Standish, Ayer & Wood Investment Trust
Standish Diversified Income Fund
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in ("Portfolio"), at value (Note 1A) $ 34,707,845
Deferred organization costs (Note 1D) 10,571
Prepaid expenses 401
------------
Total assets 34,718,817
Liabilities
Distributions payable $467,202
Accrued accounting, custody and transfer agent fees 2,678
Accrued trustees' fees and expenses (Note 2) 984
Accrued expenses and other liabilities 883
--------
Total liabilities 471,747
------------
Net Assets $ 34,247,070
============
Net Assets consist of:
Paid-in capital $ 38,711,095
Accumulated net realized loss (2,200,337)
Undistributed net investment income 535,682
Net unrealized depreciation (2,799,370)
------------
Total Net Assets $ 34,247,070
============
Shares of beneficial interest outstanding 1,816,119
============
Net Asset Value, offering price and redemption price
per share
(Net Assets/Shares outstanding) $ 18.86
============
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Diversified Income Fund
Statement Of Operations
For The Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Interest income allocated from Portfolio $1,676,319
Dividend income allocated from Portfolio 31,379
Expenses allocated from Portfolio 0
----------
Net investment income allocated from Portfolio 1,707,698
Expenses
Accounting, custody and transfer agent fees $ 13,629
Legal and audit services 7,107
Registration fees 6,965
Amortization of organization expenses (Note 1D) 1,790
Trustees' fees and expenses (Note 2) 1,693
Miscellaneous 4,107
----------
Total expenses 35,291
Deduct:
Reimbursement of Fund operating expenses (Note 2) (35,291)
----------
Net expenses 0
----------
Net investment income 1,707,698
----------
Realized And Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions (137,682)
Written options transactions (142,724)
Foreign currency transactions and forward foreign
currency exchange contracts 134,662
----------
Net realized loss (145,744)
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities (887,437)
Financial futures contracts 8,752
Written options 51,737
Foreign currency and forward foreign currency
exchange contracts 46,263
----------
Change in net unrealized depreciation (780,685)
----------
Net realized and unrealized loss on investments (926,429)
----------
Net Increase in Net Assets from Operations $ 781,269
==========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Diversified Income Fund
Statements Of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Investment Operations
Net investment income $ 1,707,698 $ 3,596,738
Net realized loss (145,744) (2,216,708)
Change in net unrealized depreciation (780,685) (1,640,761)
------------ ------------
Net increase (decrease) in net assets from investment
operations 781,269 (260,731)
------------ ------------
Distributions to Shareholders (Note 1F)
From net investment income (1,090,362) (3,585,033)
------------ ------------
Total distributions to shareholders (1,090,362) (3,585,033)
------------ ------------
Fund Share (Principal) Transactions (Note 4)
Net proceeds from sale of shares 251,397 26,356,500
Value of shares issued to shareholders in payment of
distributions declared 155,957 1,262,115
Cost of shares redeemed (6,308,531) (10,713,175)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions (5,901,177) 16,905,440
------------ ------------
Total Increase (Decrease) In Net Assets (6,210,270) 13,059,676
Net Assets
At beginning of period 40,457,340 27,397,664
------------ ------------
Atend of peroid (including undistributed net
investment income and distributions in excess of
net investment income of $535,682 and $81,654
respectively) $ 34,247,070 $ 40,457,340
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Diversified Income Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1999 ---------------------------
(Unaudited) 1998(1) 1997(1)(3)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.02 $ 20.51 $ 20.00
---------- ---------- ----------
From Investment Operations:
Net investment income* 0.93 1.70 0.98
Net realized and unrealized gain (loss) on
investments (0.49) (1.52) 0.26
---------- ---------- ----------
Total from investment operations 0.44 0.18 1.24
---------- ---------- ----------
Less Distributions to Shareholders:
From net investment income (0.60) (1.67) (0.63)
From net realized gain on investments -- -- (0.10)
---------- ---------- ----------
Total distributions to shareholders (0.60) (1.67) (0.73)
---------- ---------- ----------
Net Asset Value, End of Period $ 18.86 $ 19.02 $ 20.51
========== ========== ==========
Total Return 2.35% 0.86% 6.20%
Ratios/supplemental Data:
Expenses (to average daily net assets)*(2) 0.00%+ 0.00% 0.00%+
Net Investment Income (to average daily net
assets)* 9.82%+ 8.40% 8.07%+
Net Assets, End of Period (000's omitted) $ 34,247 $ 40,457 $ 27,398
</TABLE>
- -----------------
* For the periods indicated, the investment adviser did not impose any of its
advisory fee and reimbursed all of the Fund's and the Portfolio's operating
expenses. If these voluntary reductions had not been taken, the investment
income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C>
Net investment income per share $ 0.83 $ 1.51 $ 0.74
Ratios (to average daily net assets):
Expenses (2) 1.04%+ 0.91% 1.96%+
Net investment income 8.78%+ 7.49% 6.11%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of Standish Diversified Income Portfolio's
allocated expenses.
