MERRIMAC CASH FUND
Semi-Annual Report
June 30, 1998
<PAGE>
MERRIMAC FUNDS
-------------
August 14, 1998
Dear Shareholder:
We are pleased to provide you with our semi-annual report of the Merrimac Cash
Fund. The period covered is January 1, 1998 to June 30, 1998.
The Board of Trustees of the Merrimac Master Portfolio voted to recommend to the
shareholders of the Merrimac Cash Portfolio (the "Cash Portfolio") that
Allmerica Asset Management, Inc. ("Allmerica") replace the Bank of New York
("BNY") as sub-adviser to the Cash Portfolio. Shareholders will vote on August
28, 1998 and we anticipate that the change will occur on September 1, 1998.
The investment objective of the Fund continues to seek as high a level of
current income as is consistent with the preservation of capital and liquidity.
Investors Bank & Trust Company, the investment adviser to the Merrimac Master
Portfolio and The Bank of New York, sub-adviser for the Cash Portfolio, have
done a good job maintaining high quality while providing a better than average
yield.
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.
/s/ Sean P. Brennan
- ---------------------------
Sean P. Brennan
President
200 Clarendon Street [bullet] Boston, Massachusetts 02116
888.MERRMAC [bullet] 617.927.8303 fax
<PAGE>
Merrimac Cash Fund
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
=======================================================================================
<S> <C>
Assets
Investment in Merrimac Cash Portfolio, at value (Note 1) $550,179,218
Deferred organization expense (Note 1) 45,435
Prepaid assets 9,711
------------
Total assets 550,234,364
Liabilities
Distributions payable to shareholders 3,289,392
Accrued expenses 194,495
------------
Total liabilities 3,483,887
------------
Net Assets $546,750,477
============
Net Assets Consist of
Paid in capital $546,750,964
Accumulated net realized loss on investments (487)
------------
Total net assets $546,750,477
============
Total Net Assets
Premium Class $532,133,317
============
Institutional Class $ 14,617,160
============
Shares of Beneficial Interest Outstanding
Premium Class 532,133,790
============
Institutional Class 14,617,174
============
Net Asset Value, Maximum Offer and Redemption Price per Share $ 1.00
============
</TABLE>
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
=======================================================================================
<S> <C>
Investment Income (Note 1)
Interest income allocated from Portfolio $ 32,072,647
------------
Expenses
Expenses allocated from Portfolio 704,725
Accounting, transfer agency, and administration fees (Note 4) 56,488
Legal 59,600
Insurance 24,635
Trustees fees and expenses 14,305
Audit and tax return preparation fees 14,305
Printing 10,331
Amortization of organization expenses (Note 1) 6,991
Miscellaneous 7,947
------------
Total expenses common to all classes 899,327
Shareholder servicing fee-Institutional Class 224,172
------------
Total expenses 1,123,499
------------
Net Investment Income 30,949,148
Net Realized Loss on Investments from Portfolio (487)
------------
Net Increase in Net Assets from Operations $ 30,948,661
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Merrimac Cash Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
==========================================================================================================================
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 30,949,148 $ 72,603,059
Net realized loss from Portfolio (487) --
--------------- --------------
Net increase in net assets from operations 30,948,661 72,603,059
--------------- --------------
Dividends Declared from Net Investment Income
Premium Class (26,227,686) (64,735,055)
Institutional Class (4,721,462) (7,868,004)
--------------- --------------
Total dividends declared (30,949,148) (72,603,059)
--------------- --------------
Fund Share Transactions (Note 7)
Proceeds from shares sold 854,112,286 2,131,629,146
Proceeds from shares reinvested 939,086 1,658,508
Payment for shares redeemed (1,626,283,250) 1,818,650,746)
--------------- --------------
Net increase (decrease) in net assets derived from share transactions (771,231,878) 314,636,908
--------------- --------------
Net increase (decrease) in net assets (771,232,365) 314,636,908
Net Assets
Beginning of period 1,317,982,842 1,003,345,934
--------------- --------------
End of period $ 546,750,477 $1,317,982,842
=============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Merrimac Cash Fund
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
Premium Class Institutional Class
--------------------------------------------------- ---------------------------------------------------
Six Months Nov. 12, 1996 Six Months Nov. 12, 1996
Ended (Commencement Ended (Commencement
June 30, 1998 Year Ended of Operations) to June 30, 1998 Year Ended of Operations) to
(Unaudited) December 31, 1997 December 31, 1996 (Unaudited) December 31, 1997 December 31, 1996
------------- ----------------- ----------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ---------- -------- ------- -------- --------
