Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Financial Statement for the Period Ended
September 30, 1997
[STANDISH LOGO]
<PAGE>
Standish, Ayer & Wood Investment Trust
Chairman's Message
October 31, 1997
Dear Standish, Ayer & Wood Investment Trust Shareholder:
Enclosed you will find the annual statement for the Standish Equity Fund. Please
note that it is a nine-month reporting period for the fiscal year ended
September 30, 1997, as the fund has changed its fiscal year end from December to
September in order to streamline our reporting process.
As of September 1997, Standish, Ayer & Wood managed assets for its clients of
approximately $36.7 billion, including the Standish mutual fund assets of $5.3
billion. The principal clients of the firm are corporate pension trusts, state
and local governmental units, insurance companies, endowments and foundations,
and high net worth individuals. the firm remains independent and is owned by
investment professionals active in the operation of the business.
During the last nine months ended September 30, 1997, the financial markets have
generally registered very positive rates of return. The U.S. equity markets as
measured by the Standard & Poor's 500 Index or the Russell 2000 Growth Index
have recorded total rates of return of 29.64% and 23.02%, respectively. Foreign
equity markets, as benchmarked by the Morgan Stanley Capital International
Index, have lagged behind these strong domestic returns with a return of 10.42%.
During the last year, we at Standish have continued to add resources to both
investment research and shareholder servicing. We remain confident that we have
the resources and the organization to do a superior investment management job,
and we will be working hard to fulfill your expectations in the years ahead. We
appreciate the opportunity to serve you and hope you will find the attached
information helpful.
Sincerely yours,
/s/ Edward H. Ladd
Edward H. Ladd
Chairman
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Management Discussion & Analysis
The first nine months of 1997 have been a strong period for the U.S. equity
market with the S&P 500 up 29.6%. For the same period, the Standish Equity Fund
has a total return of 35.1%.
For the last several years, there has been a pattern of performance
differentiated by capitalization group, with small and medium capitalization
stocks trailing the performance of the large capitalization stocks. This pattern
continued during the first half of calendar 1997. However, in the last three
months, the S&P Midcap and Russell 2000 indices outperformed the S&P 500 by more
than 8% and 7%, respectively. By industry sector, the best groups within the S&P
500 in 1997 have been Technology, Financials and Healthcare. The sectors that
have underperformed the S&P 500 through September 30 have been Basic Industries,
Consumer Stable, Services and Electric Utilities.
For the Standish Equity Fund, performance through June was hurt by the fact that
the average capitalization of stocks in the Fund is smaller than that of the S&P
500. However, in the quarter ending September 30, the Standish Equity Fund had
outstanding performance beating the S&P 500 by approximately 6%. Particularly
notable was performance in Financials, Services and Healthcare where our results
were ahead of the comparable S&P 500 groups. In addition, we were helped by
modest underweightings in Utilities and Basic Industries where performance
lagged that of the broad market.
Our stock selection process is driven by proprietary modeling techniques that
utilize a combination of valuation and earnings growth measures to determine the
relative attractiveness of equity securities. We continue to be committed to
consistently applying our stock selection disciplines. For the first nine months
of 1997, the Multifactor Model, Price/Earnings Ratio and Earnings Trend factors
have been the strongest indicators. To date in 1997, the top decline of stocks
in our universe have outperformed the universe by over 11.5%. In 1997, our
disciplines have again provided us with a very strong starting point for our
portfolio construction process.
While the reporting period is only nine months, we are still pleased to be able
to report another strong period of performance for the Standish Equity Fund and
are grateful to our shareholders for their continuing support.
