Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Financial Statements 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 Small Cap 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 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 year ended September 30, 1997, 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 Small Capitalization Equity Fund
Management Discussion & Analysis
The strong performance in small cap stocks which began with a bang in May has
continued to date. We are pleased to report that 1997 is turning out to be an
excellent year for small cap stocks after all. For the period from January 1
through September 30, the Standish Small Cap Fund gained 27.92%, compared to a
gain of 23.02% for the Russell 2000 Growth Index, and a gain of 26.61% for the
Russell 2000 Index.
Small caps had been performing poorly for the past four years, with some notable
sharp rallies as exceptions. Currently, there is some evidence that the tone of
the market is more favorable for these stocks. The key to this shift apparently
is in earnings and valuation. Small caps have been improving in terms of
earnings growth and propensity to positively surprise analysts' estimates. In
addition, their price/earnings multiples on average compare well to those of
large cap stocks. Large cap stock earnings are more in question now because of
the age of this business cycle and the challenge of repatriating foreign
earnings that must be translated into a very strong U.S. currency. Large cap
valuations appear extended, and it may be that investors are taking some
profits, and marginally gravitating to small cap stocks. It would take very
little increased attention from institutional managers to have a noticeable
impact on small cap stocks. In a marketplace which has been very generous to
shareholders, we believe that the best part of this cycle has been experienced,
but prospects for small caps are still good for the longer term.
The first nine months of 1997 has been again a volatile period for small cap
stocks. After a strong January the stocks languished badly through April, with a
very strong rally beginning in May and continuing to date. Our investments are
oriented toward rapidly growing, high quality companies at the smaller end of
the small cap spectrum, and this has presented a performance challenge for the
last two years. In recent months smallness seems to have ceased as a negative.
Also this has been a better year for value investors compared to growth, and we
are decidedly in the higher growth camp. This past trend again has moderated in
recent months. Our most important value-addition this year has been from stock
selection, while our sector emphasis a neutral influence. While we were helped
by growth sector emphasis in technology in particular, it was offset by the
strong performance in financial stocks, and more recently in the traditionally
cyclical industries; areas in which we typically have very few investments. As a
reminder, our high growth orientation leads us to heavier commitments in the
technology, medical, and business services sectors, with comparatively fewer
investments in the slower growth areas of the economy. We generally seek to
invest in the highest quality companies, and we select stocks based on earnings
and margin dynamics, business position analysis, and an evaluation of
management.
We are very pleased to announce the addition of Jonathan Stone to the Standish
Small Cap Team. Jonathan joins Drew Beja, Melissa Dane and me after several
years as an effective and distinguished analyst with a regional research and
brokerage firm where he covered technology stocks. He is an experienced,
seasoned analyst who has already had considerable impact in stock selection as
well as portfolio management. He is clearly an important addition to our
capabilities.
In closing, it is important to remind you of the volatility of small cap
investments, while we do not expect a diminution of this volatility in the
future. We remain, however, optimistic about the outlook for small cap stocks
and view the category as having important potential over the long term. We are
very appreciative of your support and thank you for your interest in the
Standish Small Capitalization Equity Fund.
Sincerely,
/s/ Nicholas S. Battelle
Nicholas S. Battelle
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Comparison of Change in Value of $100,000 Investment
in Standish Small Capitalization Fund,
in the S&P 500 Index, the Russell 2000 Index, and the Russell 2000 Growth Index
[GRAPHIC OMITTED]
[The following table was represented as a line graph in the printed materials.]
