[MERRIMAC LOGO]
January 27, 1999
Dear Shareholder:
We are pleased to provide you with the 1998 Annual Report of the Merrimac
Series. The Merrimac Cash Series and Merrimac Treasury Series commenced
operations on June 25, 1998 and the Merrimac Short Term Asset Reserve Series
began operations on August 7, 1998. The funds are part of a master-feeder
program under which each fund invests its assets in a master portfolio having
identical investment objectives. The program is described further in the
footnotes to the enclosed financial statements.
On September 1, 1998, Allmerica Asset Management, Inc. replaced The Bank of New
York as sub-adviser for the Merrimac Cash Portfolio. We thank BNY both for their
investment management expertise since the start of the portfolio's operations in
November 1996 and for their overall support in the development of the Merrimac
products.
On January 4, 1999, Merrimac Treasury Series (and the related Merrimac Treasury
Portfolio) changed its instrument restrictions to allow for purchase of only
direct Treasury obligations, eliminating the availability of government agency
obligations as an investment alternative. Concurrent with this change, M & I
Investment Management Corp. became sub-adviser for Merrimac Treasury Portfolio,
replacing Aeltus Investment Management, Inc. We would like to thank Aeltus for
their efforts in managing the portfolio since its inception in April 1997.
We thank our shareholders for your support and participation. We look forward to
continuing to serve you in the future.
Very truly yours,
/S/ George A. Rio
George A. Rio
President
200 Clarendon Street o Boston, MA 02116
1.888.MERRMAC o Fax 617.587.4402
Merrimac Series
Distributed by:
[Funds Distributor Logo]
FUNDS DISTRIBUTOR INC.
<PAGE>
Merrimac Series
Statements of Assets and Liabilities
December 31, 1998
================================================================================
<TABLE>
<CAPTION>
Short-Term
Cash Treasury Asset Reserve
Series Series Series
-------------- --------------- --------------
<S> <C> <C> <C>
Assets
Investment in corresponding Portfolio, at value (Note 1) $ 115,928,788 $ 114,725,941 $ 1,015,161
Receivable from Custodian (Note 4) -- -- 9,912
Deferred organization expense (Note 1) 10,750 8,510 --
Prepaid expenses 6,420 10,670 4,910
-------------- --------------- --------------
Total assets 115,945,958 114,745,121 1,029,983
Liabilities
Distributions payable to shareholders 534,330 330,952 15,485
Accrued expenses 184,519 92,713 6,611
-------------- --------------- --------------
Total liabilities 718,849 423,665 22,096
-------------- --------------- --------------
Net Assets $ 115,227,109 $ 114,321,456 $ 1,007,887
============== =============== ==============
Net Assets consist of
Paid in capital $ 115,223,400 $ 114,320,187 $ 1,007,780
Accumulated net realized gain on investments 3,709 1,269 3,822
Unrealized net loss on investments -- -- (3,715)
-------------- --------------- --------------
Total net assets $ 115,227,109 $ 114,321,456 $ 1,007,887
============== =============== ==============
Total Net Assets
Premium Class $ 100,002 $ -- $ 1,007,887
============== =============== ==============
Institutional Class $ 115,127,107 $ 114,321,456 $ --
============== =============== ==============
Shares of Beneficial Interest Outstanding
Premium Class 100,000 -- 101,107
============== =============== ==============
Institutional Class 115,123,400 114,320,187 --
============== =============== ==============
Net Asset Value, Maximum Offer and Redemption Price per Share $ 1.00 $ 1.00 $ 9.97
============== =============== ==============
</TABLE>
Statements of Operations
================================================================================
<TABLE>
<CAPTION>
Short-Term
Cash Treasury Asset Reserve
Series Series Series
-------------------- ---------------------- -------------------------
For the Period For the Period For the Period
June 25, 1998 June 25, 1998 August 7, 1998
(Commencement of (Commencement of (Commencement of
Operations) Operations) Operations)
to December 31, 1998 to December 31, 1998 to December 31, 1998
-------------------- ---------------------- -------------------------
<S> <C> <C> <C>
Net Investment Income Allocated from Portfolio
(Note 1)
Interest $ 4,921,602 $ 1,708,363 $ 130,868
Expenses (160,734) (90,813) (5,864)
------------------ ----------------- ----------------
Net investment income from Portfolio 4,760,868 1,617,550 125,004
------------------ ----------------- ----------------
Fund Expenses
Accounting, transfer agency, and administration
fees (Note 4) 8,773 3,542 636
Legal 10,577 7,500 1,272
Insurance 5,342 1,300 509
Printing 3,082 1,000 636
Trustees fees and expenses 5,901 988 140
Audit and tax return preparation fees 20,545 8,000 3,521
Registration 57,321 33,000 4,944
Amortization of organization expenses (Note 1) 1,250 990 --
Miscellaneous 5,896 2,700 457
------------------ ----------------- ----------------
Total expenses common to all classes 118,687 59,020 12,115
Expense reimbursement and waiver (Note 4) -- -- 10,336
------------------ ----------------- ----------------
Net expenses 118,687 59,020 1,779
Shareholder servicing fee-Institutional Class 217,806 88,555 --
------------------ ----------------- ----------------
Total expenses 336,493 147,575 1,779
------------------ ----------------- ----------------
Net Investment Income 4,424,375 1,469,975 123,225
Net Realized Gain on Investments Allocated from
Portfolio 3,709 1,269 3,822
------------------ ----------------- ----------------
Net Unrealized Loss on Investments Allocated
from Portfolio -- -- (3,715)
------------------ ----------------- ----------------
Net Increase in Net Assets from Operations $ 4,428,084 $ 1,471,244 $ 123,332
================== ================= ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Merrimac Series
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Short-Term
Cash Treasury Asset Reserve
Series Series Series
-------------------- ---------------------- -------------------------
For the Period For the Period For the Period
June 25, 1998 June 25, 1998 August 7, 1998
(Commencement of (Commencement of (Commencement of
Operations) Operations) Operations)
to December 31, 1998 to December 31, 1998 to December 31, 1998
-------------------- ---------------------- -------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 4,424,375 $ 1,469,975 $ 123,225
Net realized gain allocated from Portfolio 3,709 1,269 3,822
Net unrealized loss allocated from Portfolio -- -- (3,715)
----------------- ----------------- ----------------
Net increase in net assets from operations 4,428,084 1,471,244 123,332
----------------- ----------------- ----------------
Dividends Declared from Net Investment Income
Premium Class (32,029) -- (123,225)
Institutional Class (4,392,346) (1,469,975) --
----------------- ----------------- ----------------
Total dividends declared (4,424,375) (1,469,975) (123,225)
----------------- ----------------- ----------------
Fund Share Transactions (Note 6)
Proceeds from shares sold 445,807,182 285,700,675 14,000,030
Proceeds from shares reinvested 18,202 -- 107,750
Payment for shares redeemed (330,701,984) (171,380,488) (13,100,000)
----------------- ----------------- ----------------
Net increase in net assets derived from
share transactions 115,123,400 114,320,187 1,007,780
----------------- ----------------- ----------------
Net increase in net assets 115,127,109 114,321,456 1,007,887
Net Assets
Beginning of period 100,000 -- --
----------------- ----------------- ----------------
End of period $ 115,227,109 $ 114,321,456 $ 1,007,887
================= ================= ================
</TABLE>
Financial Highlights
=======================================================================
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
Short-Term
Treasury Asset Reserve
Cash Series Series Series
----------------------------------- ---------------------- --------------------
For the Period For the Period For the Period
June 25, 1998 June 25, 1998 August 7, 1998
(Commencement of (Commencement of (Commencement of
Operations) Operations) Operations)
to December 31, 1998 to December 31, 1998 to December 31, 1998
----------------------------------- ---------------------- --------------------
------------------------------------ ---------------------- --------------------
Premium Class Institutional Class Institutional Class Premium Class
--------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 10.00
---------- ------------ ------------- --------------------
Net investment income 0.0275 0.0262 0.0220 0.235
Dividends from net investment income (0.0275) (0.0262) (0.0220) (0.235)
Net realized and unrealized loss on
investments -- -- -- (0.030)
------------------------------ ------------- --------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 9.97
============================== ============= ====================
Total Return (1) 5.41% 5.15% 4.31% 5.22%
Annualized Ratios to Average Net Assets/
Supplemental Data
Net expenses 0.33% 0.58% 0.67% 0.36%
Net investment income 5.28% 5.03% 4.23% 5.80%
Net expenses, before waivers and
reimbursements 0.34% 0.59% -- 1.36%
Net assets, end of period
(000s omitted) $100 $115,127 $114,321 $1,008
</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.
