[cover]
[logo] MERRIMAC FUNDS
Semi-annual Report
June 30, 1997
<PAGE>
[logo]
MERRIMAC FUNDS
June 30, 1997
Dear Shareholder:
We are pleased to provide you with our semi-annual report of the Merrimac Funds-
Merrimac Cash Fund and Merrimac Treasury Fund. The period covererd is January 1,
1997 to June 30, 1997.
The investment objective of each Fund is to seek as high a level of current
income as is consistent with the preservation of capital and liquidity.
Investors Bank & Trust Company, the investment advisor to the Merrimac Master
Portfolio, has engaged The Bank of New York as sub-adviser for the Cash
Portfolio and Aeltus Investment Management as sub-adviser for the Treasury
Portfolio, each to carry out a program to accomplish their stated investment
objective. In our first two full quarters operating results along with the
Funds' growth have again been noteworthy.
On behalf of the Board of Trustees of the Merrimac Funds, I want to thank you
for your continued confidence and participation. We look forward to serving you
in the months and years to come and into the next millennium.
/s/ Sean P. Brennan
Sean P. Brennan
President
[letterhead]
200 Clarendon Street [bullet] Boston, Massachusetts 02116
888.MERRMAC [bullet] 617.927.8303 fax
<PAGE>
Merrimac Funds
Statements of Assets and Liabilities (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Cash Fund Treasury Fund
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
- --------------------------------------------------------------------------------------------------
Investment in corresponding Merrimac Portfolio, at value (Note 1) $1,332,246,121 $55,307,556
Deferred organization expense (Note 1) 61,484 28,733
- --------------------------------------------------------------------------------------------------
Total assets $1,332,307,605 $55,336,289
- --------------------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------------------
Distributions payable to shareholders $ 6,323,832 $ 230,853
Accrued expenses 108,781 53,302
- --------------------------------------------------------------------------------------------------
Total liabilities $ 6,432,613 $ 284,155
- --------------------------------------------------------------------------------------------------
Net assets $1,325,874,992 $55,052,134
- --------------------------------------------------------------------------------------------------
Net Assets consist of
- --------------------------------------------------------------------------------------------------
Paid in capital 1,325,874,992 55,049,763
Accumulated net realized gain on investments -- 2,371
- --------------------------------------------------------------------------------------------------
Total net assets $1,325,874,992 $55,052,134
- --------------------------------------------------------------------------------------------------
Total Net Assets
- --------------------------------------------------------------------------------------------------
Premium Class 1,187,442,607 25,001,077
- --------------------------------------------------------------------------------------------------
Institutional Class 138,432,385 30,051,057
- --------------------------------------------------------------------------------------------------
Shares Outstanding
- --------------------------------------------------------------------------------------------------
Premium Class 1,187,442,607 25,000,000
- --------------------------------------------------------------------------------------------------
Institutional Class 138,432,385 30,049,763
- --------------------------------------------------------------------------------------------------
Net asset value, maximum offer and redemption price per share $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
1
<PAGE>
Merrimac Funds
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Cash Fund Treasury Fund
--------------- -------------------
For the Period
Six Months April 2, 1997
Ended (Commencement of
June 30, Operations)
1997 to June 30, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1)
- -------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $35,293,886 $899,433
- -------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------
Expenses allocated from Portfolio $ 1,107,560 $ 39,069
Accounting, transfer agency, and administration fees (Note 4) 54,595 692
Trustees fees and expenses 6,750 1,267
Insurance 15,551 365
Legal 4,320 675
Registration fees 1,037 270
Amortization of organization expenses (Note 1D) 6,048 608
Audit and tax return preparation fees 6,048 945
Printing 4,320 675
Miscellaneous 4,322 608
- -------------------------------------------------------------------------------------------------
Total expenses common to all classes $ 1,210,551 $ 45,174
Shareholder servicing fee - Institutional Class 180,260 26,499
- -------------------------------------------------------------------------------------------------
Total expenses $ 1,390,811 $ 71,673