Standish Small
Capitalization Russell 2000 S&P 500 Russell 2000
Equity Fund Index Index Growth Index
----------- ----- ----- ------------
Inception 9/1/90 100000 100000 100000 100000
9/30/90 91650 91110 95170 90527
10/31/90 86544 85543 94846 85451
11/30/90 96795 92070 100850 93307
12/31/90 105117 95688 103654 97757
1/31/91 114039 104310 108173 106938
2/28/91 129023 116014 115908 119224
3/31/91 134971 124146 118712 127623
4/30/91 135963 123823 118997 126104
5/31/91 145342 129717 124126 132194
6/30/91 138841 122220 118441 123197
7/31/91 149636 126497 123961 128780
8/31/91 153870 131165 126898 134465
9/30/91 156311 132188 124779 136492
10/31/91 168745 135678 126451 142304
11/30/91 156082 129396 121355 134880
12/31/91 173092 139748 135238 147796
1/31/92 185514 151081 132723 159406
2/29/92 185081 155493 134448 161107
3/31/92 178546 150237 131827 151841
4/30/92 168374 144964 135702 143025
5/31/92 166166 146892 136367 142705
6/30/92 156860 139988 134335 133605
7/31/92 162314 144860 139830 137799
8/31/92 161275 140760 136963 132493
9/30/92 168201 143998 138579 136193
10/31/92 174910 148548 139064 141793
11/30/92 187808 159927 143793 155026
12/31/92 189929 165492 145561 159280
1/31/93 191980 171086 146784 161255
2/28/93 183826 167134 148780 152498
3/31/93 191121 172549 151919 156426
4/30/93 186114 167804 148243 151462
5/31/93 195604 175221 152216 160543
6/30/93 197702 176307 152657 160925
7/31/93 201469 178740 152047 162531
8/31/93 214725 186462 157809 170314
9/30/93 226265 191720 156594 175940
10/31/93 229842 196666 159836 181028
11/30/93 228363 190255 158317 173705
12/31/93 243531 196762 160233 180560
1/31/94 253626 202920 165681 185366
2/28/94 252532 202190 161191 184551
3/31/94 235027 191534 154163 173214
4/30/94 239751 192664 156136 173479
5/31/94 236718 190487 158697 169591
6/30/94 224748 184068 154809 162345
7/31/94 224696 187087 159886 164658
8/31/94 237944 197507 166442 176741
9/30/94 237995 196836 162364 177481
10/31/94 239530 196048 166017 179371
11/30/94 226180 188128 159974 172114
12/31/94 234638 193170 162342 176169
1/31/95 234582 190736 166546 172580
2/28/95 241318 198671 173037 180555
3/31/95 248777 202068 178141 185829
4/30/95 248443 206554 183396 188624
5/31/95 246328 210106 190727 191095
6/30/95 255086 221011 195152 204263
7/31/95 280472 233741 201623 220184
8/31/95 290271 238577 202129 222901
9/30/95 296339 242838 210659 227490
10/31/95 282699 231979 209907 216300
11/30/95 294557 241722 219122 225848
12/31/95 304637 248098 223342 230852
1/31/96 302870 247830 230944 228941
2/29/96 311418 255555 233085 239381
3/31/96 324752 260838 235330 244113
4/30/96 362020 274785 238799 262854
5/31/96 387093 285614 244957 276333
6/30/96 358091 273886 245891 258377
7/31/96 309817 249965 235027 226834
8/31/96 336505 264478 239984 243627
9/30/96 347415 274814 253490 256173
10/31/96 329291 270579 260481 245122
11/30/96 334746 281727 280171 251939
12/31/96 357533 289111 274621 256852
1/31/97 370698 294887 291779 263268
2/28/97 340993 287736 294067 247369
3/31/97 313449 274158 281984 229912
4/30/97 306428 274923 298790 227245
5/31/97 354833 305522 316986 261400
6/30/97 378865 318629 331187 270262
7/31/97 399711 333445 357550 284099
8/31/97 411750 341081 337527 292622
9/30/97 237995 196836 162364 177481
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statement of Assets and Liabilities
September 30, 1997
- --------------------------------------------------------------------------------
Assets
Investment in Standish Small Capitalization Equity Portfolio
("Portfolio"), at value (Note 1A) $274,164,195
Receivable for Fund shares sold 207,175
Receivable from Investment Adviser (Note 3) 1,037
Other assets 13,706
------------
Total assets 274,386,113
Liabilities
Payable for Fund shares redeemed $ 7,500
Accrued accounting, custody and transfer agent fees 3,489
Accrued expenses and other liabilities 6,958
--------
Total liabilities 17,947
------------
Net Assets $274,368,166
============
Net Assets consist of:
Paid-in capital $182,395,989
Accumulated net realized gain 23,572,592
Net unrealized appreciation 68,399,585
------------
Total Net Assets $274,368,166
============
