at a value at least
equal to 102% of the repurchase price and counterparties are required to
deliver additional collateral in the event the market value of the collateral
falls below 100%. The Portfolios bear the risk of loss in the event the other
party defaults on its obligations and the Portfolio is delayed or prevented
from its right to dispose of the collateral securities or if the Portfolio
realizes a loss on the sale of the collateral securities. Each Portfolio will
enter into repurchase agreements with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees. Each Portfolio will not
invest more than 10% of its net assets in repurchase agreements maturing in
more than seven days because such agreements would be considered "illiquid
securities."
REVERSE REPURCHASE AGREEMENTS. The Cash Portfolio, the Treasury Plus Portfolio
and the U.S. Government Portfolio each may borrow funds for temporary purposes
by entering into reverse repurchase agreements. Pursuant to such agreements,
each Portfolio would sell the securities to financial institutions such as
banks and broker-dealers and agree to repurchase them at a mutually agreed-upon
date and price. Each Portfolio will enter into reverse repurchase agreements to
avoid otherwise selling securities during unfavorable market conditions to
provide cash to satisfy redemption requests. At the time each Portfolio enters
into a reverse repurchase agreement, it would place in a segregated custodial
account, assets such as cash or liquid securities, consistent with each
Portfolio's investment restrictions and having a value equal to the repurchase
price (including accrued interest), and would subsequently monitor the account
to ensure that such equivalent value was maintained. Reverse repurchase
agreements involve the risk that the counterparty may default at a time when
the market value of securities sold by each Portfolio have increased in value.
Reverse repurchase agreements are considered by the SEC to be borrowings by the
Portfolio under the 1940 Act.
RESTRICTED AND ILLIQUID SECURITIES. Each Portfolio may invest up to 10% of its
net assets in illiquid securities. Illiquid securities are those that are not
readily marketable, repurchase agreements maturing in
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more than seven days, time deposits with a notice or demand period of more than
seven days and certain restricted securities. Based upon continuing review of
the trading markets for a specific restricted security, the security may be
determined to be eligible for resale to qualified institutional buyers pursuant
to Rule 144A under the Securities Act of 1933 and, therefore, to be liquid.
Also, certain illiquid securities may be determined to be liquid if they are
found to satisfy certain relevant liquidity requirements. The Board of Trustees
of the Portfolio Trust have adopted guidelines and delegated to each
Portfolio's investment adviser or sub-adviser, as applicable, the daily
function of determining and monitoring the liquidity of portfolio securities,
including restricted and illiquid securities. Each Portfolio's Board of
Trustees, however, retains oversight and is ultimately responsible for such
determinations. The purchase price and subsequent valuation of illiquid
securities normally reflect a discount, which may be significant, from the
market price of comparable securities for which a liquid market exists.
SHORT-TERM TRADING. Although each Portfolio usually intends to hold securities
purchased until maturity, at which time they will be redeemable at their full
principal value plus accrued interest, they may, at times, engage in short-term
trading to attempt to take advantage of yield variations in the short-term
market. Each Portfolio also may sell portfolio securities prior to maturity
based on a revised evaluation of the creditworthiness of the issuer or to meet
redemptions. In the event there are unusually heavy redemption requests due to
changes in interest rates or otherwise, a Portfolio may have to sell a portion
of its investment portfolio at a time when it may be disadvantageous to do so.
However, each Portfolio believes that its ability to borrow funds to
accommodate redemption requests may mitigate in part the necessity for such
portfolio sales during these periods.
ZERO COUPON SECURITIES. The Cash Portfolio may invest in zero coupon
securities. Zero coupon securities are securities sold at a discount to par
value and on which interest payments are not made during the life of the
security. Upon maturity, the holder is entitled to receive the par value of the
security. The Portfolio is required to accrue income with respect to these
securities prior to the receipt of cash payments. Because the Fund will
distribute its share of this accrued income to shareholders, to the extent that
the shareholders and shareholders of other mutual funds that invest in the
Portfolio elect to receive dividends in cash rather than reinvesting such
dividends in additional shares, the Portfolio will have fewer assets with which
to purchase income producing securities. The Treasury Portfolio, the Treasury
Plus Portfolio and the U.S. Government Portfolio may invest in zero coupon
treasury securities.
LOAN PARTICIPATIONS. The Cash Portfolio may invest in loan participations,
which represent a participation in a corporate loan of a commercial bank. Such
loans must be to corporations in whose obligations the Cash Portfolio may
invest. Since the issuing bank does not guarantee the participations in any
way, they are subject to the credit risks generally associated with the
underlying corporate borrower. It may be necessary under the terms of the loan
participation for the Cash Portfolio to assert through the issuing bank such
rights as may exist against the corporate borrower, in the event the underlying
corporate borrower fails to pay principal and interest when due. In such
circumstances, the Cash Portfolio may be subject to delays, expenses and risks
that are greater than if the Cash Portfolio had purchased a direct obligation
(such as commercial paper) of such borrower. Further, under the terms of the
loan participation, the Cash Portfolio may be regarded as a creditor of the
issuing bank (rather than the underlying corporate borrower), so that the Cash
Portfolio may also be subject to the risk that the issuing bank may become
insolvent. The secondary market for loan participations is extremely limited,
and therefore loan participations purchased by the Cash Portfolio are generally
regarded as illiquid.
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PART B
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ITEM 10. COVER PAGE AND TABLE OF CONTENTS
MERRIMAC MASTER PORTFOLIO
Merrimac Cash Portfolio
Merrimac Treasury Portfolio
Merrimac Treasury Plus Portfolio
Merrimac U.S. Government Portfolio
PART B
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information ("SAI") is not a Prospectus and is
only authorized for distribution when preceded or accompanied by the Merrimac
Master Portfolio's (the "Trust") current Prospectus dated May 1, 2000.
Financial Statements are incorporated by reference into this SAI from the
Trust's most recent Annual Report. This SAI supplements and should be read in
conjunction with the Prospectus, a copy of which may be obtained without charge
by calling the Trust at 1-888-MERRMAC or writing the Trust at 200 Clarendon
Street, Boston, Massachusetts 02116. This SAI is not an offer of any Portfolio
for which an investor has not received a Prospectus.
Information about the Funds' (including the SAI) may be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C., or you may obtain copies,
upon payment of a duplicating fee, by writing to the Public Reference Room of
the SEC, Washington, D.C. 20549-0102 or by electronic request at the following
E-mail address: [email protected]. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 202-942-8090. Reports and
other information about the Fund may be obtained on the Commission's Internet
site at http://www.sec.gov.
TABLE OF CONTENTS
Page Page
Portfolio History 3 Capital Stock and Other Securities 12
Description of the Portfolios,
Their Investments and Risks 3 Purchase, Redemption and Valuation 13
of Shares
Management of the Trust 6 Taxation of the Trust 14
Control Persons and Principal 8 Calculation of Performance Data 16
Holders of Securities
Investment Advisory and Other 9 Financial Statements 17
Services
Brokerage Allocation and Other 11 Appendix 18
Practices
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ITEM 11. PORTFOLIO HISTORY
The Merrimac Master Portfolio (the "Portfolio Trust") is composed of four
series: Merrimac Cash Portfolio ("Cash Portfolio"), Merrimac Treasury Portfolio
("Treasury Portfolio"), Merrimac Treasury Plus Portfolio ("Treasury Plus
Portfolio") and Merrimac U.S. Government Portfolio ("U.S. Government
Portfolio") (each, a "Portfolio" and collectively, the "Portfolios").
The Portfolio Trust is a common law trust organized under the laws of the State
of New York pursuant to a Declaration of Trust dated October 30, 1996 and
amended February 6, 1997, October 26, 1998 and March 15, 1999.
ITEM 12. DESCRIPTION OF THE PORTFOLIOS, THEIR INVESTMENTS AND RISKS
CLASSIFICATION
Each Portfolio is a diversified open-end, management investment company under
the 1940 Act and a separate series of the Trust.
INVESTMENT STRATEGIES AND RISKS
MATURITY AND DURATION. Duration of an individual portfolio security is a
measure of the security's price sensitivity taking into account expected cash
flow and prepayments under a wide range of interest rate scenarios. In
computing the duration a Portfolio will have to estimate the duration of
obligations that are subject to prepayment or redemption by the issuer taking
into account the influences of interest rates on prepayments and coupon flows.