(3) For the period June 2, 1997 (commencement of operations) to December 31,
1997.
+ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Diversified Income 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 Diversified Income Fund (the "Fund") is a separate
diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of the
Standish Diversified Income 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 June 30, 1999). 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 its 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 regulated investment company qualified 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.
The Fund elected to defer to its fiscal year ending December 31, 1999
losses of $603,207 recognized during the period from November 1, 1998 to
December 31, 1998, which expire in 2006.
At December 31, 1998, the Fund, for federal income tax purposes, had a
capital loss carryover of $1,365,591, which expires in 2006, which will
reduce the Fund's taxable income arising from future net realizable gain
on investments, if any, to the extent permitted by the Internal Revenue
code and thus will reduce the amount of distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability
for federal income tax.
D. Deferred organization expense
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized on a straight-line basis through May
2002.
E. Other
All net investment income and realized and unrealized gains and losses of
the Portfolio are allocated pro rata among the investors in the Portfolio.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Diversified Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
F. 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 a 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 foreign currency, forward currency exchange contracts, options and
financial futures contracts. 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 gain (loss).
(2) 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 International Management Company, LP ("SIMCO") for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. For the six months ended June
30, 1999, SIMCO voluntarily agreed to limit the operating expenses of the
Fund and its pro rata share of expenses allocated from the Portfolio
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.00% of the Fund's average daily net assets. Pursuant to this agreement,
SIMCO voluntarily reimbursed the Fund for $35,291 of operating expenses
for the six months ended June 30, 1999. The Trust pays no compensation
directly to its trustees who are affiliated with the investment adviser or
to its officers, all of whom receive remuneration for their services to
the Trust from SIMCO. Certain of the trustees and officers of the Trust
are limited partners or officers of SIMCO.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 1999 aggregated $250,000 and $7,963,904,
respectively.
(4) 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
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
---------------- -----------------
<S> <C> <C>
Shares sold 13,348 1,277,800
Shares issued to shareholders in payment of
distributions declared 8,300 63,709
Shares redeemed (332,212) (550,939)
-------- ---------
Net increase/decrease (310,565) 790,570
======== =========
</TABLE>
At June 30, 1999, two shareholders were record owners of approximately 56%
and 19%, of the total outstanding shares of the Fund, respectively.
