[MERRIMAC LOGO]
MERRIMAC CASH FUND
Annual Report
December 31, 1999
<PAGE>
January 26, 2000
Dear Shareholder:
We are pleased to provide you with the 1999 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.
The Premium Class of the Merrimac Cash Fund had a total return of 5.26% for the
year, making it one of the top performing institutional money market funds in
1999. We commend Allmerica Asset Management, Inc., sub-adviser of Merrimac Cash
Portfolio, for achieving excellent investment results for the year.
We thank our shareholders 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
<PAGE>
Merrimac Cash Fund
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
Assets
Investment in Merrimac Cash Portfolio, at value (Note 1) $815,612,605
Deferred organization expense (Note 1) 25,874
Prepaid expenses 12,268
-------------
Total assets 815,650,747
-------------
Liabilities
Distributions payable to shareholders 3,833,422
Accrued expenses 26,878
-------------
Total liabilities 3,860,300
-------------
Net Assets $811,790,447
=============
Net Assets Consist of
Paid in capital $811,896,618
Accumulated net realized loss on investments (106,171)
-------------
Total net assets $811,790,447
=============
Total Net Assets
Premium Class $808,102,719
=============
Institutional Class $ 3,687,728
=============
Shares of Beneficial Interest Outstanding
Premium Class 808,207,876
=============
Institutional Class 3,688,742
=============
Net Asset Value, Maximum Offer and Redemption Price per Share $ 1.00
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Fund
Statement of Operations
For the Year Ended December 31, 1999
================================================================================
<TABLE>
<S> <C>
Net Investment Income Allocated from Portfolio (Note 1)
Interest $51,791,632
Expenses (1,871,779)
------------
Net investment income from Portfolio 49,919,853
------------
Fund Expenses
Accounting, transfer agency, and administration fees (Note 4) 97,092
Legal 9,495
Insurance 12,343
Trustees fees and expenses 6,646
Audit and tax return preparation fees 14,242
Printing 6,646
Amortization of organization expenses (Note 1) 13,501
Miscellaneous 6,646
------------
Total expenses common to all classes 166,611
Shareholder servicing fee-Institutional Class 18,422
------------
Total expenses 185,033
------------
Net Investment Income 49,734,820
Net Realized Loss on Investments from Portfolio (115,927)
------------
Net Increase in Net Assets from Operations $49,618,893
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Fund
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1999 1998
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 49,734,820 $ 49,643,646
Net realized gain (loss) from Portfolio (115,927) 9,756
----------------- ----------------
Net increase in net assets from operations 49,618,893 49,653,402
----------------- ----------------
Dividends Declared from Net Investment Income
Premium Class (49,374,483) (44,674,176)
Institutional Class (360,337) (4,969,470)
----------------- ----------------
Total dividends declared (49,734,820) (49,643,646)
----------------- ----------------
Fund Share Transactions (Note 7)
Proceeds from shares sold 4,432,656,104 3,205,476,292
Proceeds from dividends reinvested 22,732,585 6,112,095
Payment for shares redeemed (4,308,386,105) (3,864,677,195)
----------------- ----------------
Net increase (decrease) in net assets derived from share transactions 147,002,584 (653,088,808)
----------------- ----------------
Net increase (decrease) in net assets 146,886,657 (653,079,052)
Net Assets
Beginning of period 664,903,790 1,317,982,842
----------------- ----------------
End of period $ 811,790,447 $ 664,903,790
================= ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<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
------------------------------------------------------
Nov. 12, 1996
Year Ended December 31, (Commencement
---------------------------------- of Operations) to
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 0.051 0.055 0.055 0.006
Dividends from net investment income (0.051) (0.055) (0.055) (0.006)
--------- --------- ------------ ---------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ============ =========
Total Return (1) 5.26% 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 5.13% 5.46% 5.49% 5.42%
Net expenses, before waiver NA 0.20% 0.21% 0.24%
Net assets, end of period (000s omitted) $808,103 $655,049 $1,119,556 $875,936
<CAPTION>
Institutional Class
------------------------------------------------------
Nov. 12, 1996
Year Ended December 31, (Commencement
---------------------------------- of Operations) to
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 0.049 0.052 0.052 0.006
Dividends from net investment income (0.049) (0.052) (0.052) (0.006)
-------- --------- ---------- ---------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ $1.00
======== ========= ========== =========
Total Return (1) 4.99% 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 4.88% 5.21% 5.24% 5.17%
Net expenses, before waiver NA 0.45% 0.46% 0.49%
Net assets, end of period (000s omitted) $3,688 $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.