Sincerely,
/s/ Ralph S. Tate /s/ David C. Cameron
Ralph S. Tate David C. Cameron
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Comparison of Change in Value of $100,000 Investment in
Standish Equity Fund and the S&P 500 Index
[GRAPHIC OMITTED]
Standish S&P 500
Equity Fund Index
----------- -----
Inception 1/2/91 100000 100000
1/31/91 105200 104360
2/28/91 112000 111822
3/31/91 116300 114528
4/30/91 115748 114803
5/31/91 119964 119751
6/30/91 113088 114266
7/31/91 118475 119591
8/31/91 120439 122425
9/30/91 120036 120381
10/31/91 123528 121994
11/30/91 119985 117077
12/31/91 133349 130471
1/31/92 131582 128044
2/29/92 133713 129709
3/31/92 129660 127180
4/30/92 129974 130919
5/31/92 129031 131560
6/30/92 126256 129600
7/30/92 132182 134901
8/31/92 128425 132135
9/30/92 131336 133694
10/31/92 134788 134162
11/30/92 141851 138724
12/31/92 146046 140430
1/31/93 151326 141610
2/28/93 152104 143536
3/31/93 157328 146564
4/30/93 151810 143017
5/31/93 157718 146850
6/30/93 161675 147276
7/31/93 159998 146687
8/31/93 167599 152246
9/30/93 172405 151074
10/31/93 174758 154201
11/30/93 172461 152736
12/31/93 176446 154585
1/1/94 182557 159840
2/28/94 181758 155509
3/31/94 172390 148729
4/30/94 172734 150632
5/31/94 172046 153103
6/30/94 166978 149352
7/31/94 170853 154250
8/31/94 178198 160575
9/30/94 172357 156641
10/31/94 175142 160165
11/30/94 165683 154335
12/31/94 169774 156619
1/31/95 169655 160676
2/28/95 178304 166937
3/31/95 184642 171862
4/30/95 191011 176932
5/31/95 197797 184004
6/30/95 205154 188272
7/31/95 216634 194523
8/31/95 217112 195011
9/30/95 224766 203241
10/31/95 222845 202515
11/30/95 234311 211406
12/31/95 233529 215477
1/31/96 240371 222812
2/29/96 247416 224878
3/31/96 249495 227043
4/30/96 255894 230390
5/31/96 259262 236332
6/30/96 256195 237232
7/31/96 245225 226751
8/31/96 253418 231533
9/30/96 268901 244564
10/31/96 277543 251309
11/30/96 298105 270306
12/31/96 296213 264951
1/31/97 310417 281505
2/28/97 311180 283712
3/31/97 299689 272054
4/30/97 310647 288269
5/31/97 334555 305824
6/30/97 352494 319525
7/31/97 385105 344959
8/31/97 375928 325642
9/30/97 172046 153103
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Statement of Assets and Liabilities
September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investment in Standish Equity Portfolio ("Portfolio"), at value (Note 1A) $ 170,141,845
Receivable for Fund shares sold 51,419
Receivable from Investment Adviser (Note 3) 494
Other assets 9,875
-------------
Total assets 170,203,633
Liabilities
Distribution payable $ 22,390
Accrued accounting, custody & transfer agent fees 3,783
Accrued expenses and other liabilities 7,664
-----------
Total liabilities 33,837
-------------
Net Assets $ 170,169,796
=============
Net Assets consist of:
Paid-in capital $ 114,146,424
Accumulated net realized gain 22,011,512
Distributions in excess of net investment income (21,987)
Net unrealized appreciation 34,033,847
=============
Total Net Asssets $ 170,169,796
=============
Shares of beneficial interest outstanding 3,486,603
=============
Net Asset Value, Offering and Redemption Price Per Share
(Net assets/Shares outstanding) $ 48.81
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, 1997 December 31, 1996
---------------------- ---------------------
<S> <C> <C>
Investment Income (Note 1B)
Interest income $ -- $ 77,789
Dividend income (net of withholding tax of $3,380) -- 612,003
Interest income allocated from Portfolio 228,206 117,893
Dividend income allocated from Portfolio (net of withholding
taxes of $0 and $1,452, respectively) 1,400,800 1,453,073
Expenses allocated from Portfolio (650,790) (479,297)
------------ ------------
Net investment income from Portfolio 978,216 1,781,461
Expenses
Investment Advisory fee (Note 3) -- 163,530
Registration fees 35,740 --
Accounting, custody and transfer agent fees 15,705 46,088
Legal and audit services 7,997 32,621
Miscellaneous 1,720 1,627
------------ ------------
Total expenses 61,162 243,866
Deduct:
Waiver of investment advisory fee -- (12,085)
Reimbursement of Fund operating expenses (22,014) --
------------ ------------
Total waiver of investment advisory fee and reimbursement
of Fund operating expenses (22,014) (12,085)
------------ ------------
Net expenses 39,148 231,781
------------ ------------
Net investment income 939,068 1,549,680
------------ ------------
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investment security transactions -- 3,307,925
Financial futures contracts -- 164,221
Net realized gain allocated from Portfolio on:
Investment security transactions 21,401,393 12,874,303
Financial futures contracts 863,199 428,300
------------ ------------