- -------------------------------------------------------------------------------------------------
Net Investment Income $33,903,075 $827,760
Net Realized Gain on Investments from Portfolio -- 2,371
- -------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $33,903,075 $830,131
- -------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
2
<PAGE>
Merrimac Funds
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Cash Fund Treasury Fund
--------------------------------- ----------------
For the Period
Six Months For the Period April 2, 1997
Ended November 12, 1996 (Commencement
June 30, (Commencement of of Operations) to
1997 Operations) to June 30, 1997
(Unaudited) December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 33,903,075 $ 3,447,120 $ 827,760
Net realized gain from Portfolio -- -- 2,371
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 33,903,075 $ 3,447,120 $ 830,131
- --------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income
Premium Class $ (30,010,802) $ (2,859,529) $ (311,302)
Institutional Class (3,892,273) (587,591) (516,459)
- --------------------------------------------------------------------------------------------------------------------------
Total dividends declared to shareholders $ (33,903,075) $ (3,447,120) $ (827,760)
- --------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (Note 6)
Proceeds from sale of shares $ 1,147,556,845 $ 1,072,725,924 $ 109,080,386
Proceeds from shares reinvested 536,261 -- 202,292
Payment for redemption of shares (825,564,048) (69,379,990) (54,232,915)
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from share transactions $ 322,529,058 $ 1,003,345,934 $ 55,049,763
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets $ 322,529,058 $ 1,003,345,934 $ 55,052,134
Net Assets
Beginning of period 1,003,345,934 -- --
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 1,325,874,992 $ 1,003,345,934 $ 55,052,134
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
3
<PAGE>
Merrimac Funds
Financial Highlights
<TABLE>
<CAPTION>
Premium Class Institutional Class
----------------------------- ----------------------------
For the For the
Period Period
November 12, November 12,
1996 1996
Six Months (Commencement Six Months (Commencement
Ended of Ended of
June 30, Operations) to June 30, Operations) to
1997 December 31, 1997 December 31,
(Unaudited) 1996 (Unaudited) 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------
Income from operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 0.027 0.006 0.026 0.006
- ----------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (0.027) (0.006) (0.026) (0.006)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------
Total Return (1) 5.43% 5.42% 5.18% 5.17%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (thousands) $1,187,443 $875,936 $138,432 $127,410
Ratio of net expenses to average daily net assets 0.19% 0.15% 0.44% 0.40%
+(2)
Ratio of net investment income to average daily net 5.43% 5.42% 5.18% 5.17%
assets +
</TABLE>
+ Annualized.
(1) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the payable date. Total return is computed on an
annualized basis.
(2) Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
See notes to financial statements
4
<PAGE>
Merrimac Treasury Fund
Financial Highlights
<TABLE>
<CAPTION>
For the Period
April 2, 1997
(Commencement of
Operations)
to June 30, 1997
(Unaudited)
----------------------------
Premium Institutional
Class Class
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------
Income from operations
- -----------------------------------------------------------------------------------------------
Net investment income 0.012 0.012
- -----------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------
From net investment income (0.012) (0.012)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------
Total Return (1) 5.10% 4.85%
- -----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------
Net assets, end of period (thousands) $25,001 $30,051
Ratio of net expenses to average daily net assets +(2) 0.27% 0.52%
Ratio of net investment income to average daily net assets + 5.10% 4.85%
</TABLE>
+ Annualized.
(1) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the payable date. Total return is computed on an
annualized basis.
(2) Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
See notes to financial statements
5
<PAGE>
Merrimac Funds
Notes to Financial Statements (Unaudited)
June 30, 1997
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
The Merrimac Funds (the "Trust") was organized as a Delaware business trust
and is registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Merrimac Cash Fund (the "Cash
Fund) and The Merrimac Treasury Fund (the " Treasury Fund" and collectively,
the "Funds") are separate diversified investment portfolios or series of the
Trust. The Funds consist of two classes of shares, the Premium Class and the
Institutional Class.