Each of the Portfolios has a policy of investing in instruments with maturities
of 397 days or less. For purposes of complying with this policy, each Portfolio
will determine the maturity of an instrument in accordance with the
requirements of Rule 2a-7 under the 1940 Act. Rule 2a-7 permits each Portfolio
to shorten the maturity of a particular instrument in circumstances in which
the instrument is subject to certain types of demand features or interest-rate
reset provisions.
EXCHANGE COMMERCIAL NOTES ("ECNs"). The Cash Portfolio may invest in ECNs. ECNs
are short-term (90 days or less) securities that automatically extend to a
390-day maximum maturity if the issuer does not redeem the ECNs on the Initial
Redemption Date (the equivalent of a commercial paper maturity). The extension
feature substitutes for bank back-up. Investors receive a premium for giving
the issuer the option to extend the maturity. However, investors receive a
sizeable additional premium if the maturity is extended. ECNs carry the same
credit rating(s) as the issuer's commercial paper.
FUNDING AGREEMENTS. The Cash Portfolio may invest in funding agreements. A
funding agreement is, in substance, an obligation of indebtedness negotiated
privately between an investor and an insurance company. Funding agreements
often have maturity-shortening features, such as an unconditional put, that
permit the investor to require the insurance company to return the principal
amount of the funding agreement, together with accrued interest, within one
year or less. Most funding agreements are not transferable by the investor and,
therefore, are illiquid, except to the extent the funding agreement is subject
to a demand feature of seven days or less. An insurance company may be subject
to special protections under state insurance laws, which protections may impair
the ability of the investor to require prompt performance by the insurance
company of its payment obligations under the funding agreement.
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MONEY MARKET INSTRUMENTS AND REPURCHASE AGREEMENTS. The money market
instruments in which the Cash Portfolio invests include short-term U.S.
Government Securities (defined below), commercial paper (promissory notes
issued by corporations to finance their short-term credit needs), negotiable
certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances and repurchase agreements. The Treasury Portfolio invests only in
direct obligations of the U.S. Treasury. The Treasury Plus Portfolio invests
substantially all of its assets in direct obligations of the U.S. Treasury and
in U.S. Government Securities (defined below)and in repurchase agreements.
U.S. Government Securities include securities which are direct obligations of
the U.S. Government backed by the full faith and credit of the United States,
and securities issued by agencies and instrumentalities of the U.S. Government,
which may be guaranteed by the U.S. Treasury or supported by the issuer's right
to borrow from the U.S. Treasury or may be backed by the credit of the federal
agency or instrumentality itself. Agencies and instrumentalities of the U.S.
Government include, but are not limited to, Federal Land Banks, the Federal
Farm Credit Bank, the Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks and the Federal National Mortgage
Association ("FNMA").
A repurchase agreement is an agreement under which a Portfolio acquires money
market instruments (generally U.S. Government Securities) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed-upon price
and date (normally the next business day). The resale price reflects an
agreed-upon interest rate effective for the period the instruments are held by
a Portfolio and is unrelated to the interest rate on the instruments. The
instruments acquired by a Portfolio (including accrued interest) must have an
aggregate market value in excess of the resale price and will be held by the
custodian bank for the Portfolio until they are repurchased. The Board of
Trustees of the Portfolio Trust will monitor the standards that the investment
adviser or sub-adviser will use in reviewing the creditworthiness of any party
to a repurchase agreement with a Portfolio. See "Investment Advisory Services"
for information regarding the investment adviser and sub-adviser.
The use of repurchase agreements involves certain risks. For example, if the
seller defaults on its obligation to repurchase the instruments acquired by a
Portfolio at a time when their market value has declined, a Portfolio may incur
a loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by a Portfolio are collateral for a loan by a Portfolio
and therefore are subject to sale by the trustee in bankruptcy. Finally, it is
possible that a Portfolio may not be able to substantiate its interest in the
instruments it acquires. It is expected that these risks can be controlled
through careful documentation and monitoring.
"WHEN-ISSUED" AND "DELAYED DELIVERY" SECURITIES. Each Portfolio may invest in
securities purchased on a
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"when-issued" or "delayed delivery" basis. Delivery and payment for securities
purchased on a when-issued or delayed delivery basis will normally take place
15 to 45 days after the date of the transaction. The payment obligation and
interest rate on the securities are fixed at the time that a Portfolio enters
into the commitment, but interest will not accrue to a Portfolio until delivery
of and payment for the securities. Although each such Portfolio will only make
commitments to purchase "when-issued" and "delayed delivery" securities with
the intention of actually acquiring the securities, each such Portfolio may
sell the securities before the settlement date if deemed advisable by their
investment adviser or sub-adviser. Each Portfolio may also, with respect to up
to 25% of its total assets, enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time.
Unless the Portfolios have entered into an offsetting agreement to sell the
securities purchased on a "when-issued" or "forward commitment" basis, cash or
liquid obligations with a market value equal to the amount of a Portfolio's
commitment will be segregated with a Portfolio's custodian bank. If the market
value of these securities declines, additional cash or securities will be
segregated daily so that the aggregate market value of the segregated
securities equals the amount of a Portfolio's commitment.
Securities purchased on a "when-issued" and "delayed delivery" basis may have a
market value on delivery which is less than the amount paid by a Portfolio.
Changes in market value may be based upon the public's perception of the
creditworthiness of the issuer or changes in the level of interest rates.
Generally, the value of "when-issued," "delayed delivery" and "forward
commitment" securities will fluctuate inversely to changes in interest rates,
i.e., they will appreciate in value when interest rates fall and will decline
in value when interest rates rise.
PORTFOLIO POLICIES
The Portfolios have adopted the following fundamental policies. Each of the
Portfolio's fundamental policies cannot be changed unless the change is
approved by a "vote of the outstanding voting securities" of a Portfolio, as
the case may be, which phrase as used herein means the lesser of (i) 67% or
more of the voting securities of a Portfolio present at a meeting, if the
holders of more than 50% of the outstanding voting securities of a Portfolio
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of a Portfolio.
As a matter of fundamental policy, the Cash Portfolio, the Treasury Portfolio,
the Treasury Plus Portfolio and the U.S. Government Portfolio may not:
(1) purchase any securities that would cause more than 25% of the
total assets of the Portfolio at the time of such purchase to be
invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that
there is no limitation with respect to U.S. Government Securities or
(for the Cash Portfolio, the Treasury Plus Portfolio and the U.S.
Government Portfolio) bank obligations or repurchase agreements
collateralized by any of such obligations as applicable;
(2) borrow money, except as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions, provided that
borrowing does not exceed an amount equal to 33 1/3% of the current
value of the Portfolio's assets taken at market value, less
liabilities, other than borrowings;
(3) purchase securities on margin (except for delayed delivery or
when-issued transactions or such short-term credits as are necessary
for the clearance of transactions);
(4) make loans to any person or firm; provided, however, that the
making of a loan shall not include entering into repurchase
agreements, and provided further that a Portfolio may lend its
portfolio securities to broker-dealers or other institutional
investors if the aggregate value of all securities loaned does not
exceed 33 1/3% of the value of a Portfolio's total assets;
(5) engage in the business of underwriting the securities issued by
others, except that a Portfolio will not be deemed to be engaging in
the business of underwriting with respect to the purchase or sale of
securities subject to legal or contractual restrictions on
disposition;
(6) issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act; and
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(7) purchase or sell real estate, commodities, or commodity contracts
unless acquired as a result of ownership of securities, and provided
further that a Portfolio may invest in securities backed by real
estate and in financial futures contracts and options thereon.
If any percentage restriction described above is adhered to at the time of
investment, a subsequent increase or decrease in the percentage resulting from
a change in the net assets of the Portfolios will not constitute a violation of
the restriction.
ITEM 13. MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Trust rests with
the Board of Trustees. The Trustees approve all significant agreements between
the Trust and the persons and companies that furnish services to the Trust,
including agreements with its custodian, transfer agent, investment adviser,
sub-adviser and administrator. The SAI contains background information
regarding each of the Trustees and executive officers of the Trust.
TRUSTEES AND OFFICERS. The names, dates of birth and principal occupation(s)
during the last five years of the Trustees and officers of the Trust and the
Portfolio Trust are listed below. An asterisk (*) indicates that a Trustee is
an "interested person" of the Trust and the Portfolio Trust, as defined in the
1940 Act. The business address of the Trustees and officers of the Trust and
the Portfolio Trust is 200 Clarendon Street, Boston, Massachusetts 02116.
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TRUSTEES AND OFFICERS OF THE PORTFOLIO TRUST
KEVIN J. SHEEHAN, TRUSTEE*, 6/22/51, Director since 1990, President June 1992 -
present, Chairman and Chief Executive Officer June 1995 - present, Investors
Bank & Trust Company, Chairman and Chief Executive Officer June 1995 - present,
Investors Financial Services Corp.