3
<PAGE>
Merrimac Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
The Merrimac Series (the "Trust") was 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 Series (the "Cash
Series"), the Merrimac Treasury Series (the "Treasury Series") and the
Merrimac Short-Term Asset Reserve Series (the "STAR Series") (collectively,
the "Funds") are separate diversified investment portfolios or series of
the Trust. The Funds consist of three classes of shares, the Premium Class,
the Institutional Class and the Investment Class. The Cash Series and
Treasury Series commenced operation on June 25, 1998. The STAR Series
commenced operation on August 7, 1998.
The Funds seek to achieve their investment objective by investing all of
their investable assets in the Merrimac Cash Portfolio (the "Cash
Portfolio"), the Merrimac Treasury Portfolio (the "Treasury Portfolio") and
the Standish Short-Term Asset Reserve Portfolio (the "STAR Portfolio"),
respectively. The Cash Portfolio and the Treasury Portfolio, each an
open-end investment management company and a series of the Merrimac Master
Portfolio, and the STAR Portfolio, an open-end investment company and a
subtrust of Standish Ayer & Wood Master Portfolio, are hereinafter referred
to singly as a "Portfolio," and collectively as the "Portfolios." Each Fund
has the same investment objective as the Portfolio into which it invests.
The performance of each Fund is directly affected by the performance of the
Portfolio into which it invests. Each Portfolio seeks to achieve a high
level of current income, consistent with the preservation of capital and
liquidity. The financial statements of the Portfolios are included
elsewhere in this report and should be read in conjunction with the Funds'
financial statements. At December 31, 1998, the investment by the Cash
Series, the Treasury Series and the STAR Series represent ownership of
proportionate interests of 14.6%, 100% and 0.4%, respectively, of their
corresponding portfolios.
The policies of the Cash Series and the Treasury Series are designed to
maintain a stable net asset value of $1.00 per share. The Cash Series and
the Treasury Series have adopted certain investment, valuation, dividend
and distribution policies which conform to general industry practice, to
enable them to do so. However, there is no assurance that the Cash Series
and the Treasury Series will be able to maintain a stable net asset value.
The net asset value of the STAR Series shares will fluctuate.
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The preparation
of financial statements in accordance with generally accepted accounting
principles ("GAAP") requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. Investment Security Valuations
The Funds record investments in the Portfolios at value. Valuation of
securities by the Portfolios is discussed in Note 1 of each Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
B. Securities Transactions and Income
The Portfolios record securities transactions as of the trade date.
Interest income, including the accretion of discount or the amortization of
premium, is recognized when earned. Gains or losses on sales of securities
are calculated on the identified cost basis. Each Fund's net investment
income consists of its pro rata share of the net investment income of its
corresponding Portfolio, less all expenses of the Fund determined in
accordance with GAAP.
C. Federal Income Taxes
Each 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, each 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 Cash Series and Treasury Series in connection with
their organization and initial registration are being amortized on a
straight-line basis over a five year period beginning at the commencement
of operations of each Fund.
4
<PAGE>
Merrimac Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
E. Expense Allocation
Expenses directly attributable to a Fund 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.
(2) Dividends and Distributions to Shareholders
Dividends on the shares of the Funds 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.
(3) Shareholder Servicing and Distribution Plans
The Trust has adopted Shareholder Servicing Plans with respect to the
Institutional Class and Investment Class under which certain service
organizations may be compensated for providing shareholder accounting and
other administrative services for their clients. The Institutional Class
and Investment Class may pay an annual fee of up to 0.25% of the value of
the assets that an organization services on behalf of its clients. Under a
Distribution Plan, the Investment Class may also pay an annual distribution
fee of up to 0.25% of the value of the assets that an organization invests
in the Funds on behalf of its clients. The Investment Class of each Fund,
the Premium Class of the Treasury Series and the Institutional Class of the
STAR Series have not yet commenced operations.
(4) Management Fee and Affiliated Transactions
The Cash Portfolio and Treasury Portfolio retain Investors Bank & Trust
Company ("Investors Bank") as investment adviser. Allmerica Asset
Management, Inc. ("AAM") serves as the sub-adviser to the Cash Portfolio
and Aeltus Investment Management, Inc. ("Aeltus") serves as sub-adviser to
the Treasury Portfolio. The STAR Portfolio retains Standish, Ayer & Wood,
Inc. as investment adviser. The Funds pay no direct fees for such services,
but indirectly bear their pro rata share of the compensation paid by the
Portfolios. See Note 2 of the Portfolios' Notes to Financial Statements
which are included elsewhere in this report.
Prior to September 1, 1998, The Bank of New York ("BNY") served as
sub-adviser to the Cash Portfolio. A new Sub-Adviser Agreement with AAM was
approved by the Board of Trustees at a meeting held on July 30, 1998 and by
shareholders at a meeting of shareholders held on August 28, 1998.