Net realized gain 22,264,592 16,774,749
Change in unrealized appreciation (depreciation):
Investment securities -- 3,350,428
Financial futures contracts -- (58,213)
From Portfolio -- 3,404,697
------------ ------------
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities 17,006,988 --
Financial futures contracts (47,733) --
------------ ------------
Change in net unrealized appreciation (depreciation) 16,959,255 6,696,912
------------ ------------
Net realized and unrealized gain on investments 39,223,847 23,471,661
------------ ------------
Net increase in net assets resulting from operations $ 40,162,915 $ 25,021,341
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended Year Ended
September 30, 1997 December 31, 1996 December 31, 1995
----------------------- -------------------- ----------------------
<S> <C> <C> <C>
Increase (decrease) in Net Assets
From operations
Net investment income $ 939,068 $ 1,549,680 $ 2,196,110
Net realized gain 22,264,592 16,774,749 21,564,705
Change in net unrealized appreciation 16,959,255 6,696,912 10,229,026
(depreciation) ------------ ------------ ------------
Net increase in net assets from operations 40,162,915 25,021,341 33,989,841
------------ ------------ ------------
Distributions to Shareholders
From net investment income (1,248,360) (1,481,454) (2,203,103)
In excess of net investment income (21,987) -- --
From net realized gain (7,692,777) (11,604,448) (8,605,084)
------------ ------------ ------------
Total distributions to shareholders (8,963,124) (13,085,902) (10,808,187)
------------ ------------ ------------
Fund share (principal) Transactions (Note 5)
Net proceeds from sale of shares 42,813,303 21,565,418 32,648,683
Net asset value of shares issued to shareholders
in payment of distributions declared 8,649,462 12,463,945 10,246,215
Cost of shares redeemed (18,347,542) (28,642,403) (64,134,926)
------------ ------------ ------------
Increase in net assets from Fund share
transactions 33,115,223 5,386,960 (21,240,028)
------------ ------------ ------------
Net increase in net assets 64,315,014 17,322,399 1,941,626
Net Assets
At beginning of period 105,854,782 88,532,383 86,590,757
------------ ------------ ------------
At end of period (including distributions in excess
of net investment income of $21,987, undistributed
net investment income of $88,950 and
distributions in excess of net
investment income of $20,274, respectively) $170,169,796 $105,854,782 $ 88,532,383
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, 1997 Year Ended December 31,
--------------------------------------------------
(Note 1E) 1996 1995 1994 1993 1992 +
----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 38.79 $ 34.81 $ 28.66 $ 30.89 $ 26.28 $ 25.66
-------- -------- ------- -------- -------- -------
Income from operations:
Net investment income * 0.39 0.60 0.76 0.45 0.50 0.56
Net realized and unrealized gain (loss) on
investments 12.79 8.52 9.94 (1.62) 5.57 1.81
-------- -------- ------- -------- -------- -------
Total from investment operations 13.18 9.12 10.70 (1.17) 6.07 2.37
-------- -------- ------- -------- -------- -------
Less distributions declared to shareholders
From net investment income (0.43) (0.56) (0.78) (0.44) (0.47) (0.54)
From net realized gain on investments (2.73) (4.58) (3.77) (0.62) (0.99) (1.19)
From paid-in capital -- -- -- -- -- (0.02)
-------- -------- ------- -------- -------- -------
Total distributions (3.16) (5.14) (4.55) (1.06) (1.46) (1.75)
-------- -------- ------- -------- -------- -------
Net asset value, end of period $ 48.81 $ 38.79 $ 34.81 $ 28.66 $ 30.89 $ 26.28
======== ======== ======= ======== ======== =======
Total return 35.13% 26.84% 37.55% (3.78)% 20.79% 9.52%
Ratios (to average daily net assets)/
Supplemental Data:
Net assets, end of period (000's omitted) $170,170 $105,855 $88,532 $ 86,591 $ 72,916 $14,679
Expenses * (1) 0.70%++ 0.71% 0.69% 0.70% 0.80% --
Net investment income * 0.95%++ 1.53% 2.05% 1.55% 1.29% 2.52%
Portfolio turnover (2) -- 41% 159% 182% 192% 92%
Average broker commission rate (2) -- $ 0.0499 -- -- -- --
* For the nine months ended September 30, 1997 and for the years ended December
31, 1996, 1993 and 1992, the investment adviser did not impose a portion of
its advisory fee and/or reimbursed a portion of the Fund's operating
expenses. If this voluntary reduction had not been taken, the net investment
income per share and the ratios would have been:
Net investment income per share $0.38 $ 0.59 -- -- $ 0.47 $ 0.34
Ratios (to average daily net assets):
Expenses (1) 0.72%++ 0.72% -- -- 0.97% 1.00%
Net investment income 0.93%++ 1.52% -- -- 1.12% 1.52%
</TABLE>
- ----------
+ Audited by other auditors.
