Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statement of Assets and Liabilities
March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investment in Standish Small Capitalization Equity Portfolio ("Portfolio"),
at value (Note 1A) $ 253,459,484
Receivable for Fund shares sold 58,705
Other assets 13,382
-------------
Total assets 253,531,571
Liabilities
Payable for Fund shares redeemed $19,307,575
Payable to investment adviser (Note 3) 16,378
Accrued trustees' fees (Note 3) 1,994
Accrued accounting, custody and transfer agent fees 1,567
Accrued expenses and other liabilities 4,974
-----------
Total liabilities 19,332,488
-------------
Net Assets $ 234,199,083
=============
Net Assets consist of:
Paid-in capital $ 171,080,297
Accumulated net realized gain 19,282,679
Accumulated net investment loss (711,854)
Net unrealized appreciation 44,547,961
=============
Total Net Assets $ 234,199,083
=============
Shares of beneficial interest outstanding 4,004,281
=============
Net asset value, offering and redemption price per share
(Net assets/Shares outstanding) $ 58.49
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statement of Operations
For the Six Months Ended March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1B)
Interest income allocated from Portfolio $ 133,079
Dividend income allocated from Portfolio 73,287
Expenses allocated from Portfolio (918,220)
------------
Net investment income from Portfolio (711,854)
Expenses
Accounting, custody and transfer agent fees 23,336
Legal and audit services 16,460
Registration fees 6,570
Trustees' fees (Note 3) 1,572
Insurance expense 324
Miscellaneous 932
-----------
Total expenses 49,194
Deduct:
Reimbursement of Fund operating expenses (49,194)
-----------
Net expenses --
------------
Net investment income (711,854)
------------
Realized and Unrealized Gain (Loss)
Net realized gain allocated from Portfolio on:
Investment securities transactions 27,330,240
Financial futures contracts 445,190
---------
Net realized gain 27,775,430
Change in unrealized appreciation (depreciation) allocated from
Portfolio on:
Investment securities (23,871,334)
Financial futures contracts 19,710
-----------
Change in net unrealized appreciation (depreciation) (23,851,624)
------------
Net realized and unrealized gain on investments 3,923,806
------------
Net increase in net assets resulting from operations $ 3,211,952
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Nine Months
March 31, 1998 Ended Year Ended
(Unaudited) September 30, 1997 December 31, 1996
------------------ --------------------- --------------------
<S> <C> <C> <C>
Increase (decrease) in Net Assets
From operations
Net investment loss $ (711,854) $ (996,730) $ (971,564)
Net realized gain 27,775,430 24,823,794 37,360,958
Change in net unrealized appreciation (23,851,624) 36,079,031 (2,412,418)
(depreciation)
------------- ------------- -------------
Net increase in net assets from operations 3,211,952 59,906,095 33,976,976
------------- ------------- -------------
Distributions to Shareholders
From net realized gain (32,065,343) (4,207,292) (39,018,707)
------------- ------------- -------------
Total distributions to shareholders (32,065,343) (4,207,292) (39,018,707)
------------- ------------- -------------
Fund share (principal) Transactions (Note 5)
Net proceeds from sale of shares 9,927,032 23,255,837 63,681,602
Net asset value of shares issued to shareholders
in payment of distributions declared 29,237,801 3,950,929 36,043,859
Cost of shares redeemed (50,480,525) (52,668,241) (31,022,858)
------------- ------------- -------------
Increase (decrease) in net assets from Fund
share transactions (11,315,692) (25,461,475) 68,702,603
------------- ------------- -------------
Net increase (decrease) in net assets (40,169,083) 30,237,328 63,660,872
Net Assets
At beginning of period 274,368,166 244,130,838 180,469,966
------------- ------------- -------------
At end of period (including accumulated net
investment loss of $711,854, $0 and $0,
respectively) $ 234,199,083 $ 274,368,166 $ 244,130,838
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Ended
Ended Ended Year Ended December 31,