Investors Bank serves as administrator, custodian and transfer agent to the
Trust and provides fund accounting services to the STAR Series. IBT Fund
Services (Canada) Inc., a subsidiary of Investors Bank, provides fund
accounting services to the Cash Series and the Treasury Series. 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 Cash Series and
the Treasury Series and 0.03% of the average net assets of the STAR Series.
Investors Bank has voluntarily agreed to waive 0.02% of the average net
assets of the STAR Series. Investors Bank has voluntarily agreed to limit
the total Fund operating expenses of the STAR Series to 0.36% of the
average daily net assets.
Certain trustees and officers of the Trust are directors or officers of
Investors Bank. The Funds do not pay compensation to the trustees or
officers who are affiliated with Investors Bank.
5
<PAGE>
Merrimac Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
(5) Investment Transactions
Investments in and withdrawls from the respective Portfolios were as
follows:
<TABLE>
<CAPTION>
Cash Series Treasury Series STAR Series
-------------------- ------------------- --------------------
June 25, 1998 June 25, 1998 August 7, 1998
(Commencement of (Commencement of (Commencement of
Operations) to Operations) to Operations) to
December 31, 1998 December 31, 1998 December 31, 1998
-------------------- ------------------- --------------------
<S> <C> <C> <C>
Investments in Portfolio $ 445,925,384 $ 285,700,675 $ 14,107,780
Withdrawls from Portfolio (334,761,173) (172,593,523) (13,217,083)
</TABLE>
(6) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest having a par value of $0.001 per share.
Transactions in Fund shares for each class were as follows:
<TABLE>
<CAPTION>
Treasury STAR
Cash Series Series Series
------------------------------------- ------------------ ------------------
Premium Class Institutional Institutional Premium Class
Class Class
------------------ ----------------- ------------------ --------------------
June 25, 1998 June 25, 1998 June 25, 1998 August 7, 1998
(Commencement of (Commencement of (Commencement of (Commencement of
Operations) to Operations) to Operations) to Operations) to
December 31, 1998 December 31, 1998 December 31, 1998 December 31, 1998
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Shares sold ................ 33,618,994 412,188,188 285,700,675 1,401,014
Shares reinvested .......... -- 18,202 -- 10,779
Shares redeemed ............ (33,618,994) (297,082,990) (171,380,488) (1,310,686)
------------- -------------- ------------ ------------
Net increase in shares ..... -- 115,123,400 114,320,187 101,107
============= ============== ============= ============
</TABLE>
At December 31, 1998, Investors Bank as agent for its clients, was the
record holder of all outstanding Institutional Class shares of each Fund.
All outstanding Cash Series Premium Class shares, which represent the
initial shares sold by the Trust, were held by the Trust's distributor. If
any of the initial shares are redeemed, the amount paid by the Fund on any
redemption of the initial shares will by reduced by the pro-rata portion of
any unamortized organizational expenses of the Fund.
(7) Subsequent Events
Effective January 4, 1999, M&I Investment Management Corp. ("M&I") replaced
Aeltus as sub-adviser of the Treasury Portfolio. The new Sub-Adviser
Agreement with M&I was approved by the Board of Trustees at a meeting held
on October 26, 1998 and by shareholders at a meeting of shareholders held
on December 18, 1998.
Effective January 4, 1999, the Treasury Portfolio will only invest in
direct obligations of the U.S. Treasury. This non-fundamental investment
policy change was approved by the Board of Trustees at a meeting held on
October 26, 1998.
6
<PAGE>
Merrimac Series
Other Information (Unaudited)
- --------------------------------------------------------------------------------
MERRIMAC TREASURY SERIES SOURCES OF INCOME
The following table summarizes the percentage of income earned by the
Merrimac Treasury Series in 1998 from various obligors. It is presented to
assist Fund shareholders in preparing state tax returns.
<TABLE>
<S> <C>
U.S. Treasury Obligations 78.20%
Federal Home Loan Bank Corporation 16.98%
Student Loan Marketing Association 3.34%
Federal Farm Credit Bank 1.08%
Federal Home Loan Mortgage Corporation 0.40%
</TABLE>
SHAREHOLDER VOTING RESULTS
A special meeting of the Merrimac Cash Series shareholders was held on
August 28, 1998 at which shareholders considered one proposal. The voting
results were as follows:
To approve a new Investment Sub-Adviser Agreement between Investors Bank &
Trust Company (the "Adviser") and Allmerica Asset Management, Inc. (the
"Sub-Adviser"), with respect to the assets of the Merrimac Cash Portfolio,
a series of the Merrimac Master Portfolio:
<TABLE>
<CAPTION>
Shares Shares
Shares For Against Abstaining
---------- ------- ----------
<S> <C> <C>
0 0 207,059,045
</TABLE>
A special meeting of the Merrimac Treasury Series shareholders was held on
December 18, 1998 at which shareholders considered one proposal. The voting
results were as follows:
To approve a new Investment Sub-Adviser Agreement between Investors Bank &
Trust Company (the "Adviser") and M&I Investment Management Corp. (the
"Sub-Adviser"), with respect to the assets of the Merrimac Treasury
Portfolio, a series of the Merrimac Master Portfolio:
<TABLE>
<CAPTION>
Shares Shares
Shares For Against Abstaining
---------- ------- ----------
<S> <C> <C>
83,125,905 0 0
</TABLE>
7
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees and
Shareholders of Merrimac Series
We have audited the accompanying statements of assets and liabilities of the
Merrimac Cash Series, the Merrimac Treasury Series, and the Short-Term Asset
Reserve Series (collectively, the "Series"), the three series comprising the
Merrimac Series (the "Trust"), as of December 31, 1998, and the related
statements of operations, changes in net assets, 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 generally accepted auditing
standards. 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 each
of the Series at December 31, 1998, the results of their operations, changes in
their net assets, and their financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 18, 1999
8
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
==========================================================================================================================
Yield to Par
Security Maturity Maturity Value Value
==========================================================================================================================
<S> <C> <C> <C> <C>
Commercial Paper - 35.4%
Atlantis One Funding .......................... 5.52% 1/27/99 $ 7,500,000 $ 7,470,100
Atlantis One Funding .......................... 5.37% 3/31/99 7,500,000 7,400,431
Atlantis One Funding .......................... 5.15% 4/26/99 5,000,000 4,917,743
Barton Capital Corporation .................... 5.42% 2/19/99 10,000,000 9,926,228