FRANCIS J. GAUL, JR., TRUSTEE, 9/25/43, Private Investor July 1998 - present,
Director and Principal, Triad Investment Management Company June 1997 - June
1998, Vice President, Triad Investment Management Company (Registered
Investment Adviser) July 1996 - May 1997, Vice President & Resident Manager,
Goldman Sachs & Co. (Investment Banking & Institutional Sales) June 1993 -
January 1995.
EDWARD F. HINES, JR., TRUSTEE, 9/5/45, Partner 1977 - present, Choate, Hall &
Stewart.
THOMAS E. SINTON, TRUSTEE, 8/26/32, Retired, Managing Director, Corporate
Accounting Policy, April 1993 - October 1996 and Consultant, January 1993 -
March 1996, Bankers Trust Company.
PAUL J. JASINSKI, PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICEr, 2/17/47,
Managing Director, Investors Bank & Trust Company, 1990 - present.
TIMOTHY J. COYNE, VICE PRESIDENT, 5/9/67, Director, Corporate Marketing,
Investors Bank & Trust Company, 1997 - present, Vice President, Corporate
Sales, Dreyfus Corporation, 1995 - 1997, Assistant Vice President, Concord
Financial Corp., 1992 - 1995.
CHRISTOPHER J. QUINN, ASSISTANT VICE PRESIDENT, 5/6/66, Manager, Advisory
Client Services, Investors Bank & Trust Company, 1996 - present, Service
Specialist Mutual Funds, Fleet Bank, 1994 - 1996, Executive Sales Assistant,
Concord Financial Corp., 1993 - 1994.
SUSAN C. MOSHER, SECRETARY, 1/29/55, Director, Mutual Fund Administration -
Legal Administration, Investors Bank & Trust Company, 1995 - present.
SANDRA I. MADDEN, ASSISTANT SECRETARY, 8/29/66, Associate Counsel, Mutual Fund
Administration - Legal Administration, Investors Bank & Trust Company, 1999 -
present; Associate Counsel at Scudder Kemper Investments, Inc. in the Mutual
Fund Administration Group of the Legal Department, 1996-1999.
COMPENSATION OF THE TRUSTEES AND OFFICERS. Neither the Trust nor the Portfolio
Trust compensates the Trustees or officers of the Trust and the Portfolio Trust
who are affiliated with Investors Bank. None of the Trustees or officers of the
Trust or the Portfolio Trust have engaged in any financial transactions with
the Trust or the Portfolio Trust, respectively, during the fiscal year ended
December 31, 1999.
The Trustees of the Portfolio Trust are paid an annual retainer of $10,000,
payable in equal quarterly installments, and a $2,500 meeting fee for each
quarterly meeting attended. The Trustees of the Trust are paid a $1,000 meeting
fee for each quarterly meeting attended. The following table reflects the
compensation paid by the Trust, by the Portfolio Trust and by another related
open-end investment company, to each Trustee for the fiscal year ended December
31, 1999.
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Aggregate Pension or Retirement Total Compensation
Compensation Benefits Accrued as From Trust and Fund
Name of Trustee From the Trust Part of Portfolio's Complex *
- --------------- -------------- ------------------- ------------------
Expenses
---------
Kevin J. Sheehan $0 $0 $0
Francis J. Gaul, Jr. $20,000 $0 $26,250
Edward F. Hines, Jr. $20,000 $0 $26,250
Thomas E. Sinton $20,000 $0 $26,250
*Fund Complex consists of the Trust, the Portfolio Trust, the Merrimac Global
Cash Fund and the Merrimac Series, comprising eight series as of December 31,
1999.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control is defined by the 1940 Act as the beneficial ownership, either directly
or through one or more controlled companies, of more than 25 percent of the
voting securities of the company.
As of April 3, 2000, the Merrimac Cash Fund (the "Cash Fund") beneficially
owned approximately 65.9% of the outstanding interests of the Cash Portfolio
and the Merrimac Cash Series beneficially owned approximately 32.9% of the
outstanding interests of the Cash Portfolio, each were, therefore, deemed as
control persons of the Cash Portfolio. As of April 3, 2000, the Merrimac
Treasury Series, a series of Merrimac Series, owned 100% of the value of the
outstanding shares of the Treasury Portfolio, and, therefore was deemed as a
control person of the Treasury Portfolio. As of April 3, 2000, the Merrimac
Treasury Plus Series, a series of Merrimac Series, owned 100% of the value of
the outstanding shares of the Treasury Plus Portfolio, and, therefore was
deemed as a control person of the Treasury Plus Portfolio. As of April 3, 2000,
the Merrimac U.S. Government Series, a series of Merrimac Series, owned 100% of
the value of the outstanding shares of the U.S. Government Portfolio, and,
therefore was deemed as a control person of the U.S. Government Portfolio.
As of April 3, 2000, Trustees and officers of the Trust owned in the aggregate
less than 1% of any of the
Portfolios.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER AND SUBADVISERS
Each Portfolio retains Investors Bank & Trust Company ("Investors Bank" or the
"Adviser") as their investment adviser. The Investment Adviser Agreements (the
"Adviser Agreements") between Investors Bank and each Portfolio provides that
Investors Bank will manage the operations of each Portfolio, subject to the
policies established by the Board of Trustees of the Trust. Investors Bank also
provides office space, facilities, equipment and personnel necessary to
supervise each Portfolio's operations and pays the compensation of each such
Portfolio's officers, employees and directors who are affiliated with Investors
Bank. Each Portfolio pays Investors Bank a unitary fee for services as
Investment Adviser, Administrator, Custodian, Fund Accountant and Transfer
Agent. For a description of the rate of compensation that each Portfolio pays
Investors Bank under the Adviser Agreements, see "Administrator, Transfer Agent
and Fund Accountant" below.
The fees earned by Investors Bank from the Cash Portfolio for the fiscal years
ended December 31, 1997,
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December 31, 1998 and December 31, 1999 were $2,314,064 of which $381,468 was
waived, $1,760,305 of which $384,213 was waived, and $2,117,982, respectively.
The fees earned by Investors Bank from the Treasury Portfolio for the fiscal
years ended December 31, 1997, December 31, 1998 and December 31, 1999 were
$1,932,596, $98,068 and $302,524, respectively. The fees earned by Investors
Bank from the Treasury Plus Portfolio for the period beginning January 22, 1999
(commencement of operations) to December 31, 1999 were $397,835. The fees
earned by Investors Bank from the U.S. Government Portfolio for the period
beginning June 29, 1999 (commencement of operations) to December 31, 1999 were
$123,332.
Pursuant to an Investment Sub-Adviser Agreement (the "AAM Sub-Adviser
Agreement"), Investors Bank has retained Allmerica Asset Management, Inc.
("AAM") as sub-adviser to the Cash Portfolio and the U.S. Government Portfolio.
AAM is compensated by Investors Bank at no additional cost to the Cash
Portfolio and the U.S. Government Portfolio. Subject to the supervision of
Investors Bank and of the Portfolio Trust's Board of Trustees, AAM furnishes to
the Cash Portfolio and the U.S. Government Portfolio investment research,
advice and supervision and determines what securities will be purchased, held
or sold by the Cash Portfolio and the U.S. Government Portfolio. AAM is
rendered an annual fee, computed and paid monthly, based on the average net
assets ("ANA") of each of the Cash Portfolio and the U.S. Government Portfolio
according to the following schedule: 0.09% on the first $500 million in assets;
0.07% on the next $500 million in assets, and 0.06% on assets exceeding $1
billion. Prior to September 1, 1998, the Cash Portfolio was advised by The Bank
of New York ("BNY") and BNY was paid an annual fee, computed and paid monthly,
based on 0.08% of the ANA of the Cash Portfolio. The amount paid by Investors
Bank to BNY for the period January 1, 1998 to August 31, 1998 was $429,014. The
amount paid by Investors Bank to AAM for the period September 1, 1998 to
December 31, 1998 was $233,588 and for the fiscal year ended December 31, 1999
was $997,094. The amount paid by Investors Bank to AAM as sub-adviser to the
U.S. Governemnt Portfolio for the period June 29, 1999 (commencement of
operations) to December 31, 1999 was $65,311.
Pursuant to an Investment Sub-Adviser Agreement (the "M&I Sub-Adviser
Agreement"), Investors Bank has retained M&I Investment Management Corp.