March 31, 1998 Sept. 30, -------------------------------------------------------
(Unaudited) 1997(1) 1996 1995 1994 1993 1992+
--------------- --------------------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 66.50 $ 52.96 $ 53.46 $ 42.15 $ 48.97 $ 39.83 $ 39.99
-------- --------- -------- -------- --------- -------- --------
Income from investment operations:
Net investment loss* (0.18) (0.23) -- -- -- (0.07) (0.11)
Net realized and
unrealized gain
(loss) on
investments 0.05 14.80 9.29 12.57 (1.84) 11.31 4.00
-------- --------- -------- -------- --------- -------- --------
Total from investment
operations (0.13) 14.57 9.29 12.57 (1.84) 11.24 3.89
-------- --------- -------- -------- --------- -------- --------
Less distributions declared to
shareholders
From net realized gain
on investments (7.88) (1.03) (9.79) (1.26) (4.98) (2.10) (4.05)
-------- --------- -------- -------- --------- -------- --------
Total distributions (7.88) (1.03) (9.79) (1.26) (4.98) (2.10) (4.05)
-------- --------- -------- -------- --------- -------- --------
Net asset value, end of
period $ 58.49 $ 66.50 $ 52.96 $ 53.46 $ 42.15 $ 48.97 $ 39.83
======== ========= ======== ======== ========= ======== ========
Total return 2.04% 27.92% 17.36% 29.83% (3.66)% 28.21% 9.74%
Ratios (to average daily net assets)/Supplemental Data:
Net assets, end of
period (000's
omitted) $234,199 $274,368 $244,131 $180,470 $107,591 $85,141 $50,950
Expenses*(2) 0.74%++ 0.74%++ 0.75% 0.75% 0.79% 0.88% 1.04%
Net investment loss* (0.57)%++ (0.57)%++ (0.44)% (0.30)% (0.27)% (0.18)% (0.38)%
Portfolio turnover(3) -- -- 28% 112% 130% 144% 101%
Average broker
commission rate(3) -- -- $ 0.045 -- -- -- --
- -------------------
* 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 undertaken, the investment income per share and the
ratios would have been:
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income
(loss) per share $ (0.19) $ (0.23) $ (0.01) -- -- -- --
Ratios (to average daily net assets):
Expenses(2) 0.78%++ 0.74%++ 0.76% -- -- -- --
Net investment loss (0.61)%++ (0.57)%++ (0.45)% -- -- -- --
</TABLE>
(1) Calculated based on average shares outstanding.
+ Audited by other auditors.
(2) Includes the Fund's share of the Standish Small Capitalization Equity
Portfolio's allocated expenses for periods after May 3, 1996.
++ Computed on an annualized basis.
(3) 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.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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 March 31, 1998). 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.
(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).
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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 March 31, 1998,
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%, 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 $49,194 for the six months ended March 31, 1998. 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 six months ended March 31, 1998 aggregated $10,117,083 and
$34,033,746, 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>
Six Months Ended Nine Months Ended Year Ended
March 31, 1998 September 30, 1997 December 31, 1996
-------------------- -------------------- -------------------
<S> <C> <C> <C>
Shares sold................................. 176,438 431,424 1,100,618
Shares issued to shareholders in payment of
distributions declared.................... 592,338 73,437 562,742
Shares redeemed............................. (890,318) (988,851) (531,585)
-------------------- -------------------- -------------------
Net increase/(decrease)..................... (121,542) (483,990) 1,131,775
==================== ==================== ===================
</TABLE>
At March 31, 1998, the Fund had two shareholders of record owning
approximately 11% of the Fund's outstanding voting shares,
respectively.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES -- 90.4%
Capital Goods -- 10.8%
Aviation Sales Co.* 114,700 $ 4,702,699
Ballantyne Of Omaha, Inc.* 125,900 1,982,925
Eagle USA Airfreight, Inc.* 68,600 1,852,200
Hagler Bailly* 74,200 1,855,000