The Funds each seek to achieve their investment objectives by investing all
of their investable assets in a corresponding portfolio of Merrimac Master
Portfolio (the "Portfolios"), an open-end management investment company. The
Merrimac Cash Portfolio and the Merrimac Treasury Portfolio have the same
investment objectives as their corresponding funds. At June 30, 1997, the
investment by the Cash Fund and the Treasury Fund represent ownership of
proportionate interests of 97.79% and 100% of the corresponding portfolios.
The performance of each Fund is directly affected by the performance of the
Portfolio into which it invests. The Portfolios seek to achieve a high level
of current income, consistent with the preservation of capital and liquidity.
The financial statements of the Portfolios are included elsewhere in this
report and should be read in conjunction with the Funds' financial
statements.
It is the policy of the Funds to maintain a net asset value of $1.00 per
share; the Funds have adopted certain investment, valuation, dividend and
distribution policies which conform to general industry practice, to enable
it to do so. However, there is no assurance that the Fund will be able to
maintain a stable net asset value.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The preparation of
financial statements in accordance with generally accepted accounting
principles ("GAAP") requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A Investment Security Valuations - The Funds record investments in the
Portfolios at value. Valuation of securities by the Portfolios is discussed
in Note 1 of the Portfolios' Notes to Financial Statements, which are
included elsewhere in this report.
B Securities Transactions and Income - The Portfolios record securities
transactions as of the trade date. Interest income, including the accretion
of discount or the amortization of premium, is recognized when earned. Gains
or losses on sales of securities are calculated on the identified cost basis.
Each Fund's net investment income consists of its pro rata share of the net
investment income of the Portfolio, less all expenses of the Fund determined
in accordance with GAAP.
C Federal Income Taxes - Each Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, and thus
not be subject to income taxes to the extent that it distributes all of its
taxable income for its fiscal year and meets certain other requirements.
Accordingly, no provision for Federal income taxes is required.
D Deferred Organization Expense - Costs incurred by the Funds in connection
with their organization and initial registration are being amortized on a
straight-line basis over a five year period beginning at the commencement of
operations of each Fund.
E Expense Allocation - Expenses directly attributable to a Fund are charged
to that Fund. Expenses not directly attributed to a specific Fund are
allocated, based on relative net assets, to each of the Funds.
2 Dividends and Distributions to Shareholders
- --------------------------------------------------------------------------------
Dividends on the shares of the Funds are declared each business day to
shareholders of record at 2:00 PM (New York time) on that day, and paid or
reinvested on the last business day of the month. Distributions of net
realized gains, if any, are declared annually. Dividends and distributions
are determined in accordance with Federal income tax regulations, which may
differ from GAAP.
6
<PAGE>
Merrimac Funds
Notes to Financial Statements (Unaudited)
June 30, 1997
3 Shareholder Servicing Plan
- --------------------------------------------------------------------------------
The Trust has adopted a Shareholder Servicing Plan with respect to the
institutional class, under which certain service organizations may be
compensated for providing shareholder accounting and other administrative
services for their clients. The Institutional Class will pay an annual fee of
0.25% of the value of the assets that an organization services on behalf of
their clients.
4 Management Fee and Affiliated Transactions
- --------------------------------------------------------------------------------
The Portfolios retain Investors Bank & Trust Company ("Investors Bank") as
investment adviser. Aeltus Investment Management, Inc. ("Aeltus") serves as
sub adviser of the Treasury Portfolio. The Bank of New York ("BNY") serves as
the Cash Portfolio' sub-adviser. The Funds pay no direct fees for such
services, but indirectly bear their pro rata share of the compensation paid
by the Portfolios. See Note 2 of the Portfolios' Notes to Financial
Statements which are included elsewhere in this report.