++ Computed on an annualized basis.
(1) Includes the Fund's share of Standish Equity Portfolio's allocated
expenses for the nine months ended September 30, 1997 and for the period
from May 3, 1996 to December 31, 1996.
(2) Portfolio turnover and average broker commission rate represents activity
while the Fund was investing directly in securities. The portfolio
turnover and average broker commission rate for the period since the Fund
transferred substantially all of its investable assets to the Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Notes to Financial Statements
(1) Significant Accounting Policies:
Standish, Ayer & Wood Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Equity Fund (the "Fund") is a separate diversified
investment series of the Trust.
The Fund invests all of its investable assets in an interest of the
Standish Equity Portfolio (the "Portfolio"), a subtrust of Standish,
Ayer & Wood Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and has the same investment objective as
the Fund. The value of the Fund's investment in the Portfolio reflects
the Fund's proportionate interest in the net assets of the Portfolio
(approximately 100% at September 30, 1997). The performance of the Fund
is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies followed
by the Fund in the preparation of the 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-
The Fund records its investment in the Portfolio at value. The method
by which the Portfolio values it's securities is discussed in Note 1A
of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
B. Securities transactions and income-
Securities transactions are recorded as of the trade date. Currently,
the Fund's net investment income consists of the Fund's pro rata share
of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally
accepted accounting principles. Prior to the Fund's investment in the
Portfolio, the Fund held its investments directly. For investments held
directly, interest income was determined on the basis of interest
accrued, dividend income was recorded on the ex-dividend date and
realized gains and losses from securities sold were recorded on the
identified cost basis.
C. Federal taxes-
As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal
year.
D. Other-
All net investment income and realized and unrealized gains and losses
of the Portfolio are allocated pro rata among all the investors in the
Portfolio.
E. Change in fiscal year end-
The Board of Trustees voted on July 12, 1997 to change the fiscal year
end of the Fund from December 31 to September 30, effective September
30, 1997.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Distributions to Shareholders:
The Fund's dividends from short-term and long-term capital gains, if
any, after reduction of capital losses will be declared and distributed
at least annually, as will dividends from net investment income. In
determining the amounts of its dividends, the Fund will take into
account its share of the income, gains or losses, expenses, and any
other tax items of the Portfolio. Dividends from net investment income
and capital gains distributions, if any, are reinvested in additional
shares of the Fund unless the shareholder elects to receive them in
cash. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for futures transactions. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications between paid-in capital, undistributed net investment
income, and accumulated net realized gains (losses).
(3) Investment Advisory Fee:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish, Ayer & Wood, Inc. ("SA&W") for such services.
For the period ended September 30, 1997, SA&W voluntarily agreed to
limit the aggregate annual operating expenses of the Fund and Portfolio
(excluding commissions, taxes and extraordinary expenses) to 0.70% of
the Fund's average daily net assets. This agreement is voluntary and
temporary and may be discontinued or revised by SA&W at any time.
Pursuant to this agreement, for the nine months ended September 30,
1997, SA&W voluntarily reimbursed the Fund for it's operating expenses
of $22,014 and for the year ended December 31, 1996, SA&W voluntarily
waived $12,085 of its investment advisory fee. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere
in this report. The 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 Trust from SA&W. Certain of the
trustees and officers of the Trust are directors or officers of SA&W.
(4) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for
the nine months ended September 30, 1997 aggregated $42,815,798 and
$19,153,532, respectively. For the period from May 3, 1996 to December
31, 1996, increases and decreases in the Fund's investment in the
Portfolio aggregated $113,559,410 and $25,080,761, respectively.
(5) Shares of Beneficial Interest:
The Declaration of Trust permits the trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a
par value of one cent per share. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
September 30, 1997 December 31, 1996 December 31, 1995
------------------------ ---------------------- ----------------------
<S> <C> <C> <C>
Shares sold 979,248 561,325 932,595
Shares issued to shareholders in
payment of distributions declared 202,060 325,504
294,939
Shares redeemed (423,446) (701,269) (1,705,536)
------------------------ ---------------------- ----------------------
Net increase 757,862 185,560 (478,002)
======================== ====================== ======================
</TABLE>
At September 30, 1997, the Fund had one shareholder of record owning
approximately 10% of the Fund's outstanding voting shares.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(6) Tax Information - Unaudited:
The Fund paid distributions of $2.10 from long term capital gains
during the nine months ended September 30, 1997. Pursuant to section
852 of the Internal Revenue Code, the Fund designates $4,695,163 as
capital gain dividends for the nine months ended September 30, 1997.
