[Front cover]
[Logo; M
MERRIMAC]
MERRIMAC CASH FUND
Semi-Annual Report
June 30, 1999
<PAGE>
[Logo; M
MERRIMAC]
August 10, 1999
Dear Shareholder:
We are pleased to provide you with the June 30, 1999, Semi-Annual Report of the
Merrimac Cash Fund. The fund purchases an interest in the Merrimac Cash
Portfolio with its investable assets rather than creating its own portfolio of
investment securities. In this way, the fund obtains the economies and
efficiencies of investment by a larger pool of assets. The investment objective
of Merrimac Cash Fund and Merrimac Cash Portfolio are identical. They seek as
high a level of current income as is consistent with the preservation of capital
and liquidity.
Allmerica Asset Management, Inc., the sub-adviser for the Merrimac Cash
Portfolio continued to achieve impressive investment performance during the
period ended June 30, 1999. The annualized total return for the Premium Class of
the Merrimac Cash Fund was 4.99% and for the Institutional Class was 4.73%.
Thank you for your support and participation. We look forward to continuing to
serve you in the future.
Very truly yours,
/s/ Paul J. Jasinski
- --------------------
Paul J. Jasinski
President
200 Clarendon Street o Boston, Massachusetts o 02116 o 888.MERRMAC
o fax: 617.587.4402
mailing address: P.O. Box 9130 o Boston, Massachusetts o 02117
<PAGE>
Merrimac Cash Fund
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
================================================================================
<TABLE>
<S> <C>
Assets
Investment in Merrimac Cash Portfolio, at value (Note 1) $ 895,485,520
Deferred organization expense (Note 1) 32,625
--------------------------
Total assets 895,518,145
Liabilities
Distributions payable to shareholders 3,902,521
Accrued expenses 45,517
--------------------------
Total liabilities 3,948,038
--------------------------
Net Assets $ 891,570,107
==========================
Net Assets Consist of
Paid in capital $ 891,623,756
Accumulated net realized gain (loss) on investments (53,649)
--------------------------
Total net assets $ 891,570,107
==========================
Total Net Assets
Premium Class $ 883,949,332
==========================
Institutional Class $ 7,620,775
==========================
Shares of Beneficial Interest Outstanding
Premium Class 884,002,539
==========================
Institutional Class 7,621,217
==========================
Net Asset Value, Maximum Offer and Redemption Price per Share $ 1.00
==========================
</TABLE>
Statement of Operations
For the Period Ended June 30, 1999 (Unaudited)
================================================================================
<TABLE>
<S> <C>
Net Investment Income Allocated from Portfolio (Note 1)
Interest $ 25,256,530
Expenses (935,043)
--------------------------
Net investment income from Portfolio 24,321,487
--------------------------
Fund Expenses
Accounting, transfer agency, and administration fees (Note 4) 49,073
Legal 5,867
Insurance 7,823
Trustees fees and expenses 4,303
Audit and tax return preparation fees 12,126
Printing 5,867
Amortization of organization expenses (Note 1) 6,750
Miscellaneous 3,130
--------------------------
Total expenses common to all classes 94,939
Shareholder servicing fee-Institutional Class 8,536
--------------------------
Total expenses 103,475
--------------------------
Net Investment Income 24,218,012
Net Realized Gain (Loss) on Investments from Portfolio (63,405)
--------------------------
Net Increase in Net Assets from Operations $ 24,154,607
==========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Merrimac Cash Fund
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
-------------------------- ---------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 24,218,012 $ 49,643,646
Net realized gain from Portfolio (63,405) 9,756
-------------------------- ---------------------------
Net increase in net assets from operations 24,154,607 49,653,402
-------------------------- ---------------------------
Dividends Declared from Net Investment Income
Premium Class (24,056,966) (44,674,176)
Institutional Class (161,046) (4,969,470)
-------------------------- ---------------------------
Total dividends declared (24,218,012) (49,643,646)
-------------------------- ---------------------------
Fund Share Transactions (Note 7)
Proceeds from shares sold 2,752,951,001 3,205,476,292
Proceeds from shares reinvested 9,915,420 6,112,095
Payment for shares redeemed (2,536,136,699) (3,864,677,195)
-------------------------- ---------------------------
Net increase (decrease) in net assets derived from share transactions 226,729,722 (653,088,808)
-------------------------- ---------------------------
Net increase (decrease) in net assets 226,666,317 (653,079,052)
Net Assets
Beginning of period 664,903,790 1,317,982,842
-------------------------- ---------------------------
End of period $ 891,570,107 $ 664,903,790
========================== ===========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Merrimac Cash Fund