("M&I") as sub-adviser to the Treasury Portfolio and the Treasury Plus
Portfolio. M&I is compensated by Investors Bank at no additional cost to the
Treasury Portfolio and the Treasury Plus Portfolio. Subject to the supervision
of Investors Bank and of the Portfolio Trust's Board of Trustees, M&I furnishes
to the Treasury Portfolio and the Treasury Plus Portfolio investment research,
advice and supervision and determines what securities will be purchased, held
or sold by Treasury Portfolio and Treasury Plus Portfolio. Until January 4,
1999, the Treasury Portfolio was advised by Aeltus Investment Management, Inc.
("Aeltus") and Aeltus received the same fees as M&I currently receives. The
amount accrued and paid by Investors Bank to Aeltus for the fiscal year ended
December 31, 1998 was $46,158 and for 1999 was $755. The amount paid by
Investors Bank to M&I as sub-adviser to the Treasury Portfolio for the fiscal
year ended December 31, 1999 was $145,788. The amount paid by Investors Bank to
M&I as sub-adviser to the Treasury Plus Portfolio for the period January 22,
1999 (commencement of operations) to December 31, 1999 was $183,100.
Each Portfolio bears the expenses of its operations other than those incurred
by AAM or M&I, respectively. Among the other expenses, each Portfolio pays
share pricing and shareholder servicing fees and expenses; custodian fees and
expenses; legal and auditing fees and expenses; expenses of shareholder
reports; registration and reporting fees and expenses; and the Portfolio
Trust's Trustee fees and expenses.
ADMINISTRATOR, TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT
IBT Trust & Custodial Services (Ireland) LMTD ("IBT Ireland"), a subsidiary of
Investors Bank & Trust Company ("Investors Bank"), serves as Administrator to
the Portfolios. The services provided by IBT Ireland include certain
accounting, clerical and bookkeeping services, corporate secretarial services
and
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assistance in the preparation of reports to shareholders.
IBT Fund Services (Canada) Inc., ("IBT Canada") a subsidiary of Investors Bank,
serves as transfer and dividend paying agent for the Portfolios. As transfer
agent, IBT Canada is responsible for maintaining records of holders in interest
and for the payment of distributions for each Portfolio.
Investors Bank also acts as custodian for the Portfolios. As custodian,
Investors Bank holds cash, securities and other assets of the Portfolios as
required by the 1940 Act. IBT Canada also serves as fund accounting agent for
the Portfolios. As fund accounting agent, IBT Canada performs certain
accounting, clerical and bookkeeping services, and the daily calculation of net
asset value for each Portfolio.
INDEPENDENT AUDITORS
For the fiscal year ended December 31, 1999, Ernst & Young LLP ("E&Y") served
as independent auditors to the Portfolio Trust. E&Y is responsible for
performing annual audits of the financial statements and financial highlights
in accordance with generally accepted accounting standards, and preparation of
the Federal tax returns. Additionally, pursuant to Rule 17f-2 of the 1940 Act,
three security counts are performed for the Portfolio Trust. The mailing
address for E&Y is 200 Clarendon Street, Boston, Massachusetts 02116.
COUNSEL
Goodwin, Procter & Hoar LLP serves as counsel to the Portfolio Trust.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES
Purchases and sales of securities for the Portfolios usually are principal
transactions. Securities are normally purchased directly from the issuer or
from an underwriter or market maker for the securities. There usually are no
brokerage commissions paid for such purchases. Each Portfolio does not
anticipate paying brokerage commissions. Any transaction for which the
Portfolios pay a brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include the spread between the bid and
asked price.
Allocations of transactions, including their frequency, to various dealers is
determined by the respective Sub-Advisers in their best judgment and in a
manner deemed to be in the best interest of the other investors in each
Portfolio rather than by any formula. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price.
Investment decisions for the Portfolios will be made independently from those
for any other account or investment company that is or may in the future become
managed by the Sub-Advisers. If, however, each Portfolio and other accounts
managed by its Sub-Adviser are contemporaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by each Portfolio or the size of the position
obtainable for each Portfolio. In addition, when purchases or sales of the same
security for each Portfolio and for other accounts managed by their Sub-Adviser
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantages available to large denomination purchases or
sales.
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ITEM 17. CAPITAL STOCK AND OTHER SECURITIES
Under the Declaration of Trust, interests in each Portfolio have no preemptive
or conversion rights, and are fully paid and non-assessable, except as set
forth in the Prospectus. The Portfolio Trust normally will not hold meetings of
holders of such interests except as required under the 1940 Act. The Portfolio
Trust would be required to hold a meeting of holders in the event that at any
time less than a majority of its Trustees holding office had been elected by
holders. The Trustees of the Portfolio Trust continue to hold office until
their successors are elected and have qualified. Holders holding a specified
percentage of interests in a Portfolio may call a meeting of holders in such
Portfolio for the purpose of removing any Trustee. A Trustee of the Portfolio
Trust may be removed upon a majority vote of the interests held by holders in
the Portfolio Trust qualified to vote in the election. The 1940 Act requires
the Portfolio Trust to assist its holders in calling such a meeting. Upon
liquidation of a Portfolio, holders in a Portfolio would be entitled to share
pro rata in the net assets of the Portfolio available for distribution to
holders. Each holder in a Portfolio is entitled to a vote in proportion to its
percentage interest in such Portfolio.
ITEM 18. PURCHASE, REDEMPTION AND VALUATION OF SHARES
MANNER IN WHICH SHARES ARE OFFERED
An investment in a Portfolio may be made without a sales load. All investments
are made at net asset value next determined after an order is received by the
Portfolio. The net asset value of a Portfolio is determined on each Business
Day. Securities are valued at amortized cost, which the Trustees of the
Portfolios have determined in good faith constitutes fair value for the
purposes of complying with the 1940 Act. This valuation method will continue to
be used until such time as the Trustees of the Portfolios determine that it
does not constitute fair value for such purposes.
VALUATION OF SHARES
The investment securities in each Portfolio are valued based upon the amortized
cost method which involves valuing a security at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium.
Although the amortized cost method provides consistency in valuation, it may
result in periods during which the stated value of a security is higher or
lower than the price that each Portfolio would receive if the security were
sold.
ITEM 19. TAXATION OF THE TRUST
Each Portfolio is treated as a partnership for federal income tax purposes. As
such, a Portfolio is not subject to federal income taxation. Each Portfolio
will allocate at least annually among its investors, each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
If a Portfolio invests in zero coupon securities, certain increasing rate or
deferred interest securities or, in general, other securities with an original
issue discount (or with market discount if an election is in effect to include
market discount in income currently), the Portfolio must accrue income on such
investments prior to the receipt of the corresponding cash payments.
ITEM 21. CALCULATION OF PERFORMANCE DATA
Not applicable.
B - 11
<PAGE>
ITEM 22. FINANCIAL STATEMENTS
The Portfolios' financial statements contained in the 1999 Annual Report of the
Trust have been audited by Ernst & Young LLP, independent auditors, and are
incorporated by reference into this SAI. Copies of the Trust's 1999 Annual
Report may be obtained by calling 1-888-MERRMAC.
B - 12
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of short-term debt ratings have been published by
Standard & Poor's Ratings Service ("Standard & Poor's"), Moody's Investors
Service ("Moody's"), Fitch's IBCA Investors Service ("Fitch"), and Duff and
Phelps ("Duff"), respectively. These obligations have an original maturity not
exceeding thirteen months, unless explicitly noted.
A -- Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Commercial paper issues rated A-1 by Standard & Poor's reflect a very
strong degree of safety of timely payment. Commercial paper issues rated A-2
reflect a strong degree of safety of timely payment but not as strong as for
issues designated A-1.
Commercial paper issues rated Prime-1 by Moody's are judged by Moody's to be of
the "highest" quality on the basis of relative repayment capacity with a
superior ability for repayment of senior short-term debt obligations.
Commercial paper issues rated Prime-2 are judged by Moody's to be of the
"second highest" quality with a strong ability for repayment of senior
short-term debt obligations.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. Commercial paper issues rated Fitch-2 are
regarded as having only a slightly less assurance of timely payment than those
issues rated Fitch-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors that are supported by ample asset protection.
Risk factors are minor. The rating Duff-2 is regarded as having good certainty
of timely payment with sound liquidity factors supported by good asset
protection. Risk factors are small.
