<PAGE>
[LOGO]
MERRIMAC SERIES
Semi-Annual Report
June 30, 2000
<PAGE>
[LOGO]
August 14, 2000
Dear Shareholder:
We are please to provide you with the Semi Annual Report of the Merrimac
Series as of June 30, 2000. The funds are part of a master-feeder structure
under which each fund invests its assets in a master portfolio having identical
objectives. The fund structure is described further in the footnotes to the
enclosed financial statements.
Since June 30, 1999, the Federal Reserve's Open Market Committee has raised
short-term interest rate targets six times, including a 50 basis point increase
in mid May of this year. As noted in the financial results of our funds
reflected in the enclosed financial statements, our sub-advisers, Allmerica
Asset Management, Inc. and M & I Investment Management Corp., have responded to
the challenges of the rate environment and continue to provide our shareholders
highly commendable results.
We thank you, 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
<PAGE>
MERRIMAC SERIES
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Treasury Treasury Plus U.S. Government
Series Series Series Series
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets
Investment in corresponding
Portfolio, at value (Note 1) $318,363,372 $214,254,098 $224,703,906 $143,399,864
Deferred organization expense (Note 1) 8,531 6,380 -- --
Prepaid expenses 7,116 11,413 12,768 7,004
------------ ------------ ------------ ------------
Total assets 318,379,019 214,271,891 224,716,674 143,406,868
------------ ------------ ------------ ------------
Liabilities
Distributions payable to
shareholders 1,988,971 1,059,292 1,224,482 747,829
Accrued expenses 291,442 212,686 190,932 115,569
------------ ------------ ------------ ------------
Total liabilities 2,280,413 1,271,978 1,415,414 863,398
------------ ------------ ------------ ------------
Net Assets $316,098,606 $212,999,913 $223,301,260 $142,543,470
============ ============ ============ ============
Net Assets consist of
Paid in capital $316,140,589 212,995,137 223,301,326 142,548,336
Accumulated net realized gain
(loss) on investments (41,983) 4,776 (66) (4,866)
------------ ------------ ------------ ------------
Total net assets $316,098,606 $212,999,913 $223,301,260 $142,543,470
============ ============ ============ ============
Total Net Assets
Premium Class $ 29,495,593 $ 32,325,005 $ 8,742,835 $ 50,015
============ ============ ============ ============
Institutional Class $286,603,013 $180,674,908 $214,558,425 $142,493,455
============ ============ ============ ============
Shares of Beneficial Interest
Outstanding
Premium Class 29,499,510 32,323,804 8,742,835 50,017
============ ============ ============ ============
Institutional Class 286,641,079 180,668,194 214,558,491 142,498,319
============ ============ ============ ============
Net Asset Value, Maximum Offer and
Redemption Price per Share $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MERRIMAC SERIES
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Treasury Treasury Plus U.S. Government
Series Series Series Series
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Investment Income Allocated from
Portfolio (Note 1)
Interest and dividends $ 11,243,849 $ 7,000,975 $ 6,888,768 $ 4,500,383
Expenses (338,395) (259,180) (241,229) (161,560)
------------ ------------ ------------ ------------
Net investment income from Portfolio 10,905,454 6,741,795 6,647,539 4,338,823
------------ ------------ ------------ ------------
Fund Expenses
Accounting, transfer agency, and
administration fees (Note 4) 17,749 12,438 11,678 7,464
Legal 2,749 3,355 4,165 3,471
Insurance 1,100 1,677 1,250 1,488
Printing 4,124 3,355 3,749 2,479
Trustees fees and expenses 2,200 1,677 2,083 992
Audit and tax return preparation fees 4,124 5,591 4,998 4,959
Registration 25,460 13,849 8,997 11,234
Amortization of organization expenses
(Note 1) 1,320 1,070 -- --
Miscellaneous 2,749 6,709 4,997 2,481
------------ ------------ ------------ ------------
Total expenses common to all classes 61,575 49,721 41,917 34,568
Shareholder servicing
fee-Institutional Class 340,562 273,770 289,759 186,160
------------ ------------ ------------ ------------
Total expenses 402,137 323,491 331,676 220,728
------------ ------------ ------------ ------------
Net Investment Income 10,503,317 6,418,304 6,315,863 4,118,095
Net Realized Gain (Loss) on
Investments Allocated from Portfolio (17,807) 7,139 -- (5,872)
------------ ------------ ------------ ------------
Net Increase in Net Assets from
Operations $ 10,485,510 $ 6,425,443 $ 6,315,863 $ 4,112,223
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MERRIMAC SERIES
STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cash Series Treasury Series
--------------------------------------- ----------------------------------------
Six Months Ended Six Months Ended
June 30, 2000 For the Year Ended June 30, 1999 For the Year Ended
(Unaudited) December 31, 1999 (Unaudited) December 31, 1999
---------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 10,503,317 $ 12,842,025 $ 6,418,304 $ 7,486,005
Net realized gain (loss)
allocated from Portfolio (17,807) (27,885) 7,139 (3,632)
--------------- --------------- --------------- ---------------
Net increase in net assets
from operations 10,485,510 12,814,140 6,425,443 7,482,373
--------------- -------------- --------------- ---------------