All of this amount represents a 28% rate gain distribution.
11
<PAGE>
Report of Independent Accountants h\DOT\48120.dot
To the Trustees of Standish, Ayer & Wood Investment Trust and
Shareholders of Standish Equity Fund:
We have audited the accompanying statement of assets and liabilities of
Standish, Ayer & Wood Investment Trust: Standish Equity Fund (the
"Fund"), as of September 30, 1997, and the related statements of
operations for the nine months ended September 30, 1997 and for the
year ended December 31, 1996, the statements of changes in net assets
for the nine months ended September 30, 1997 and for each of the two
years in the period ended December 31, 1996 and the financial
highlights for the nine months ended September 30, 1997 and for each of
the four years in the period ended December 31,1996. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial highlights for the year ended December 31, 1992, presented
herein, were audited by other auditor's, whose report, dated February
12, 1993, expressed an unqualified opinion on such financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
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. 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
present fairly, in all material respects, the financial position of
Standish, Ayer & Wood Investment Trust: Standish Equity Fund as of
September 30, 1997, and the results of its operations for the nine
months ended September 30, 1997 and for the year ended December
31,1996, changes in its net assets for the nine months ended September
30, 1997 and for each of the two years in the period ended December 31,
1996 and financial highlights for the nine months ended September 30,
1997 and for each of the four years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 11, 1997
12
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
EQUITIES -- 95.0%
Basic Industry -- 3.8%
Dexter Corp. 27,800 $ 1,113,738
Lubrizol Corp. 24,300 1,020,600
Lyondell Petro Chemical 75,600 1,979,775
Southdown, Inc. 22,000 1,201,750
USX-US Steel Group, Inc. 33,100 1,150,225
---------------
6,466,088
---------------
Capital Goods -- 8.6%
Aeroquip-Vickers Inc. 30,300 1,484,700
Airborne Freight Corporation 14,600 884,213
Caterpiller Tractor, Inc. 30,800 1,661,275
Crane Company 36,400 1,496,950
Deere & Co. 38,200 2,053,250
General Dynamics 24,800 2,160,700
Ingersoll Rand Co. 42,950 1,849,534
Kaydon Corp. 4,700 282,000
Manitowoc Co., Inc. 10,200 364,013
Timken Co. 39,000 1,562,438
Yellow Corp.* 25,500 830,344
---------------
14,629,417
---------------
Consumer Stable -- 10.0%
Alberto Culver Company, Class B 25,000 760,938
Coors (Adolph) 23,800 901,425
Dole Food Company 36,800 1,662,900
Fred Meyer, Inc.* 29,200 1,554,900
Interstate Bakeries Corp. 30,000 2,056,875
Lancaster Colony Corp. 18,500 982,813
Owens Illinois* 54,800 1,859,775
Philip Morris Companies Inc. 44,800 1,862,000
Safeway, Inc.* 47,300 2,571,937
Sealed Air Corp.* 32,100 1,763,494
Universal Foods Corp. 25,900 1,042,475
---------------
17,019,532
---------------
Early Cyclical -- 4.2%
Ford Motor Co. 59,900 2,710,474
U.S. Airways Group, Inc.* 45,900 1,899,113
UAL Corp.* 18,100 1,531,713
USG Corp.* 22,700 1,088,181
---------------
7,229,481
---------------
Energy -- 9.3%
British Petroleum Co. PLC 34,864 3,166,047
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Energy (continued)
Camco International, Inc. 17,600 $ 1,227,600
Chevron Corporation 13,500 1,123,031
Ensco International, Inc. 29,600 1,167,350
Global Marine Inc.* 36,000 1,197,000
Pennzoil 20,900 1,665,469
Phillips Petroleum Co. 45,200 2,333,449
Tidewater, Inc. 28,400 1,682,700
USX-Marathon Group 61,000 2,268,438
---------------
15,831,084
---------------
Financial -- 14.9%
Ace Limited 19,400 1,823,600
BankAmerica Corp. 34,800 2,551,274
Bear Stearns Cos., Inc. 48,605 2,138,620