Budget Funding Corporation .................... 5.40% 2/05/99 15,000,000 14,921,250
Credit Suisse First Boston .................... 5.19% 1/27/99 5,000,000 4,981,258
Equilon Enterprises LLC ....................... 5.27% 2/25/99 15,000,000 14,879,229
Frontier Corporation .......................... 5.10% 3/29/99 10,000,000 9,876,750
General Electric Capital Corporation .......... 4.94% 2/12/99 5,000,000 4,971,183
General Electric Capital Corporation .......... 5.15% 3/09/99 20,000,000 19,808,305
GTE Corporation ............................... 5.47% 2/05/99 4,500,000 4,476,069
Iowa Student Loan Liquidation Company ......... 5.60% 1/20/99 15,000,000 14,955,667
Jefferson Smurfit Financial ................... 5.44% 2/24/99 11,500,000 11,406,160
Lexington Parker Capital ...................... 5.51% 1/04/99 3,500,000 3,498,393
Liberty Lighthouse U.S. Capital .............. 5.41% 2/12/99 11,000,000 10,930,572
Morgan Stanley Dean Witter .................... 5.35% 1/22/99 14,000,000 13,956,309
Paine Webber Group ............................ 5.59-5.60% 3/15/99 30,000,000 29,659,840
Pegasus Four Limited .......................... 5.38% 1/25/99 10,000,000 9,964,133
Pegasus Four Limited .......................... 5.43% 2/26/99 12,446,000 12,340,873
Pegasus Two Limited ........................... 5.47% 1/27/99 12,000,000 11,952,593
Sharp Electronics Corporation ................. 5.48% 1/07/99 13,000,000 12,988,127
Sharp Electronics Corporation ................. 5.42% 3/03/99 10,000,000 9,908,162
Songs Fuel Company ............................ 5.02% 6/21/99 9,000,000 8,785,395
Uniao de Banco Brasilieros SA Grand Cayman .... 5.18% 4/21/99 3,000,000 2,952,517
Westways Funding I Limited .................... 5.32% 1/29/99 8,000,000 7,966,898
Westways Funding IV Limited ................... 5.46% 1/27/99 15,000,000 14,940,850
---------------
279,835,035
---------------
Variable Rate Notes - 21.2%
Bankers Trust Corporation ..................... 4.97-5.80% 1/04/99 16,000,000 15,948,201
Bear Stearns Company .......................... 5.75% 2/17/99 20,000,000 20,000,000
Beneficial Corporation ........................ 5.46% 1/12/99 5,000,000 4,998,146
Donaldson Lufkin & Jenrette ................... 5.56% 1/05/99 33,000,000 33,000,000
General American Life Insurance Company ....... 5.17% 1/04/99 30,000,000 30,000,000
Liberty Lighthouse U.S. Capital .............. 5.60% 1/19/99 5,000,000 4,997,083
Liberty Lighthouse U.S. Capital .............. 5.23% 3/09/99 14,000,000 14,000,000
Morgan Stanley Dean Witter .................... 5.30% 1/15/99 20,000,000 20,000,000
New England Educational Loan Marketing ........ 5.32% 3/08/99 7,500,000 7,500,000
Paine Webber Group ............................ 6.05% 1/21/99 13,000,000 13,000,000
Pittsburgh National Corporation ............... 4.85% 3/11/99 5,000,000 4,998,632
---------------
168,442,062
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
==========================================================================================================================
Yield to Par
Security Maturity Maturity Value Value
==========================================================================================================================
<S> <C> <C> <C> <C>
Corporate Debt - 13.6%
Aetna Services ................................ 5.66% 11/29/99 $ 10,000,000 $ 10,000,000
Bankers Trust Corporation ..................... 5.63% 7/30/99 10,000,000 10,055,813
Bear Stearns Company .......................... 5.56% 3/15/99 9,460,000 9,473,722
Bear Stearns Company .......................... 5.31% 9/15/99 1,540,000 1,564,346
Caterpillar Financial Service Corporation ..... 5.39% 7/01/99 1,000,000 1,006,802
Chemical New York Corporation ................. 5.20% 6/15/99 1,600,000 1,632,336
First Chicago NBD Corporation ................. 5.21-5.40% 7/01/99 9,000,000 9,200,576
First Union Corporation ....................... 5.20% 6/15/99 1,000,000 1,018,881
Fleet Mortgage Group .......................... 5.16-5.32% 9/15/99 6,442,000 6,499,458
Ford Motor Credit Company ..................... 5.32% 9/15/99 1,000,000 1,007,248
General Motors Acceptance Corporation ......... 5.17% 6/22/99 2,585,000 2,609,827
General Motors Acceptance Corporation ......... 4.95-5.32% 9/09/99 4,000,000 4,059,933
Household International BV .................... 5.30% 3/15/99 7,000,000 7,009,827
KeyCorp ....................................... 5.69% 4/01/99 5,680,000 5,717,044
Morgan Stanley Group .......................... 5.22% 9/01/99 1,575,000 1,598,160
Norwest Financial ............................. 5.31% 9/15/99 2,000,000 2,012,101
Salomon Brothers .............................. 5.31% 10/01/99 9,000,000 9,061,274
Sunamerica Corporation ........................ 5.21-5.29% 10/31/99 13,450,000 13,551,554
Texaco Capital Corporation .................... 5.18% 11/01/99 2,500,000 2,556,470
Travelers Property Casualty Corporation ....... 5.23% 10/01/99 5,000,000 5,036,903
Walt Disney Company ........................... 5.05% 6/21/99 3,522,000 3,541,248
------------
108,213,523
------------
Certificates of Deposit - 12.7%
Bayerische Vereinsbank New York ............... 5.21% 5/07/99 5,000,000 5,009,201
National Bank Canada NY ....................... 5.19% 2/17/99 20,000,000 20,000,259
Sanwa Bank, New York .......................... 5.99% 3/02/99 25,000,000 25,000,607
Sanwa Bank, New York .......................... 5.65% 4/05/99 5,500,000 5,500,139
Societe Generale .............................. 5.67% 2/09/99 30,000,000 29,998,463
Svenska Handelsbanken ......................... 5.30% 4/26/99 15,000,000 15,020,986
------------
100,529,655
------------
Yankee Certificates of Deposit - 10.1%
Commerzbank ................................... 5.60% 2/11/99 50,000,000 49,997,305
Credit Agricole ............................... 5.71% 2/26/99 30,000,000 29,997,795
------------
79,995,100
------------
Time Deposits - 2 8%
National City Bank ............................ 4.00% 1/04/99 22,000,000 22,000,000
------------
U.S. Government Agency Obligations - 2.0%
Federal Home Loan Bank ........................ 4.83% 2/03/99 15,000,000 15,000,000
Federal Home Loan Bank ........................ 5.11% 8/18/99 1,035,000 1,040,812
------------
16,040,812
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Merrimac Cash Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
==========================================================================================================================
Yield to Par
Security Maturity Maturity Value Value
==========================================================================================================================
<S> <C> <C> <C> <C>
Asset Backed Securities - 0.9%
First Sierra Receivables ...................... 5.21% 1/12/00 $ 7,500,000 $ 7,500,000
------------
TOTAL INVESTMENTS, at amortized cost - 98.7% 782,556,187
Other Assets and Liabilities (net) - 1.3% 10,643,660
------------
TOTAL NET ASSETS - 100.0% $793,199,847
============
</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.