Dividends Declared from Net
Investment Income
Premium Class (2,585,010) (1,118,490) (796,086) (1,163,077)
Institutional Class (7,918,307) (11,723,535) (5,622,218) (6,322,928)
--------------- --------------- --------------- ---------------
Total dividends declared (10,503,317) (12,842,025) (6,418,304) (7,486,005)
--------------- --------------- --------------- ---------------
Fund Share Transactions (Note 6)
Proceeds from shares sold 1,208,267,779 1,531,856,638 436,590,764 695,212,525
Proceeds from dividends
reinvested 1,654,209 549,246 -- --
Payment for shares redeemed (1,154,834,948) (1,386,575,735) (402,127,704) (631,000,635)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net
assets derived from share
transactions 55,087,040 145,830,149 34,463,060 64,211,890
--------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets 55,069,233 145,802,264 34,470,199 64,208,258
Net Assets
Beginning of period 261,029,373 115,227,109 178,529,714 114,321,456
--------------- --------------- --------------- ---------------
End of period $ 316,098,606 $ 261,029,373 $ 212,999,913 $ 178,529,714
=============== =============== =============== ===============
<CAPTION>
Treasury Plus Series U.S. Government Series
---------------------------------------- -------------------------------------
For the period For the period
January 22, 1999 June 29, 1999
Six Months Ended (Commencement of Six Months Ended (Commencement of
June 30, 2000 Operations) June 30, 2000 Operations)
(Unaudited) to December 31, 1999 (Unaudited) to December 31, 1999
---------------- -------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 6,315,863 $ 10,416,028 $ 4,118,095 $ 3,478,499
Net realized gain (loss)
allocated from Portfolio -- (66) (5,872) 1,006
--------------- --------------- --------------- ---------------
Net increase in net assets
from operations 6,315,863 10,415,962 4,112,223 3,479,505
--------------- --------------- --------------- ---------------
Dividends Declared from Net
Investment Income
Premium Class (24,879) -- (496) --
Institutional Class (6,290,984) (10,416,028) (4,117,599) (3,478,499)
--------------- --------------- --------------- ---------------
Total dividends declared (6,315,863) (10,416,028) (4,118,095) (3,478,499)
--------------- --------------- --------------- ---------------
Fund Share Transactions (Note 6)
Proceeds from shares sold 584,287,614 1,227,975,120 465,631,184 697,418,162
Proceeds from dividends
reinvested 4,751 -- -- --
Payment for shares redeemed (642,603,808) (946,362,351) (453,768,577) (566,732,433)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net
assets derived from share
transactions (58,311,443) 281,612,769 11,862,607 130,685,729
--------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets (58,311,443) 281,612,703 11,856,735 130,686,735
Net Assets
Beginning of period 281,612,703 -- 130,686,735 --
--------------- --------------- --------------- ---------------
End of period $ 223,301,260 $ 281,612,703 $ 142,543,470 $ 130,686,735
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
MERRIMAC SERIES
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
Net Asset Distributions Net Asset
Periods Ended Value Net from Net Value
December 31, 1999, 1998 Beginning Investment Investment End Total
and June 30, 2000 of Period Income Income of Period Return (A)
-------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH SERIES
PREMIUM CLASS (1)
2000* $ 1.00 $ 0.030 $ (0.0300) $ 1.00 6.12%
1999 1.00 0.0510 (0.0510) 1.00 5.22%
1998 1.00 0.0275 (0.0275) 1.00 5.41%
INSTITUTIONAL CLASS (1)
2000* 1.00 0.0288 (0.0288) 1.00 5.87%
1999 1.00 0.0485 (0.0485) 1.00 4.96%
1998 1.00 0.0262 (0.0262) 1.00 5.15%
TREASURY SERIES
PREMIUM CLASS (2)
2000* 1.00 0.0267 (0.0267) 1.00 5.42%
1999 1.00 0.0386 (0.0386) 1.00 4.54%
INSTITUTIONAL CLASS (1)
2000* 1.00 0.0254 (0.0254) 1.00 5.17%
1999 1.00 0.0418 (0.0418) 1.00 4.26%
1998 1.00 0.0220 (0.0220) 1.00 4.31%
TREASURY PLUS SERIES
PREMIUM CLASS (5)
2000* 1.00 0.0101 (0.0101) 1.00 6.08%
INSTITUTIONAL CLASS (3)
2000* 1.00 0.0270 (0.0270) 1.00 5.49%
1999 1.00 0.0420 (0.0420) 1.00 4.54%
U.S. GOVERNMENT SERIES
PREMIUM CLASS (5)
2000* 1.00 0.0101 (0.0101) 1.00 6.07%
INSTITUTIONAL CLASS (4)
2000* 1.00 0.0274 (0.0274) 1.00 5.58%
1999 1.00 0.0246 (0.0246) 1.00 4.87%
<CAPTION>
Annualized Ratios to Average Net Assets/Supplemental Data
-----------------------------------------------------------
Net
Expenses Net Assets
Periods Ended Net Before End of
December 31, 1999, 1998 Net Investment Waivers and Period
and June 30, 2000 Expenses Income Reimbursements (000s omitted)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH SERIES
PREMIUM CLASS (1)
2000* 0.22% 6.05% -- $ 29,496
1999 0.25% 5.10% -- 7,232
1998 0.33% 5.28% 0.34% 100
INSTITUTIONAL CLASS (1)
2000* 0.47% 5.80% -- 286,603
1999 0.50% 4.85% -- 253,798
1998 0.58% 5.03% 0.59% 115,127
TREASURY SERIES
PREMIUM CLASS (2)
2000* 0.25% 5.36% -- 32,325
1999 0.28% 4.46% -- 24,816
INSTITUTIONAL CLASS (1)
2000* 0.50% 5.11% -- 180,675
1999 0.53% 4.18% -- 153,714
1998 0.67% 4.23% -- 114,321
TREASURY PLUS SERIES
PREMIUM CLASS (5)
2000* 0.24% 6.07% -- 8,743
INSTITUTIONAL CLASS (3)
2000* 0.49% 5.43% -- 214,558
1999 0.53% 4.46% -- 281,613
U.S. GOVERNMENT SERIES
PREMIUM CLASS (5)
2000* 0.24% 6.05% -- 50
INSTITUTIONAL CLASS (4)
2000* 0.51% 5.52% -- 142,493
1999 0.58% 4.82% -- 130,687
</TABLE>
(A) 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.