Income from Operations
Net investment income 0.027 0.055 0.006 0.026 0.052 0.006
-------- ---------- -------- ------- -------- --------
Less Distributions
From net investment
income (0.027) (0.055) (0.006) (0.026) (0.052) (0.006)
-------- ---------- -------- ------- -------- --------
Net Asset Value,
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ========== ======== ======= ======== ========
Total Return (1) 5.66% 5.64% 5.42% 5.39% 5.37% 5.17%
Annualized Ratios to
Average Net Assets/
Supplemental Data
Net expenses 0.16% 0.18% 0.15% 0.41% 0.43% 0.40%
Net investment income 5.52% 5.49% 5.42% 5.27% 5.24% 5.17%
Net expenses, before
waiver 0.22% 0.21% 0.24% 0.47% 0.46% 0.49%
Net assets, end of
period (000s omitted) $532,133 $1,119,556 $875,936 $14,617 $198,427 $127,410
</TABLE>
(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 are assumed reinvested at the
net asset value on the payable date. Total return is computed on an
annualized basis.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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, diversified, management investment company. The Merrimac Cash
Fund (the "Fund") is a separate diversified investment portfolio or series
of the Trust. The Fund consists of three classes of shares, the Premium
Class, the Institutional Class and the Placement Class.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Merrimac Cash Portfolio (the "Portfolio"), an
open-end management investment company and a series of the Merrimac Master
Portfolio. The Fund has the same investment objective as the Portfolio. The
performance of the Fund is directly affected by the performance of the
Portfolio. The Portfolio seeks to achieve a high level of current income,
consistent with the preservation of capital and liquidity. The financial
statements of the Portfolio are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements. At June
30, 1998 the investment by the Fund represents ownership of a proportionate
interest of 76.31% of the Portfolio.
It is the policy of the Fund to maintain a net asset value of $1.00 per
share; the Fund has adopted certain investment, valuation, dividend and
distribution policies which conform to general industry practice, to enable
it to do so. However, there is no assurance that the Fund will be able to
maintain a stable net asset value.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting
principles ("GAAP") requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. Investment Security Valuations
The Fund records investments in the Portfolio at value. Valuation of
securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes
to Financial Statements, which are included elsewhere in this report.
B. Securities Transactions and Income
The Portfolio records securities transactions as of the trade date.
Interest income, including the accretion of discount or the amortization of
premium, is recognized when earned. Gains or losses on sales of securities
are calculated on the identified cost basis. The Fund's net investment
income consists of its pro rata share of the net investment income of the
Portfolio, less all expenses of the Fund determined in accordance with
GAAP.
C. Federal Income Taxes
The Fund intends to qualify annually as a regulated investment company
under Subchapter M of the Internal Revenue Code, and thus not be subject to
income taxes. The Fund must distribute all of its taxable income for its
fiscal year and meet certain other requirements. Accordingly, no provision
for federal income taxes is required.
D. Deferred Organization Expense
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized on a straight-line basis over a five year
period beginning at the commencement of operations.
E. Expense Allocation
Expenses directly attributable to the Fund are charged to the Fund.
Expenses not directly attributable to a specific Fund within the Trust are
allocated, based on relative net assets, to each fund.
5
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(2) Dividends and Distributions to Shareholders
Dividends on the shares of the Fund are declared each business day to
shareholders of record at 2:00 PM (New York time) on that day, and paid or
reinvested as of the last business day of the month. Distributions of net
realized gains, if any, may be declared annually. Dividends and
distributions are determined in accordance with federal income tax
regulations, which may differ from GAAP.
(3) Shareholder Servicing and Placement Plans
The Trust has adopted Shareholder Servicing Plans with respect to the
Institutional Class and Placement Class under which certain service
organizations may be compensated for providing shareholder accounting and
other administrative services for their clients. The Institutional Class
and Placement Class will pay an annual fee of 0.25% of the value of the
assets that an organization services on behalf of its clients. Under a
Placement Agreement, the Placement Class will also pay an annual placement
fee of 0.25% of the value of the assets that an organization invests in the
funds on behalf of its clients. The Placement Class has not yet commenced
operations.