Financial Highlights (1999 information is unaudited)
================================================================================
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
Premium Class
--------------------------------------------------------------------------------------
Nov. 12, 1996
Six Months Year Ended December 31, (Commencement
Ended ------------------------------------------ of Operations) to
June 30, 1999 1998 1997 December 31, 1996
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------- -------------------- -------------------- --------------------
Net investment income 0.024 0.055 0.055 0.006
Dividends from net investment income (0.024) (0.055) (0.055) (0.006)
-------------------- -------------------- -------------------- --------------------
Net Asset Value, End of Period $ 1.00 1.00 $ 1.00 $ 1.00
==================== ==================== ==================== ====================
Total Return (1) 4.99% 5.59% 5.64% 5.42%
Annualized Ratios to Average Net Assets/
Supplemental Data
Net expenses 0.21% 0.16% 0.18% 0.15%
Net investment income 4.94% 5.46% 5.49% 5.42%
Net expenses, before waiver NA 0.20% 0.21% 0.24%
Net assets, end of period (000s omitted) $ 883,949 $ 655,049 $ 1,119,556 $ 875,936
<CAPTION>
Institutional Class
--------------------------------------------------------------------------------------
Nov. 12, 1996
Six Months Year Ended December 31, (Commencement
Ended ------------------------------------------ of Operations) to
June 30, 1999 1998 1997 December 31, 1996
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------- -------------------- -------------------- --------------------
Net investment income 0.023 0.052 0.052 0.006
Dividends from net investment income (0.023) (0.052) (0.052) (0.006)
-------------------- -------------------- -------------------- --------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
==================== ==================== ==================== ====================
Total Return (1) 4.73% 5.33% 5.37% 5.17%
Annualized Ratios to Average Net Assets/
Supplemental Data
Net expenses 0.46% 0.41% 0.43% 0.40%
Net investment income 4.69% 5.21% 5.24% 5.17%
Net expenses, before waiver NA 0.45% 0.46% 0.49%
Net assets, end of period (000s omitted) $ 7,621 $ 9,857 $ 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.
5
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
The Merrimac Funds (the "Trust") is organized as a Delaware business trust
and is registered under the Investment Company Act of 1940, as an open-end
management investment company. The Merrimac Cash Fund (the "Fund") is a
separate diversified investment portfolio or series of the Trust. The Fund
consists of two classes of shares, the Premium Class and the Institutional
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
Portfolio seeks to achieve a high level of current income, consistent with
the preservation of capital and liquidity. The performance of the Fund is
directly affected by the performance of the Portfolio. 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, 1999 the investment by the Fund represents ownership of a proportionate
interest of 76.0% 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 its investment in the Portfolio at value. Valuation of
securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes
to Financial Statements, which are included elsewhere in this report.
B. Securities Transactions and Income
The Portfolio records securities transactions as of the trade date.
Interest income, including the accretion of discount or the amortization of
premium, is recognized when earned. Gains or losses on sales of securities
are calculated on the identified cost basis. The Fund's net investment
income consists of its pro rata share of the net investment income of the
Portfolio, less all expenses of the Fund determined in accordance with
GAAP.
C. Federal Income Taxes
The Fund intends to qualify annually as a regulated investment company
under Subchapter M of the Internal Revenue Code, and thus not be subject to
income taxes. To qualify, the Fund must distribute 90% 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.
(2) Dividends and Distributions to Shareholders
Dividends on the shares of the Fund are declared each business day to
shareholders of record on that day, and paid or reinvested as of the last
business day of the month. Distributions of net realized gains, if any, may
be declared annually. Dividends and distributions are determined in
accordance with federal income tax regulations, which may differ from GAAP.
6
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Shareholder Servicing and Placement Plans
The Trust has adopted a Shareholder Servicing Plan with respect to the
Institutional Class under which certain service organizations may be
compensated for providing shareholder accounting and other administrative
services for their clients. The Institutional Class will pay an annual fee
of up to 0.25% of the value of the assets that an organization services on
behalf of its clients.