Investors Bank serves as administrator, custodian and transfer agent of the
Trust. IBT Fund Services (Canada) Inc., a subsidiary of Investors Bank,
provides fund accounting for the Trust. For these services, Investors Bank
and its subsidiary are paid a monthly fee at an annual rate of 0.01% of the
average daily net assets of each Fund.
Certain trustees and officers of the Trust are directors or officers of
Investors Bank. The Trust does not pay compensation to its trustees or
officers who are affiliated with the investment adviser.
5 Investment Transactions
- --------------------------------------------------------------------------------
The Cash Fund's investments in and withdrawals from the Cash Portfolio for
the period from January 1, l997 to June 30, 1997 aggregated $1,148,093,106
and $856,343,457 respectively. The Treasury Fund's investments in and
withdrawals from the Treasury Portfolio from its date of inception, April 2,
1997, to June 30, 1997 aggregated $109,282,678 and $54,837,857 respectively.
6 Shares of Beneficial Interest
- --------------------------------------------------------------------------------
The Declaration of Trust permits the trustees to issue an unlimited number of
shares of beneficial interest having a par value of $0.001 per share.
Transactions in Fund shares for each class were as follows:
Merrimac Cash Fund
------------------
Premium Institutional
Class Class
----- -----
Proceeds from shares $ 801,113,000 $ 346,443,845
sold
Proceeds for shares
reinvested 6,606 529,655
Payment for shares (489,613,000) (335,951,048)
redeemed
--------------- --------------
Net increase in $ 311,506,606 $ 11,022,452
shares =============== ==============
Merrimac Treasury Fund
----------------------
Premium Institutional
Class Class
----- -----
Proceeds from shares $ 25,000,000 $ 84,080,386
sold
Proceeds for shares
reinvested -- 202,292
Payment for shares
redeemed -- (54,232,915)
---------------- ---------------
Net increase in $ 25,000,000 $ 30,049,763
shares ================ ===============
At June 30, 1997, Investors Bank and the respective sub-advisers or their
affiliates were record holders of 97.79% and 100% of the outstanding shares
of the Cash Fund and the Treasury Fund, respectively. These holdings were,
with respect to Investors Bank and BNY, as agents for their respective
clients.
7
<PAGE>
Merrimac Cash Portfolio
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Yield to
Maturity on Value
Principal Date of Maturity (Note
Amount Description Purchase Date 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper-- 40.8%
$ 50,000,000 Abbey National North America 5.61% 07/08/97 $ 49,945,459
50,000,000 ABN AMRO North America Finance 5.61% 07/09/97 49,937,667
25,000,000 Atlas Funding Corporation 5.75% 07/16/97 24,940,105
55,000,000 Bank of Scotland Treasury Services 5.67% 07/25/97 54,792,133
16,000,000 Creative Capital Corporation 5.75% 07/11/97 15,974,445
70,000,000 Ford Motor Credit 5.56% 08/06/97 69,610,800
30,000,000 International Nederlander U.S. Insurance Holdings 5.58% 08/21/97 29,762,850
33,300,000 Orix America Incorporated 5.73% 07/07/97 33,268,198
47,500,000 Pepsico Incorporated 5.53% 07/18/97 47,375,959
70,000,000 Repeat Offering Securitization Entity Incorporated 5.65% 08/28/97 69,362,806