7
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 91.7%
Asset Backed -- 7.5%
GE Capital Mortgage 1996 HE3 8.250% 09/25/2026 $ 353,764 $ 363,824
Green Tree Financial Corp. 1997-6 B2
Non-ERISA 7.750% 01/15/2029 875,000 692,310
IMC Home Equity Loan 1998-1 M1 Non-ERISA 7.030% 06/20/2029 375,000 364,687
Newcourt Rec Asset Lease 98-2D 7.210% 09/15/2007 400,000 399,500
Vanderbilt Mortgage Financial 1996-C B2 8.000% 11/07/2026 400,000 373,000
Vanderbilt Mortgage Financial 1997-D 1B2 7.550% 12/07/2027 425,000 378,250
-----------
Total Asset Backed (Cost $2,792,318) 2,571,571
-----------
Collateralized Mortgage Obligations -- 1.2%
GE Capital Mortgage Services Inc.1994-1 B3
144A Non-ERISA 6.500% 01/25/2024 247,250 207,420
GE Capital Mortgage Services Inc.1996-11 B3
Non-ERISA 7.500% 07/25/2026 242,152 210,218
-----------
Total Collateralized Mortgage Obligations (Cost $430,975) 417,638
-----------
Convertible Corporate Bonds -- 2.9%
Exide Corp. 144A 2.900% 12/15/2005 460,000 271,400
Integrated Health 5.750% 01/01/2001 500,000 345,000
Tenet Healthcare Corp. 6.000% 12/01/2005 450,000 369,000
-----------
Total Convertible Corporate Bonds (Cost $1,149,715) 985,400
-----------
Corporate -- 39.7%
Bank Bonds -- 3.2%
Bank United Corp. Notes 8.875% 05/01/2007 200,000 198,990
First Palm Beach Notes 10.350% 06/30/2002 100,000 103,035
GS Escrow Corp. 144A Notes 7.125% 08/01/2005 400,000 384,420
Imperial Credit Capital Trust(a) 10.250% 06/14/2002 50,000 37,500
Matrix Capital Corp. Notes 11.500% 09/30/2004 300,000 288,484
Webster Financial Capital 144A Notes 9.360% 01/29/2027 100,000 97,898
-----------
1,110,327
-----------
Financial -- 12.8%
Amresco Inc. Corp. Senior Sub Notes 9.875% 03/15/2005 175,000 138,687
Cabot Industrial Property LP 7.125% 05/01/2004 300,000 291,975
Conseco Finance Trust Cap. Notes 8.796% 04/01/2027 700,000 640,129
Conseco Finance Trust II 8.700% 11/15/2026 75,000 67,591
Franchise Fin Corp. REIT Notes 8.250% 10/30/2003 350,000 350,910
Fresenius Medical Capital Trust Notes 7.875% 02/01/2008 60,000 558,000
Harborside Health Step Up Senior NC'03 0.000% 08/01/2008 750,000 270,000
Lehman Bros Holding Inc. 6.625% 04/01/2004 775,000 754,958
Meditrust, REIT 7.820% 09/10/2026 200,000 174,750
Ocwen Financial Capital Notes 10.875% 08/01/2027 50,000 40,000
Ocwen Financial Capital Notes 11.875% 10/01/2003 150,000 144,000
Phoenix Re-Insurance Corp. Capital Notes 8.850% 02/01/2027 175,000 146,638
Prologis Trust 6.700% 04/15/2004 300,000 291,930
Speiker Property REIT Notes NCL 6.800% 05/01/2004 400,000 391,108
Tanger REIT Senior Notes 7.875% 10/24/2004 200,000 188,896
-----------
4,449,572
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Bonds -- 23.7%
Allied Waste Industries 144A Notes 7.375% 01/01/2004 $ 125,000 $ 118,437
Allied Waste Industries 144A Notes 7.625% 01/01/2006 275,000 255,062
Charter Communications Holdings LLC 8.250% 04/01/2007 200,000 190,500
Coastal Corp. Notes NCL 6.200% 05/15/2004 275,000 268,771
Conmed Corp. Notes 9.000% 03/15/2008 175,000 171,500
Enron Corp. 6.450% 11/15/2001 75,000 74,898
Extendicare Health Sevices Senior Notes 9.350% 12/15/2007 484,000 346,060
Fort James Corp. Sr Notes 6.875% 09/15/2007 400,000 393,796
Genesis Multicare Senior Sub Notes 9.000% 08/01/2007 175,000 127,750
Grove Worldwide Senior Notes 0.000% 05/01/2009 175,000 49,000
Grove Worldwide Senior Sub Notes 9.250% 05/01/2008 125,000 93,750