Chase Manhattan Corp. 13,700 1,616,600
Cigna Corp. 7,800 1,452,750
Conseco, Inc. 40,900 1,996,431
First Union Corp. 39,200 1,962,450
Golden West Financial Corp. 20,000 1,795,000
H.F. Ahmanson & Co. 39,800 2,261,138
Old Republic International Corp. 47,600 1,856,400
Reliastar Financial Corp. 42,800 1,703,975
Republic New York Corp. 19,800 2,249,775
The Money Store, Inc. 68,200 1,943,700
---------------
25,351,713
---------------
Growth Cyclical -- 8.4%
Applebees International, Inc. 28,900 722,500
Costco Companies Inc.* 30,900 1,162,613
G Tech Holdings Corp.* 35,800 1,223,913
Liz Claiborne 23,100 1,269,056
Nautica Enterprises Inc.* 50,100 1,409,063
Neiman Marcus Group Inc.* 60,200 1,926,400
Pier 1 Imports Inc. 72,150 1,294,191
Ross Stores Inc. 65,400 2,231,775
Ryan's Family Steakhouse* 77,300 710,194
Tommy Hilfiger Corp.* 46,100 2,302,118
---------------
14,251,823
---------------
Health Care -- 10.2%
Becton Dickinson & Co 34,800 1,666,050
Bergen Brunswig Corp., Class A 26,450 1,067,919
Biomet, Inc. 81,800 1,963,200
Health Care & Retirement* 33,000 1,227,188
Lincare Holdings, Inc.* 22,700 1,144,931
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
Novacare, Inc.* 73,900 $ 1,274,775
Schering-Plough Corp. 88,600 4,562,899
Sofamor Danek Group, Inc.* 19,400 1,108,225
Tenet Healthcare Corp.* 37,300 1,086,363
Watson Pharmaceutical Inc.* 38,500 2,300,375
---------------
17,401,925
---------------
Real Estate -- 1.9%
Duke Realty Investments, REIT 22,800 520,125
Felcor Suite Hotels Inc., REIT 9,700 398,306
Prentiss Properties Trust, REIT 31,600 912,450
Starwood Lodging Trust, REIT 23,900 1,372,756
---------------
3,203,637
---------------
Services -- 10.4%
Ameritech Corp. 35,400 2,354,099
Bell Atlantic Corp. 19,968 1,606,176
Bellsouth Corp. 37,300 1,725,125
Cincinnati Bell, Inc. 66,200 1,882,563
Gannett Co., Inc. 26,000 2,806,374
New York Times Co. Class A 44,400 2,330,999
Omnicom Group 27,800 2,022,450
Shared Medical 18,700 988,763
Xerox Corp. 24,500 2,062,594
---------------
17,779,143
---------------
Technology -- 12.6%
Adaptec Inc.* 29,400 1,374,450
Compaq Computer* 17,600 1,315,600
Computer Associates International, Inc. 25,900 1,859,944
Harris Corp., Inc. 36,000 1,647,000
Kulicke & Soffa Industries* 36,200 1,676,513
Pitney Bowes, Inc. 18,300 1,522,331
Raychem Corp. 8,700 735,150
Sci Sys, Inc.* 49,000 2,428,562
Storage Technology Corp.* 47,100 2,251,969
Stratus Computer, Inc.* 31,300 1,514,138
Sun Microsystems Inc.* 41,500 1,942,719
Symantec* 58,900 1,339,975
Tech Data Corp.* 38,600 1,775,600
---------------
21,383,951
---------------
Utilities -- 0.7%
FPL Group Inc. 21,600 1,107,000
---------------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
TOTAL EQUITIES (COST $127,583,794) 161,654,794
---------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BOND -- 0.3%
U.S. Government -- 0.3%
FNMA+ 5.551% 12/16/1997 $ 100,000 $ 98,862
FNMA+ 5.512% 12/11/1997 375,000 371,014
---------------
Total U.S. Government (Cost $469,863) 469,876
---------------
TOTAL BOND (COST $469,863) 469,876
---------------
SHORT-TERM INVESTMENTS -- 4.2%
Repurchase Agreements -- 4.2%
Prudential-Bache Repurchase Agreement,
dated 9/30/97, due 10/1/97, with a
maturity value of $7,210,834 and an
effective yield of 5.47%, collateralized by
a U.S. Government Agency Obligation with a
rate of 9.00%, with a maturity date
of 4/1/10 and with an aggregate market
value of $7,353,933. 7,209,738 7,209,738
---------------
Total Repurchase Agreements (Cost $7,209,738) 7,209,738
---------------
TOTAL SHORT-TERM INVESTMENTS (COST $7,209,738) 7,209,738
---------------
TOTAL INVESTMENTS-- 99.5% (COST $135,263,395) $ 169,334,408
Other Assets, Less Liabilities-- 0.5% 807,597
---------------
NET ASSETS-- 100% $ 170,142,005
===============
</TABLE>
Notes to the Schedule of Investments:
* Non-income producing security.