11
<PAGE>
Merrimac Treasury Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
==============================================================================================================
Yield to Par
Security Maturity Maturity Value Value
==============================================================================================================
<S> <C> <C> <C> <C>
U.S. Government Obligations - 78.6%
U.S. Treasury Bill ...................................... 4.32% 1/14/99 $ 5,000,000 $ 4,992,200
U.S. Treasury Bill ...................................... 4.47-4.68% 1/21/99 23,000,000 22,941,133
U.S. Treasury Bill ...................................... 4.40% 2/04/99 20,181,000 20,097,137
U.S. Treasury Note ...................................... 4.08% 1/15/99 4,000,000 4,003,358
U.S. Treasury Note ...................................... 4.69% 1/31/99 14,000,000 14,002,496
U.S. Treasury Note ..................................... 4.36-5.03% 2/15/99 13,000,000 13,016,380
U.S. Treasury Note ...................................... 4.51% 3/31/99 5,000,000 5,020,335
U.S. Treasury Note ...................................... 4.46% 4/15/99 3,000,000 3,021,312
U.S. Treasury Note ...................................... 4.47% 4/30/99 3,000,000 3,019,448
------------
Total U.S. Government Obligations 90,113,799
------------
U.S. Government Agency Obligations - 20.7%
Student Loan Marketing Association ...................... 4.28% 1/04/99 23,788,000 23,779,516
------------
TOTAL INVESTMENTS, at amortized cost - 99.3% 113,893,315
Other Assets and Liabilities (net) - 0.7% 832,626
------------
TOTAL NET ASSETS - 100.0% $114,725,941
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Merrimac Master Portfolio
Statements of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
======================================================================================================
Cash Portfolio Treasury Portfolio
-------------------- ------------------
<S> <C> <C>
Assets
Investments, at value (Note 1) $ 782,556,187 $ 113,893,315
Cash 155,730 717
Interest receivable 10,539,721 858,458
Deferred organization expense (Note 1) 35,052 4,735
Prepaid assets 111,216 21,167
-------------------- ------------------
Total assets 793,397,906 114,778,392
-------------------- ------------------
Liabilities
Management fee payable (Note 2) 139,469 14,218
Other accrued expenses 58,590 38,233
-------------------- ------------------
Total liabilities 198,059 52,451
-------------------- ------------------
Net Assets Applicable to Investors' Beneficial Interests $ 793,199,847 $ 114,725,941
==================== ==================
</TABLE>
Statements of Operations
For the Year Ended December 31, 1998
================================================================================
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
-------------------- ------------------
<S> <C> <C>
Income
Interest $ 58,239,893 $ 2,884,352
---------------------- ------------------
Expenses
Management fee (Note 2) 1,760,305 98,068
Trustee fees and expenses 59,497 5,903
Insurance 55,995 6,720
Audit 29,054 23,393
Transaction fees 21,130 7,428
Amortization of organization expense (Note 1) 12,150 1,526
Legal 2,112 2,498
Miscellaneous 5,405 4,266
-------------------- ------------------
Total expenses 1,945,648 149,802
Less: Management fee waived (Note 2) (384,213) --
-------------------- ------------------
Net expenses 1,561,435 149,802
-------------------- ------------------
Net Investment Income 56,678,458 2,734,550
Net Realized Gain on Investments 13,660 966
-------------------- ------------------
Net Increase in Net Assets from Operations $ 56,692,118 $ 2,735,516
==================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Merrimac Master Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
==================================================================================================================================
Cash Portfolio Treasury Portfolio
----------------------------------- --------------------------------------
For the Period
April 2, 1997
Year Ended December 31, (Commencement
----------------------------------- Year Ended of Operations) to
1998 1997 December 31, 1998 December 31, 1997
----------------- -------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 56,678,458 $ 74,983,944 $ 2,734,550 $ 2,361,756
Net realized gain (loss) on investments 13,660 -- 966 (2,590)
---------------- ---------------- ------------------ ----------------
Net increase in net assets from operations 56,692,118 74,983,944 2,735,516 2,359,166
---------------- ---------------- ------------------ ----------------
Transactions in Investors'
Beneficial Interest
Contributions 3,737,889,197 2,193,287,654 360,772,130 255,362,805
Withdrawals (4,386,229,061) (1,889,734,150) (322,698,051) (183,805,625)
---------------- ---------------- ------------------ ----------------
Net increase (decrease) from investors'
transactions (648,339,864) 303,553,504 38,074,079 71,557,180
---------------- ---------------- ------------------ ----------------
Net Increase (Decrease) in Net Assets (591,647,746) 378,537,448 40,809,595 73,916,346
Net Assets
Beginning of period 1,384,847,593 1,006,310,145 73,916,346 --
================ ================ ================== ================
End of period $ 793,199,847 $ 1,384,847,593 $ 114,725,941 $ 73,916,346
================ ================ ================== ================
</TABLE>
Supplementary Data
<TABLE>
<CAPTION>
==================================================================================================================================
Cash Portfolio Treasury Portfolio
----------------------------------------- --------------------------------------
November 12, 1996 April 2, 1997
Year Ended December 31, (Commencement (Commencement
---------------------- of Operations) to Year Ended of Operations) to
1998 1997 December 31, 1996 December 31, 1998 December 31, 1997
--------- ----------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Annualized Ratios to Average Net Assets
Net expenses 0.15% 0.16% 0.12% 0.26% 0.29%
Net investment income 5.47% 5.51% 5.45% 4.74% 5.06%
Net expenses, before waiver 0.19% 0.19% 0.21% NA NA
Net assets, end of period (000s omitted) $793,200 $1,384,848 $1,006,310 $114,726 $73,916
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Merrimac Master Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 ("1940 Act"), as an open-end
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 Portfolio
Trust.
The following is a summary of significant accounting policies followed by
the Portfolio Trust in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles ("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. Each Portfolio's
use of amortized cost is subject to compliance with certain conditions
specified under Rule 2a-7 of the 1940 Act.
B. Securities Transactions and Income
Interest income consists of interest accrued and discount earned (including
both the original issue and market discount) less premium amortized on the
investments of the Portfolios, accrued ratably to the date of maturity.
Purchases, maturities and sales of money market instruments are accounted
for on the date of transaction. Expenses of the Portfolios are accrued
daily. All investment income, expenses, and realized capital gains and
losses of the Portfolios are allocated pro rata to their investors.
C. Federal Income Taxes
Each Portfolio is considered a partnership under the U.S. Internal Revenue
Code. Accordingly, no provision for federal income taxes is necessary. Each
Portfolio also intends to conduct its operations such that each investor
will be able to qualify as a regulated investment company.
D. Repurchase Agreements
It is the policy of the Cash Portfolio to require the custodian bank to
take possession of all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Cash Portfolio to monitor, on a daily basis, the market
value of the repurchase agreement's underlying investments to ensure the
existence of a proper level of collateral. The Treasury Portfolio does not
invest in repurchase agreements.