Shares of beneficial interest outstanding 4,125,823
============
Net Asset Value, Offering and Redemption Price Per Share
(Net assets/Shares outstanding) $ 66.50
============
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statements of Operations
- --------------------------------------------------------------------------------
Nine Months
Ended Year Ended
September 30, December 31,
1997 1996
------------- -------------
Investment Income (Note 1B)
Interest income $ -- $ 108,348
Dividend income -- 89,921
Interest income allocated from Portfolio 172,824 305,276
Dividend income allocated from Portfolio 114,280 153,520
Expenses allocated from Portfolio (1,240,209) (1,112,861)
------------- -------------
Net investment income from Portfolio (953,105) (455,796)
Expenses
Investment Advisory fee (Note 3) -- 396,796
Accounting, custody and transfer agent fees 21,515 76,102
Registration fees 17,578 11,758
Legal and audit services 10,055 29,409
Miscellaneous 1,429 14,821
------------- -------------
Total expenses 50,577 528,886
Deduct:
Waiver of investment advisory fee -- (13,118)
Reimbursement of Fund operating expenses (6,952) --
------------- -------------
Total waiver of investment advisory fee
and reimbursement
of Fund operating expenses (6,952) (13,118)
------------- -------------
Net expenses 43,625 515,768
------------- -------------
Net investment loss (996,730) (971,564)
------------- -------------
Realized and Unrealized Gain (Loss)
Net realized gain from:
Investment securities transactions -- 15,760,827
Financial futures contracts -- 87,425
Net realized gain allocated from Portfolio on:
Investment securities transactions 23,991,237 20,794,956
Financial futures contracts 832,557 717,750
------------- -------------
Net realized gain 24,823,794 37,360,958
Change in unrealized appreciation
(depreciation):
Investment securities -- 20,543,632
Financial futures contracts -- 82,425
From Portfolio -- (23,038,475)
------------- -------------
Change in unrealized appreciation
(depreciation) allocated from Portfolio on:
Investment securities 36,145,336 --
Financial futures contracts (66,305) --
------------- -------------
Change in net unrealized appreciation
(depreciation) 36,079,031 (2,412,418)
------------- -------------
Net realized and unrealized gain on
investments 60,902,825 34,948,540
------------- -------------
Net increase in net assets resulting from
operations $59,906,095 $33,976,976
============= =============
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Nine Months
Ended Year Ended Year Ended
September 30, December 31, December 31,
1997 1996 1995
--------------------------------------------
Increase (decrease) in Net Assets
From operations
Net investment loss $ (996,730) $ (971,564) $ (436,289)
Net realized gain 24,823,794 37,360,958 12,833,607
Change in net unrealized
appreciation (depreciation) 36,079,031 (2,412,418) 27,572,436
------------ ------------ ------------
Net increase in net assets
from operations 59,906,095 33,976,976 39,969,754
------------ ------------ ------------
Distributions to Shareholders
From net realized gain (4,207,292) (39,018,707) (4,170,634)
------------ ------------ ------------
Fund share (principal) Transactions
(Note 5)
Net proceeds from sale of shares 23,255,837 63,681,602 56,591,350
Net asset value of shares issued
to shareholders in payment of
distributions declared 3,950,929 36,043,859 3,924,054
Cost of shares redeemed (52,668,241) (31,022,858 (23,435,868)
------------ ------------ ------------
Increase (decrease) in net
assets from Fund share
transactions (25,461,475) 68,702,603 37,079,536
------------ ------------ ------------
Net increase in net assets 30,237,328 63,660,872 72,878,656
Net Assets
At beginning of period 244,130,838 180,469,966 107,591,310
------------ ------------ ------------
At end of period $274,368,166 $244,130,838 $180,469,966
============ ============ ============
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September December 31,
30, 1997 ---------------------------------------
(Note 1E)(3) 1996 1995 1994 1993 1992+
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $52.96 $53.46 $42.15 $48.97 $39.83 $39.99