(1) Commenced Operations June 25, 1998.
(2) Commenced Operations February 19, 1999.
(3) Commenced Operations January 22, 1999.
(4) Commenced Operations June 29, 1999.
(5) Commenced Operations May 1, 2000
* Unaudited
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MERRIMAC SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Merrimac Series (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 Series (the
"Cash Series"), the Merrimac Treasury Series (the "Treasury Series"),
the Merrimac Treasury Plus Series (the "Treasury Plus Series"), the
Merrimac U.S. Government Series (the "Government Series") and the
Merrimac Short-Term Asset Reserve Series (the "STAR Series")
(collectively, excluding the STAR series, the "Funds") are separate
diversified investment portfolios or series of the Trust. The STAR
Series is currently inactive and not included in these financial
statements. The Funds consist of three classes of shares, the Premium
Class, the Institutional Class and the Investment Class (inactive).
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"), the Merrimac Treasury Plus Portfolio (the "Treasury Plus
Portfolio"), and the Merrimac U.S. Government Portfolio (the
"Government Portfolio"), respectively. The Portfolios are each an
open-end investment management company and a series of the Merrimac
Master Portfolio, and are hereinafter referred to singly as a
"Portfolio," and collectively as the "Portfolios." Each Portfolio seeks
to achieve a high level of current income, consistent with the
preservation of capital and liquidity. 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. The financial statements of the
Portfolios are included elsewhere in this report and should be read in
conjunction with the Funds' financial statements. At June 30, 2000, the
investment by the Cash Series, the Treasury Series, Treasury Plus
Series, and the Government Series represent ownership of proportionate
interests of 32.2%, 100%, 100%, and 100%, respectively, of their
corresponding portfolios.
The policies of the Funds are designed to maintain a stable net asset
value of $1.00 per share. They 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 they will be able to maintain a stable net asset value.
The following is a summary of significant accounting policies followed
by the Funds in the preparation of their financial statements. The
preparation of financial statements in accordance with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
A. INVESTMENT SECURITY VALUATIONS
The Funds record their investment in the Portfolios at value. Valuation
of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements, which are included elsewhere
in this report.
B. SECURITIES TRANSACTIONS AND INCOME
The Portfolios record securities transactions as of the trade date.
Interest income, including the accretion of discount or the
amortization of premium, is recognized when earned. Gains or losses on
sales of securities are calculated on the identified cost basis. Each
Fund's net investment income consists of its pro rata share of the net
investment income of 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.
7
<PAGE>
MERRIMAC SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
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.
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 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 pays
an annual fee of 0.25% of the value of the assets that an organization
services on behalf of its clients. Under a Distribution Plan, the
Investment Class will pay an annual distribution fee of 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 has not yet
commenced operations.)
(4) MANAGEMENT FEE AND AFFILIATED TRANSACTIONS
The Merrimac Master Portfolio retains Investors Bank & Trust Company
("Investors Bank") as investment adviser. Allmerica Asset Management,
Inc. ("AAM") serves as the sub-adviser to the Cash Portfolio and U.S.
Government Portfolio and M&I Investment Management Corp. ("M&I") serves
as sub-adviser to the Treasury Portfolio and Treasury Plus Portfolio.
The Funds pay no direct fees for such services, but indirectly bear
their pro rata share of the compensation paid by the Portfolios. See
Note 2 of the Portfolios' Notes to Financial Statements which are
included elsewhere in this report.
Investors Bank 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 each Fund.
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.