E. Deferred Organization Expense
Costs incurred by each Portfolio in connection with its organization and
initial registration are being amortized on a straight-line basis over a
five year period beginning at the commencement of operations of each
Portfolio.
15
<PAGE>
Merrimac Master Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Management Fee and Affiliated Transactions
The Portfolios retain Investors Bank & Trust Company ("Investors Bank") as
investment adviser to continuously review and monitor the Portfolios'
investment program. Allmerica Asset Management, Inc. ("AAM") serves as the
sub-adviser to the Cash Portfolio and Aeltus Investment Management, Inc.
("Aeltus") serves as sub-adviser to the Treasury Portfolio. For its
services to the Portfolios, each sub-adviser is paid a monthly fee by
Investors Bank. For its services as investment sub-adviser to the Cash
Portfolio, AAM is rendered 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. For its services as investment
sub-adviser to the Treasury Portfolio, Aeltus is paid a monthly fee by
Investors Bank computed at an annual rate of 0.08% of the average daily net
assets of the Treasury Portfolio. The Portfolios do not pay a fee directly
to either sub-adviser for such services.
Prior to September 1, 1998, The Bank of New York ("BNY") served as
sub-adviser to the Cash Portfolio. A new Sub-Adviser Agreement with AAM was
approved by the Board of Trustees at a meeting held on July 30, 1998 and by
shareholders at a meeting of shareholders held on August 28, 1998.
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 subsidiares are paid a monthly fee at an annual rate
of 0.17% of the average daily assets of the Portfolios. Investors Bank and
BNY voluntarily collectively reduced their fees by $384,213 for the Cash
Portfolio during the year ended December 31, 1998.
Certain trustees and officers of the Portfolio Trust are directors or
officers of Investors Bank. The Portfolio Trust does not pay compensation
to the trustees or officers who are affiliated with the investment adviser.
(3) Investment Transactions
Purchases and combined maturities and sales for the respective Portfolios
for the year ended December 31, 1998 were aggregated as follows:
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
----------------------- -----------------------
<S> <C> <C>
Purchases $ 47,041,977,701 $ 3,117,322,595
Combined Maturities and Sales (47,664,010,769) (2,978,683,229)
</TABLE>
(4) Subsequent Events
Effective January 4, 1999, M&I Investment Management Corp. ("M&I") replaced
Aeltus as sub-adviser of the Treasury Portfolio. The new Sub-Adviser
Agreement with M&I was approved by the Board of Trustees at a meeting held
on October 26, 1998 and by shareholders at a meeting of shareholders held
on December 18, 1998.
Effective January 4, 1999, the Treasury Portfolio will only invest in
direct obligations of the U.S. Treasury. This non-fundamental investment
policy change was approved by the Board of Trustees at a meeting held on
October 26, 1998.
16
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees and
Owners of Beneficial Interest of
Merrimac Master Portfolio
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of the Merrimac Cash Portfolio and the Merrimac
Treasury Portfolio (collectively, the "Portfolios"), the two series comprising
the Merrimac Master Portfolio (the "Portfolio Trust"), as of December 31, 1998,
and the related statements 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
Portfolio 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 generally accepted auditing
standards. 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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 financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Portfolios at December 31, 1998, the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended, and their financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 18, 1999
17
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Short-Term Asset Reserve Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
======================================================================================================================
Expected
Maturity Par Value
Security Rate (Unaudited) Maturity Value (Note 1A)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
BONDS AND NOTES -- 86.0%
Asset Backed -- 38.4%
Advanta Mortgage Loan Trust 1993-4 A1 5.500% 03/28/01 03/25/2010 $ 546,589 $ 535,615
Amresco 1997-1 B1A Non-ERISA FRN(a) 6.456% 02/28/99 03/25/2027 5,550,000 5,249,086
Auto Finance Group 1997-A A 6.350% 12/05/99 10/15/2002 2,342,740 2,351,526
BCI Home Equity 1994-1 B(a) 6.220% 02/28/99 03/29/2044 1,442,502 1,433,025
Case Equipment Loan Trust 1997-B C 6.410% 02/26/00 09/15/2004 3,978,465 3,987,790
Charming Shoppes Master Trust 1994-1 A 7.000% 04/13/99 04/15/2003 3,500,000 3,509,844
Charter Financial Corp 1994-1A 7.400% 11/20/98 10/25/2001 304,290 304,290
Chase Manhattan Auto Owner 1997-B 6.750% 03/15/01 01/15/2004 3,825,000 3,923,912
Chase Manhattan Credit Card
Master Trust 1996-3 A 7.040% 02/15/2004 5,000,000 5,193,359
Chemical Master Credit Card Trust 1995-2 A 6.230% 08/24/00 06/15/2003 5,140,000 5,215,455
Delta Funding Home Equity 1996-1 A5 7.400% 10/24/00 07/25/2013 5,000,000 5,094,531
Delta Funding Home Equity 1998-2 A3F 6.240% 10/16/06 05/15/2025 3,000,000 3,004,102
Delta Funding Home Equity Loan 1998-1 2A(a) 5.252% 03/31/99 05/25/2030 3,237,262 3,213,994
Equicredit Home Equity 1993-4 A 5.725% 02/27/01 12/15/2008 1,011,564 1,007,771
Equicredit Home Equity 1998-1 A3F 6.225% 12/12/00 12/15/2012 2,852,000 2,859,130
Green Tree Acc Corp. 1998-6 A3 5.930% 10/05/00 04/01/2009 6,050,000 6,070,752
Greentree Home Equity 1997-3 A2 6.490% 04/04/99 07/15/2028 1,323,317 1,324,971
Gulf States Auto Grantor Trust 1996-B A 6.600% 10/07/99 05/25/2003 2,385,720 2,387,956
IMC Home Equity Ln Trust 97-3 A4 6.840% 11/21/99 10/20/2013 5,000,000 5,004,688