------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income* (0.23) -- -- -- (0.07) (0.11)
Net realized and
unrealized gain
(loss) on
investments 14.80 9.29 12.57 (1.84) 11.31 4.00
------ ------ ------ ------ ------ ------
Total from investment
operations 14.57 9.29 12.57 (1.84) 11.24 3.89
------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders
From net realized gain
on investments (1.03) (9.79) (1.26) (4.98) (2.10) (4.05)
------ ------ ------ ------ ------ ------
Net asset value, end
of period $66.50 $52.96 $53.46 $42.15 $48.97 $39.83
====== ====== ====== ====== ====== ======
Total return 27.92% 17.36% 29.83% (3.66)% 8.21% 9.74%
</TABLE>
<TABLE>
Ratios (to average daily net assets)/Supplemental Data:
Net assets, end of
<S> <C> <C> <C> <C> <C> <C>
period (000 omitted) $274,368 $244,131 $180,470 $107,591 $85,141 $50,950
Expenses * (1) 0.74%++ 0.75% 0.75% 0.79% 0.88% 1.04%
Net investment loss * (0.57)%++ (0.44)% (0.30)% (0.27)% (0.18)% (0.38)%
Portfolio turnover (2) -- 28% 112% 130% 144% 101%
Average broker
commission rate (2) -- $0.045 -- -- -- --
</TABLE>
* For the nine months ended September 30, 1997 and for the year ended to
December 31, 1996, the investment adviser did not impose a portion of its
advisory fee and/or reimbursed the Fund for a portion of its operating
expenses. If this voluntary reduction had not been undertaken, the net
investment income per share and the ratios would have been:
Net investment income
(loss) per share $(0.23) $(0.0) -- -- -- --
Ratios (to average daily
net assets):
Expenses (1) 0.74%++ 0.76% -- -- -- --
Net investment loss (0.57)%++ (0.45)% -- -- -- --
- -------------
+ Audited by other auditors.
++ Computed on an annualized basis.
(1) Includes the Fund's share of the Standish Small Capitalization 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.
(3) Calculated based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization 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 Small Capitalization Equity Fund (the "Fund") is a
separate diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest in the
Standish Small Capitalization 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 its 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.
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 of 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.
(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
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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. See
Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. For the period ended September 30, 1997 and for
the year ended December 31, 1996, SA&W voluntarily agreed to limit the
aggregate annual operating expenses of the Fund and the Portfolio
(excluding commissions, taxes and extraordinary expenses) to 0.74% and
0.75%, respectively, 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, SA&W voluntarily reimbursed
the Fund for operating expenses in the amount of $6,952 for the nine
months ended September 30, 1997 and voluntarily waived $13,118 of its
investment advisory fee for the year ended December 31, 1996. The Trust
pays no compensation directly to its trustees who are affiliated with the
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 $23,224,550 and
$55,662,396, respectively. For the period May 3, 1996 to December 31,
1996, increases and decreases in the Fund's investment in the Portfolio
aggregated $253,391,982 and $23,335,985, 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:
Nine Months
Ended Year Ended Year Ended
September 30, December December
1997 31, 1996 31, 1995
------------- ------------- ------------
Shares sold................... 431,424 1,100,618 1,215,183
Shares issued to shareholders
in payment of
distributions declared...... 73,437 562,742 73,432
Shares redeemed............... (988,851) (531,585) (465,355)
------------- ------------- ------------
Net increase/(decrease)....... (483,990) 1,131,775 823,260
============= ============= ============
Effective December 20, 1996, the Fund was closed to new investors.