8
<PAGE>
MERRIMAC SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of beneficial interest for each Fund having a par
value of $0.001 per share. Transactions in Fund shares for each class
were as follows:
<TABLE>
<CAPTION>
Net Increase
Period Shares Sold Shares Shares Redeemed (Decrease) in
Reinvested Shares
----------------- ------------- ------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Cash Series Six Months
Premium Class Ended
June 30, 2000 461,530,803 1,327,115 (440,593,556) 22,264,362
Year Ended
December 31, 1999 265,910,695 480,304 (259,255,851) 7,135,148
Cash Series Six Months
Institutional Ended
Class June 30, 2000 746,736,976 327,094 (714,241,392) 32,822,678
Year Ended
December 31, 1999 1,265,945,943 68,942 (1,127,319,884) 138,695,001
Treasury Six Months
Series Premium Ended
Class June 30, 2000 60,985,529 -- (53,478,364) 7,507,165
February 19, 1999
to
December 31, 1999 120,340,322 -- (95,523,683) 24,816,639
Treasury Six Months
Series Ended
Institutional June 30, 2000 375,605,235 -- (348,649,340) 26,955,895
Class
Year Ended
December 31, 1999 574,872,203 -- (535,476,952) 39,395,251
Treasury Plus May 1, 2000
Series Premium to
Class June 30, 2000 9,243,655 -- (500,820) 8,742,835
Treasury Plus Six Months
Series Ended
Institutional June 30, 2000 575,043,959 4,751 (642,102,988) (67,054,278)
Class
January 22, 1999
to
December 31, 1999 1,227,975,120 -- (946,362,351) 281,612,769
</TABLE>
9
<PAGE>
MERRIMAC SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Increase
Period Shares Sold Shares Shares Redeemed (Decrease) in
Reinvested Shares
----------------- ------------- ------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Government May 1, 2000
Series Premium to
Class June 30, 2000 50,017 -- -- 50,017
Government Six Months
Series Ended
Institutional June 30, 2000 465,581,167 -- (453,768,577) 11,812,590
Class
June 29, 1999
to
December 31, 1999 697,418,162 -- (566,732,433) 130,685,729
</TABLE>
At June 30, 2000, Investors Bank as agent for its clients, was the record holder
of all outstanding Institutional Class shares of each Fund. Affiliates of M&I,
as agents for their clients, were the record holders of 96.8% of the outstanding
Premium Class shares of the Treasury Series and 99.4% of the Premium Class
shares of the Treasury Plus Series.
(6) INVESTMENT TRANSACTIONS
For the six months ended June 30, 2000, investments in and withdrawals
from the respective Portfolios were as follows:
Investments in Withdrawals from
Portfolio Portfolio
---------------- -----------------
Cash Series $1,209,921,988 $1,164,862,248
Treasury Series 436,590,764 408,414,523
Treasury Plus Series 584,292,365 649,080,596
Government Series 465,631,184 457,882,544
10
<PAGE>
MERRIMAC CASH PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield to Par
Security Maturity Maturity Value Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Variable Rate Notes* - 42.1%
Asset Backed Capital Finance ................................... 6.44% 07/04/00 $38,000,000 $ 38,000,000
Bear Stearns Companies, Inc. ................................... 7.00% 07/03/00 10,000,000 9,999,037
Bear Stearns Companies, Inc. ................................... 6.80% 07/17/00 7,000,000 7,005,487
Bear Stearns Companies, Inc. ................................... 6.39% 08/02/00 20,000,000 20,000,000
CIC Group ...................................................... 6.82% 07/03/00 35,000,000 34,999,403
Countrywide Credit Industries, Inc. ............................ 6.77% 08/22/00 25,000,000 24,994,580
Donaldson, Lufkin & Jenrette, Inc. ............................. 6.70% 08/03/00 10,000,000 10,001,557
First Union Corporation ........................................ 6.87% 07/03/00 9,000,000 9,000,000
Heller Financial, Inc. ......................................... 6.35% 07/03/00 18,000,000 17,966,994
Heller Financial, Inc. ......................................... 6.90% 08/07/00 17,000,000 16,999,092
Heller Financial, Inc. ......................................... 7.10% 09/25/00 10,000,000 10,007,209
Household Finance Corporation .................................. 6.37% 07/04/00 33,000,000 33,000,000
Jackson National Life Insurance Company Funding Agreement** .... 6.42% 07/03/00 40,000,000 40,000,000
Merrill Lynch & Co., Inc. ...................................... 7.32% 08/21/00 20,000,000 20,039,466
PaineWebber Group, Inc. ........................................ 6.82% 07/12/00 20,000,000 20,000,000
Sigma Finance Corporation ...................................... 6.39% 07/04/00 40,000,000 40,000,000
Strategic Money Market Trust ................................... 6.77% 07/14/00 10,000,000 10,000,000
Strategic Money Market Trust ................................... 6.81% 09/13/00 15,000,000 15,000,000
Syndicated Loan Fund Trust ..................................... 6.53% 07/03/00 40,000,000 40,000,000
-----------
417,012,825
-----------
Commercial Paper - 23.7%
Aetna, Inc. .................................................... 6.80% 08/21/00 5,000,000 4,951,833
Aetna, Inc. .................................................... 6.76% 08/23/00 20,000,000 19,800,956
Aetna, Inc. .................................................... 6.82% 09/05/00 25,000,000 24,687,417
Associates Corporation of North America ........................ 6.69% 08/23/00 10,500,000 10,396,584
AT&T Corporation ............................................... 7.27% 06/14/01 20,000,000 20,000,000
Bear Stearns Companies, Inc. ................................... 6.89% 02/12/01 19,000,000 18,178,176
Christiania Capital Corporation ................................ 6.66% 09/12/00 25,000,000 24,662,628
France Telecom S.A. ............................................ 6.68% 09/05/00 20,000,000 19,755,067
Govco, Inc. .................................................... 6.65% 08/07/00 20,000,000 19,863,305
Lehman Brothers Holdings ....................................... 7.05% 02/12/01 5,000,000 4,778,708