DESCRIPTION OF LONG-TERM DEBT RATINGS
The following is a description of Moody's debt instrument ratings:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification. The modifier 1 indicates that the obligation ranks in the
higher end of its generic rating category; the modifier 2 indicates
B - 13
<PAGE>
a midrange ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
The following is a description of Standard & Poor's debt instrument ratings:
Standard & Poor's ratings are based, in varying degrees, on the following
considerations: (i) the likelihood of default -- capacity and willingness of
the obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligations; (ii) the nature of and provisions
of the obligation; and (iii) the protection afforded by, and relative position
of, the obligation in the event of bankruptcy, reorganization, or other
arrangement under the laws of bankruptcy and other laws affecting creditors'
rights.
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
Plus (+) or minus (-): The ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
THOMSON BANK WATCH SHORT-TERM DEBT RATINGS
Thomson Bank Watch ratings represent an assessment of the likelihood of an
untimely payment of principal and interest. Important factors that may
influence this assessment are the overall financial health of the particular
company, and the probability that the government will come to the aid of a
troubled institution in order to avoid a default or failure. The probability of
government intervention stems from four primary factors:
o Government Guarantees
o Government Or Quasi-Government Ownership Or Control
o The Degree Of Concentration In The Banking System
o Government Precedent
As with the Issuer Ratings, the Short-Term Debt Ratings incorporate both
qualitative and quantitative factors. The ratings are not meant to be
"pass/fail" but rather to provide a relative indication of creditworthiness.
Therefore, obligations rated TBW-3 are still considered investment-grade.
These Short-Term Debt Ratings can also be restricted to local currency
instruments. In such cases, the ratings will be preceded by the designation LC
for Local Currency. Short-Term Debt Ratings are based on the following scale
and the definitions are:
TBW-1 LC-1
The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis.
B - 14
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TBW-2 LC-2
The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated TBW-1.
TBW-3 LC-3
The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal
and external) than those with higher ratings, the capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 LC-4
The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.
THOMSON BANK WATCH LONG-TERM DEBT RATINGS
Long-Term Debt Ratings assigned by THOMSON BANK WATCH ALSO WEIGH HEAVILY
GOVERNMENT OWNERSHIP AND SUPPORT. The quality of both the company's management
and franchise are of even greater importance in the Long-Term Debt Rating
decisions. Long-Term Debt Ratings look out over a cycle and are not adjusted
frequently for what is believed to be short-term performance aberrations.
Long-Term Debt Ratings can be restricted to local currency debt - ratings will
be identified by the designation LC. In addition, Long-Term Debt Ratings may
include a plus (+) or minus (-) to indicate where within the category the issue
is placed. Thomson Bank Watch Long-Term Debt Ratings are based on the following
scale:
INVESTMENT GRADE
AAA LC-AAA
Indicates that the ability to repay principal and interest on a timely
basis is extremely high.
AA LC-AA
Indicates a very strong ability to repay principal and interest on a
timely basis, within limited incremental risk compared to issues rated
in the highest category.
A LC-A
Indicates the ability to repay principal and interest is strong. Issues
rated A could be more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings.
BBB LC-BBB
The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. BBB issues are more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
B - 15
<PAGE>
NON-INVESTMENT GRADE - MAY BE SPECULATIVE IN THE LIKELIHOOD OF TIMELY REPAYMENT
OF PRINCIPAL AND INTEREST.
BB LC-BB
While not investment grade, the BB rating suggests that the likelihood
of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to
adequately service debt obligations.
B LC-B
Issues rated B show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse developments
could negatively affect the payment of interest and principal on a
timely basis.
CCC LC-CCC
Issues rated CCC clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.
CC LC-CC
CC is applied to issues that are subordinate to other obligations rated
CCC and are afforded less protection in the event of bankruptcy or
reorganization.
D LC-D
Default
B - 16
<PAGE>
PART C
Item 23. Exhibits
Exhibit No. Description
----------- -----------
(a1) Declaration of Trust, effective as of October 30,
1996(1)
(a2) Amendment No. 1 to the Declaration of Trust (2)
(a3) Amendment No. 2 to the Declaration of Trust(3)
(a4) Amendment No. 3 to the Declaration of Trust(3)
(b) By-Laws(1)
(c) None
(d1) Investment Adviser Agreement between the Registrant
and Investors Bank & Trust Company ("Investors Bank")
(Cash Portfolio)(1)
(d2) Investment Adviser Agreement between the Registrant
and Investors Bank (Treasury Portfolio)(3)
(d3) Investment Adviser Agreement between the Registrant and
Investors Bank (Treasury Plus Portfolio)(3)
(d4) Investment Adviser Agreement between the Registrant and
Investors Bank (U.S. Government Portfolio)(4)
(d5) Investment Sub-Adviser Agreement between Investors Bank
and Allmerica Asset Management, Inc. ("AAM")(Cash
Portfolio)(3)
(d6) Investment Sub-Adviser Agreement between Investors Bank
and M&I Investment Management Corp. ("M&I")(Treasury
Portfolio)(3)
(d7) Investment Sub-Adviser Agreement between Investors Bank
and M&I (Treasury Plus Portfolio)(3)
(d8) Investment Sub-Adviser Agreement between Investors Bank
and AAM (U.S. Government Portfolio)(4)
C - 1
<PAGE>
(e) *
(f) Not Applicable
(g) Custodian Agreement between Registrant and Investors
Bank(1)
(h1) Fund Accounting Agreement between Registrant and IBT
Fund Services (Canada) Inc.(1)
(h2) Administration Agreement between Registrant and IBT
Trust & Custodial Services (Ireland) Limited (1)
(h3) Transfer Agency Agreement between Registrant and IBT
Trust & Custodial Services (Ireland) Limited (1)
(i) *
(j) *
(k) *
(l) None
(m) Not Applicable
(o) Not Applicable
(1) Incorporated by reference to the Registrant's Registration Statement on
Form N-1A filed March 28, 1997 (Accession No. 0001029869-97-000386).
(2) Incorporated by reference to the Registrant's Registration Statement on
Form N-1A filed April 21, 1998 (Accession No. 0001029869-98-000530).
(3) Incorporated by reference to the Registrant's Registration Statement on
Form N-1A filed April 28, 1999 (Accession No. 0000897436-99-000105).
(4) Filed herein.
*Pursuant to General Instructions B2 of Form N-1A, a registration statement
filed under only the Investment Company Act of 1940 shall consist of the facing
sheet of the Form, responses to all items of Part A and B except Items 1, 2, 3,
5 and 9 of Part A thereof, responses to all items of Part C except Items 23(e)
and (i)-(k) and the required signatures and all other documents that are
required or which the Registrant may file as part of the registration
statement.
C - 2
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
As of the close of business on April 3, 2000, the following entities were
deemed control persons of the respective Portfolio.
Control is defined by the 1940 Act as the beneficial ownership, either directly
or through one or more controlled companies, of more than 25 percent of the
voting securities of the company.
Record Owner Percent Ownership
- ------------ -----------------
Merrimac Cash Fund 65.9%
Merrimac Cash Series 32.9%
Record Owner Percent Ownership
- ------------ -----------------
Merrimac Treasury Series 100%
Record Owner Percent Ownership
- ------------ -----------------
Merrimac Treasury Plus Series 100%
Record Owner Percent Ownership
- ------------ -----------------
Merrimac U.S. Government Series 100%
Item 25. Indemnification
Under Article V of the Registrant's Declaration of Trust, the Trust shall
indemnify, to the fullest extent permitted by law (including the 1940 Act),
each Trustee, officer or employee of the Trust (including any Person who serves
at the Trust's request as a director, officer or trustee of another
organization in which the Trust has any interest as a shareholder, creditor or
otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by such Person in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, in which such Person may be involved or with which such Person may be
threatened, while in office or thereafter, by reason of such Person being or
having been such a Trustee, officer, employee, except with respect to any
matter as to which such Person shall have been adjudicated to have acted with
bad faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties, such liabilities and expenses being liabilities only of the
Portfolio Series out of which such claim for indemnification arises; provided,
however, that as to any matter disposed of by a compromise payment by such
Person, pursuant to a consent decree or otherwise, no indemnification either
for such payment of for any other expenses shall be provided unless there has
been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Person's office (i) by the court or other body approving the
settlement or other disposition; or (ii) based upon a review of readily
available facts (as opposed to a full trial-type inquiry), by written opinion
from independent legal counsel approved by the Trustees; or (iii) by a majority
of the Trustees who are neither Interested Persons of the Trust nor parties to
the matter, based upon a review of readily available facts (as opposed to a
full trial-type inquiry).