(6) Tax Information- Unaudited
The Fund paid distributions of $7.86 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 $3,738,369 as capital gain
dividends for the nine months ended September 30, 1997. All of this amount
represents a 28% rate gain distribution.
10
<PAGE>
Report of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust and the
Shareholders of Standish Small Capitalization Equity Fund:
We have audited the accompanying statements of assets and liabilities of
Standish, Ayer & Wood Investment Trust: Standish Small Capitalization
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 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
auditors, 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 referred
to above present fairly, in all material respects, the financial position
of Standish, Ayer & Wood Investment Trust: Standish Small Capitalization
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
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
EQUITIES -- 99.2%
Basic Industry -- 1.5%
Chirex, Inc.* 159,500 $ 4,067,249
------------
Capital Goods -- 8.0%
Align-Rite International, Inc.* 79,600 1,900,450
Ballantyne Of Omaha, Inc.* 122,000 2,348,500
Hagler Bailly* 40,200 1,020,075
Kellstrom Industries, Inc.* 125,700 2,592,562
Power-One, Inc.* 28,300 396,200
SBS Technologies, Inc.* 154,900 3,698,237
Service Experts, Inc.* 74,900 2,026,981
Tetra Technologies, Inc.* 98,600 2,280,125
Trailer Bridge, Inc.* 179,100 2,373,074
Triumph Group, Inc.* 98,400 3,290,249
------------
21,926,453
------------
Consumer Stable -- 6.9%
800-Jr Cigar, Inc.* 112,500 3,937,499
Aviation Sales Co.* 129,700 3,923,424
General Cigar Holdings, Inc.* 74,300 2,145,413
Hughes Supply, Inc. 102,450 3,092,708
Robert Mondavi Corp., Class A* 51,800 2,836,049
Suiza Foods Corp.* 59,800 3,079,699
------------
19,014,792
------------
Early Cyclical -- 3.8%
Aftermarket Technology, Inc.* 118,500 2,814,374
Atlantic Coast Airlines, Inc.* 122,800 2,640,199
Excelsior-Henderson Motorcycle* 192,400 1,238,575
Hospitality Worldwide Services* 125,700 1,649,813
Midwest Express Holdings* 60,600 1,942,988
------------
10,285,949
------------
Energy -- 3.6%
Cal Dive International, Inc.* 44,100 1,642,725
Friede Goldman Intl, Inc.* 50,500 3,029,999
Hvide Marine, Inc.* 111,200 3,558,399
Veritas DGC, Inc.* 37,200 1,583,325
------------
9,814,448
------------
Financial -- 2.2%
CCC Information Services Group* 63,300 1,345,125
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Financial (continued)
Rental Service Corp.* 111,400 $ 2,499,537
Texas Regional Bancshares, Class A 66,800 2,087,500
------------
5,932,162
------------
Growth Cyclical -- 16.9%
Alliance Gaming Corp.* 408,000 2,702,999
Apple South, Inc. 195,600 3,765,299
Ashworth, Inc.* 157,700 1,616,425
Atria Communities, Inc.* 138,700 2,496,599
Central Garden & Pet Co.* 121,200 3,726,899
Coach USA, Inc.* 138,200 4,154,637
Coldwater Creek, Inc.* 67,300 1,951,700
Gadzooks, Inc.* 153,900 3,231,899
Golden Bear Golf, Inc.* 92,200 1,290,800
Logan's Roadhouse Inc.* 80,000 2,080,000
North Face, Inc.* 83,700 2,249,438
Scientific Games Holdings Corp.* 111,200 2,418,599
Sonic Corp.* 73,100 2,046,800
Steiner Leisure Ltd.* 72,900 2,679,074
Suburban Lodges of America* 130,100 3,431,387
Sunrise Assisted Living, Inc.* 80,600 2,911,674
Travel Services, Inc.* 64,500 1,338,375
Vans, Inc.* 141,700 2,267,200
------------
46,359,804
------------
Health Care -- 19.8%
Arbor Health Care Company* 49,900 2,195,600
Arris Pharmaceutical Corp.* 197,400 2,566,199
Ballard Medical Products 105,900 2,554,837
CN Bioscience, Inc.* 130,000 3,054,999
Cohr, Inc.* 112,100 1,821,625
Daou Systems, Inc.* 66,100 2,065,625
Guilford Pharmaceuticals, Inc.* 99,900 2,947,049
HCIA, Inc.* 113,600 1,533,600
Horizon Health Corp.* 137,700 3,442,499
Ilex Oncology, Inc.* 133,700 1,604,400
Imnet Systems, Inc.* 80,400 2,160,750