IMC Home Equity Trust 1996-3 A3 7.270% 04/29/99 04/25/2011 2,520,792 2,523,549
Independent National Mortgage
Corp. 1998-2 A2 6.170% 04/30/01 12/25/2011 4,900,000 4,906,125
Premier Auto Trust 1997-2 A2 6.010% 11/06/1999 1,018,888 1,018,888
Standard Credit Card 1994-3 B 7.000% 04/05/99 04/07/2001 2,225,000 2,231,252
Standard Credit Card 1998-1 A6(a) 6.737% 03/31/99 03/23/2003 4,674,000 4,672,539
TMS Home Equity 1996-A5 ERISA 6.850% 10/11/99 06/15/2019 4,000,000 4,023,125
TMS Home Equity 1996-C A3 7.070% 04/19/99 12/15/2016 2,682,684 2,692,745
TMS Home Equity Trust 1996-D A1O(a) 5.851% 03/31/99 04/15/2028 2,904,962 2,885,295
TMS Home Equity Trust 1998-1 AV1(a) 5.710% 03/31/99 06/15/2029 4,102,512 4,070,461
UCFC Home Equity Loan Trust 1994-D A4 8.775% 09/08/99 02/10/2016 3,746,554 3,809,777
UCFC Home Equity Loan Trust 1996 A1 A5 6.500% 10/01/99 03/15/2016 4,000,000 4,005,000
World Omni Auto Lease 1996-A A1 ERISA 6.300% 02/28/99 06/25/2002 1,920,321 1,922,721
--------------
Total Asset Backed (Cost $100,909,568) 100,433,274
--------------
Corporate -- 39.5%
Bank Bonds -- 10.0%
Banponce Corp. 6.270% 03/04/1999 6,400,000 6,402,739
Huntington Bank 6.150% 01/07/1999 1,550,000 1,550,047
Key Corp. 8.400% 04/01/1999 5,300,000 5,339,008
MBNA Corp.(a) 5.756% 05/05/1999 3,000,000 3,001,020
MTN-MBNA American Bank 7.120% 04/12/1999 2,850,000 2,860,517
Nations Bank 5.750% 03/15/2001 2,500,000 2,521,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Short-Term Asset Reserve Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
======================================================================================================================
Expected
Maturity Par Value
Security Rate (Unaudited) Maturity Value (Note 1A)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Bank Bonds (continued)
Sovereign Bancorp 6.750% 07/01/2000 $ 4,555,000 $ 4,565,112
--------------
26,239,693
--------------
Financial -- 20.6%
American Express Centuri Bank(a) 5.644% 07/12/1999 2,500,000 2,502,800
Bear Stearns Co. 7.625% 09/15/1999 1,000,000 1,013,350
Bear Stearns Co.(a) 4.300% 01/14/1999 2,800,000 2,786,000
Beneficial Corp. 8.170% 11/09/1999 3,950,000 4,046,420
Carramerica Realty Corp. 6.625% 10/01/2000 3,050,000 3,042,406
Chrysler Corp. Medium Term Notes 5.250% 10/19/2000 2,750,000 2,732,895
CIT Group Holdings 6.250% 09/30/1999 5,000,000 5,043,600
Conseco 6.400% 06/15/2001 6,500,000 6,261,970
Dean Witter Discover(a) 4.240% 03/10/1999 2,800,000 2,753,940
Finova Financial Corp. 6.750% 03/25/1999 5,000,000 5,009,750
Goldman Sachs, Inc. 144A(a) 5.604% 01/26/1999 3,000,000 3,000,000
Household Financial Corp. 6.000% 05/08/2000 2,000,000 2,010,044
Lehman Brothers 6.330% 08/01/2000 3,000,000 2,994,990
Lehman Brothers Holding Inc. 6.000% 02/26/2001 4,000,000 3,970,459
Wellsford Residential Property REIT(a) 5.570% 03/31/99 11/24/1999 6,750,000 6,753,780
--------------
53,922,404
--------------
Industrial Bonds -- 8.9%
Chrysler Finance Corp. Senior Notes 9.500% 12/15/1999 3,000,000 3,117,660
Coca-Cola Co. 144A 6.000% 03/15/2001 4,175,000 4,217,151
COMDISCO Inc. 6.500% 06/15/2000 5,750,000 5,772,310
Cox Enterprises 144A 6.250% 08/26/1999 6,460,000 6,488,657
USA Waste Services Inc. 6.125% 07/15/2001 3,500,000 3,533,639
--------------
23,129,417
--------------
Total Corporate (Cost $103,374,695) 103,291,514
--------------
Government/Other -- 3.6%
EuroDollar -- 0.9%
St. Georges Euro(a) 6.750% 03/31/99 07/14/2000 2,285,800 2,285,800
--------------
Yankee Bonds -- 2.7%
St. Georges Bank 144A Notes 6.875% 04/01/1999 2,150,000 2,159,030
Tyco International 6.125% 06/15/2001 5,000,000 5,048,150
--------------
7,207,180
--------------
Total Government/Other (Cost $9,450,556) 9,492,980
--------------
U.S. Government Agency -- 4.5%
Pass Thru Securities -- 4.5%
FHLMC(a) 7.855% 02/01/23 02/01/2023 113,356 113,626
FHLMC Gold 5 Yr 7.000% 04/30/99 08/01/1999 1,003,167 1,008,810
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Short-Term Asset Reserve Portfolio
Schedule of Investments - December 31, 1998
<TABLE>
<CAPTION>
======================================================================================================================
Expected
Maturity Par Value
Security Rate (Unaudited) Maturity Value (Note 1A)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Pass Thru Securities (continued)
FHLMC Gold 5 Yr 8.000% 08/31/99 02/01/2000 -
07/01/2000 $ 980,108 $ 998,790
FNMA 5.920% 07/05/99 07/05/2001 5,000,000 5,013,300
FNMA 8.500% 01/31/02 12/01/2026 4,553,516 4,768,351
--------------
Total U.S. Government Agency (Cost $11,887,485) 11,902,877
--------------
TOTAL BONDS AND NOTES (COST $225,622,304) 225,120,645
--------------
SHORT-TERM INVESTMENTS -- 13.1%
Commercial Paper -- 7.7%
Cummings Engine Corp. 0.000% 02/19/99 7,300,000 7,224,078
Browning Ferris Corp. 6.200% 01/14/99 5,000,000 4,950,917
Ciesco 5.350% 02/04/99 5,000,000 4,972,507
Occidental Petroleum 6.150% 01/04/99 3,000,000 2,984,112
--------------
20,131,614
--------------
U.S. Government Agency -- 4.7%
FHMLC Discount Notes 4.980% 01/08/99 1,650,000 1,649,093
FNMA Discount Notes 4.800% 01/07/99 1,000,000 999,590
FHLB Discount Notes 4.250% 01/07/99 9,800,000 9,789,996
--------------
12,438,679
--------------
Repurchase Agreements -- 0.7%
Prudential-Bache Repurchase Agreement, dated 12/31/98, due 1/4/99, with a
maturity value of $1,713,148 and an effective yield of 3.95%, collateralized by
a U.S. Government Agency Obligation with a rate of 7.685%, a maturity date of
12/1/24 and a market value of $1,746,704. 1,712,397
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $34,299,874) 34,282,690
--------------
TOTAL INVESTMENTS -- 99.1% (Cost $259,922,178) $ 259,403,335
Other Assets, Less Liabilities-- 0.9% 2,335,085
==============
NET ASSETS -- 100% $ 261,738,420
==============
</TABLE>
Notes to the Schedule of Investments:
144A - Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration.
