MERRIMAC SHORT-TERM ASSET
RESERVE SERIES
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
Merrimac Short-Term Asset Reserve Series
Statement of Operations
================================================================================
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1999 (1)
----------------------
<S> <C>
Net Investment Income Allocated from Portfolio (Note 1)
Interest $ 24,438
Expenses (1,333)
--------------------
Net investment income from Portfolio 23,105
--------------------
Fund Expenses
Accounting, transfer agency, and administration fees (Note 4) 41
Trustees fees and expenses 203
Audit and tax return preparation fees 4,000
Registration 8,419
Miscellaneous 127
--------------------
Total expenses 12,790
Expense reimbursement and waiver (note 4) (12,637)
--------------------
Total expenses 153
--------------------
Net Investment Income 22,952
Net Realized Loss on Investments Allocated from Portfolio (6,713)
--------------------
Net Unrealized Gain on Investments Allocated from Portfolio 3,715
--------------------
Net Increase in Net Assets from Operations $ 19,954
====================
</TABLE>
(1) The Merrimac Short-Term Asset Reserve Series ceased investment operations
on May 26, 1999.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Short-Term Asset Reserve Series
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the Period
August 7, 1998
(Commencement of
For the Year Ended Operations) to
December 31, 1999 (1) December 31, 1998
--------------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 22,952 $ 123,225
Net realized gain (loss) allocated from Portfolio (6,713) 3,822
Net unrealized gain (loss) allocated from Portfolio 3,715 (3,715)
----------------- ----------------
Net increase in net assets from operations 19,954 123,332
----------------- ----------------
Dividends Declared from Net Investment Income
Premium Class (22,820) (123,225)
----------------- ----------------
Total dividends declared (22,820) (123,225)
----------------- ----------------
Fund Share Transactions (Note 6)
Proceeds from shares sold -- 14,000,030
Proceeds from shares reinvested 34,416 107,750
Payment for shares redeemed (1,039,437) (13,100,000)
----------------- ----------------
Net increase in net assets derived from share transactions (1,005,021) 1,007,780
----------------- ----------------
Net increase (decrease) in net assets (1,007,887) 1,007,887
Net Assets
Beginning of period 1,007,887 --
----------------- ----------------
End of period $ 0 $ 1,007,887
================= ================
</TABLE>
(1) The Merrimac Short-Term Asset Reserve Series ceased investment operations on
May 26, 1999.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Short-Term Asset Reserve Series
Financial Highlights
================================================================================
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
Premium Class
--------------------------------------------------------------
For the Period
August 7, 1998
(Commencement of
Operations) to
December 31, 1999 (2) December 31, 1998
------------------------------ ---------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.97 $ 10.00
---------------------------- ---------------------------
Net investment income 0.2204 0.2350
Dividends from net investment income (0.2204) (0.2350)
Net realized and unrealized loss on investments (0.0100) (0.0300)
---------------------------- ---------------------------
Net asset value, end of period $ 9.96(3) $ 9.97
============================ ===========================
Total Return (1) 4.65% 5.22%
Annualized Ratios to Average Net Assets/
Supplemental Data
Net expenses 0.36%(4) 0.36%
Net investment income 5.54%(4) 5.80%
Net expenses, before waivers and reimbursements 3.42%(4) 1.36%
Net assets, end of period (000s omitted) -- $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.
(2) The Merrimac Short-Term Asset Reserve Series ceased investment operations
on May 26, 1999.
(3) Reflects the net asset value on May 26, 1999.
(4) Annualized based on the activity of the Fund through May 26, 1999.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Merrimac Short-Term Asset Reserve Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
(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 Short-Term Asset
Reserve Series (the "Fund") is a diversified investment portfolio or
series of the Trust. The Fund consists of three classes of shares, the
Premium Class, the Institutional Class and the Investment Class. As of
May 26, 1999, there were no assets in the Fund, thus no Statement of
Assets and Liabilities is presented.