+ Denotes all or part of security pledged as collateral to cover margin
requirements on open financial futures contracts (Note 5).
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Statement of Assets and Liabilities
September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value (Note 1A) (identified cost, $135,263,395) $ 169,334,408
Receivable for investments sold 665,607
Interest and dividends receivable 158,611
Other assets 7,569
Deferred organization costs (Note 1E) 53,596
-------------
Total assets 170,219,791
Liabilities
Payable for daily variation margin on open financial futures $ 61,625
contracts (Note5)
Accrued accounting and custody fees 5,487
Accrued expenses and other liabilities 10,674
------------
Total liabilities 77,786
-------------
Net Assets (applicable to investors' beneficial interests) $ 170,142,005
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
May 3, 1996
Nine Months (commencement of
Ended operations) to
September 30, 1997 December 31, 1996
--------------------- --------------------
<S> <C> <C>
Investment Income (Note 1C)
Dividend income (net of withholding tax of $0 and $1,452,
respectively.) $ 1,400,800 $ 1,453,074
Interest income 228,206 117,893
------------- -------------
Total income 1,629,006 1,570,967
Expenses
Investment advisory fee (Note 2) 493,202 345,301
Accounting and custody fees 78,676 81,888
Legal and audit services 47,083 23,672
Amortization of organization cost (Note 1E) 11,007 10,067
Miscellaneous 20,822 18,369
------------- -------------
Total expenses 650,790 479,297
------------- -------------
Net investment income 978,216 1,091,670
------------- -------------
Realized and Unrealized Gain (loss)
Net realized gain
Investment security transactions 21,401,416 12,874,316
Financial futures contracts 863,199 428,300
------------- -------------
Net realized gain 22,264,615 13,302,616
Change in unrealized appreciation (depreciation)
Investment securities 17,007,005 3,338,425
Financial futures contracts (47,733) 66,274
------------- -------------
Change in net unrealized appreciation (depreciation) 16,959,272 3,404,699
------------- -------------
Net realized and unrealized gain 39,223,887 16,707,315
------------- -------------
Net increase (decrease) in net assets from operations $ 40,202,103 $ 17,798,985
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
May 3, 1996
Nine Months (commencement of
Ended operations) to
September 30, 1997 December 31, 1996
---------------------- --------------------
<S> <C> <C>
Increase (decrease) in Net Assets
From operations
Net investment income $ 978,216 $ 1,091,670
Net realized gain 22,264,615 13,302,616
Change in net unrealized appreciation (depreciation) 16,959,272 3,404,699
------------ ------------
Net increase in net assets from operations 40,202,103 17,798,985
------------ ------------
Capital transactions
Assets contributed by Standish Equity Fund at commencement
(including unrealized gain of $13,669,897) -- 97,994,616
Contributions 42,815,799 15,564,794
Withdrawals (19,153,531) (25,080,761)
------------ ------------
Increase in net assets resulting from capital transactions 23,662,268 88,478,649
------------ ------------
Total increase in net assets 63,864,371 106,277,634
Net Assets
At beginning of period 106,277,634 --
------------ ------------
At end of period $170,142,005 $106,277,634
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
May 3, 1996
Nine Months Ended (commencement of
Nine Months Ended operations) to
September 30, 1997 December 31, 1996
-------------------- --------------------------
<S> <C> <C>
Ratios (to average daily net assets):
Expenses 0.66%+ 0.69%+
Net investment income 0.99%+ 1.58%+
Portfolio Turnover 75% 78%
Average broker commission per share (1) $ 0.0465 $ 0.0483
Net assets, end of period (000s omitted) $170,142 $106,278
</TABLE>
- ----------
+ Computed on an annualized basis.
(1) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting 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 Equity Portfolio (the "Portfolio") is a separate diversified
investment series of the Portfolio Trust. As of September 30, 1997, the
Standish Equity Fund's proportionate interest in the net assets of the
Portfolio was approximately 100%.
The following is a summary of significant accounting policies followed
by the Portfolio in the preparation of the 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, 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 Portfolio are valued on an amortized cost
basis. 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-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 custodian 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 transaction and income-
Securities transactions are recorded as of the trade date. Interest
income is determined on the basis of interest accrued. Dividend income
is recorded on the ex-dividend date. Realized gains and losses from
securities sold are recorded on the identified cost basis.