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
REIT - Real Estate Investment Trust
(a) Variable Rate Security; rate indicated is as of 12/31/98.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Short-Term Asset Reserve Portfolio
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
============================================================================================
<S> <C> <C>
Assets
Investments, at value (Note 1A) (identified cost, $259,922,178) $259,403,335
Interest and dividends receivable 2,277,529
Reclaim receivable 78,507
Deferred organization costs (Note 1E) 8,097
Prepaid expenses 1,992
------------
Total assets 261,769,460
------------
Liabilities
Accrued accounting and custody fees $10,017
Accrued trustees' fees and expenses (Note 2) 4,490
Accrued expenses and other liabilities 16,533
-------
Total liabilities 31,040
------------
Net Assets (applicable to investors' beneficial interests) $261,738,420
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Short-Term Asset Reserve Portfolio
Statement of Operations
For the period January 2, 1998
(commencement of operations) to
December 31, 1998
<TABLE>
<CAPTION>
==============================================================================================
<S> <C> <C>
Investment Income (Note 1C)
Interest income $ 17,434,018
-------------
Total income 17,434,018
Expenses
Investment advisory fee (Note 2) $ 709,540
Accounting and custody fees 121,516
Legal and audit services 27,429
Trustees' fees and expenses (Note 2) 17,152
Insurance expense 6,294
Amortization of organization expense (Note 1E) 2,017
Miscellaneous 800
----------
Total expenses 884,748
-------------
Net investment income 16,549,270
-------------
Realized and Unrealized Gain (Loss)
Net realized gain
Investment securities transactions 67,070
----------
Net realized gain 67,070
Change in unrealized appreciation (depreciation)
Investment securities (632,740)
----------
Change in net unrealized appreciation (depreciation) (632,740)
-------------
Net realized and unrealized loss (565,670)
-------------
Net Increase in Net Assets from Operations $ 15,983,600
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Short-Term Asset Reserve Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
=====================================================================================================
For the Period
January 2, 1998
(commencement of operations)
December 31, 1998
-------------------------------
<S> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 16,549,270
Net realized gain 67,070
Change in net unrealized appreciation (depreciation) (632,740)
--------------
Net increase in Net Assets from Investment
Operations 15,983,600
--------------
Capital Transactions
Assets contributed by Standish Short Term Asset
Reserve Fund at commencement (including
unrealized appreciation of $113,897) 248,286,826
Contributions 305,080,235
Withdrawals (307,612,241)
--------------
Increase in Net Assets resulting from
capital transactions 245,754,820
--------------
Total Increase in Net Assets 261,738,420
Net Assets
At beginning of period --
--------------
At end of period $ 261,738,420
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Short-Term Asset Reserve Portfolio
Supplemental Data
<TABLE>
<CAPTION>
===================================================================================================
For the period
January 2, 1998
(commencement of operations)
December 31, 1998
----------------------------
<S> <C>
Ratios:
Expenses (to average daily net assets) 0.31%+
Net investment income (to average daily net assets) 5.83%+
Portfolio Turnover 113%
Net assets, end of period (000s omitted) $261,738
</TABLE>
- ------------------------------
+ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Short-Term Asset Reserve Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Account Policies:
Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of
1940, as amended as an open-end, management investment company. Standish
Short-Term Asset Reserve Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
On January 2, 1998 the Short-Term Asset Reserve Fund contributed
substantially all of its investable assets to the Portfolio. At December
31, 1998 there were two funds invested in the Portfolio. The value of each
Fund's investment in the Portfolio reflects the Funds' proportionate
interest in the net assets of the Portfolio. The proportionate interest at
December 31, 1998 of the Standish Short-Term Asset Reserve Fund and the
Merrimac Short-Term Asset Reserve Series were approximately 99.6% and 0.4%,
respectively.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Securities
(including restricted securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost. If the Portfolio
acquires a short-term instrument with more than sixty days remaining to its
maturity, it is valued at current market value until the sixtieth day prior
to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-date period
that amortized cost does not represent fair value.
B. Repurchase agreements
It is the policy of the Portfolio to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System, or to have segregated within the custodian bank's vault, all
securities held as collaterial in support of repurchase agreement
investments. Additionally, procedures have been established by the
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.
C. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount on long-term debt securities when required
for federal income tax purposes. Realized gains and losses from securities
sold are recorded on the identified cost basis.
25
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Short-Term Asset Reserve Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
D. Income Taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them. The Portfolio allocates
at least annually among its investors each investor's distributive share of
the Portfolio's net investment income, net realized capital gains, and any
other items of income, gain, loss deduction or credit.
E. Deferred Organizational Expenses
Costs incurred by the Portfolio in connectionw with its organiation and
initial registration are being amortized on a straight-line basis through
January 2003.
(2) Investment Advisory Fee:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory services is paid monthly at the annual rate
of 0.25% of the Portfolio's average daily net assets. The Portfolio Trust
pays no compensation directly to its trustees who are affiliated with SA&W
or to its officers, all of whom receive remuneration for their services to
the Portfolio Trust from SA&W. Certain of the trustees and officers of the
Portfolio Trust are directors or officers of SA&W.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
U.S. Government Securities ..................... $128,744,468 $104,806,778
============ ============
Investments (non-U.S. Government Securities) ... $233,419,802 $101,952,506
============ ============
</TABLE>
(4) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at December 31, 1998, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost .................................... $259,922,178
============
Gross unrealized appreciation ..................... 438,305
Gross unrealized depreciation ..................... (957,148)
------------
Net unrealized depreciation ....................... $ (518,843)
============
</TABLE>
26
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Short-Term Asset Reserve Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these instruments are set forth more fully in Parts
A & B of the Master Portfolio registration statement.
The Portfolio trades the following financial instruments with off-balance
sheet risk:
Options
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Portfolio may use options to hedge against risks of
market exposure and changes in security prices, as well as to seek to
enhance returns. Writing puts and buying calls tend to increase the
Portfolio's exposure to the underlying instrument. Buying puts and writing
calls tend to decrease the Portfolio's exposure to the underlying
instrument, or hedge other Portfolio investments. Options, both held and
written by the Portfolio, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face amount at value
of any open purchased option is shown in the Schedule of Investments. This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market, or if the
counterparties do not perform under the contracts terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option purchased by the Portfolio is exercised, the premium
reduces the cost basis of the securities purchased by the Portfolio. The
Portfolio, as a writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a result
bears the market risk of an unfavorable change in the price of the security
underlying the written option. There were no outstanding written option
contracts at December 31, 1998.
27
<PAGE>
Independent Auditors' Report
To the Trustees of Standish, Ayer & Wood Master Portfolio and Investors of
Standish Short-Term Asset Reserve Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplemental data present fairly, in all material
respects, the financial position of Standish Short-Term Asset Reserve Portfolio,
at December 31, 1998, the results of its operations, the changes in its net
assets and the supplemental data for the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and supplemental data (herein referred to as "financial statements")
are the responsibility of the Portfolio's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998, by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
28