Horseshoe Gaming 144A Senior Sub Notes 8.625% 05/15/2009 400,000 391,361
Horseshoe Gaming LLC Notes 9.375% 06/15/2007 250,000 253,750
Huntsman ICI Chemicals LLC 144A 10.125% 07/01/2009 600,000 607,500
Mohegan Tribal Gaming 8.125% 01/01/2006 100,000 99,969
Mohegan Tribal Gaming 8.750% 01/01/2009 50,000 49,250
Nextlink Communications 12.250% 06/01/2009 225,000 131,625
Nextlink Communications 144A Notes 10.750% 11/15/2008 500,000 510,000
Optel Inc. Senior Notes 11.500% 07/01/2008 450,000 317,250
Panavision Inc. Step Up Sub Notes 0.000% 02/01/2006 450,000 274,500
Premier Parks Inc 9.750% 06/15/2007 150,000 150,750
Premier Parks Inc. Senior Notes 9.250% 04/01/2006 50,000 49,500
Premier Parks Inc. Step Up Senior Notes 0.000% 04/01/2008 150,000 97,500
Prime Succession Acq Co. Senior Sub Notes 10.750% 08/15/2004 400,000 324,000
RSL Communications PLC Notes 0.000% 03/01/2008 625,000 375,000
Republic Service 7.125% 05/15/2009 625,000 609,600
Revlon Worldwide Senior Notes 0.000% 03/15/2001 800,000 554,000
Rose Hills Co. Senior Sub Notes 9.500% 11/15/2004 125,000 114,375
Salem Communications Corp. Senior Sub Notes 9.500% 10/01/2007 225,000 234,000
Southland Corp. Deb Notes 4.500% 06/15/2004 300,000 255,000
TRW Inc. 144A 7.125% 06/01/2009 300,000 291,360
Winstar Communications Senior Sub Step Up
Notes 0.000% 10/15/2005 500,000 438,750
-----------
8,218,564
-----------
Total Corporate (Cost $15,208,265) 13,778,463
-----------
Government/Other -- 34.2%
Argentina -- 1.3%
Cointel 144A Notes 10.375% 08/01/2004 575,000 448,500
-----------
Denmark -- 0.2%
Denmark Nykredit 7.000% 10/01/2026 375,000 52,956
-----------
EuroDollar -- 4.6%
Bulgaria IAB 5.875% 07/28/2011 450,000 302,625
Republic of Argentina 11.375% 01/30/2017 875,000 748,672
Republic of Argentina Global Bond 9.750% 09/19/2027 730,000 547,500
Republic of Ecuador Registered PDI(a) 3.813% 12/29/2049 4,451 1,433
-----------
1,600,230
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
France -- 1.4%
Remy Cointreau 144A 10.000% 07/30/2005 $ 450,000 $ 502,185
-----------
Germany -- 1.7%
Colt Telecom Group PLC 144A Notes 7.625% 07/31/2008 725,000 384,913
Exide Holding Europe 144A Notes 9.125% 04/15/2004 200,000 107,638
Texon International PLC Senior Notes 10.000% 02/01/2008 240,000 113,614
-----------
606,165
-----------
New Zealand -- 0.2%
Fletcher Challenge CVT 10.000% 04/30/2005 110,000 61,133
-----------
United Kingdom -- 1.7%
IPC Magazines 144A 0.000% 03/15/2008 200,000 151,469
William Hill Finance 10.625% 04/30/2008 275,000 443,658
-----------
595,127
-----------
Yankee Bonds -- 23.1%
Alestra SA 12.125% 05/15/2006 175,000 166,250
Asia Pulp and Paper Global Financial 144A CVT 2.000% 07/25/2000 125,000 123,750
Asia Pulp and Paper Global Financial Notes 9.060% 10/04/2001 600,000 438,000
Asia Pulp and Paper Global Financial Notes 11.750% 10/01/2005 125,000 95,625
Brazil C Bond(a) 5.000% 04/15/2014 3,758,595 2,417,247
Colt Telecom Group PLC Senior Step Up Notes 0.000% 12/15/2006 350,000 288,750
Ecuador Bearer PDI(a) 3.250% 02/27/2015 569,730 183,382
Global Crossing Holding Ltd. Notes 9.625% 05/15/2008 400,000 432,000
Grupo Televisa S.A 0.000% 05/15/2008 250,000 199,375
Guangdong Enterprises 144A Senior Notes NCL 8.875% 05/22/2007 825,000 246,518
Merita Bank Pfd Step Up 144A Notes 7.150% 12/29/2049 300,000 298,062
Peru FLIRB(a) 3.250% 03/07/2017 885,000 483,984
Petro Mexicanos 144A Notes 9.500% 09/15/2027 475,000 448,875