Newbury Funding Ltd. ........................................... 6.70% 08/07/00 20,000,000 19,862,278
PaineWebber Group, Inc. ........................................ 6.83% 08/23/00 25,000,000 24,748,618
Unibanco-Grand Cayman .......................................... 7.00% 04/11/01 8,000,000 7,558,222
Westways Funding I Ltd. ........................................ 6.70% 08/24/00 7,975,000 7,894,851
Westways Funding II Ltd. ....................................... 6.70% 08/24/00 6,450,000 6,385,178
-----------
233,523,821
-----------
Corporate Debt - 17.0%
BankBoston Corporation ......................................... 6.11% 08/11/00 5,310,000 5,311,507
Chrysler Financial ............................................. 6.49% 01/26/01 6,800,000 6,777,651
Countrywide Credit Industries, Inc. ............................ 6.36% 10/23/00 6,000,000 6,000,965
E.I. du Pont de Nemours and Company ............................ 6.09% 08/29/00 5,000,000 5,004,206
First Union Corporation ........................................ 6.86% 09/15/00 25,000,000 25,000,000
Ford Motor Company ............................................. 6.49% 01/24/01 5,000,000 4,981,285
Ford Motor Company ............................................. 6.43% 01/25/01 5,000,000 4,981,459
Landesbank Baden-Wuerttemberg .................................. 6.29% 08/08/00 10,770,000 10,774,886
Lehman Brothers Holdings ....................................... 7.17% 08/01/00 6,000,000 5,995,528
Lehman Brothers Holdings ....................................... 6.60% 10/10/00 5,000,000 5,003,660
Lehman Brothers Holdings ....................................... 6.87% 03/06/01 25,000,000 24,905,355
Lehman Brothers Holdings ....................................... 6.60% 03/30/01 6,190,000 6,192,934
Links Finance LLC .............................................. 7.00% 06/04/01 25,000,000 25,000,000
PaineWebber Group, Inc. ........................................ 6.50% 08/09/00 5,050,000 5,054,207
Salomon Smith Barney ........................................... 6.67% 02/21/01 10,000,000 9,995,205
Sigma Finance Corporation ...................................... 6.80% 03/30/01 10,000,000 10,000,000
Volkswagen AG .................................................. 5.77% 07/13/00 7,000,000 6,999,772
-----------
167,978,620
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
MERRIMAC CASH PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Yield to Par
Security Maturity Maturity Value Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates of Deposit - 5.8%
National Bank of Canada ........................................ 6.17% 11/22/00 $22,000,000 $ 21,994,203
Wilmington Trust ............................................... 6.08% 10/02/00 35,000,000 34,979,841
-----------
56,974,044
-----------
Time Deposits - 2.9%
Suntrust Bank .................................................. 7.06% 07/03/00 28,250,000 28,250,000
-----------
Extendible Commercial Notes - 2.5%
Carolina Power & Light Company+** .............................. 6.70% 08/14/00 25,000,000 24,795,278
-----------
Variable Rate Municipal Obligations - 2.0%
California Housing Finance Agency Revenue ...................... 6.63% 08/01/00 6,400,000 6,400,000
-----------
Memphis Center City Revenue Financing .......................... 7.12% 07/06/00 13,000,000 13,000,000
-----------
19,400,000
-----------
Variable Rate Asset Backed Securites - 1.8%
Wesley Commercial & Residential Funding** ...................... 6.70% 07/29/00 17,836,538 17,836,538
-----------
Asset Backed Securities - 1.1%
CNH Equipment Trust ............................................ 6.18% 04/09/01 5,148,494 5,148,494
Copelco Capital Funding Corporation ............................ 5.94% 10/18/00 1,240,713 1,240,713
Orix Credit Alliance Trust ..................................... 6.24% 11/15/00 4,180,978 4,180,978
-----------
10,570,185
-----------
Total Investments, at amortized cost - 98.9% 976,341,311
Other assets and liabilities (net) - 1.1% 10,965,277
-----------
Total Net Assets 100.0% $987,306,588
============
</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.
** Illiquid Security
+ Extendible Commercial Note under which the issuer may extend the
maturity to 07/01/01. The interest rate is calculated at one
month LIBOR plus 1.49% during the extension period.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
MERRIMAC TREASURY PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Yield to Par
Security Maturity Maturity Value Value
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Bills - 13.5%
U.S. Treasury Bill ............................ 5.38-5.62% 07/06/00 $12,000,000 $ 11,990,866
U.S. Treasury Bill ............................ 5.65% 07/20/00 11,000,000 10,967,228
U.S. Treasury Bill ............................ 5.50% 08/10/00 6,000,000 5,963,334
------------
28,921,428
------------
Other Treasury Obligations - 78.3%
U.S. Treasury Note ............................ 5.51-5.95% 07/31/00 51,000,000 51,007,018
U.S. Treasury Note ............................ 5.89-5.90% 08/15/00 25,000,000 25,001,278
U.S. Treasury Note ............................ 5.89-6.38% 08/31/00 53,000,000 52,949,226
U.S. Treasury Note ............................ 6.32% 09/30/00 7,000,000 6,968,183
U.S. Treasury Strip - Principal Only .......... 5.91-6.20% 08/15/00 32,000,000 31,765,365
------------
167,691,070
------------
Mutual Funds - 6.9% Shares
------
AIM Treasury Money Market Fund .............................................. 1,159,085 1,159,085
Dreyfus Treasury Prime Cash Fund ............................................ 7,428,041 7,428,041
Goldman Sachs Liquid Assets Treasury Obligations Fund ....................... 6,186,316 6,186,316
-----------
14,773,442
-----------
Total Investments, at amortized cost - 98.7% 211,385,940
Other assets and liabilities (net) - 1.3% 2,868,158
------------
Total Net Assets 100.0% $214,254,098
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
MERRIMAC TREASURY PLUS PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Par