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 December 31, 1999 the investment by the
Fund represents ownership of a proportionate interest of 75.4% 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 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 a Fund of the Trust are charged to
that Fund. Expenses not directly attributable to a specific Fund are
allocated, based on relative net assets, to each of the funds in the
Trust.
(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.
<PAGE>
Merrimac Cash Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 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 December 31, 1999 aggregated
$4,455,388,689 and $4,358,049,834 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
---------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Proceeds from shares sold.......... 4,383,441,069 2,762,456,356 49,215,035 443,019,936
Proceeds from shares reinvested.... 22,344,032 5,086,657 388,553 1,025,438
Payment for shares redeemed........ (4,252,614,441) (3,232,061,975) 55,771,664) 632,615,220)
-------------------------------------------------------------
Net increase (decrease) in shares.. 153,170,660 (464,518,962) (6,168,076) 188,569,846)
=============================================================
</TABLE>
At December 31, 1999, Investors Bank, as agent for its clients, and
affiliates of AAM were record holders of 39% and 45%, respectively, of
the outstanding Premium Class shares of the Fund.
(7) Federal Tax Information
At December 31, 1999, the Cash Fund had $111,232 available as capital
loss carryforwards, which expire in 2007.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees and
Shareholders of Merrimac Funds
We have audited the accompanying statement of assets and liabilities of the
Merrimac Cash Fund (the "Fund"), a series of the Merrimac Funds (the "Trust"),
as of December 31, 1999, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund at December 31, 1999, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the periods indicated
therein, in conformity with accounting principles accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2000
7
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - December 31, 1999
================================================================================
<TABLE>
<CAPTION>
Yield to Par
Security Maturity Maturity Value Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Variable Rate Notes* - 36.9%
Barclays Bank PLC New York 5.64% 01/03/00 $10,000,000 $ 9,997,879
Bear Stearns Companies, Inc. 5.28-5.75% 01/03/00 27,000,000 27,000,000
Bear Stearns Companies, Inc. 6.33% 01/10/00 15,000,000 15,000,000
CIC Group 5.82% 01/03/00 35,000,000 34,996,000
Citigroup, Inc. 6.11% 02/15/00 5,000,000 5,000,100
Comerica Bank 5.66% 01/03/00 5,000,000 4,993,358
Comerica Bank 6.53% 01/25/00 15,000,000 14,997,116
Countrywide Home Loans 6.22% 02/25/00 10,100,000 10,100,986
Countrywide Home Loans 6.62% 03/08/00 15,000,000 15,013,165
First Union Corporation 5.87% 01/03/00 34,000,000 34,010,190
Goldman Sachs Group 5.79% 01/03/00 10,000,000 10,000,000
Goldman Sachs Group 6.27% 01/13/00 8,000,000 7,999,942
GTE Corporation 6.16% 03/13/00 25,000,000 24,992,754
Heller Financial, Inc. 5.90% 01/03/00 35,000,000 34,988,943
Jackson National Life Insurance Company Funding Agreement *** 6.21% 01/03/00 40,000,000 40,000,000
Morgan Stanley, Dean Witter & Co. 6.49% 03/01/00 4,000,000 4,002,298
PaineWebber Group, Inc. 6.64% 01/12/00 20,000,000 20,000,000
Prudential Funding 6.24% 01/24/00 10,000,000 9,997,479
Sigma Finance, Inc. 5.78% 01/03/00 25,000,000 25,000,000
Strategic Money Market Trust 6.27% 03/15/00 11,500,000 11,500,000
Textron Financial Corporation 5.92% 01/03/00 40,000,000 40,000,000
---------------
399,590,210
---------------
Commercial Paper - 27.2%
Aetna Services 5.91% 03/06/00 25,000,000 24,733,230
Block Financial Corporation 6.17-6.20% 01/31/00 15,000,000 14,922,624
Block Financial Corporation 6.15% 02/22/00 15,000,000 14,866,750
Computer Sciences Corporation 6.50% 02/11/00 24,000,000 23,822,333
Fairway Finance Corporation 5.84% 03/09/00 20,000,000 19,779,377
Invensys PLC 5.65% 02/07/00 25,000,000 24,854,826.