The Fund seeks to achieve its investment objective by investing all of
its investable assets in the Standish Short-Term Asset Reserve
Portfolio (the "Portfolio"). The Portfolio seeks to achieve a high
level of current income, consistent with the preservation of capital
and liquidity. The Fund has the same investment objective as the
Portfolio into which it invests. The performance of the Fund is
directly affected by the performance of the Portfolio.
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
A. Investment Security Valuations
Portfolio securities for which quotations are readily available are
valued at the last sales price, or if no sales 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 supervision of the Portfolio's Board of Trustees.
Short-term instruments with less than sixty-one days remaining to
maturity when acquired by the Portfolio are valued at amortized cost.
If the Portfolio acquired 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-day day 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 bank's vault, all
securities held as collateral 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
The Portfolio 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. The
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.
D. Federal Income Taxes
The Fund intends to qualify annually as a regulated investment company
under Subchapter M of the Internal Revenue Code, and thus not be
subject to income taxes. To qualify, the Fund must distribute all of
its taxable income for its fiscal year and meet certain other
requirements. Accordingly, no provision for federal income taxes is
required.
E. Expense Allocation
Expenses directly attributable to a Fund of the Trust are charged to
that Fund. Expenses not directly attributable to a specific Fund are
allocated, based on relative net assets, to each of the funds in the
Trust.
<PAGE>
Merrimac Short-Term Asset Reserve Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Dividends and Distributions to Shareholders
Dividends on the shares of the Fund are declared each business day to
shareholders of record on that day, and paid or reinvested as of the
last business day of the month. Distributions of net realized gains, if
any, may be declared annually. Dividends and distributions are
determined in accordance with federal income tax regulations, which may
differ from GAAP.
(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 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 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.
(4) Management Fee and Affiliated Transactions
The Portfolio retains Standish, Ayer & Wood, Inc. as investment
adviser. The Fund pays no direct fee for such services, but indirectly
bear their pro rata share of the compensation paid by the Portfolio.
Investors Bank & Trust Company ("Investors Bank") or its subsidiary,
IBT Fund Services (Canada), Inc. serves as administrator, custodian,
fund accounting agent, and transfer agent to the Fund. For these
services, Investors Bank and its subsidiary are paid a monthly fee at
an annual rate of 0.03% of the average daily net assets of the Fund.
Investors Bank has voluntarily agreed to waive 0.02% of its fee and 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) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of beneficial interest for the Fund having a par value
of $0.001 per share. Transactions in Fund Premium Class shares were as
follows:
<TABLE>
<CAPTION>
Net Increase in
Period Shares Sold Shares Reinvested Shares Redeemed Shares
-------------------------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
For the year
ended December -- 3,453 (104,560) (101,107)
31, 1999
August 7, 1998
(Commencement of
Operations) to
December 31, 1998 1,401,014 10,779 (1,310,686) 101,107
</TABLE>
(6) Investment Transactions
Investments in and withdrawals from the Portfolio during the Fund's
1999 operations were $34,416 and $1,049,577, respectively.
(7) Federal Tax Information
At December 31, 1999, the Fund had $13,737 available as capital loss
carryforwards, which expire in 2007.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees and
Shareholders of the Merrimac STAR Series
We have audited the accompanying statement of operations of the Merrimac STAR
Series (the Series) for the period from January 1, 1999 to May 26, 1999 (date
which investment operations ceased), the statements of changes in net assets and
the financial highlights for the period from January 1, 1999 to May 26, 1999,
and for the period from August 7, 1998 (commencement of operations) to December
31, 1998. These financial statements and financial highlights are the
responsibility of the Series' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the results of operations of the
Merrimac STAR Series for the period from January 1, 1999 to May 26, 1999, and
the changes in its net assets and the financial highlights for the period from
January 1, 1999 to May 26, 1999 and for the period from August 7, 1998 to
December 31, 1998, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2000