Impath, Inc.* 105,400 3,082,949
Inhale Therapeutic Systems* 108,100 3,391,637
Medimmune, Inc.* 74,100 2,723,174
Medquist, Inc.* 135,150 3,159,130
National Surgery Centers, Inc.* 125,175 2,722,555
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Health Care (continued)
Neurogen Corp.* 116,800 $ 3,153,599
Pharmaceutical Product Development* 115,000 2,343,125
Possis Medical, Inc.* 86,100 1,226,925
Rochester Medical Corp.* 87,000 1,457,250
Specialty Care Network, Inc.* 163,700 2,025,788
Urologix, Inc.* 125,600 2,982,999
------------
54,216,314
------------
Services -- 19.1%
Abacus Direct Corp.* 60,400 1,940,350
Analysts International Corp. 64,100 2,483,874
Barrett Business Services, Inc.* 136,400 2,284,700
Best Software, Inc.* 78,800 1,152,500
BET Holdings, Inc.* 60,900 3,220,087
Data Processing Resources Corp.* 109,300 2,732,499
Emmis Broadcasting Corp., Class A* 62,900 3,003,474
F.Y.I., Inc. 107,500 2,794,999
Gray Communications Systems, Class B 108,900 2,722,499
Harbinger Corp.* 31,000 1,127,625
Inspire Insurance Solutions* 106,500 1,930,313
LCC International, Inc.* 130,500 2,854,687
Metzler Group, Inc.* 44,500 1,785,563
On Assignment, Inc.* 65,300 2,971,149
Personnel Group of America, Inc.* 69,000 2,363,249
Physician Support Systems* 124,700 2,104,313
Remedy Temp, Inc.* 107,300 2,521,549
Rural Metro Corp.* 80,000 2,439,999
Scandinavian Broadcast Systems Corp.* 146,800 3,523,199
Scholastic Corp.* 79,800 3,152,099
Wackenhut Corrections Corp.* 51,900 1,608,900
Walsh International, Inc.* 141,200 1,765,000
------------
52,482,627
------------
Technology -- 17.4%
Advanced Technology Material* 111,900 4,112,324
Benchmark Electronics, Inc.* 91,900 2,590,430
Brooks Automation, Inc.* 60,000 2,302,500
C. P. Clare Corp.* 109,300 2,158,675
CFM Technologies, Inc.* 52,200 2,045,588
Datastream Systems, Inc.* 61,700 2,307,963
Exar Corp.* 83,100 2,202,150
FSI International, Inc.* 80,400 1,678,350
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Technology (continued)
Hadco Corp.* 51,400 $ 2,783,628
Helix Technology Corp. 29,200 1,807,661
Hyperion Software Corp.* 89,600 2,794,399
Intelligroup, Inc.* 115,700 2,487,549
Lecroy Corp.* 52,100 2,305,425
Level One Communications, Inc.* 56,600 2,278,150
Periphonics Corp. 89,500 956,531
Photronics, Inc.* 28,700 1,738,144
Radiant Systems, Inc.* 114,700 2,408,699
Semtech Corp.* 41,400 2,861,774
Star Telecommunications, Inc.* 129,100 2,969,299
Ultrak, Inc.* 147,700 1,809,325
Viisage Technology, Inc.* 109,400 1,230,750
------------
47,829,314
------------
TOTAL EQUITIES (COST $203,530,742) 271,929,112
------------
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------
BOND -- 0.0%
U.S. Government -- 0.0%
FNMA+ 5.551% 12/16/1997 150,000 148,293
----------
Total U.S. Government (Cost $148,290) 148,293
----------
TOTAL BOND (COST $148,290) 148,293
----------
SHORT-TERM INVESTMENTS -- 0.2%
REPURCHASE AGREEMENTS -- 0.2%
Prudential-Bache Repurchase Agreement, dated 9/30/97,
due 10/1/97, with a maturity value of $544,264
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 $555,065. 544,181 544,181
----------
Total Repurchase Agreements (Cost $544,181) 544,181
----------
TOTAL SHORT-TERM INVESTMENTS (COST $544,181) 544,181
----------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - September 30, 1997
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 99.4% (COST $204,223,213) $272,621,586
Other Assets, Less Liabilities-- 0.6% 1,542,736
============
NET ASSETS-- 100% $274,164,322
============
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 6).
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Statement of Assets and Liabilities
September 30, 1997
- --------------------------------------------------------------------------------
Assets
Investments, at value (Note 1A)
(identified cost, $204,223,213) $272,621,586
Cash 25,000