Security Value Value
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements - 100.0%
Bear Stearns Repurchase Agreement, dated 6/30/00, due 7/03/00, with a
maturity value of $35,019,562 and an effective yield of 6.80%, collateralized
by U.S. Government Agency Obligations with rates ranging from 5.40% to 7.00%
and maturities ranging from 8/09/01 to 6/08/10, with an aggregate
market value of $36,492,772. $35,000,000 $ 35,000,000
First Union Bank Repurchase Agreement, dated 6/30/00, due 7/03/00, with a
maturity value of $45,024,750 and an effective yield of 6.60%, collateralized
by U.S. Treasury Obligations with rates ranging from 5.80% to 6.50% and
maturities ranging from 8/15/00 to 11/15/27, with an aggregate market
value of $45,900,409. 45,000,000 45,000,000
J.P. Morgan Repurchase Agreement, dated 6/30/00, due 7/03/00, with a
maturity value of $34,018,275 and an effective yield of 6.45%, collateralized
by a U.S. Government Agency Obligation with a rate of 7.56% maturing on 5/25/10,
with an aggregate market value of $34,680,202. 34,000,000 34,000,000
Lehman Brothers Repurchase Agreement, dated 6/30/00, due 7/03/00, with a
maturity value of $30,016,521 and an effective yield of 6.70%, collateralized
by U.S. Government Agency Obligations with rates at 8.05% and maturities
ranging from 8/27/18 to 2/25/19, with an aggregate market value of $30,600,003. 30,000,000 30,000,000
Merrill Lynch Repurchase Agreement, dated 6/30/00, due 7/03/00, with a
maturity value of $35,019,095 and an effective yield of 6.50%, collateralized
by U.S. Treasury Obligations with rates ranging from 6.26% to 6.28% and
maturities ranging from 8/15/05 to 2/15/19, with an aggregate market
value of $36,458,782. 35,742,789 35,742,789
Morgan Stanley Repurchase Agreement, dated 6/30/00, due 7/03/00, with a
maturity value of $45,024,041 and an effective yield of 6.50%, collateralized
by a U.S. Treasury Note with a rate of 6.43%, a maturity of 1/31/01, and an
aggregate market value of $46,127,399. 45,000,000 45,000,000
------------
224,742,789
------------
Total Investments, at amoritized cost - 100.0% 224,742,789
Other assets and liabilities (net) - 0.0% (38,882)
------------
Total Net Assets 100.0% $224,703,907
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
MERRIMAC U. S. GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Yield to Par
Security Maturity Maturity Value Value
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Agency Fixed Rate Obligations - 57.7%
Federal Farm Credit Bank ............................. 6.19% 07/17/00 $ 750,000 $ 749,780
Federal Farm Credit Bank ............................. 6.18% 08/01/00 5,000,000 5,000,000
Federal Farm Credit Bank ............................. 6.02% 08/16/00 200,000 200,071
Federal Home Loan Bank ............................... 5.87% 07/14/00 2,230,000 2,229,103
Federal Home Loan Bank ............................... 6.49% 12/22/00 2,000,000 1,937,263
Federal Home Loan Bank ............................... 6.32% 01/19/01 5,000,000 5,000,000
Federal Home Loan Mortgage Corporation ............... 5.55% 08/01/00 100,000 99,523
Federal Home Loan Mortgage Corporation ............... 6.46% 08/10/00 1,357,000 1,347,260
Federal Home Loan Mortgage Corporation ............... 6.52% 08/17/00 4,276,000 4,239,602
Federal Home Loan Mortgage Corporation ............... 6.50% 08/24/00 10,000,000 9,902,500
Federal Home Loan Mortgage Corporation ............... 6.22% 04/26/01 5,000,000 4,741,697
Federal National Mortgage Association ................ 6.53% 08/10/00 10,000,000 9,927,445
Federal National Mortgage Association ................ 5.62-6.57% 09/01/00 10,000,000 9,895,032
Federal National Mortgage Association ................ 6.06% 09/11/00 170,000 171,014
Federal National Mortgage Association ................ 5.65% 09/14/00 479,000 473,363
Federal National Mortgage Association ................ 5.80-6.01% 09/25/00 3,615,000 3,609,009
Federal National Mortgage Association ................ 6.50% 09/28/00 15,000,000 14,758,958
Federal National Mortgage Association ................ 5.63% 09/29/00 683,000 673,386
Federal National Mortgage Association ................ 6.00% 10/16/00 2,535,000 2,523,878
International Bank for Reconstruction & Development .. 6.66% 05/24/01 5,000,000 4,987,807
Student Loan Marketing Association ................... 5.97% 07/17/00 250,000 249,924
------------
82,716,615
------------
U.S. Government Agency Variable Rates
Obligations* - 33.7%
Federal Farm Credit Bank ............................. 6.32% 07/04/00 5,000,000 4,997,721
Federal Home Loan Bank ............................... 6.13% 07/04/00 10,000,000 9,998,215
Federal Home Loan Bank ............................... 6.14% 07/05/00 12,000,000 11,999,507
Federal National Mortgage Association ................ 6.66% 09/06/00 3,500,000 3,499,380
International Bank for Reconstruction & Development .. 6.26% 07/05/00 10,000,000 10,001,125
Student Loan Marketing Association ................... 6.34-6.46% 07/04/00 7,900,000 7,900,485
------------
48,396,433
------------
Mutual Funds - 0.9% Shares
---------
Goldman Sachs Financial Square Government Fund .................................. 534,938 534,938
Janus Government Money Market Fund .............................................. 785,147 785,147
------------
1,320,085
------------
Repurchase Agreements - 7.0% Par Value
---------
Lehman Brothers Repurchase Agreement, dated
6/30/00, due 7/03/00, with a maturity
value of $10,001,778 and an effective yield
of 6.40%, collateralized by U.S. Government
Agency Obligations with rates ranging from
7.93% to 7.99% and maturities
ranging from 1/29/18 to 2/25/19, with an
aggregate market value of $10,200,535. $10,000,000 10,000,000
------------
Total Investments, at amortized cost - 99.3% 142,433,133
Other assets and liabilities (net) - 0.7% 966,731
------------
Total Net Assets 100.0% $143,399,864
============
</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.