Item 26. Business and Other Connections of Investment Adviser
Investors Bank serves as investment adviser to the Registrant. Investors Bank
was organized in 1969 as a Massachusetts-chartered trust company and provides
domestic and global custody, multi-currency accounting, institutional transfer
agency, performance measurement, foreign exchange, securities lending and
mutual fund administration services to a variety of financial asset managers,
including mutual fund complexes, investment advisers, banks and insurance
companies. The business, profession, vocation or employment of a substantial
nature that each director or officer of
C - 3
<PAGE>
Investors Bank is or has been, at any time during the past two fiscal years,
engaged in for his own account or in the capacity of director, officer,
employee, partner or trustee, is as follows:
Business and Other
Positions Within
Name Position With Adviser Last Two Years
- ---- --------------------- --------------
Kevin J. Sheehan President & Chief Executive Chief Executive Officer
Officer since June 1995;
President since June
1992
Michael F. Rogers Executive Vice President since September 1993
Karen C. Keenan Senior Vice President, Chief Treasurer since
Financial Officer and Treasurer September 1997; Senior
Vice President and Chief
Financial Officer since
June 1995
Edmund J. Maroney Senior Vice President, since July 1991
Technology
Robert D. Mancuso Senior Vice President, since September 1993
Marketing Client Services
David F. Flynn Senior Vice President-Lending since April 1992
John E. Henry General Counsel & Secretary since January 1997;
General Counsel &
Assistant Secretary
since February 1996
James M. Oates Director Chairman of IBEX Capital
Markets, LLC since 1996.
Thomas P. McDermott Director Managing Director of TPM
Associates since 1994.
Frank B. Condon Director Chief Executive Officer
& Chairman of The
Woodstock Corporation
from 1993 to April 1997.
C - 4
<PAGE>
Phyllis S. Swersky Director President of The Meltech
Group since 1995;
President & Chief
Executive Officer of The
NET Collaborative from
1996 to 1997.
Donald G. Friedl Director President of All Seasons
from 1986 until January
1997.
Robert B. Fraser Director Retired, Formerly,
Chairman of Goodwin,
Procter & Hoar, L.L.P.
Item 27. Principal Underwriters
Not Applicable
Item 28. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in part, at
the office of the Registrant and the following locations:
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
(Investment Adviser and Custodian)
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
(Investment Sub-Adviser)
M&I Investment Management Corp.
1000 North Water Street
Milwaukee, Wisconsin 53202
(Investment Sub-Adviser)
IBT Trust & Custodial Services (Ireland) LMTD
Deloitte & Touche House
29 Earlsfort Terrace
Dublin 2, Ireland
(Administrator)
C - 5
<PAGE>
IBT Fund Services (Canada) Inc.
1 First Canadian, King Street West
Suite 2800 P.O. Box 231
Toronto, CA M5X1C8
(Transfer Agent and Fund Accountant)
Item 29. Management Services
Not Applicable
Item 30. Undertakings
Not Applicable.
C - 6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Amendment No. 3 to the Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Boston and the Commonwealth of Massachusetts as
of the 28th day of April, 2000.
MERRIMAC MASTER PORTFOLIO
/s/ Paul J. Jasinski
---------------------
Paul J. Jasinski
President
<PAGE>
Exhibit Index
Exhibit No. Description
-------------------------------
(d4) Investment Adviser Agreement between the
Registrant and Investors Bank (U.S. Government
Portfolio)
(d8) Investment Sub-Adviser Agreement between
Investors Bank and AAM (U.S. Government Portfolio)
INVESTMENT ADVISER AGREEMENT
Agreement made as of this 2nd day of June, 1999, by and between Merrimac
Master Portfolio, a New York Trust (the "Trust") and Investors Bank and Trust
Company (the "Adviser"), a Massachusetts banking corporation.
WHEREAS, the MERRIMAC U.S. GOVERNMENT PORTFOLIO (the "Portfolio") is a
series of the Trust, which is an open-end diversified management investment
company registered as such with the Securities and Exchange Commission (the
"SEC") pursuant to the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Merrimac U.S. Government Series (the "Fund"), which is an
open-end diversified management investment company registered as such with the
SEC pursuant to the 1940 Act and the Securities Act of 1933, will invest all of
its investable assets in the Portfolio;
WHEREAS, the Trust, on behalf of the Portfolio, desires to appoint the
Adviser to render, or contract to obtain as hereinafter provided, investment
advisory services to the Portfolio and to administer the Portfolio's day to day
business affairs and the Adviser is willing to act in such capacity upon the
terms herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Trust, on behalf of the Portfolio, and the
Adviser, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Appointment
(a) The Trust, on behalf of the Portfolio, hereby appoints the Adviser as
the investment adviser of the Portfolio to administer its business affairs and
to perform for the Portfolio such other duties and functions as are hereinafter
set forth. The Adviser hereby accepts such appointment and agrees to give the
Portfolio and the Trust's Board of Trustees (the "Trustees"), the benefit of
the Adviser's best judgment, effort, advice and recommendations in respect of
its duties as defined in Section 2.
(b) The Trust hereby represents and warrants to the Adviser, which
representations and warranties shall be deemed to be continuing, that (i) it
has full power and authority to enter into this Agreement, and (ii) it has
taken all necessary and proper action to authorize the execution and delivery
of this Agreement.
(c) The Adviser hereby represents and warrants to the Trust, which
representations and warranties shall be deemed to be continuing, that (i) it
has full power and authority to enter into this Agreement, and (ii) it has
taken all necessary and proper action to authorize the execution and delivery
of this Agreement.
2. Adviser Duties
(a) The Adviser shall, subject to the direction and control of the
Trustees and in accordance with the objective and policies of the Portfolio and
the implementation thereof as set forth in the Fund's Prospectus and Statement
of Additional Information ("SAI"), the Portfolio's Registration Statement on
Form N-1A and any federal and state laws: (i) regularly provide investment
advice and recommendations to the Portfolio, with respect to the Portfolio's
investments, investment policies and the purchase and sale of securities; (ii)
supervise and monitor continuously the investment program of the Portfolio and
the composition of its portfolio and determine what securities shall be
purchased and sold by the Portfolio; (iii) arrange, subject to the provision of
Section 4 hereof, for the purchase of securities and other investments for the
Portfolio and the sale of securities and other investments of the Portfolio;
(iv) provide reports on the
1
<PAGE>
foregoing to the Trust in such detail as the Trust may reasonably deem to be
appropriate in order to permit the Trust to determine the adherence by the
Adviser to the investment policies and legal requirements of the Portfolio; and
(v) make its officers and employees available to the Trust's officers at
reasonable times to review the investment policies of the Portfolio and to
consult with the Trust's officers regarding the investment affairs of the
Portfolio.
(b) The Adviser is further authorized to enter into a sub-adviser
arrangement for the investment advisory services outlined in Section 2 (a) of
this Agreement in connection with the management of the Portfolio, provided
that no such arrangement shall be made until a sub-adviser agreement has been
approved by the Trustees. Should the Adviser enter into such a sub-adviser
agreement, the Adviser shall, nevertheless, retain supervisory responsibility
for all investment advisory services furnished pursuant to any such
sub-advisory arrangements and the Adviser's duties shall then include: (i)
supervise and monitor continuously the investment advisory services furnished
pursuant to any such sub-adviser arrangements; (ii) review the performance of
the sub-adviser, and make recommendations to the Trustees with respect to the
retention and renewal of such sub-adviser arrangements; (iii) provide reports
on the foregoing to the Trustees for each Board meeting; (iv) make its officers
and employees available to review the investment policies of the Portfolio and
to consult with the sub-adviser regarding the investment affairs of the
Portfolio; (v) supervise relationships with and monitor the performance of the
custodian, depositories, transfer agent, accountants, attorneys, insurers and
other persons in any capacity deemed to be necessary or desirable; and (vi)
make recommendations to the Trustees with respect to Portfolio policies and
carry out such policies as are adopted by the Trustees.
3. Compensation of the Adviser
The Portfolio will pay to the Adviser as compensation for the Adviser's
services rendered and for the expenses borne by the Adviser, including
personnel expenses, a fee, determined as described in Schedule A which is
attached hereto and made a part hereof.
4. Portfolio Transactions and Brokerage
The Adviser shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with issuers, brokers or dealers
selected by the Adviser, which may include where permissible under the 1940
Act, brokers or dealers affiliated with the Adviser. In the selection of such
brokers or dealers and the placing of such orders, the Adviser always shall
seek best execution, which is to place transactions where the Portfolio can
obtain the most favorable combination of price and execution services in
particular transactions or provided on a continuing basis by a broker or
dealer, and to deal directly with a principal market in connection with
over-the-counter transactions, except when it is believed that best execution
is obtainable elsewhere.