Lehman Brothers Holdings 5.58% 02/14/00 25,000,000 24,829,500
Lehman Brothers Holdings 5.75% 03/27/00 20,000,000 19,725,277
Mass College of Pharmacy and Allied Health Sciences 5.85% 05/09/00 8,911,000 8,724,203
Omnicom Finance, Inc. 6.43% 01/21/00 30,000,000 29,892,833
Swiss Re Financial Products 5.80% 02/18/00 38,000,000 37,706,133
Swiss Re Financial Products 5.80% 03/01/00 10,302,000 10,202,414
Vodafone AirTouch Plc. 5.85% 02/07/00 40,000,000 39,759,500
---------------
293,819,000
---------------
Corporate Debt - 17.0%
Allergan, Inc. 5.93% 04/03/00 12,500,000 12,502,181
AT&T Capital Corporation 5.16% 01/21/00 7,500,000 7,505,610
BankBoston Corporation 6.11% 08/11/00 5,310,000 5,318,232
Bear Stearns Companies, Inc. 5.52% 06/20/00 3,000,000 3,014,200
Chrysler Financial 6.49% 01/26/01 6,800,000 6,758,190
Countrywide Credit Industries, Inc. 6.36% 10/23/00 6,000,000 6,002,864
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - December 31, 1999
================================================================================
<TABLE>
<CAPTION>
Yield to Par
Security Maturity Maturity Value Value
===============================================================================================================================
<S> <C> <C> <C> <C>
E.I. du Pont de Nemours and Company 6.09% 08/29/00 $5,000,000 $ 5,017,102
Fleet Mortgage Group 5.37% 05/11/00 5,000,000 5,015,351
Ford Motor Company 6.49% 01/24/01 5,000,000 4,964,831
Ford Motor Company 6.42% 01/25/01 5,000,000 4,965,450
General Motors Acceptance Corporation 6.02% 04/06/00 3,000,000 2,998,694
General Motors Acceptance Corporation 6.16% 05/24/00 9,700,000 9,718,333
Goldman Sachs Group 5.17% 02/07/00 20,000,000 20,000,000
International Lease Finance Corporation 6.02% 02/01/00 4,000,000 4,000,059
Key Bank NA 5.17% 03/24/00 10,000,000 9,999,018
Landesbank Baden-Wuerttemberg 6.29% 08/08/00 10,770,000 10,798,543
Lehman Brothers Holdings 6.60% 10/10/00 5,000,000 5,010,611
Pacific Telesis Group 5.79% 05/01/00 4,169,000 4,153,362
PaineWebber Group, Inc. 5.58% 03/01/00 15,730,000 15,764,729
PaineWebber Group, Inc. 6.03% 05/30/00 3,000,000 3,000,653
PaineWebber Group, Inc. 6.50% 08/09/00 5,050,000 5,073,958
Prudential Funding 5.27% 04/20/00 10,000,000 10,019,266
Sears, Roebuck & Co. 5.75% 07/17/00 5,000,000 5,013,149
Sigma Finance, Inc. 5.24% 03/01/00 10,000,000 10,000,000
Volkswagen AG 5.77% 07/13/00 7,000,000 6,996,310
---------------
183,610,696
---------------
Certificates of Deposit - 13.1%
Abbey National Treasury Services Plc.** 5.80% 01/31/00 25,000,000 25,009,435
Bank of Austria** 5.75% 02/14/00 10,000,000 10,001,688
Commerzbank AG 5.19% 02/25/00 10,000,000 9,999,566
Deutsche Bank NY** 5.74% 03/10/00 10,000,000 10,000,826
European American Bank 5.31% 05/12/00 10,000,000 9,998,957
Merita Bank PLC 5.20% 02/07/00 20,000,000 20,000,000
National Bank of Canada NY 6.17% 11/22/00 22,000,000 21,986,878
Wilmington Trust Company 6.08% 10/02/00 35,000,000 34,979,841
---------------
141,977,191
---------------
Variable Rate Municipal Obligations* - 2.6%
Illinois Student Assistance Commission 6.50% 01/05/00 20,000,000 20,000,000
Memphis Center City Revenue Financing 7.75% 01/06/00 8,000,000 8,000,000
---------------
28,000,000
---------------
Municipal Obligations - 2.2%
Los Angeles County Metropolitan Transportation Authority 6.33% 02/09/00 9,500,000 9,498,995
Richmond County Development Authority, Georgia 5.65% 06/01/00 14,000,000 13,990,356
---------------
23,489,351
---------------
Asset Backed Securities - 1.1%
Case Equipment Loan Trust 99-B A1 5.67% 09/15/00 3,146,814 3,146,814
Copelco Capital Funding Corporation 5.94% 10/18/00 7,477,919 7,477,920
Fidelity Equipment Lease Trust 5.16% 05/16/00 1,514,163 1,514,163
---------------
12,138,897
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - December 31, 1999
================================================================================
<TABLE>
<CAPTION>
Yield to Par
Security Maturity Maturity Value Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Time Deposits - 4.5%
State Street Bank & Trust Company 4.50% 01/03/00 $49,000,000 $ 49,000,000
---------------
TOTAL INVESTMENTS, at amortized cost - 104.6% 1,131,625,345
Other Assets and Liabilities (net) - (4.6%) (50,132,036)
---------------
TOTAL NET ASSETS - 100.0% $1,081,493,309
===============
</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 final maturity date.