(4) Management Fee and Affiliated Transactions
The Portfolio retains Investors Bank & Trust Company ("Investors Bank") as
investment adviser. The Bank of New York ("BNY") serves as sub-adviser to
the Portfolio. The Fund pays no direct fees for such services, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report.
Investors Bank serves as administrator, custodian and transfer agent to the
Trust. IBT Fund Services (Canada) Inc., a subsidiary of Investors Bank,
provides fund accounting for the Fund. 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 the Fund.
Certain trustees and officers of the Trust are directors or officers of
Investors Bank. The Fund does not pay compensation to its trustees or
officers who are affiliated with the investment adviser.
(5) Investment Transactions
The Fund's investments in and withdrawals from the Portfolio for the period
from January 1, 1998 to June 30, 1998 aggregated $855,051,372 and
$1,660,826,649 respectively.
(6) Line of Credit
The Fund has an agreement with BNY which provides the Fund with an
unsecured line of credit for advances to the Fund of up to $100 million.
The proceeds of advances made under this line of credit may be used only
for extraordinary or emergency purposes and to provide temporary liquidity
for redemptions of the Fund's securities. Since the line of credit was
established, there have been no borrowings.
6
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(7) 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 at $1.00 per share for each class were as
follows:
<TABLE>
<CAPTION>
Premium Class Institutional Class
------------------------------------- -----------------------------------------------
Six Months Ended Six Months Ended
June 30, 1998 Year Ended June 30, 1998 Year Ended
(Unaudited) December 31, 1997 (Unaudited) December 31, 1997
------------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Proceeds from shares sold .......... 427,757,000 1,359,423,000 426,355,286 772,206,146
Proceeds from shares reinvested .... 150,658 303,648 788,428 1,354,860
Payment for shares redeemed ........ (1,015,330,046) (1,116,106,470) (610,953,204) (702,544,276)
-------------- --------------- ----------------- -----------------
Net increase (decrease) in shares .. (587,422,388) 243,620,178 (183,809,490) 71,016,730
============== =============== ================ =================
</TABLE>
At June 30, 1998, Investors Bank and BNY, as agents for their respective
clients, were record holders of 49.9% and 45.8%, respectively, of the
outstanding shares of the Fund.
(8) Subsequent Event
On July 30, 1998, the Board of Trustees of the Merrimac Master Portfolio
voted to recommend to shareholders of the Portfolio that Allmerica Asset
Management, Inc. ("Allmerica") replace BNY as sub-adviser. The decision was
based on a mutual agreement between BNY and Investors Bank that BNY would
not serves as sub-adviser beyond the initial term of its Sub-Adviser
Agreement. If shareholder approval is obtained at the scheduled August 28,
1998 shareholder meeting, Allmerica will assume sub-adviser responsibility
on September 1, 1998.