(4) Management Fee and Affiliated Transactions
The Portfolio retains Investors Bank & Trust Company ("Investors Bank") as
investment adviser. Allmerica Asset Management, Inc. ("AAM") 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 or its subsidiary, IBT Fund Services (Canada), Inc. serves
as administrator, custodian, fund accounting agent, and transfer agent to
the Trust. For these services, Investors Bank and its subsidiary are paid a
monthly fee at an annual rate of 0.01% of the average daily net assets of
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, 1999 to June 30, 1999 aggregated $2,762,866,421 and
$2,560,108,807 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 at $1.00 per share for each class were as
follows:
<TABLE>
<CAPTION>
Premium Class Institutional Class
----------------------------------- -----------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Unaudited)
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Proceeds from shares sold ............ 2,736,590,412 2,762,456,356 16,360,589 443,019,936
Proceeds from shares reinvested ...... 9,733,771 5,086,657 181,649 1,025,438
Payment for shares redeemed .......... (2,517,358,860) (3,232,061,975) (18,777,839) (632,615,220)
---------------- ------------------ ---------------- ------------------
Net increase (decrease) in shares .... 228,965,323 (464,518,962) (2,235,601) (188,569,846)
================ ================== ================ ==================
</TABLE>
At June 30, 1998, Investors Bank, as agent for its clients, and affiliates
of AAM were record holders of 46.1% and 50.7%, respectively, of the
outstanding shares of the Fund.
7
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield to Expected Par
Security Maturity Maturity Value Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Variable Rate Notes* - 33.9%
Bankers Trust Corporation ............................................. 5.07% 07/01/99 $ 10,000,000 $ 9,991,124
Barclays Bank PLC New York ............................................ 4.89% 08/12/99 10,000,000 9,994,923
Bear Stearns Companies ................................................ 5.15% 07/12/99 15,000,000 15,000,000
Bear Stearns Companies ................................................ 5.00% 08/02/99 8,000,000 8,000,000
Bear Stearns Companies ................................................ 5.35% 08/17/99 20,000,000 20,000,000
Beneficial Corporation ................................................ 5.07% 07/12/99 5,000,000 4,999,328
Countrywide Home Loans ................................................ 5.17% 08/25/99 10,100,000 10,104,279
Countrywide Home Loans ................................................ 5.60% 09/08/99 15,000,000 15,046,766
Donaldson Lufkin & Jenrette ........................................... 5.25% 07/06/99 33,000,000 33,000,000
General American Life Insurance Company **............................. 5.10% 03/16/00 15,000,000 15,000,000
General American Life Insurance Company **............................. 5.05% 09/10/99 30,000,000 30,000,000
General Electric Capital Corporation .................................. 4.95% 07/13/99 15,000,000 15,000,000
Goldman Sachs Group ................................................... 5.04% 07/01/99 10,000,000 10,000,000
Goldman Sachs Group ................................................... 5.10% 07/13/99 8,000,000 7,999,070
GTE Corporation ....................................................... 5.14% 09/13/99 25,000,000 24,984,722
Jackson National Life Insurance Company ............................... 5.13% 07/30/99 40,000,000 40,000,000
J.P. Morgan & Company ................................................. 5.69% 07/07/99 50,000,000 50,037,866
Liberty Lighthouse U.S. Capital ....................................... 4.98% 07/19/99 5,000,000 4,999,389
Liberty Lighthouse U.S. Capital ....................................... 5.09% 09/09/99 4,000,000 4,000,000
Morgan Stanley, Dean Witter & Co. ..................................... 5.43% 09/01/99 4,000,000 4,009,328
National Rural Utilities Cooperative Finance Corporation .............. 5.18% 09/27/99 10,000,000 10,000,000
New England Educational Loan Marketing ................................ 5.20% 09/08/99 7,500,000 7,500,000
PaineWebber Group ..................................................... 5.85% 07/21/99 13,000,000 13,000,000