Pindo Deli Financial Notes 10.250% 10/01/2002 600,000 438,000
Republic of Panama Notes 8.875% 09/30/2027 475,000 394,250
SE Banken Step Up Notes 144A 6.500% 12/29/2049 325,000 307,450
TPSA Finance 144A Senior Notes 7.750% 12/10/2008 300,000 288,000
Tyco International 7 Yr. Notes NCL 6.375% 06/15/2005 300,000 293,439
UPM-Kymmene Corp. 144A Notes 7.450% 11/26/2027 350,000 329,917
Venezuela DCB DEB FRN 5.938% 12/18/2007 202,380 154,441
-----------
8,027,315
-----------
Total Government/Other (Cost $13,006,352) 11,893,611
-----------
Non-agency -- 0.9%
Pass Thru Securities -- 0.9%
Franchise Mortgage Corp. 1997-A D 144A 8.140% 04/15/2019 350,000 324,516
-----------
Total Non-Agency (Cost $363,891) 324,516
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations -- 5.3%
Treasury Bonds -- 1.6%
U.S. Treasury Bond 8.125% 08/15/2019 $ 50,000 $ 60,391
U.S. Treasury Bond 8.125% 05/15/2021 400,000 487,124
-----------
547,515
-----------
Treasury Notes -- 3.7%
U.S. Treasury Note 5.250% 05/31/2001 750,000 746,483
U.S. Treasury Note 5.750% 10/31/2002 475,000 476,335
U.S. Treasury Note 5.875% 11/15/1999 75,000 75,223
-----------
1,298,041
-----------
Total U.S. Treasury Obligations (Cost $1,848,819) 1,845,556
-----------
TOTAL BONDS AND NOTES (COST $34,800,335) 31,816,755
-----------
<CAPTION>
SHARES
----------
<S> <C> <C>
PREFERRED STOCKS -- 2.6%
Equity Office Properties Trust 144A CVT 8,000 341,000
Global Crossing PIK Pfd 144A 4,000 420,000
Paxson Communications 12.5% Pfd PIK 150 136,501
-----------
TOTAL PREFERRED STOCKS (COST $907,859) 897,501
-----------
<CAPTION>
CONTRACT
SIZE
----------
<S> <C> <C>
PURCHASED OPTIONS -- 2.0%
BRL Put/USD Call, Strike Price 1.35, 09/09/99 2,080,000 539,344
BTP 6.75% Put, Strike Price 107.69, 02/07/00 1,325,000,000 2,650
DBR 5.25% Call, Strike Price 110.76, 12/15/99 1,000,000 211
EUR Put/JPY Call, Strike Price 146.70, 04/13/00 731,145 108,956
JPY Put, Strike Price 116.95, 12/24/99 600,000 21,540
UST 4.75% Call, Strike Price 96.6093, 10/18/99 4,500 1,219
UST 5.25% Call, Strike Price 101.8281, 7/20/99 9,000 70
UST 5.25% Put, Strike Price 90.5781, 12/1/99 3,000 10,723
UST 5.25% Put, Strike Price 90.6562, 12/1/99 3,000 10,383
-----------
TOTAL PURCHASED OPTIONS (COST $909,220) 695,096
-----------
<CAPTION>
SHARES
----------
<S> <C> <C>
WARRANTS -- 0.0%
Financial -- 0.0%
Equity Office Properties Warrants 2,750 137
-----------
TOTAL WARRANTS (COST $2,200) 137
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 3.7%
Commercial Paper -- 1.1%
Triple A Funding Corp. 0.000% 07/16/1999 $ 400,000 $ 399,180
-----------
U.S. Government Agency -- 1.3%
Federal Farm Credit Bank+ 0.000% 07/15/1999 450,000 449,118
-----------
Repurchase Agreements -- 1.3% Prudential-Bache
Repurchase agreement, dated 6/30/99, due 7/1/99,
with a maturity value of $452,363 and an effective
yield of 4.10%, collaterized by U.S. Government
Agency Obligations with rates ranging from 0.00%
to 7.00%, maturity dates ranging from 8/24/99 to
8/1/28 and an aggregate market value of $461,358. 452,312
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,300,753) 1,300,610
-----------
TOTAL INVESTMENTS -- 100.0% (COST $37,920,367) $34,710,099
Other Assets, Less Liabilities -- (0.0%) (2,145)
-----------
NET ASSETS -- 100.0% $34,707,954
===========
</TABLE>
Notes To Schedule Of Investments:
144A - Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration.