7
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Yield to Par Value
Security Maturity Maturity Value (Note 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Variable Rate Notes * - 38.0%
Asset Backed Securities Investment Trust 5.65% 7/15/98 50,000,000 $ 50,000,000
Australia & New Zealand Bank 5.59% 7/15/98 70,000,000 69,997,736
Bank One Wisconsin 5.53% 7/07/98 54,000,000 53,986,826
Bankers Trust 5.68% 7/01/98 25,000,000 24,997,059
IBM Credit Corporation 5.71% 7/01/98 30,000,000 29,999,702
Morgan Stanley Dean Witter 5.63% 7/15/98 20,000,000 20,000,000
Pittsburgh National Corporation 5.80% 7/01/98 25,000,000 24,996,146
-------------
Total Variable Rate Notes 273,977,469
-------------
Commercial Paper - 27.7%
Amsterdam Funding Corporation 5.56% 7/14/98 25,000,000 24,949,806
Archer Daniels Midland Company 5.50% 7/13/98 20,000,000 19,963,334
Compass Securitization 5.64% 7/15/98 30,000,000 29,934,200
Ford Motor Credit Corporation 5.49% 7/14/98 50,000,000 49,900,875
National Rural Utilities 5.49% 8/06/98 50,000,000 49,725,500
Sheffield Receivables Corporation 5.56% 7/10/98 25,000,000 24,965,250
-------------
Total Commercial Paper 199,438,965
-------------
Yankee Certificates of Deposit - 11.1%
Commerzbank 5.55% 2/11/99 50,000,000 49,985,214
Credit Agricole 5.66% 2/26/99 30,000,000 29,990,548
-------------
Total Yankee Certificates of Deposit 79,975,762
-------------
Time Deposits - 9.7%
Banco Bilbao Vizcaya 6.00% 7/01/98 35,000,000 35,000,000
Norddeutsche Landesbank 6.00% 7/01/98 35,000,000 35,000,000
-------------
Total Time Deposits 70,000,000
-------------
Certificates of Deposit - 5.5%
Bayerische Landesbank 5.60% 7/01/98 10,000,000 10,000,000
Societe Generale 5.55% 2/09/99 30,000,000 29,991,208
-------------
Total Certificates of Deposit 39,991,208
-------------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Yield to Par Value
Security Maturity Maturity Value (Note 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements - 7.3%
Goldman Sachs Repurchase Agreement dated 6/30/98, due
7/01/98, with a maturity value of $17,303,835 and an
effective yield of 5.90%, collateralized by U.S. Government
Agency Obligations with rates ranging from 6.00% to 7.00%
and maturities ranging from 3/15/27 to 2/20/28, with an
aggregate market value of $17,647,020. $17,301,000 $ 17,301,000
Merrill Lynch Repurchase Agreement, dated 6/30/98, due
7/01/98, with a maturity value of $35,005,931 and an
effective yield of 6.10% , collateralized by U.S. Government
Agency Obligations with maturity dates ranging from 10/01/27
to 04/01/28, and with an aggregate market value of
$35,701,566. 35,000,000 35,000,000
-------------
Total Repurchase Agreements 52,301,000
-------------
TOTAL INVESTMENTS - 99.3%
(Cost $715,684,404) 715,684,404
Other Assets and Liabilities (net) - 0.7% 5,300,173
-------------
TOTAL NET ASSETS - 100.0% $ 720,984,577
=============
</TABLE>
Notes to the Schedule of Investments:
* Variable rate securities - maturity dates on these types of securities
reflect the next interest rate reset date or, when applicable, the final
maturity date. Yield to maturity for these securities is determined on the
date of the most recent interest rate change.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Merrimac Cash Portfolio
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
=========================================================================
Assets
<S> <C>
Investments, at value (Note 1) $715,684,404
Cash 211
Interest receivable 5,388,282
Deferred organization expense (Note 1) 41,152
Prepaid assets 13,178
------------
Total assets 721,127,227
------------
Liabilities
Management fee payable (Note 2) 97,690
Other accrued expenses 44,960
------------
Total liabilities 142,650
------------
Net Assets Applicable to Investors' Beneficial Interests $720,984,577
============
</TABLE>
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
=========================================================================
<S> <C>
Income
Interest $ 33,532,322
------------
Expenses
Management fee (Note 2) 1,006,293
Insurance 25,297
Trustee fees and expenses 23,557
Audit and tax return preparation fees 11,042
Transaction fees 9,908
Legal 7,787
Amortization of organization expense (Note 1) 6,050
Miscellaneous 9,616
------------
Total expenses 1,099,550
Less: Management fee waived (Note 2) (362,621)
------------
Net expenses 736,929
------------
Net Investment Income 32,795,393
Net Realized Loss on Investments (638)
------------
Net Increase in Net Assets from Operations $ 32,794,755
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Merrimac Cash Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------------------
Six Months
Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
--------------------- -------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 32,795,393 $ 74,983,944
Net realized loss on investments (638) --
Net increase in net assets from operations 32,794,755 74,983,944
Transactions in Investors' Beneficial Interest
Contributions 1,001,408,146 2,193,287,654
Withdrawals (1,698,065,917) (1,889,734,150)
Net increase (decrease) from investors' transactions (696,657,771) 303,553,504
Net Increase (Decrease) in Net Assets (663,863,016) 378,537,448
Net Assets
Beginning of period 1,384,847,593 1,006,310,145
End of period $ 720,984,577 $ 1,384,847,593
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------
Six Months Nov. 12, 1996
Ended (Commencement
June 30, 1998 Year Ended of Operations) to
(Unaudited) December 31, 1997 December 31, 1996
------------------ ----------------- ------------------------
<S> <C> <C> <C>
Annualized Ratios to Average Net Assets/
Supplemental Data
Net expenses 0.12% 0.16% 0.12%
Net investment income 5.54% 5.51% 5.45%
Net expenses, before waiver 0.19% 0.19% 0.21%
Net assets, end of period (000s omitted) $720,985 $ 1,384,848 $ 1,006,310
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Merrimac Cash Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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 ("1940 Act"), as an
open-end, diversified, management investment company with its principal
offices in the Cayman Islands. 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 Trust. The Treasury Portfolio is not included in this report.