Yield to maturity for these securities is determined on the date of the
most recent interest rate change.
** Forward commitment
*** Illiquid security
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
Assets
Investments, at value (Note 1) $1,131,625,345
Cash 592,956
Interest receivable 9,575,199
Deferred organization expense (Note 1) 22,902
Prepaid assets 27,545
---------------
Total assets 1,141,843,947
---------------
Liabilities
Management fee payable (Note 2) 153,957
Payable for securities purchased 60,132,146
Other accrued expenses 64,535
---------------
Total liabilities 60,350,638
---------------
Net Assets Applicable to Investors' Beneficial Interests $1,081,493,309
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Statement of Operations
For the Year Ended December 31, 1999
================================================================================
<TABLE>
<S> <C>
Income
Interest $66,351,698
------------
Expenses
Management fee (Note 2) 2,117,982
Trustee fees and expenses 42,801
Insurance 32,101
Audit and tax return preparation fees 34,046
Transaction fees 14,591
Amortization of organization expense (Note 1) 12,150
Legal 69,066
Miscellaneous 74,902
------------
Total expenses 2,397,639
------------
Net Investment Income 63,954,059
Net Realized Loss on Investments (144,611)
------------
Net Increase in Net Assets from Operations $63,809,448
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1999 1998
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 63,954,059 $ 56,678,458
Net realized gain (loss) on investments (144,611) 13,660
---------------- ----------------
Net increase in net assets from operations 63,809,448 56,692,118
---------------- ----------------
Transactions in Investors' Beneficial Interest
Contributions 6,036,333,627 3,737,889,197
Withdrawals (5,811,849,613) (4,386,229,061)
---------------- ----------------
Net increase (decrease) from investors' transactions 224,484,014 (648,339,864)
---------------- ----------------
Net Increase (Decrease) in Net Assets 288,293,462 (591,647,746)
Net Assets
Beginning of period 793,199,847 1,384,847,593
---------------- ----------------
End of period $ 1,081,493,309 $ 793,199,847
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Supplementary Data
================================================================================
<TABLE>
<CAPTION>
For the Period
November 12, 1996
Year Ended December 31, (Commencement
--------------------------------------------- of Operations) to
1999 1998 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 5.14% 5.47% 5.51% 5.45%
Net expenses, before waiver NA 0.19% 0.19% 0.21%
Net assets, end of period (000s omitted) $1,081,493 $793,200 $1,384,848 $1,006,310
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Cash Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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. Forward Commitments
The Cash Portfolio may enter into contracts to purchase securities for
a fixed price at a specified future date beyond customary settlement
time ("forward commitments"). If the Cash Portfolio does so, it will
maintain cash or other liquid obligations having a value in an amount
at all times sufficient to meet the purchase price. Forward commitments
involve risk of loss if the value of the security to be purchased
declines prior to the settlement date. Although the Cash Portfolio
generally will enter into forward commitments with the intention of
acquiring the securities for their portfolio, it may dispose of a
commitment prior to settlement if their Sub-Adviser deems it
appropriate to do so.
E. 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.
F. 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.
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Merrimac Cash Portfolio
Notes to Financial Statements
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(2) Management Fee and Affiliated Transactions
The Cash Portfolio retains Investors Bank & Trust Company ("Investors
Bank") as investment adviser to continuously review and monitor its
investment program. Investors Bank also 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 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 $22,165,036,104 and $21,835,139,771 respectively for the
Cash Portfolio for the year ended December 31, 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
year ended December 31, 1999.
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Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees
Merrimac Master Portfolio and Owners of Beneficial Interest of
Merrimac Cash Portfolio
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Merrimac Cash Portfolio (the "Portfolio"),
one of the series comprising the Merrimac Master Portfolio (the "Trust"), as of
December 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the supplementary data for each of the periods indicated
therein. These financial statements and supplementary data are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and supplementary data based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and supplementary data. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian and brokers, or other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of the
Portfolio at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its supplementary data for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2000
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