Hawker Pacific Aerospace* 121,500 1,215,000
Hub Group, Inc., Class A* 43,900 1,226,456
Kellstrom Industries, Inc.* 129,400 3,259,263
Power-One, Inc.* 137,700 2,340,900
Service Experts, Inc.* 69,200 2,175,475
Trailer Bridge, Inc.* 206,900 2,056,069
Triumph Group, Inc.* 103,700 4,601,687
---------------
27,267,674
---------------
Consumer Stable -- 2.8%
800-Jr Cigar, Inc.* 61,100 1,222,000
Barnett, Inc.* 82,600 1,775,900
Robert Mondavi Corp., Class A* 59,400 2,450,250
Wilmar Industries, Inc.* 64,700 1,609,413
---------------
7,057,563
---------------
Early Cyclical -- 4.0%
Aftermarket Technology, Inc.* 109,500 2,422,688
Atlantic Coast Airlines, Inc.* 39,100 1,876,800
Excelsior-Henderson Motorcycle* 298,600 2,314,150
Midway Airlines Corp.* 88,800 1,676,100
Midwest Express Holdings 37,200 1,822,800
---------------
10,112,538
---------------
Energy -- 2.1%
Cal Dive International, Inc.* 83,800 2,765,400
Friede Goldman Intl, Inc. 90,200 2,604,525
---------------
5,369,925
---------------
Financial -- 3.6%
Bay View Capital Corp. 64,100 2,227,475
First Republic Bank* 41,300 1,486,800
First Sierra Financial, Inc.* 26,100 678,600
Greater Bay Bancorp 23,400 1,450,800
Texas Regional Bancshares, Class A 61,700 2,070,806
West Coast Bancorp 51,600 1,309,350
---------------
9,223,831
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Cyclical -- 9.4%
Alliance Gaming Corp.* 423,900 $ 2,304,956
Apple South, Inc. 125,600 1,860,450
Ashworth, Inc.* 74,600 1,277,525
Atria Communities, Inc.* 96,100 1,849,925
Coldwater Creek, Inc.* 42,400 1,028,200
Gadzooks, Inc.* 98,500 2,203,938
North Face, Inc.* 83,700 2,029,725
PC Connection, Inc.* 99,500 2,114,375
Scientific Games Holdings Corp.* 54,000 1,130,625
Steiner Leisure Ltd. 101,050 5,134,602
Vans, Inc.* 130,900 1,390,813
Wet Seal, Inc., Class A 37,600 1,421,750
---------------
23,746,884
---------------
Health Care -- 18.2%
AXYS Pharmaceuticals, Inc.* 182,400 1,596,000
Chirex, Inc.* 147,400 2,791,388
CN Bioscience, Inc.* 120,100 3,122,600
Coulter Pharmaceutical, Inc.* 83,800 2,294,025
Endosonics Corp. 111,500 1,156,813
Geron Corp.* 147,300 1,822,838
Guilford Pharmaceuticals, Inc.* 99,400 2,186,800
Impath, Inc.* 74,600 2,853,450
Inhale Therapeutic Systems* 83,300 2,259,513
Leukosite, Inc.* 146,400 1,354,200
Ligand Pharmaceuticals, Class B* 105,900 1,687,781
Medquist, Inc. 62,550 2,302,622
National Surgery Centers, Inc. * 115,675 2,956,942
Neurogen Corp. 107,900 1,658,963
Novoste Corp.* 70,100 1,818,219
Pharmaceutical Product Development* 144,900 3,387,037
Province Healthcare Co.* 41,000 1,076,250
Quadramed Corp.* 78,700 2,626,613
Rochester Medical Corp.* 73,500 1,038,188
Specialty Care Network, Inc.* 163,700 1,995,094
Transition Systems, Inc.* 121,500 2,475,563
Vical, Inc.* 103,900 1,636,425
---------------
46,097,324
---------------
Services -- 21.1%
Abacus Direct Corp.* 54,400 2,842,400
Culturalaccessworldwide, Inc.* 21,300 338,138
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Services (continued)
Data Processing Resources Corp.* 101,000 $ 3,137,313
Emmis Broadcasting Corp., Class A* 63,700 3,360,174
F.Y.I., Inc.* 114,100 3,123,488
Gray Communications Systems, Class B 100,600 2,917,400
Inspire Insurance Solutions* 98,400 3,271,800
Intelligroup, Inc.* 150,100 2,429,744
Intl Telecomm Data Systems 109,650 2,864,606
Metzler Group, Inc.* 41,100 2,044,725
On Assignment, Inc. 78,100 2,313,713
Pegasus Systems, Inc.* 57,200 1,472,900
Remedy Temp, Inc.* 79,900 2,586,763
Rental Service Corp.* 151,600 3,524,699
Rural Metro Corp.* 65,000 2,136,875
Scandinavian Broadcast Systems Corp.* 280,000 9,239,999
Scholastic Corp.* 43,300 1,829,425
Startec Global Communication* 53,100 1,327,500
Telegroup, Inc.* 130,000 2,632,500
---------------
53,394,162
---------------
Technology -- 18.4%
Aspen Technologies, Inc.* 37,900 1,563,375
ATMI, Inc.* 124,000 3,750,999
Benchmarq Microelectronics* 118,500 2,044,125
Best Software, Inc.* 124,600 1,884,575
Datastream Systems, Inc. 72,600 1,606,275
Deltek Systems, Inc.* 109,900 1,950,725
Exar Corp.* 71,000 1,535,375
Infinium Software, Inc.* 207,900 4,145,005
Infoseek Corp.* 69,300 1,251,731
Lecroy Corp.* 63,700 1,353,625