The following is a summary of significant accounting policies followed by
the Portfolio Trust in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. Investment Security Valuations
Portfolio securities are valued using the amortized cost method, which
involves initially valuing an investment at its cost and thereafter
assuming a constant amortization to maturity of any premium or discount.
This method results in a value approximating market value. The Cash
Portfolio's use of amortized cost is subject to compliance with certain
conditions specified under Rule 2a-7 of the 1940 Act.
B. Securities Transactions and Income
Interest income consists of interest accrued and discount earned (including
both the original issue and market discount) less premium amortized on the
investments of the Cash Portfolio, accrued ratably to the date of maturity.
Purchases, maturities and sales of money market instruments are accounted
for on the date of transaction. Expenses of the portfolio are accrued
daily. All investment income, expenses, and realized capital gains and
losses of the Cash Portfolio are allocated pro rata to its investors.
C. Federal Income Taxes
The Cash Portfolio is considered a partnership under the U.S. Internal
Revenue Code. Accordingly, no provision for federal income taxes is
necessary. The Cash Portfolio also intends to conduct its operations such
that each investor will be able to qualify as a regulated investment
company.
D. Repurchase Agreements
It is the policy of the Portfolio 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.
E. Deferred Organization Expense
Costs incurred by the Cash 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 the
portfolio.
12
<PAGE>
Merrimac Cash Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(2) Management Fee and Affiliated Transactions
The Cash Portfolio retains Investors Bank & Trust Company ("Investors
Bank") as investment adviser to continuously review and monitor the
Portfolio's investment program. The Bank of New York ("BNY") serves as the
Cash Portfolio's sub-adviser. For its services, BNY is paid a monthly fee
by Investors Bank computed at an annual rate of 0.08% of the average daily
assets of the Cash Portfolio. The Cash Portfolio does not pay a fee
directly to its sub-adviser for such services.
Investors Bank serves as custodian for the Portfolio Trust. Investor's Fund
Services (Ireland) Limited, a subsidiary of Investors Bank, serves as
administrator. IBT Fund Services (Canada) Inc., a subsidiary of Investors
Bank, serves as fund accounting and transfer agent. For these services,
Investors Bank and its subsidiaries are paid a monthly fee at an annual
rate of 0.17% of the average daily net assets of the Cash Portfolio.
Investors Bank and BNY voluntarily collectively reduced their fees by
$362,621 for the Cash Portfolio during the period ended June 30, 1998.
Certain trustees and officers of the Portfolio Trust are directors or
officers of Investors Bank. The Fund does not pay compensation to its
trustees or officers who are affiliated with the investment adviser.
(3) Investment Transactions
Purchases and combined maturities and sales of money market instruments
aggregated $23,044,355,503 and $23,727,469,833, respectively for the Cash
Portfolio for the period ended June 30, 1998.
(4) Subsequent Event
On July 30, 1998, the Board of Trustees of the Portfolio Trust voted to
recommend to shareholders of the Cash Portfolio that Allmerica Asset
Management, Inc. ("Allmerica") replace BNY as sub-adviser. The decision was
based on a mutual agreement between BNY and Investors Bank that BNY would
not serves as sub-adviser beyond the initial term of its Sub-Adviser
Agreement. If shareholder approval is obtained at the scheduled August 28,
1998 shareholder meeting, Allmerica will assume sub-adviser responsibility
on September 1, 1998.
13