Receivable for investments sold 7,869,381
Interest and dividends receivable 634
Other assets 4,266
Deferred organization costs (Note 1E) 53,596
------------
Total assets 280,574,463
Liabilities
Payable for investments purchased $ 6,383,367
Accrued accounting and custody fees 7,769
Payable for daily variation margin on open
financial futures contracts (Note 5) 3,055
Accrued expenses and other liabilities 15,950
------------
Total liabilities 6,410,141
------------
Net Assets (applicable to investors' beneficial interests) $274,164,322
============
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Statements of Operations
- --------------------------------------------------------------------------------
For the
period
May 3, 1996
(commencement
of
Nine Months operations)
Ended to
September 30, December 31,
1997 1996
------------- ------------
Investment Income (Note 1C)
Dividend income $114,280 $153,520
Interest income 172,824 305,276
----------- -----------
Total income 287,104 458,796
Expenses
Investment advisory fee (Note 2) 1,051,872 920,742
Accounting and custody fees 96,700 125,602
Legal and audit services 53,927 32,620
Amortization of organization expense (Note 1E) 11,007 10,067
Miscellaneous 26,703 23,830
----------- -----------
Total expenses 1,240,209 1,112,861
----------- -----------
Net investment loss (953,105) (654,065)
----------- -----------
Realized and Unrealized Gain (Loss)
Net realized gain
Investment security transactions 23,991,258 20,794,956
Financial futures contracts 832,557 717,750
----------- -----------
Net realized gain 24,823,815 21,512,706
Change in unrealized appreciation (depreciation)
Investment securities 36,145,344 (22,995,625)
Financial futures contracts (66,305) (42,850)
----------- -----------
Change in net unrealized appreciation
(depreciation) 36,079,039 (23,038,475)
----------- -----------
Net realized and unrealized gain (loss) 60,902,854 (1,525,769)
----------- -----------
Net increase (decrease) in net assets from
operations $59,949,749 $(2,179,834)
=========== ===========
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Period
Nine Months May 3, 1996
Ended (commencement of
September operations) to
30, 1997 December 31, 1996
------------ ---------------------
Increase (decrease) in Net Assets
From operations
Net investment loss $ (953,10) $ (654,065)
Net realized gain 24,823,815 21,512,706
Change in net unrealized appreciation
(depreciation) 36,079,039 (23,038,475)
------------ ------------
Net increase (decrease) in net assets
from operations 59,949,749 (2,179,834)
------------ ------------
Capital transactions
Assets contributed by Standish Small
Capitalization Equity Fund at
commencement (including unrealized
appreciation of $55,359,029) -- 233,108,124
Contributions 23,224,550 39,060,115
Withdrawals (55,662,397) (23,335,985)
------------ ------------
Increase (decrease) in net assets
resulting from capital transactions (32,437,847) 248,832,254
------------ ------------
Total increase in net assets 27,511,902 246,652,420
Net Assets:
At beginning of period 246,652,420 --
------------ ------------
At end of period $274,164,322 $246,652,420
============ ============
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Supplementary Data
- --------------------------------------------------------------------------------
For the period
Nine Months May 3, 1996
Ended (commencement of
September operations) to
30, 1997 December 31, 1996
------------- --------------------
Ratios (to average daily net assets):
Expenses 0.71%+ 0.73%+
Net investment loss (0.54)%+ (0.43)%+
Portfolio Turnover 70% 76%
Average broker commission per share (1) $0.0403 $0.0434
Net assets, end of period (000's omitted) $274,164 $246,652
- -------------------------
+ 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 Small Capitalization 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