15
<PAGE>
MERRIMAC MASTER PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Cash Treasury Treasury Plus U.S. Government
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets
Investment securities, at value (Note 1) $976,341,311 $211,385,940 $ -- $132,433,133
Repurchase agreements -- -- 224,742,789 10,000,000
Cash 208,807 -- -- 48,338
Interest receivable 10,985,476 2,963,222 41,115 974,082
Deferred organization expense (Note 1) 16,828 2,447 -- --
Prepaid assets 27,545 6,731 10,090 1,599
------------ ------------ ------------ ------------
Total assets 987,579,967 214,358,340 224,793,994 143,457,152
------------ ------------ ------------ ------------
Liabilities
Management fee payable (Note 2) 173,696 33,006 34,574 21,648
Other accrued expenses 99,684 71,236 55,514 35,640
------------ ------------ ------------ ------------
Total liabilities 273,380 104,242 90,088 57,288
------------ ------------ ------------ ------------
Net Assets Applicable to Investors' Beneficial
Interests $987,306,587 $214,254,098 $224,703,906 $143,399,864
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
MERRIMAC MASTER PORTFOLIO
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Cash Treasury Treasury Plus U.S. Government
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income
Interest and dividends $35,223,104 $7,000,975 $6,888,768 $4,500,383
----------- ---------- ---------- ----------
Expenses
Management fee (Note 2) 954,417 212,001 198,279 126,956
Trustee fees and expenses 19,992 3,054 3,617 2,622
Insurance 15,708 3,054 2,713 2,097
Audit 19,040 12,215 11,303 10,486
Transaction fees 9,520 7,329 5,425 6,292
Amortization of organization
expense (Note 1) 6,074 762 -- --
Legal 8,568 7,329 5,425 6,292
Miscellaneous 34,270 13,436 14,467 6,815
----------- ---------- ---------- ----------
Total expenses 1,067,589 259,180 241,229 161,560
----------- ---------- ---------- ----------
Net Investment Income 34,155,515 6,741,795 6,647,539 4,338,823
Net Realized Gain (Loss) on
Investments (44,982) 7,139 -- (5,872)
----------- ---------- ---------- ----------
Net Increase in Net Assets from
Operations $34,110,533 $6,748,934 $6,647,539 $4,332,951
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
MERRIMAC MASTER PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Cash Portfolio Treasury Portfolio
---------------------------------- -------------------------------
For the Six Months For the Six Months
Ended Ended
June 30, 2000 Year Ended June 30, 2000 Year Ended
(Unaudited) December 31, 1999 (Unaudited) December 31, 1999
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 34,155,515 $ 63,954,059 $ 6,741,795 $ 7,978,212
Net realized gain (loss) on investments (44,982) (144,611) 7,139 (3,632)
--------------- --------------- ------------- -------------
Net increase in net assets from operations 34,110,533 63,809,448 6,748,934 7,974,580
--------------- --------------- ------------- -------------
Transactions in Investors' Beneficial Interest
Contributions 3,180,800,174 6,036,333,627 436,590,764 695,212,525
Withdrawals (3,309,097,429) (5,811,849,613) (408,414,523) (638,584,123)
--------------- --------------- ------------- -------------
Net increase (decrease) from investors' transactions (128,297,255) 224,484,014 28,176,241 56,628,402
--------------- --------------- ------------- -------------
Net Increase (Decrease) in Net Assets (94,186,722) 288,293,462 34,925,175 64,602,982
Net Assets
Beginning of period 1,081,493,309 793,199,847 179,328,923 114,725,941
--------------- --------------- ------------- -------------
End of period $ 987,306,587 $ 1,081,493,309 $ 214,254,098 $ 179,328,923
=============== =============== ============= =============
<CAPTION>
Treasury Plus Portfolio U.S. Government Portfolio
--------------------------------------- ----------------------------------------
For the Period For the Period
For the Six Months January 22, 1999 For the Six Months June 29, 1999
Ended (Commencement of Ended (Commencement of
June 30, 2000 Operations) June 30, 2000 Operations)
(Unaudited) to December 31, 1999 (Unaudited) to December 31, 1999
------------------ -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 6,647,539 $ 11,156,778 $ 4,338,823 $ 3,738,681
Net realized gain (loss) on investments
-- (66) (5,872) 1,006
Net increase in net assets from operations ------------- -------------- ------------- -------------
6,647,539 11,156,712 4,332,951 3,739,687
------------- -------------- ------------- -------------
Transactions in Investors'
Beneficial Interest
Contributions 584,292,365 1,227,975,120 465,631,184 697,418,162
Withdrawals (649,080,596) (956,287,234) (457,882,544) (569,839,576
------------- -------------- ------------- -------------
Net increase (decrease) from investors'
transactions (64,788,231) 271,687,886 7,748,640 127,578,586
------------- -------------- ------------- -------------
Net Increase (Decrease) in Net Assets (58,140,692) 282,844,598 12,081,591 131,318,273
Net Assets
Beginning of period 282,844,598 -- 131,318,273 --
------------- -------------- ------------- -------------