5. Interested Trustees or Parties
It is understood that Trustees, officers, and shareholders of the Trust
may be or become interested in the Adviser as directors, officers or employees
and that directors, officers and stockholders of the Adviser may be or become
similarly interested in the Trust, and that the Adviser may be or become
interested in the Trust as a shareholder or otherwise.
6. Services Not Exclusive
The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage in
other activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner, with
the Adviser's ability to meet all of its obligations hereunder.
2
<PAGE>
7. Compliance; Books and Records
(a) The Adviser agrees to maintain adequate compliance procedures to
ensure its compliance with the applicable provisions of the 1940 Act and any
rules or regulations thereunder, the investment objective, policies and
restrictions of the Portfolio as set forth in the current Fund Prospectus and
SAI and any other applicable provisions of state or federal law.
(b) The Adviser shall furnish to the Portfolio, at the Portfolio's
expense, copies of all records prepared in connection with the performance of
this Agreement and the maintenance of compliance procedures pursuant to this
Section 7 as the Portfolio may reasonably request.
(c) The Adviser agrees to provide upon reasonable request of the
Portfolio, information regarding the Adviser, including but not limited to,
background information about the Adviser and its personnel, for use in
connection with efforts to promote the Fund and the sale of its shares.
(d) In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Adviser hereby agrees that all records which it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to the Trust
any of such records upon the Trust's request. The Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act. The Adviser
will treat confidentially and as proprietary information of the Trust all
records and other information relative to the Fund and prior, present or
potential shareholders, except as otherwise required by law.
8. Limitation of Liability of Adviser
In consideration of the Adviser's undertaking to render the services
described in this Agreement, the Trust, on behalf of the Portfolio, agrees that
the Adviser shall not be liable under this Agreement for any loss suffered by
the Trust in connection with the performance of this Agreement, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement.
9. Duration, Amendment and Termination
(a) Subject to prior termination as provided in sub-section (d) of this
Section 9, this Agreement shall continue in effect until two years from the
date hereof and for successive annual periods thereafter, but only so long as
the continuance after such initial two year period shall be specifically
approved at least annually by vote of the Trustees or by vote of a majority of
the outstanding voting securities of the Portfolio and the Fund.
(b) This Agreement may be modified by the written Agreement of the Adviser
and the Portfolio, such consent on the part of the Portfolio to be authorized
by vote of a majority of the outstanding voting securities of the Portfolio and
the Fund if required by law. The execution of any such modification or
amendment by a party shall constitute a representation and warranty to the
other party that all necessary consents or approvals with respect to such
modification or amendment have been obtained.
(c) In addition to the requirements of sub-sections (a) and (b) of this
Section 9, the terms of any continuance or modification of the Agreement must
have been approved by the vote of a majority of those Trustees who are not
parties to such Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(d) Either the Adviser or the Portfolio may, at any time on sixty (60)
days' prior written notice to the other party, terminate this Agreement,
without payment of any penalty, and in the case of the Portfolio, by action of
its Trustees, or by vote of a majority of its outstanding voting securities.
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(e) This Agreement shall terminate automatically in the event of its
assignment.
(f) Termination of this Agreement shall not relieve the Adviser nor the
Trust from any liability or obligation in respect of any matters, undertakings
or conditions which shall not have been done, observed or performed prior to
such termination. All records of the Portfolio in the possession of the Adviser
shall be returned to the Portfolio as soon as reasonably practicable after the
termination of this Agreement.
10. Disclaimer of Liability; Several Obligations
The Adviser understands that the obligations of the Trust under this
Agreement are not binding upon any Trustee or shareholder of the Trust
personally, but bind only the Trust and the Trust's property.
This Agreement is an agreement entered into between the Adviser and the
Trust on behalf of the Portfolio. With respect to any obligation of the Trust
on behalf of any other Portfolio arising out of this Agreement, the Adviser
shall look for payment or satisfaction of such obligation solely to the assets
of the Portfolio to which such obligation relates as though the Adviser had
separately contracted with the Trust by separate written instrument with
respect to each Portfolio.
11. Miscellaneous
(a) The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act as now in effect or as hereafter
amended.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
(d) This Agreement shall be binding upon and shall insure to the benefit
of the parties hereto and their respective successors.
(e) The Adviser's duties and responsibilities are solely those set forth
herein and no other covenant or obligation shall be implied against the Adviser
in connection with this Agreement.
(f) This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
(g) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice. No notice shall
be effective until received.
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their respective officers designated below as of the day and year first
above written.
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Merrimac Master Portfolio ("TRUST") on behalf of
the Merrimac U.S. Government Portfolio ("PORTFOLIO")
By: /s/ Paul J. Jasinski
------------------------------
Paul J. Jasinski
Title: President
---------
INVESTORS BANK & TRUST COMPANY
("ADVISER")
By: /s/ Robert Mancuso
------------------------------
Robert Mancuso
Title: Senior Vice President
---------------------
5
INVESTMENT SUB-ADVISER AGREEMENT
Agreement made as of this 2nd day of June, 1999, between Investors Bank and
Trust Company (the "Adviser"), a Massachusetts banking corporation, and
Allmerica Asset Management, Inc. (the "Sub-Adviser"), a Massachusetts
corporation.
WHEREAS, MERRIMAC U.S. GOVERNMENT PORTFOLIO (the "Portfolio") is a series of
the Merrimac Master Portfolio (the "Trust"), which is an open-end diversified
management investment company registered as such with the Securities and
Exchange Commission (the "SEC") pursuant to the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Trust has appointed the Adviser as the
investment adviser for the Portfolio, pursuant to the terms of an Investment
Adviser Agreement (the "Adviser Agreement"); and
WHEREAS, the Merrimac U.S. Government Series (the "Series"), an open-end
diversified management investment company registered as such with the SEC
pursuant to the 1940 Act and the Securities Act of 1933, as amended (the "1933
Act") will invest all of its investable assets in the Portfolio; and
WHEREAS, the Adviser Agreement provides that the Adviser may, at its option,
subject to approval by the Trustees of the Trust and, to the extent necessary,
shareholders of the Portfolio, appoint a sub-adviser to assume certain
responsibilities and obligations of the Adviser under the Adviser Agreement;
and
WHEREAS, the Adviser desires to appoint the Sub-Adviser as its sub-adviser for
the Portfolio and the Sub-Adviser is willing to act in such capacity upon the
terms herein set forth; and
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the Adviser and the Sub-Adviser, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Appointment
- ---------------
(a) The Adviser hereby appoints the Sub-Adviser as the investment
sub-adviser of the Portfolio to provide investment advice and to
perform for the Portfolio such other duties and functions as are
hereinafter set forth. The Sub-Adviser hereby accepts such
appointment and agrees to give the Portfolio and the Trust's Board of
Trustees (the "Trustees"), directly or through the Adviser, the
benefit of the Sub-Adviser's best judgment, effort, advice and
recommendations in respect of its duties as defined in Section 2.
(b) The Adviser hereby represents and warrants to the Sub-Adviser,
which representations and warranties shall be deemed to be
continuing, that (i) it has full power and authority to enter into
this Agreement and to delegate investment management discretion on
behalf of the Portfolio to the Sub-Adviser, and (ii) it has taken all
necessary and proper action to authorize the execution and delivery
of this Agreement.
(c) The Sub-Adviser hereby represents and warrants to the Adviser,
which representations and warranties shall be deemed to be
continuing, that (i) it has full power and authority to enter into
this Agreement, and (ii) it has taken all necessary and proper action
to authorize the execution and delivery of this Agreement.
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2. Delivery of Documents
- -------------------------
Prior to the execution of this Agreement, the Adviser will furnish the
Sub-Adviser with copies, properly certified or authenticated, of each of the
following documents:
(a) The Trust's Agreement and Declaration; and all amendments thereto
or restatements thereof;
(b) The Trust's By-Laws; and all amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub-Adviser and approving this Agreement;
(d) The Trust's original Notification of Registration on Form N-8A
under the 1940 Act;
(e) The Trust's initial Registration Statement on Form N-1A under the
1940 Act and all amendments thereto;
(f) The current Prospectus or similar document of any entity which
the Trust has authorized as an investor (the "Authorized Investor")
in the Portfolio (the "Investor Offering Documents");
(g) The policies and procedures applicable to the Portfolio as
adopted by the Trustees; and all amendments and supplements thereto.