Small Capitalization Equity Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust. As of September 30,
1997, the Standish Small Capitalization 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 transactions 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.
21
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization 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 0.60% of the Portfolio's average daily net
assets. SA&W has voluntarily agreed to limit the Portfolio's total annual
operating expenses (excluding brokerage commissions, taxes, and
extraordinary expenses) to 1.50% of the Portfolio's average daily net
assets. This agreement is voluntary and temporary and may be discontinued
or revised by SA&W at any time. The Portfolio Trust pays no compensation
directly to its trustees who are affiliated with SA&W or to its officers,
all of whom receive remuneration for their services to the Portfolio Trust
from SA&W. Certain of the trustees and officers of the Portfolio Trust are
directors or officers of SA&W.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, were as follows:
<TABLE>
<CAPTION>
For the Period May 3, 1996
(commencement of operations) to
Nine months Ended September 30, 1997 December 31, 1996
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
Purchases Sales Purchases Sales
------------------ ================== ================== ------------------
U.S. Government Securities............ $ 434,158 $ 0 $ 0 $ 0
================== ================== ================== ==================
Investments (non-U.S.
Government Securities)................ $ 163,412,852 $ 194,172,021 $ 193,914,188 $ 171,786,086
================== ================== ================== ==================
</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....................................... $204,410,309
============
Gross unrealized appreciation........................ $ 73,738,370
Gross unrealized depreciation........................ $ (5,527,093)
------------
Net unrealized appreciation (depreciation)........... $ 68,211,277
============
(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:
22
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Options--
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Portfolio may use options to hedge against risks of
market exposure and changes in 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 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 contracts' 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 during 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 indices, which may not correlate with
changes in value of the hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the fund'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. The Portfolio had the following open financial futures
contracts at September 30, 1997.
Underlying
Face
Expiration Amount at Unrealized
Contract Position Date value Appreciation
-------------------------------------------------------------------------
Midcap 400 Futures
Dec 97 Long 12/19/97 $2,171,650 $1,220
At September 30, 1997, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
23
<PAGE>
Independent Auditor's Report
To the Trustees of Standish, Ayer & Wood Master Portfolio and the Investors of
Standish Small Capitalization Equity Portfolio:
We have audited the accompanying statement of assets and liabilities of Standish
Small Capitalization 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 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. 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 Small
Capitalization 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
24
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<PAGE>
[STANDISH STANDISH, AYER & WOOD, INC.
LOGO] One Financial Center
Boston, Mssachusetts 02111-2662
(617) 350-6100