70,000,000 Sigma Finance Incorporated 5.63% 08/19/97 69,463,586
728,000 Southwestern Bell Telephone 6.15% 07/01/97 728,000
40,288,000 Twin Towers Incorporated 5.63% 08/19/97 39,979,271
Total Commercial Paper
(cost $555,141,279) $ 555,141,279
- -----------------------------------------------------------------------------------------------------------------------
Variable Rate Notes*-- 31.8%
20,000,000 Abbey National Treasury Services 5.60% 07/01/97 19,988,224
10,000,000 Bank One Dayton 5.70% 07/01/97 9,998,171
20,000,000 Bankers Trust Company 5.68% 07/01/97 19,997,393
20,000,000 Barclays Bank PLC 5.62% 07/01/97 19,990,723
50,000,000 Federal National Mortgage Association 5.62% 07/01/97 49,974,009
50,000,000 Huntington National Bank 5.74% 09/30/97 50,000,000
50,000,000 Merrill Lynch Company 5.71% 07/01/97 50,000,000
50,000,000 Morgan Guaranty Trust Company 5.63% 07/01/97 49,988,625
33,000,000 Paccar Financial Corporation 5.57% 07/18/97 32,978,108
10,000,000 Royal Bank of Canada 5.55% 07/01/97 9,996,285
50,000,000 Short Term Card Account Trust 5.71% 07/15/97 50,000,000
20,000,000 Societe Generale 5.62% 07/01/97 19,988,946
50,000,000 Societe Generale 5.61% 07/01/97 49,983,510
Total Variable Rate Notes
(cost $432,883,994) $ 432,883,994
- -----------------------------------------------------------------------------------------------------------------------
Certificates of Deposit, Yankee-- 23.1%
70,000,000 Banque National De Paris 5.68% 08/26/97 70,001,074
65,000,000 Industrial Bank of Japan 5.69% 08/18/97 64,995,552
35,000,000 Norinchukin Yankee 5.71% 08/18/97 34,998,529
25,000,000 Rabobank Nederland N.V. 5.65% 08/22/97 25,000,000
50,000,000 Sanwa Bank Limited 5.80% 07/10/97 50,000,000
70,000,000 Swiss Bank 5.67% 08/21/97 70,000,000
Total Certificates of Deposit, Yankee
(cost $314,995,155) $ 314,995,155
- -----------------------------------------------------------------------------------------------------------------------
8
<PAGE>
Merrimac Cash Portfolio
Portfolio of Investments (Unaudited)
June 30, 1997
- -----------------------------------------------------------------------------------------------------------------------
Yield to
Maturity on Value
Principal Date of Maturity (Note
Amount Description Purchase Date 1A)
- -----------------------------------------------------------------------------------------------------------------------
Certificates of Deposit, Euro-- 4.0%
30,000,000 Dresdner Bank A.G. 5.68% 08/22/97 30,001,243
25,000,000 Ing Bank N.V. 5.67% 08/22/97 25,000,356
Total Certificates of Deposit, Euro
(cost $55,001,599) $ 55,001,599
- -----------------------------------------------------------------------------------------------------------------------
Total Investments -- 99.7%
(cost $1,358,022,027) $1,358,022,027
Other assets in excess of liabilities -- 0.3% 4,337,440
- -----------------------------------------------------------------------------------------------------------------------
Net Assets -- 100.0% $1,362,359,467
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Variable rate securities - maturity dates reflect the earlier of reset date
or maturity date. Yield to maturity for these securities is determined on
the date of the most recent interest rate change.