Sigma Finance ......................................................... 5.03% 07/01/99 25,000,000 25,000,000
Strategic Money Management Company .................................... 5.29% 09/15/99 11,500,000 11,500,000
---------------
399,166,795
---------------
Commercial Paper - 26.9%
AlliedSignal .......................................................... 4.85% 07/12/99 25,000,000 24,962,952
Bankamerica Corporation ............................................... 4.82% 08/16/99 10,000,000 9,938,411
Citibank Credit Card Master Trust ..................................... 5.18% 08/23/99 20,000,000 19,847,478
Cooperatve Association of Tractor Dealers ............................. 4.83% 07/19/99 9,700,000 9,676,575
Cooperatve Association of Tractor Dealers ............................. 4.85% 08/26/99 5,100,000 5,061,523
Cooperatve Association of Tractor Dealers ............................. 4.85% 08/27/99 4,600,000 4,564,676
Den Norske Bank ....................................................... 4.80% 07/07/99 16,275,000 16,261,980
Den Norske Bank ....................................................... 4.91% 12/24/99 15,000,000 14,639,933
Donaldson Lufkin & Jenrette ........................................... 4.97% 07/06/99 10,000,000 9,993,097
Donaldson Lufkin & Jenrette ........................................... 4.96% 08/23/99 10,000,000 9,926,978
FPL Group ............................................................. 4.88% 08/04/99 16,989,000 16,910,699
FPL Group ............................................................. 4.91% 08/18/99 39,000,000 38,744,680
Goldman Sachs Group ................................................... 4.92% 07/01/99 15,000,000 15,000,000
Heller Financial ...................................................... 4.90% 07/26/99 15,000,000 14,948,959
Heller Financial ...................................................... 4.90% 08/30/99 15,000,000 14,877,500
Lexington Parker Capital .............................................. 5.18% 08/03/99 15,000,000 14,928,775
Omnicom Finance ....................................................... 5.25% 08/16/99 20,000,000 19,865,833
Pegasus Four Limited .................................................. 4.88% 07/26/99 5,587,000 5,568,066
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield to Expected Par
Security Maturity Maturity Value Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pegasus Three Limited ................................................. 4.88% 07/26/99 $ 2,800,000 $ 2,790,511
Pegasus Three Limited ................................................. 4.95% 08/23/99 10,345,000 10,269,611
Pegasus Two Limited ................................................... 5.09% 07/01/99 6,000,000 6,000,000
Pegasus Two Limited ................................................... 4.88% 07/26/99 3,725,000 3,712,376
Prudential Corporation PLC ............................................ 4.85% 07/12/99 14,000,000 13,979,253
Westways Funding III Limited .......................................... 4.97% 07/07/99 14,600,000 14,587,906
---------------
317,057,772
---------------
Corporate Debt - 20.9%
Aetna Services ....................................................... 5.66% 11/29/99 10,000,000 10,000,000
African Development Bank ............................................. 5.07% 07/30/99 11,700,000 11,715,418
AT&T Capital Corporation ............................................. 5.16% 01/21/00 7,500,000 7,557,254
Bank One Corporation .................................................5.18-5.40% 07/01/99 11,000,000 11,000,000
Bankers Trust Corporation ............................................5.07-5.62% 07/30/99 24,750,000 24,775,219
Bear Stearns Companies ............................................... 5.52% 06/20/00 3,000,000 3,029,232
Bear Stearns Companies ...............................................5.31-5.40% 09/15/99 17,540,000 17,619,427
Caterpillar Financial Service Corporation ............................ 5.39% 07/01/99 1,000,000 1,000,000
CIT Group ............................................................ 5.18% 08/09/99 5,000,000 5,004,686
Countrywide Home Loans ...............................................5.14-5.21% 11/16/99 12,800,000 12,953,577
Fleet Financial Group ................................................ 5.13% 12/15/99 8,000,000 8,124,823
Fleet Mortgage Corporation ...........................................5.13-5.32% 09/15/99 6,442,000 6,459,047