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 will allocate 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.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
E. Deferred Organizational Expenses-
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized on a straight-line basis
through April, 2001.
F. Change in fiscal year end-
The Board of Trustees voted on July 12, 1997 to change the fiscal year
end of the Portfolio from December 31 to September 30, effective
September 30, 1997.
(2) Investment Advisory Fee:
The investment advisory fee paid to Standish, Ayer & Wood, Inc.
("SA&W") for overall investment advisory and administrative services is
paid monthly at the annual rate of 0.50% 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 purchased
option transactions and short-term obligations, were as follows:
<TABLE>
<CAPTION>
For the Period May 3, 1996
Nine Months Ended (commencement of operations) to
September 30, 1997 December 31, 1996
----------------------------------- -----------------------------------
Purchases Sales Purchases Sales
----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
U.S. Government Securities $ 740,421 $ 0 $ 0 $ 0
================= ================ ================ =================
Investments (non-U.S. Government $ 161,249,954 $ 141,898,028 $ 75,936,681 $ 81,731,534
================= ================ ================ =================
</TABLE>
(4) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 1997, as computed on a
federal income tax basis, were as follows:
Aggregate Cost $ 135,287,920
===============
Gross unrealized appreciation $ 34,624,206
Gross unrealized depreciation $ (577,718)
---------------
Net unrealized appreciation (depreciation) $ 34,046,488
===============
22
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity 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 seek to
enhance potential gain in circumstances where hedging is not involved.
The nature, risks and objectives of these investments are set forth
more fully in Parts A and 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 seek to hedge against
risks of market exposure and changes in securities prices and foreign
currencies, 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 for
the contracts, 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 written 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. The Portfolio entered into no such transactions for the period
ended September 30, 1997.
Futures Contracts--
The Portfolio may enter into financial futures contracts for the
delayed sale or delivery of securities or contracts based on financial
indices at a fixed price on a future date. The Portfolio is required to
deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Portfolio each day, dependent on the daily fluctuations
in the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Portfolio.
There are several risks in connection with the use of futures contracts
as a hedging device. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments or index,
which may not correlate with changes in value of the hedged
investments. Buying futures tend to increase the Portfolio's exposure
to the underlying instrument, while selling futures tends to decrease
the Portfolio's exposure to the underlying instrument or hedge other
portfolio investments. In addition, there is the risk that the
Portfolio may not be able to enter into a closing transaction because
of an illiquid secondary market. Losses may arise if there is an
illiquid secondary market or if the counterparties do not perform under
the contracts' terms. The Portfolio enters into financial futures
transactions primarily to manage its exposure to certain markets and to
changes in securities prices and foreign currencies. Gains and losses
are realized upon the expiration or closing of the futures contracts.
At September 30, 1997, the Portfolio had entered into the following
financial futures contracts:
<TABLE>
<CAPTION>
Underlying
Face/amount at Unrealized
Contract Position Expiration Date value Gain/(Loss)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 (17 Contracts) Long 12/19/97 8,113,250 $ (37,145)
=============
</TABLE>
23
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
At September 30, 1997, the Portfolio had segregated sufficient cash
and/or securities to cover margin requirements on open futures
contracts.
24
<PAGE>
Independent Auditor's Report
To the Trustees of Standish, Ayer & Wood Master Portfolio and Investors
of Standish Equity Portfolio:
We have audited the accompanying statement of assets and liabilities of
Standish Equity Portfolio, including the schedule of investments as of
September 30, 1997, and the related statements of operations, the
statements of changes in net assets and the supplementary data for the
nine months ended September 30, 1997 and for the period from May 3,
1996 (commencement of operations) to December 31, 1996. These financial
statements and supplementary data are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on
these financial statements and supplementary data based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audits to obtain reasonable assurance about
whether the financial statements and supplementary data are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of September 30, 1997 by correspondence with the custodian and brokers;
where replies were not received from brokers we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary data present
fairly, in all material respects, the financial position of Standish
Equity Portfolio as of September 30, 1997, and the results of its
operations, changes in its net assets and supplementary data for the
respective stated periods, in conformity with United States generally
accepted accounting principles.
Coopers & Lybrand
Chartered Accountants
Toronto, Canada
November 11, 1997
25
<PAGE>
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26
<PAGE>
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27
<PAGE>
[STANDISH LOGO] STANDISH, AYER & WOOD, INC.
One Financial Center
Boston, Massachusetts 02111-2662
(617) 350-6100