End of period $ 224,703,906 $ 282,844,598 $ 143,399,864 $ 131,318,273
============= ============== ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
MERRIMAC MASTER PORTFOLIO
SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized Ratios to Average Net Assets
---------------------------------------
Net Net Assets
Net Expenses End of
Net Investment Before Period
Expenses Income Waiver (000s omitted)
-------- ---------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash Portfolio
2000* 0.19% 6.01% NA $ 987,307
1999 0.19% 5.14% NA 1,081,493
1998 0.15% 5.47% 0.19% 793,200
1997 0.16% 5.51% 0.19% 1,384,848
1996 (A) 0.12% 5.45% 0.21% 1,006,310
Treasury Portfolio
2000* 0.21% 5.41% NA 214,254
1999 0.21% 4.49% NA 179,329
1998 0.26% 4.74% NA 114,726
1997 (B) 0.29% 5.06% NA 73,916
Treasury Plus Portfolio
2000* 0.21% 5.69% NA 224,704
1999 (C) 0.21% 4.70% NA 282,845
U.S. Government Securities Portfolio
2000* 0.22% 5.81% NA 143,400
1999 (D) 0.22% 5.15% NA 131,318
</TABLE>
(A) Commenced Operations November 12, 1996.
(B) Commenced Operations April 2, 1997.
(C) Commenced Operations January 22, 1999.
(D) Commenced Operations June 29, 1999.
* Unaudited
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
MERRIMAC MASTER PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
-------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Merrimac Master Portfolio (the "Portfolio Trust") is organized as a
common law trust under the laws of the State of New York and is
registered under the Investment Company Act of 1940 ("1940 Act"), as an
open-end management investment company with its principal offices in
the Cayman Islands. The Merrimac Cash Portfolio (the "Cash Portfolio"),
the Merrimac Treasury Portfolio (the "Treasury Portfolio"), the
Merrimac Treasury Plus Portfolio (the "Treasury Plus Portfolio") and
the Merrimac U.S. Government Portfolio (the "Government Portfolio" and
collectively, the "Portfolios") are separate diversified investment
series of the Portfolio Trust.
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. Dividend income consists of income earned from
investments in other money market funds. 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. FORWARD COMMITMENTS
The Portfolios may enter into contracts to purchase securities for a
fixed price at a specified future date beyond customary settlement time
("forward commitments"). If the Portfolios do so, they 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 Portfolios
generally will enter into forward commitments with the intention of
acquiring the securities for their portfolio, they 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 Portfolio Trust 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 the daily 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.
F. DEFERRED ORGANIZATION EXPENSE
Costs incurred by the Cash Portfolio and the Treasury 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.
20
<PAGE>
MERRIMAC MASTER PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
-------------------------------------------------------------------------------
(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. Investors Bank also serves as custodian
for the Portfolio Trust. Investor's Fund Services (Ireland) Limited, a
subsidiary of Investors Bank, serves as administrator. IBT Fund
Services (Canada) Inc., a subsidiary of Investors Bank, serves as fund
accounting and transfer agent. For these services, Investors Bank and
its subsidiaries are paid a monthly fee at an annual rate of 0.17% of
the average daily assets of the Portfolios.
Allmerica Asset Management, Inc. ("AAM") serves as the sub-adviser to
the Cash Portfolio and the Government Portfolio and M&I Investment
Management Corp. ("M&I") serves as sub-adviser to the Treasury
Portfolio and the Treasury Plus Portfolio. For its services as
investment sub-adviser to the Cash Portfolio and the Government
Portfolio, AAM receives an annual fee, computed and paid monthly by
Investors Bank, based on the average net assets of each 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. For its services as investment sub-adviser to
the Treasury Portfolio and Treasury Plus Portfolio, M&I receives a
monthly fee by Investors Bank computed at an annual rate of 0.08% of
the average daily net assets of each Portfolio. The Portfolios do not
pay a fee directly to either sub-adviser for such services.
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 period ended June 30, 2000 were aggregated as
follows:
COMBINED
MATURITIES AND
PURCHASES SALES
---------------- -----------------
Cash Portfolio $ 11,151,713,670 $ 11,317,467,909
Treasury Portfolio 1,140,853,244 823,592,228
Treasury Plus Portfolio 28,464,634,640 28,500,059,945
Government Portfolio 2,146,683,053 2,099,183,634
(4) LINE OF CREDIT
The Portfolios participate in a $50 million line of credit agreement
with a bank. 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 0.11% on the daily unused portion of the line of credit is allocated
among the portfolios. There were no borrowings during the period ended
June 30, 2000.
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