Fleet Mortgage Corporation ........................................... 5.37% 05/11/00 5,000,000 5,036,374
Ford Motor Credit Company ............................................ 5.32% 09/15/99 1,000,000 1,002,155
General Electric Capital Corporation ................................. 5.39% 08/23/99 11,000,000 11,018,635
General Motors Acceptance Corporation ................................4.95-5.32% 09/09/99 4,000,000 4,016,766
Goldman Sachs Group .................................................. 5.17% 02/07/00 20,000,000 20,000,000
Key Bank NA .......................................................... 5.17% 03/24/00 10,000,000 9,996,841
Morgan Stanley, Dean Witter & Co. .................................... 5.22% 09/01/99 1,575,000 1,580,924
Norwest Financial .................................................... 5.31% 09/15/99 2,000,000 2,003,598
PaineWebber Group ....................................................5.58-5.67% 03/01/00 15,730,000 15,871,145
PaineWebber Group .................................................... 6.03% 05/30/00 3,000,000 3,001,470
Prudential Funding ................................................... 5.27% 04/20/00 10,000,000 10,051,179
Salomon Smith Barney ................................................. 5.31% 10/01/99 9,000,000 9,020,755
Sigma Finance ........................................................ 5.24% 03/01/00 10,000,000 10,000,000
Texaco Capital Corporation ........................................... 5.18% 11/01/99 2,500,000 2,522,893
Transamerica Financial Corporation ................................... 5.12% 11/18/99 7,000,000 7,080,422
Travelers Property Casualty Corporation .............................. 5.23% 10/01/99 5,000,000 5,012,424
Wells Fargo & Company ................................................ 5.36% 03/31/00 10,000,000 9,996,608
---------------
246,450,872
---------------
U.S. Government Agency Obligations - 6.1%
Federal Home Loan Bank ................................................ 4.75% 08/03/99 15,000,000 15,000,000
Federal Home Loan Bank ................................................ 5.13% 08/18/99 1,035,000 1,036,218
Federal National Mortgage Association ................................. 4.84% 07/01/99 35,000,000 35,000,000
Federal National Mortgage Association ................................. 4.77% 11/12/99 11,223,000 11,023,736
Student Loan Marketing Association .................................... 5.41% 07/07/99 10,000,000 10,000,000
---------------
72,059,954
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield to Expected Par
Security Maturity Maturity Value Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates of Deposit - 4.7%
Commerzbank AG .................................................... 5.19% 02/25/00 $10,000,000 $ 9,998,108
European American Bank ............................................ 5.31% 05/12/00 10,000,000 9,997,502
Merita Bank PLC ................................................... 5.20% 02/07/00 20,000,000 20,000,000
Unibank ........................................................... 4.93% 09/09/99 15,000,000 15,001,206
---------------
54,996,816
---------------
Municipal Obligations - 3.3%
Richmond County Development Authority, Georgia .................... 5.82% 06/01/00 14,000,000 13,978,679
Virginia State Housing Develpoment Authority ...................... 5.25% 08/05/99 25,000,000 24,996,374
---------------
38,975,053
---------------
Time Deposits - 2.7%
Norwest Bank ...................................................... 5.25% 07/01/99 32,000,000 32,000,000
---------------
Asset Backed Securities - 0.6%
Fidelity Equipment Lease Trust .................................... 5.16% 05/16/00 4,399,911 4,399,912
First Sierra Receivables .......................................... 5.22% 01/12/00 3,118,425 3,118,425
--------------
7,518,337
--------------
TOTAL INVESTMENTS, at amortized cost - 99.1% 1,168,225,599
Other Assets and Liabilities (net) - 0.9% 10,698,697
--------------
TOTAL NET ASSETS - 100.0% $1,178,924,296
==============
</TABLE>
Notes to the Schedule of Investments:
* Variable rate securities - maturity dates on these securities reflect the
next interest rate reset date or, when applicable, the put date or final
maturity date. Yield to maturity for these securities is determined on the
date of the most recent interest rate change.