9
<PAGE>
Merrimac Treasury Portfolio
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Yield to
Maturity on Value
Principal Date of Maturity (Note
Amount Description Purchase Date 1A)
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations-- 67.2%
<S> <C> <C> <C> <C>
$5,500,000 U.S. Treasury Bill 5.12% 07/03/97 $5,428,818
4,000,000 U.S. Treasury Bill 4.84% 07/10/97 3,994,622
2,000,000 U.S. Treasury Bill 5.11% 07/17/97 1,975,609
9,000,000 U.S. Treasury Note 5.88% 07/31/97 9,002,539
10,750,000 U.S. Treasury Note 6.50% 08/15/97 10,762,960
6,000,000 U.S. Treasury Note 5.75% 09/30/97 6,006,297
Total U.S. Treasury Obligations
(cost $37,170,845) $37,170,845
- ----------------------------------------------------------------------------------------------------------------------
U.S. Government Agency-- 31.5%
3,000,000 Federal Farm Credit Bank 5.55% 08/01/97 3,000,000
5,780,000 Federal Home Loan Bank 5.42% 07/17/97 5,736,489
4,674,000 Federal Home Loan Bank 5.42% 07/25/97 4,656,424
4,000,000 Student Loan Marketing Association 5.18% 11/20/97 4,000,000
Total U.S. Government Agency
(cost $17,392,913) $17,392,913
- ----------------------------------------------------------------------------------------------------------------------
Total Investments -- 98.7%
(cost $54,563,758) $54,563,758
Other assets in excess of liabilities -- 1.3% 743,798
- ----------------------------------------------------------------------------------------------------------------------
Net Assets -- 100.0% $55,307,556
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Merrimac Master Portfolio
Statements of Assets and Liabilities (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
- ----------------------------------------------------------------------------- ------------------
<S> <C> <C>
Assets
- -------------------------------------------------------------------------------------------------
Investments at value (Note 1) $1,358,022,027 $54,563,758
Cash 160 377
Interest receivable 4,490,743 748,789
Deferred organization expense 52,701 28,613
- -------------------------------------------------------------------------------------------------
Total assets $1,362,565,631 $55,341,537
- -------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------
Accrued expenses $ 206,164 $ 33,981
- -------------------------------------------------------------------------------------------------
Total liabilities $ 206,164 $ 33,981
- -------------------------------------------------------------------------------------------------
Net assets applicable to investors' beneficial interests $1,362,359,467 $55,307,556
- -------------------------------------------------------------------------------------------------
</TABLE>
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
-------------- ------------------
For the Period April 2, 1997
Six Months (Commencement of
Ended Operations)
June 30, 1997 to June 30, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income
- ----------------------------------------------------------------------------------------------------------
Interest $35,785,037 $899,433
- ----------------------------------------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------------------------------------
Management fee $ 1,082,452 $ 28,444
Trustee fees and expenses 16,790 3,191
Portfolio transaction fees 10,745 2,553
Legal 14,328 1,135
Audit and tax return preparation fees 9,313 1,703
Amortization of organization expense 4,299 511
Insurance 21,529 511
Other 8,954 1,021
- ----------------------------------------------------------------------------------------------------------
Total expenses $ 1,168,410 $ 39,069
Less: Management fee waived by investment adviser (Note 2) 45,506 --
- ----------------------------------------------------------------------------------------------------------
Net Expenses $ 1,122,904 $ 39,069
- ----------------------------------------------------------------------------------------------------------
Net Investment Income $34,662,133 $860,364
Net Realized Gain on Investments -- 2,371
- ----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $34,662,133 $862,735
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
11
<PAGE>
Merrimac Master Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
--------------------------------- -------------------
For the
Period
November 21,
1996 For the Period
(Commencement April 2, 1997
Six Months of (Commencement of
Ended Operations) to Operations) to
June 30, 1997 December 31, June 30, 1997
(Unaudited) 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets
- -----------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 34,662,133 $ 3,493,905 $ 860,364
Net realized gain on investments -- -- 2,371
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 34,662,133 $ 3,493,905 $ 862,735
- -----------------------------------------------------------------------------------------------------------------------
Transactions in investors' beneficial interest
Contributions $ 1,177,556,845 $ 1,072,725,924 $ 109,080,386
Withdrawals (856,169,656) (69,909,684) (54,635,565)
- -----------------------------------------------------------------------------------------------------------------------
Net increase from investors' transactions $ 321,387,189 $ 1,002,816,240 $ 54,444,821
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets $ 356,049,322 $ 1,006,310,145 $ 55,307,556
Net Assets
Beginning of period 1,006,310,145 -- --
- -----------------------------------------------------------------------------------------------------------------------
End of period $ 1,362,359,467 $ 1,006,310,145 $ 55,307,556
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Supplementary Data
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
--------------------------------- -------------------
For the
Period
November 12,
1996 For the Period
(Commencement April 2, 1997
Six Months of (Commencement of
Ended Operations) to Operations) to
June 30, 1997 December 31, June 30, 1997
(Unaudited) 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratios to Average Net Assets +
- -----------------------------------------------------------------------------------------------------------------------
Expenses 0.18% 0.12% 0.23%
Net investment income 5.44% 5.45% 5.14%
Expenses, without waiver 0.18% 0.21% NA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,362,359 $1,006,310 $55,308
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
See notes to financial statements
12
<PAGE>
Merrimac Master Portfolio
Notes to Financial Statements (Unaudited)
June 30, 1997
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
The Merrimac Master Portfolio (the "Portfolio Trust") was organized as a
common law trust under the laws of the State of New York and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, diversified, management investment company. The Merrimac Cash
Portfolio (the "Cash Portfolio") and the Merrimac Treasury Portfolio (the
"Treasury Portfolio" and collectively the "Portfolios") are separate
diversified investment series of the Portfolio Trust.