CVT - Convertible
DCB - Debt Conversion Bond
DEB - Debenture
FLIRB - Front Loaded Interest Reduction Bond
FRN - Floating Rate Note
NCL - Non-callable
REIT - Real Estate Investment Trust
UST - United States Treasury
BRL - Brazilian Real
BTP - British Pound
DBR - Deutsche Bundes Republik
EUR - EuroDollar
JPY - Japanese Yen
USD - United States Dollar
* Denominated in United States currency except for foreign country specific
bonds which are denominated in their respective local currency.
(a) Variable Rate Security; rate indicated is as of 6/30/99.
+ Denotes all or part of security pledged as collateral to cover margin
requirements on open financial futures contracts (Note 5).
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Statement of Assets And Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at value (Note 1A) (identified cost,
$37,920,367) $ 34,710,099
Receivable for investments sold 6,328
Interest receivable 577,074
Receivable for variation margin on open financial
futures contracts (Note 5) 5,437
Unrealized appreciation on forward foreign currency
exchange contracts (Note 5) 78,986
Tax reclaim receivable 1,025
Deferred organization costs (Note 1E) 3,467
Prepaid expenses 3,583
------------
Total assets 35,385,999
Liabilities
Payable for investments purchased $ 64,025
Unrealized depreciation on forward foreign currency
exchange contracts (Note 5) 7,438
Options written, at value (Note 5) (premiums
received, $917,019) 583,041
Accrued accounting and custody fees 8,522
Accrued trustees' fees and expenses (Note 2) 1,722
Accrued expenses and other liabilities 13,297
--------
Total liabilities 678,045
------------
Net Assets (applicable to investors' beneficial
interests) $ 34,707,954
============
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Statement of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1C)
Interest income $1,676,322
Dividend income 31,380
----------
Total income 1,707,702
Expenses
Investment advisory fee (Note 2) $ 87,068
Accounting and custody fees 38,447
Legal and audit services 14,192
Trustees' fees and expenses (Note 2) 2,925
Insurance expense 2,559
Amortization of organization expenses (Note 1E) 592
Miscellaneous 323
----------
Total expenses 146,106
Deduct:
Reimbursement of Fund operating expenses (Note 2) (59,038)
Waiver of investment advisory fee (Note 2) (87,068)
----------
Total expense deductions (146,106)
----------
Net expenses 0
----------
Net investment income 1,707,702
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Investment security transactions (137,682)
Written options transactions (142,724)
Foreign currency transactions and forward foreign
currency exchange contracts 134,662
----------
Net realized loss (145,744)
Change in unrealized appreciation (depreciation)
Investment securities (887,441)
Financial futures contracts 8,752
Written options 51,738
Foreign currency and forward foreign currency
exchange contracts 46,264
----------
Change in net unrealized depreciation (780,687)
----------
Net realized and unrealized loss (926,431)
----------
Net Increase in net assets from operations $ 781,271
==========
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Investment Operations
Net investment income $ 1,707,702 $ 3,596,746
Net realized loss (145,744) (2,216,713)
Change in net unrealized depreciation (780,687) (1,640,762)
------------ ------------
Net increase (decrease) in net assets from investment
operations 781,271 (260,729)
------------ ------------
Capital Transactions
Contributions 250,000 26,399,305
Withdrawals (7,963,904) (12,282,331)
------------ ------------
Net increase (decrease) in net assets from capital
transactions (7,713,904) 14,116,974
------------ ------------
Total Increase (Decrease) in Net Assets (6,932,633) 13,856,245
Net Assets
At beginning of period 41,640,587 27,784,342
------------ ------------
At end of period $ 34,707,954 $ 41,640,587
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Six Months June 2, 1997
Ended (Commencement of
June 30, 1999 Year Ended Operations) to
(Unaudited) December 31, 1998 December 31, 1997
-------------- ------------------ ------------------
<S> <C> <C> <C>
Ratios:
Expenses (to average daily net assets)* 0.00%+ 0.00% 0.00%+
Net Investment Income (to average daily net
assets)* 9.82%+ 8.40% 8.07%+
Portfolio Turnover 76% 145% 25%
Net Assets, End of Period (000's omitted) $34,708 $41,641 $27,784
</TABLE>
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not
to impose its investment advisory fee and reimbursed the Portfolio for all
of its operating expenses. If these voluntary actions had not been taken,
the ratios would have been:
<TABLE>
<S> <C> <C> <C>
Ratios (to average daily net assets):
Expenses 0.84%+ 0.75% 1.50%+
Net investment income 8.98%+ 7.65% 6.57%+
</TABLE>
+ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income 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
Diversified Income Portfolio (the "Portfolio") is a separate diversified
investment series of the Portfolio Trust.