** On August 10, 1999, management of the Portfolio was notified that the
short-term debt ratings of General American Life Insurance Company
("GALIC") had been downgraded by certain rating agencies and management
promptly exercised the Portfolio's seven-day demand rights on the funding
agreement with GALIC scheduled to mature on March 16, 2000. Subsequently,
because of short-term liquidity problems, GALIC was placed under
administrative supervision by the Missouri Department of Insurance. On
August 17, 1999, in anticipation of a default by GALIC, the Portfolio
agreed to extend for thirty days the date for repayment of this refunding
agreement and, in consideration for such extension, received a partial
payment of $1.5 million on August 18, 1999 and an increase in the interest
rate payable on the balance outstanding. Subsequently, it was announced
that Metropolitan Life Insurance Company ("MetLife") and GenAmerican Corp.,
the parent of GALIC, had agreed to terms of a cash purchase of GenAmerican
Corp. by MetLife.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Merrimac Cash Portfolio
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (Note 1) $1,168,225,599
Cash 783,144
Interest receivable 10,029,642
Deferred organization expense (Note 1) 28,977
Prepaid assets 115,372
--------------
Total assets 1,179,182,734
--------------
Liabilities
Management fee payable (Note 2) 177,637
Other accrued expenses 80,801
--------------
Total liabilities 258,438
--------------
Net Assets Applicable to Investors' Beneficial Interests $1,178,924,296
==============
</TABLE>
Statement of Operations
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Income
Interest $ 31,521,528
------------
Expenses
Management fee (Note 2) 1,043,757
Trustee fees and expenses 23,474
Insurance 16,432
Audit and tax return preparation fees 18,780
Transaction fees 10,563
Amortization of organization expense (Note 1) 6,075
Legal 8,216
Miscellaneous 39,907
------------
Total expenses 1,167,204
------------
Net Investment Income 30,354,324
Net Realized Loss on Investments (78,871)
------------
Net Increase in Net Assets from Operations $ 30,275,453
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Merrimac Cash Portfolio
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
--------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 30,354,324 $ 56,678,458
Net realized gain (loss) on investments (78,871) 13,660
-------------- --------------
Net increase in net assets from operations 30,275,453 56,692,118
-------------- --------------
Transactions in Investors' Beneficial Interest
Contributions 3,461,630,529 3,737,889,197
Withdrawals (3,106,181,533) 4,386,229,061)
-------------- --------------
Net increase (decrease) from investors' transactions 355,448,996 (648,339,864)
-------------- --------------
Net Increase (Decrease) in Net Assets 385,724,449 (591,647,746)
Net Assets
Beginning of period 793,199,847 1,384,847,593
-------------- --------------
End of period $1,178,924,296 $ 793,199,847
============== ==============
</TABLE>
Supplementary Data
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
November 12, 1996
Six Months Ended (Commencement
June 30, 1999 Year Ended Year Ended of Operations) to
(Unaudited) December 31, 1999 December 31, 1997 December 31, 1996
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Annualized Ratios to Average Net Assets/
Supplemental Data
Net expenses 0.19% 0.15% 0.16% 0.12%
Net investment income 4.94% 5.47% 5.51% 5.45%
Net expenses, before waiver NA 0.19% 0.19% 0.21%
Net assets, end of period (000s omitted) $1,178,924 $793,200 $1,384,848 $1,006,310
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Merrimac Cash Portfolio
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
(1) Significant Accounting Policies
The Merrimac Master Portfolio (the "Portfolio Trust") is organized as a
common law trust under the laws of the State of New York and is
registered under the Investment Company Act of 1940, ("1940 Act"), as
an open-end management investment company with its principal offices in
the Cayman Islands. The Merrimac Cash Portfolio (the "Cash Portfolio"),
the Merrimac Treasury Portfolio (the "Treasury Portfolio"), the
Merrimac Treasury Plus Portfolio (the "Treasury Plus Portfolio") and
the Merrimac U.S. Government Portfolio (the "Government Portfolio" and
collectively, the "Portfolios") are separate diversified investment
series of the Portfolio Trust. Only the Cash Portfolio is 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 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 to monitor, daily, 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.
13
<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
Cash Portfolio's investment program. Investors Bank also serves as
custodian for the Portfolio Trust. Investor's Fund Services (Ireland)
Limited, a subsidiary of Investors Bank, serves as administrator. IBT
Fund Services (Canada) Inc., a subsidiary of Investors Bank, serves as
fund accounting and transfer agent. For these services, Investors Bank
and its subsidiaries are paid a monthly fee at an annual rate of 0.17%
of the average daily net assets of the Cash Portfolio.
Allmerica Asset Management, Inc. ("AAM") serves as the Cash Portfolio's
sub-adviser. For its services, AAM receives an annual fee, computed and
paid monthly by Investors Bank, based on the average net assets of the
Portfolio according to the following schedule: 0.09% on the first
$500,000,000 in assets; 0.07% on the next $500,000,000 in assets; and
0.06% on assets exceeding $1,000,000,000 of the Cash Portfolio. The
Cash Portfolio does not pay a fee directly to its sub-adviser for such
services.
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 $8,583,232,180 and $8,209,824,397 respectively for the Cash
Portfolio for the six months ended June 30, 1999.
(4) Line of Credit
The Portfolios participate in a $100 million line of credit agreement
with a group of banks. Borrowings will be made solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements.
Interest is charged to each portfolio based on its borrowings at an
amount above the Federal Funds rate. In addition, a fee computed at an
annual rate of 0.08% on the daily unused portion of the line of credit
is allocated among the Portfolios. There were no borrowings during the
period ended June 30, 1999.
14