Level One Communications, Inc. 80,600 1,894,100
Lycos, Inc.* 27,100 1,199,175
Micrel, Inc. 48,000 1,821,000
N2K, Inc.* 18,400 549,700
Parlex Corp. 98,000 1,739,500
PCD, Inc.* 82,300 1,851,750
Photronics, Inc. 81,400 2,279,200
PRI Automation, Inc.* 45,500 1,191,531
Radiant Systems, Inc.* 103,800 2,569,050
Sawtek, Inc.* 92,500 2,347,188
SBS Technologies, Inc.* 118,800 3,415,499
Semtech Corp. 106,500 2,715,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Technology (continued)
Walsh International, Inc.* 135,200 $ 2,095,600
------------
46,754,853
------------
TOTAL EQUITIES (COST $184,497,667) 229,024,754
------------
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 0.1%
U.S. Government -- 0.1%
FHLMC Discount+ 0.000% 06/12/1998 350,000 346,150
------------
Total U.S. Government (Cost $346,210) 346,150
------------
TOTAL BONDS AND NOTES (COST $346,210) 346,150
------------
SHORT-TERM INVESTMENTS -- 1.2%
<CAPTION>
<S> <C> <C>
REPURCHASE AGREEMENTS -- 1.2%
Prudential-Bache Repurchase Agreement, dated 03/31/98, due 04/01/98, with a
maturity value of $3,169,810 and an effective yield of 5.42 %, collateralized by
a U.S. Government Agency Obligation with a rate of 7.88%, with a maturity
date of 03/01/27 and with an aggregate market value of $3,232,727 3,169,333 3,169,333
------------
Total Repurchase Agreements (Cost $3,169,333) 3,169,333
------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,169,333) 3,169,333
------------
TOTAL INVESTMENTS-- 91.7% (COST $188,013,210) $232,540,237
Other Assets, Less Liabilities-- 8.3% 20,919,376
------------
NET ASSETS-- 100% $253,459,613
============
</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 6).
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Statement of Assets and Liabilities
March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value (Note 1A) (identified cost, $188,013,210) $ 232,540,237
Receivable for investments sold 23,497,054
Interest and dividends receivable 7,906
Receivable from investment adviser (Note 2) 16,378
Receivable for daily variation margin on open financial futures contracts (Note 5) 12,075
Deferred organization costs (Note 1E) 46,148
Prepaid expenses 9,558
-------------
Total assets 256,129,356
Liabilities
Payable for investments purchased $ 2,619,466
Accrued accounting and custody fees 10,133
Accrued trustees' fees (Note 2) 2,919
Accrued expenses and other liabilities 37,225
-----------
Total liabilities 2,669,743
-------------
Net Assets (applicable to investors' beneficial interests) $ 253,459,613
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Statement of Operations
For the Six Months Ended March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1C)
Interest income $ 133,079
Dividend income 73,287
------------
Total income 206,366
Expenses
Investment advisory fee (Note 2) $ 743,884
Accounting and custody fees 117,864
Legal and audit services 34,961
Amortization of organization expense (Note 1E) 7,447
Insurance expense 4,949
Registration fees 3,999
Miscellaneous 21,494
------------
Total expenses 934,598
Deduct:
Waiver of investment advisory fee (Note 2) (16,378)
------------
Net expenses 918,220
------------
Net investment income (711,854)
------------
Realized and Unrealized Gain (Loss)
Net realized gain
Investment security transactions 27,330,254
Financial futures contracts 445,190
------------
Net realized gain 27,775,444
Change in unrealized appreciation (depreciation)
Investment securities (23,871,347)
Financial futures contracts 19,710
------------
Change in net unrealized appreciation (depreciation) (23,851,637)
------------
Net realized and unrealized gain 3,923,807
------------
Net increase (decrease) in net assets from operations $ 3,211,953
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Six Months May 3, 1996
Ended Nine Months (commencement of
March 31, 1998 Ended operations) to
(Unaudited) September 30, 1997 December 31, 1996
----------------- -------------------- ---------------------
<S> <C> <C> <C>
Increase (decrease) in Net Assets
From operations
Net investment loss $ (711,854) $ (953,105) $ (654,065)
Net realized gain 27,775,444 24,823,815 21,512,706
Change in net unrealized appreciation