At June 30, 1999, there is one Fund invested in the Portfolio. The value
of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. The
proportionate interest at June 30, 1999 is approximately 100%.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its 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 price, at the closing bid price in the
principal market in which such securities are normally traded. Securities
(including restricted securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the 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 at amortized cost. 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 allocates 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.
17
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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
May 2002.
(2) Investment Advisory Fee:
The investment advisory fee paid to Standish Investment Management
Company, L.P. ("SIMCO") for overall investment advisory services is paid
monthly at the annual rate of 0.50% of the Portfolio's average daily net
assets. For the six months ended June 30, 1999, SIMCO voluntarily agreed
to limit the Portfolio's operating expenses (excluding brokerage
commissions, taxes and extraordinary expenses) to 0.00% of the Portfolio's
average daily net assets. Pursuant to this agreement, SIMCO voluntarily
waived $87,068 of its investment advisory fee and reimbursed the Portfolio
for its operating expenses of $59,038. The Portfolio Trust pays no
compensation directly to its trustees who are affiliated with SIMCO or to
its officers, all of whom receive remuneration for their services to the
Portfolio Trust from SIMCO. Certain of the trustees and officers of the
Portfolio Trust are limited partners or officers of SIMCO.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 1999 were as follows:
Purchases Sales
----------- -----------
U.S. Government Securities $ 8,353,938 $ 9,594,770
=========== ===========
Investments (non-U.S.Government Securities) $17,010,378 $20,632,011
=========== ===========
(4) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 1999, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $37,920,367
===========
Gross unrealized appreciation 237,692
Gross unrealized depreciation (3,447,960)
-----------
Net unrealized depreciation $(3,210,268)
===========
(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 instruments 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:
Options
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Portfolio may use options to seek to hedge against risks
of market exposure and changes in security prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Portfolio's exposure to the underlying instrument. Buying
puts and writing calls tend to decrease the Portfolio's exposure to the
underlying instrument, or hedge other Portfolio investments. Options, both
held and written by the Portfolio, are reflected in the accompanying
Statement of Assets and Liabilities at market value. The underlying face
amount at value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each
18
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
contract's exposure to the underlying instrument at period end. Losses may
arise from changes in the value of the underlying instruments, if there is
an illiquid secondary market for the contracts, or if the counterparties
do not perform under the contract's 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.
A summary of such transactions for the six months ended June 30, 1999 is
as follows:
Written Put Option Transactions
--------------------------------------------------------------------------
Number of
Contracts Premiums
--------- --------
Outstanding, beginning of period 7 $ 58,685
Options written 6 74,653
Options expired (4) (37,375)
Options closed (3) (31,555)
--- --------
Outstanding, end of period 6 $ 64,408
=== ========
Written Call Option Transactions
--------------------------------------------------------------------------
Number of
Contracts Premiums
--------- --------
Outstanding, beginning of period 7 $ 59,908
Options written 4 27,508
Options exercised (1) (18,594)
Options expired (1) (4,500)
Options closed (6) (40,565)
--- --------
Outstanding, end of period 3 $ 23,757
=== ========
Written Cross Currency Option Transactions
--------------------------------------------------------------------------
Number of
Contracts Premiums
--------- --------
Outstanding, beginning of period 6 $612,500
Options written 5 253,734
Options closed (5) (37,380)
--- --------
Outstanding, end of period 6 $828,854
=== ========
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
19
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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 the value
of hedged investments. Buying futures tends to increase the Portfolio's
exposure to the underlying instrument, while selling futures tends to
decrease the Portfolio's exposure to the underlying instrument or hedge
other 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 contract's 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.