(h) Any further documents, materials or information that the
Sub-Adviser may reasonably request from time to time to enable it to
perform its duties pursuant to this Agreement.
3. Sub-Adviser Duties
- ----------------------
The Sub-Adviser shall, subject to the direction and control of the Trustees or
the Adviser, and in accordance with the objective and policies of the Portfolio
and the implementation thereof as set forth in the Investor Offering Documents,
the Portfolio's Registration Statement on Form N-1A and any applicable federal
and state laws: (i) regularly provide investment advice and recommendations to
the Portfolio, with respect to the Portfolio's investments, investment policies
and the purchase and sale of securities; (ii) supervise and monitor
continuously the investment program of the Portfolio and the composition of its
portfolio and determine what securities shall be purchased and sold by the
Portfolio; (iii) arrange, subject to the provisions of Section 5 hereof, for
the purchase of securities and other investments for the Portfolio and the sale
of securities and other investments of the Portfolio; (iv) provide reports on
the foregoing to the Adviser in such detail as the Adviser may reasonably deem
to be appropriate in order to permit the Adviser to determine the adherence by
the Sub-Adviser to the investment policies and legal requirements of the
Portfolio; and (v) make its officers and employees available to the Adviser at
reasonable times to review the investment policies of the Portfolio and to
consult with the Adviser regarding the investment affairs of the Portfolio.
4. Compensation of the Sub-Adviser
- -----------------------------------
The Adviser will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser, a fee,
determined as described in Schedule A which is attached hereto and made a part
hereof. Such fee shall be paid by the Adviser and the Trust shall have no
liability
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therefor. Nothing in this Agreement shall require the Sub-Adviser to bear
expenses of the Adviser, the Portfolio or the Trust.
5. Portfolio Transactions and Brokerage
- ----------------------------------------
The Sub-Adviser shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with issuers, brokers or dealers
selected by the Sub-Adviser, which may include where permissible under the 1940
Act, brokers or dealers affiliated with the Sub-Adviser. In the selection of
such brokers or dealers and the placing of such orders, the Adviser always
shall seek best execution, which is to place transactions where the Portfolio
can obtain the most favorable combination of price and execution services in
particular transactions or provided on a continuing basis by a broker or
dealer, and to deal directly with a principal market in connection with
over-the-counter transactions, except when it is believed that best execution
is obtainable elsewhere. Nothing in this Agreement shall preclude the combining
of orders for the sale or purchase of securities or other investments with
other accounts managed by the Sub-Adviser or its affiliates, provided that the
Sub-Adviser does not favor any account over any other account and provided that
any purchase or sale orders executed contemporaneously shall be allocated in an
equitable manner among the accounts involved.
6. Interested Trustees or Parties
- ----------------------------------
It is understood that Trustees, officers, and shareholders of the Trust may be
or become interested in the Adviser or the Sub-Adviser as directors, officers
or employees and that directors, officers and stockholders of the Adviser or
the Sub-Adviser may be or become similarly interested in the Trust, and that
the Adviser or the Sub-Adviser may be or become interested in the Trust as a
shareholder or otherwise.
7. Services Not Exclusive
- --------------------------
The services of the Sub-Adviser to the Adviser are not to be deemed exclusive,
the Sub-Adviser being free to render services to others and engage in other
activities, provided, however, that such other services and activities do not,
during the term of this Agreement, interfere, in a material manner, with the
Sub-Adviser's ability to meet all of its obligations with respect to rendering
investment advice hereunder. The Sub-Adviser, its affiliates and its other
clients may at any time acquire or dispose of securities which are at the same
time being acquired or disposed of for the account of the Portfolio. The
Sub-Adviser shall not be obligated to acquire for the Portfolio any security or
other investment which the Sub-Adviser or its affiliates may acquire for its or
their own accounts or for the account of another client.
8. Compliance; Books and Records
- ----------------------------------
(a) The Sub-Adviser agrees to maintain compliance procedures which
are reasonably designed to ensure the Portfolio's compliance with the
applicable provisions of the 1940 Act and any rules or regulations
thereunder and the investment objective, policies and restrictions of
the Portfolio as set forth in the current Investor Offering
Documents.
(b) The Sub-Adviser shall furnish to the Adviser, at the Adviser's
expense, copies of all records prepared and maintained in connection
with the performance of this Agreement and the maintenance of
compliance procedures pursuant to this Section 8 as the Adviser may
reasonably request.
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(c) The Sub-Adviser agrees to provide upon reasonable request of the
Adviser, information regarding the Sub-Adviser, including but not
limited to, background information about the Sub-Adviser and its
personnel and performance data, for use in connection with efforts to
promote the Fund and the sale of its shares.
(d) In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any records
which it is required to maintain by Rule 31a-1 under the 1940 Act.
The Sub-Adviser will treat confidentially and as proprietary
information of the Trust all records and other information obtained
from the Trust relative to the Authorized Investors and prior or
potential shareholders, except as otherwise required by law.
9. Limitation of Liability of Sub-Adviser; Indemnification
- -----------------------------------------------------------
In consideration of the Sub-Adviser's undertaking to render the services
described in this Agreement, the Adviser agrees that the Sub-Adviser shall not
be liable for any loss suffered by the Adviser, the Trust, the Authorized
Investors or their shareholders, or the Portfolio in connection with the
performance of this Agreement, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-Adviser against any liability
to the Adviser, the Trust, the Authorized Investors or their shareholders, or
the Portfolio to which the Sub-Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or negligence in the performance of its duties
under this Agreement.
10. Duration, Amendment and Termination
- ----------------------------------------
(a) Subject to prior termination as provided in sub-section (d) of
this Section 10, this Agreement shall continue in effect until two
years from the date hereof and for successive annual periods
thereafter, but only so long as the continuance after such initial
two year period shall be specifically approved at least annually by
vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Portfolio and the Authorized
Investors.
(b) This Agreement may be modified by the written agreement of the
Adviser, the Sub-Adviser and the Portfolio, such consent on the part
of the Portfolio to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio and the Authorized
Investors if required by law. The execution of any such modification
or amendment by a party shall constitute a representation and
warranty to the other parties that all necessary consents or
approvals with respect to such modification or amendment have been
obtained.
(c) In addition to the requirements of sub-sections (a) and (b) of
this Section 10, the terms of any continuance, modification or
amendment of the Agreement must have been approved by the vote of a
majority of those Trustees who are not parties to such Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, and in the
case of the Portfolio, by action of its Board of Trustees, or by vote
of a majority of its outstanding voting securities.
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(e) This Agreement shall terminate automatically in the event of its
assignment.
(f) Termination of this Agreement shall not relieve the Adviser nor
the Sub-Adviser from any liability or obligation in respect of any
matters, undertakings or conditions which shall not have been done,
observed or performed prior to such termination. All records of the
Portfolio in the possession of the Sub-Adviser shall be returned to
the Portfolio as soon as reasonably practicable after the termination
of this Agreement.
11. Disclaimer of Shareholder Liability
- ----------------------------------------
The Adviser and the Sub-Adviser understand that the obligations of the Trust
under this Agreement are not binding upon any Trustee or shareholder of the
Trust personally, but bind only the Trust and the Trust's property.
12. Miscellaneous
- ------------------
(a) The terms "vote of a majority of the outstanding voting
securities," "assignment," and "interested persons," when used
herein, shall have the respective meanings specified in the 1940 Act
as now in effect or as hereafter amended.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
(d) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
(e) This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
(f) Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice. No notice shall be effective until received.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their respective officers designated below as of the day and year first
above written.
INVESTORS BANK & TRUST COMPANY ("ADVISER")
By: /s/Kevin J. Sheehan
----------------------------------
Name: Kevin J. Sheehan
Title: President
ALLMERICA ASSET MANAGEMENT, INC. ("SUB-ADVISER")
By: /s/John P. Kavanaugh
-----------------------------------
Name: John P. Kavanaugh
Title: President
The Merrimac Master Portfolio on behalf of the
Merrimac U.S. Government Portfolio hereby acknowledges
the execution of this Agreement
Merrimac Master Portfolio
("THE TRUST")
By: /s/Paul J. Jasinski
----------------------------------
Name: Paul J. Jasinski
Title: President
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<PAGE>
SCHEDULE A
The Adviser will pay to the Sub-Adviser as full compensation for the
Sub-Adviser's services rendered an annual fee, computed and paid monthly, based
on the average daily net assets of the Portfolio according to the schedule set
forth below. The fee for each month shall be payable within 30 business days
after the end of the month.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
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
7