The following is a summary of significant accounting policies followed by the
Portfolio Trust in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A Investment Security Valuations - Portfolio securities are valued using the
amortized cost method, which involves initially valuing an investment at its
cost and thereafter assuming a constant amortization to maturity of any
premium or discount. This method results in a value approximating market
value. Each Portfolio's use of amortized cost is subject to compliance with
certain conditions specified under Rule 2a-7 of the 1940 Act.
B Securities Transactions and Income - Interest income consists of interest
accrued and discount earned (including both original issue and market
discount) less premium amortized on the investments of the Portfolios,
accrued ratably to the date of maturity. Purchases, maturities and sales of
money market instruments are accounted for on the date of transaction.
Expenses of the Portfolios are accrued daily.
C Federal Income Taxes - Each Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary. Each Portfolio also intends to conduct its operations
such that each investor will be able to qualify as a regulated investment
company.
D Repurchase Agreements - It is the policy of the Cash Portfolio to require
the custodian bank to take possession of all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have
been established by the Cash Portfolio to monitor, on a daily basis, the
market value of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral. The Treasury Portfolio does
not invest in repurchase agreements.
E Deferred Organizational Expense - Costs incurred by each Portfolio in
connection with its organization and initial registration are being
amortized, on a straight-line basis over a five year period beginning at the
commencement of operations of that portfolio.
2 Management Fee and Affiliated Transactions
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The Portfolios retain Investors Bank & Trust Company ("Investors Bank") as
investment adviser to continuously review and monitor the Portfolios'
investment program. The Bank of New York ("BNY") serves as sub adviser of the
Cash Portfolio. Aeltus Investment Management, Inc. ("Aeltus") serves as
sub-adviser of the Treasury Portfolio. For its services to the Portfolios,
each sub-adviser is paid a monthly fee by Investors Bank computed at an
annual rate of .08% of the average daily net assets of the Portfolio. The
Portfolio does not pay a fee directly to either sub-adviser for such
services.
Investors Bank serves as custodian for the Portfolio Trust. Investors Fund
Services (Ireland) Limited, a subsidiary of Investors Bank, serves as
administrator. IBT Fund Services (Canada) Inc., a subsidiary of Investors
Bank, serves as fund accounting agent and transfer agent. For its services to
the Portfolio Trust, Investors Bank and its subsidiaries are paid a monthly
fee at an annual rate of 0.17% of the average daily net assets of the
Portfolios. Investors Bank and BNY voluntarily collectively reduced their
fees by $45,506 for the Cash Portfolio during the period January 1, 1997 to
June 30, 1997.
Certain trustees and officers of the Trust are directors or officers of
Investors Bank. The Trust does not pay compensation to its trustees or
officers who are affiliated with the investment adviser.
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