At June 30, 1999, the Portfolio held the following open futures contract:
<TABLE>
<CAPTION>
Expiration Underlying
Contract Position Date Face Amount at Value Unrealized Gain
- --------------------------------- -------- ---------- --------------------- ----------------
<S> <C> <C> <C> <C>
U.S 10 year Note (6 Contracts) Long 9/30/99 $667,125 $8,752
</TABLE>
Forward currency exchange contracts
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Portfolio primarily to protect the value of the Portfolio's foreign
securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the
Statement of Assets and Liabilities.
At June 30, 1999, the Portfolio held the following forward foreign
currency and cross currency exchange contracts:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Local U.S.$ U.S.$ U.S.$
Principal Contract Market Aggregate Unrealized
Contracts To Receive Amount Value Date Value Face Amount Gain/(Loss)
- -------------------- ------ ---------- ----- ----------- -----------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 701,420 11/30/99 681,454 680,000 1,454
Brazilian Real 1,224,750 10/4/99 691,098 690,000 1,098
Hong Kong Dollar 218,680 10/14/99 28,128 26,686 1,442
Peruvian Sol 2,242,800 10/8/99 657,875 630,000 27,875
Turkish Lira 155,960,350 8/10/99 349,785 350,000 (215)
---------- ---------- -------
Total $2,408,340 $2,376,686 $31,654
========== ========== =======
<CAPTION>
Local U.S.$ U.S.$ U.S.$
Principal Contract Market Aggregate Unrealized
Contracts To Deliver Amount Value Date Value Face Amount Gain/(Loss)
- ---------------------- ----------- ------------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Brazilian Real 1,224,750 10/4/99 691,098 699,657 8,559
British Pound Sterling 296,347 8/11/99 467,379 485,712 18,333
Danish Krone 552,128 8/9/99 76,667 79,039 2,372
Euro Dollar 990,076 7/20-9/07/99 1,027,582 1,043,957 16,375
Hong Kong Dollar 3,014,935 10/14/99-1/14/00 387,223 380,000 (7,223)
New Zealand Dollar 118,306 7/15/99 63,148 64,626 1,478
---------- ---------- -------
Total $2,713,097 $2,752,991 $39,894
========== ========== =======
</TABLE>
20
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Diversified Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Delayed Delivery Transactions:
The Portfolio may purchase securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more
after the date of the transactions. The price of the underlying securities
and the date when the securities will be delivered and paid for are fixed
at the time the transaction is negotiated. The Portfolio instructs its
custodian to segregate securities having a value at least equal to the
amount of the purchase commitment.
At June 30, 1999, the Portfolio did not have any delayed delivery
transactions.
(7) Concentration of Risk:
The Portfolio invests in low rated (non-investment grade) and comparable
quality unrated high yield securities. Investments in high yield
securities are accompanied by a greater degree of credit risk and the risk
tends to be more sensitive to economic conditions than higher rated
securities. The risk of loss due to default of an issuer may be
significantly greater for holders of high yield securities, because such
securities are generally unsecured and are often subordinated to other
creditors of the issuer.
There are certain additional considerations and risks associated with
investing in foreign securities and currency transactions that are not
inherent with investments of domestic origin. The Portfolio's investment
in emerging market countries may involve greater risks than investments in
more developed markets and the price of such investments may be volatile.
These risks of investing in foreign and emerging markets may include
foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
(8) Line of Credit
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust, are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $25 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a commitment fee, computed at an annual rate of .065 of
1% on the daily unused portion of the facility, is allocated among the
participating portfolios/funds at the end of each quarter. During the six
months ended June 30, 1999, the Portfolio had no borrowings under the
credit facility.
21
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