(depreciation) (23,851,637) 36,079,039 (23,038,475)
------------ ------------- ------------
Net increase (decrease) in net assets
from operations 3,211,953 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 10,117,084 23,224,550 39,060,115
Withdrawals (34,033,746) (55,662,397) (23,335,985)
------------ ------------- ------------
Increase (decrease) in net assets
resulting from capital transactions (23,916,662) (32,437,847) 248,832,254
------------ ------------- ------------
Total increase (decrease) in (20,704,709) 27,511,902 246,652,420
net assets
Net Assets:
At beginning of period 274,164,322 246,652,420 --
------------ ------------- ------------
At end of period $253,459,613 $274,164,322 $246,652,420
============ ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Six Months May 3, 1996
Ended Nine Months (commencement of
March 31, 1998 Ended operations) to
(Unaudited) September 30, 1997 December 31, 1996
------------------- --------------------- --------------------
<S> <C> <C> <C>
Ratios (to average daily net assets):
Expenses 0.74%+ 0.71%+ 0.73%+
Net investment loss (0.58)%+ (0.54)%+ (0.43)%+
Portfolio Turnover 50% 70% 76%
Average broker commission per share(1) $ 0.0387 $ 0.0403 $ 0.0434
Net assets, end of period (000's omitted) $253,460 $ 274,164 $246,652
- ------------------------------------
<CAPTION>
The investment adviser voluntarily agreed not to impose its investment advisory
fee and/or reimbursed the Portfolio for a portion of its operating expenses. If
these voluntary actions had not been taken, the ratios would have been:
<S> <C> <C> <C>
Expenses 0.75%+ --+ --+
Net investment loss (0.59)%+ --+ --+
</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.
15
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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
March 31, 1998, 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.
16
<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.
(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. For the six months ended March 31, 1998, 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.
Pursuant to this agreement SA&W voluntarily did not impose $16,378 of
its investment advisory fee. 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>
Six months Ended Nine months Ended
March 31, 1998 September 30, 1997
------------------------------- ------------------------------
Purchases Sales Purchases Sales
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Government Securities................. $ 740,747 $ 0 $ 434,158 $ 0
============== ============== ============== ==============
Investments (non-U.S. Government
Securities)................................ $ 122,396,766 $ 168,760,097 $ 163,412,852 $ 194,172,021
============== ============== ============== ==============
</TABLE>
(4) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 1998, as computed on a federal
income tax basis, were as follows:
Aggregate Cost....................................... $ 188,013,210
=============
Gross unrealized appreciation........................ $ 52,188,949
Gross unrealized depreciation........................ $ (7,661,922)
=============
Net unrealized appreciation (depreciation)........... $ 44,527,027
=============
(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 Portfolio Trust's registration
statement.
The Portfolio trades the following financial instruments with
off-balance sheet risk:
17
<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 again 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 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 March 31, 1998.
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. Pursuant to margin
requirements, the Portfolio deposits 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 seek 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 March 31, 1998.
<TABLE>
<CAPTION>
Underlying
Face Amount at Unrealized
Contract Position Expiration Date value Appreciation
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mid Cap 400 (7 contracts) Long June 98 $ 1,307,075 $ 20,930
=========
</TABLE>
At March 31, 1998, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
18
