STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
Financial Statements for the
Six Months Ended March 31, 1999
(Unaudited)
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
Financial Statements
Table of Contents
Page
Statements of Assets and Liabilities...........................2
Statements of Operations.......................................3
Statements of Changes in Net Assets............................4
Financial Highlights...........................................5
Notes to Financial Statements..................................6
Schedule of Investments........................................8
Statement of Assets and Liabilities (Portfolio)...............12
Statement of Operations (Portfolio)...........................13
Statement of Changes in Net Assets (Portfolio)................14
Supplemental Data (Portfolio).................................15
Notes to Financial Statements.................................16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Statement of Assets and Liabilities
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investment in Standish Small Capitalization Equity Portfolio ("Portfolio"),
at value (Note 1A) $ 192,366,876
Receivable for Fund shares sold 22,362
-------------
Total assets 192,389,238
Liabilities
Payable for Fund shares redeemed $ 4,000
Accrued accounting, custody and transfer agent fees 4,108
Payable to Investment Adviser (Note 3) 2,116
Accrued trustees' fees and expenses (Note 3) 994
Accrued expenses and other liabilities 3,968
-----------
Total liabilities 15,186
-------------
Net Assets $ 192,374,052
=============
Net Assets consist of:
Paid-in capital $ 160,723,998
Accumulated net realized gain 2,562,144
Accumulated net investment loss (426,284)
Net unrealized appreciation 29,514,194
-------------
Total Net Assets $ 192,374,052
=============
Shares of beneficial interest outstanding 3,794,251
=============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 50.70
=============
</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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1B)
Interest income allocated from Portfolio $ 132,329
Dividend income allocated from Portfolio 48,785
Expenses allocated from Portfolio (607,398)
-------------
Net investment income allocated from Portfolio (426,284)
Expenses
Accounting, custody and transfer agent fees $ 16,552
Registration fees 8,352
Legal and audit services 7,226
Trustees' fees and expenses (Note 3) 1,010
Insurance expense 548
Miscellaneous 9,057
-----------
Total expenses 42,745
Deduct:
Reimbursement of Fund operating expenses (42,745)
Net expenses 0
-------------
Net investment loss (426,284)
-------------
Realized and Unrealized Gain (Loss)
Net realized gain allocated from Portfolio on:
Investment securities transactions 2,905,894
Financial futures contracts 6,674
-----------
Net realized gain 2,912,568
Change in unrealized appreciation (depreciation) allocated from
Portfolio on:
Investment securities 45,380,883
Financial futures contracts 163,480
-----------
Change in net unrealized appreciation (depreciation) 45,544,363
-------------
Net realized and unrealized gain 48,456,931
-------------
Net Increase in Net Assets from Operations $ 48,030,647
=============
</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 Year Ended
Ended March 31, September 30,
1999 (Unaudited) 1998
----------------- --------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment loss $ (426,284) $ (1,259,982)
Net realized gain 2,912,568 25,168,219
Change in net unrealized appreciation (depreciation) 45,544,363 (84,429,754)
------------ -------------
Net increase (decrease) in Net Assets from Investment Operations 48,030,647 (60,521,517)
------------ -------------
Distributions to Shareholders (Note 2)
From net realized gain (15,623,361) (32,065,343)
------------ -------------
Total distributions to shareholders (15,623,361) (32,065,343)
------------ -------------
Fund Share (principal) Transactions (Note 5)
Net proceeds from sale of shares 17,856,466 28,517,984
Value of shares issued to shareholders
in payment of distributions declared 14,776,461 29,237,802
Cost of shares redeemed (19,666,325) (92,536,928)
------------ -------------
Increase (decrease) in Net Assets from Fund
share transactions 12,966,602 (34,781,142)
------------ -------------
Total Increase (Decrease) in Net Assets 45,373,888 (127,368,002)
Net Assets
At beginning of period 147,000,164 274,368,166
------------ -------------
At end of period (including accumulated net investment loss of $426,284 and
$0, respectively) $192,374,052 $ 147,000,164
============ =============
</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
Ended Year Ended
March 31, September 30, Year Ended December 31,
1999 --------------------- -----------------------------------------
(Unaudited) 1998(1) 1997(1)(2) 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 41.74 $ 66.50 $ 52.96 $ 53.46 $ 42.15 $ 48.97 $ 39.83
-------- -------- -------- -------- -------- -------- -------
Investment Operations:
Net investment loss ** (0.11) (0.31) (0.23) -- -- -- (0.07)
Net realized and unrealized
gain (loss) on investments 13.84 (16.57) 14.80 9.29 12.57 (1.84) 11.31
-------- -------- -------- -------- -------- -------- -------
Total from Investment Operations 13.73 (16.88) 14.57 9.29 12.57 (1.84) 11.24
-------- -------- -------- -------- -------- -------- -------
Less distributions declared to
shareholders
From net realized gain on
investments (4.77) (7.88) (1.03) (9.79) (1.26) (4.98) (2.10)
-------- -------- -------- -------- -------- -------- -------
Total distributions (4.77) (7.88) (1.03) (9.79) (1.26) (4.98) (2.10)
-------- -------- -------- -------- -------- -------- -------
Net Asset Value, End of Period $ 50.70 $ 41.74 $ 66.50 $ 52.96 $ 53.46 $ 42.15 $ 48.97
======== ======== ======== ======== ======== ======== =======
Total Return 34.31% (27.20)% 27.92% 17.36% 29.83% (3.66)% 28.21%
Ratios/Supplemental Data:
Expenses (to average daily net
assets) ** (3) 0.74%+ 0.74% 0.74%+ 0.75% 0.75% 0.79% 0.88%
Net investment loss (to average
daily net assets) ** (0.52)%+ (0.57)% (0.57)%+ (0.44)% (0.30)% (0.27)% (0.18)%
Portfolio turnover (4) -- -- -- 28% 103% 95% 118%
Net assets, end of period
(000's omitted) $192,374 $147,000 $274,368 $244,131 $180,470 $107,591 $85,141
</TABLE>
- ----------
**For the periods indicated, 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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss)
per share $ (0.13) $ (0.34) $ (0.23) $ (0.01) -- -- --
Ratios (to average daily net
assets):
Expenses (3) 0.80%+ 0.78% 0.74%+ 0.76% -- -- --
Net investment loss (0.58)%+ (0.61)% (0.57)%+ (0.45)% -- -- --
</TABLE>
+ Computed on an annualized basis.
(1) Calculated based on average shares outstanding.
(2) For the nine months ended September 30, 1997.
(3) Includes the Fund's share of the Standish Small Capitalization Equity
Portfolio's allocated expenses for periods after May 3, 1996.
(4) Portfolio turnover represents activity while the Fund was investing directly
in securities. The portfolio turnover 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, 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 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. Prior to the Fund's investment in the Portfolio,
the Fund held its investments directly. For investments held directly,
interest income was determined on the basis of interest accrued, dividend
income was recorded on the ex-dividend date and realized gains and losses
from securities sold were recorded on the identified cost basis.
C. Federal taxes
As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal year.
D. Other
All net investment income and realized and unrealized gains and losses of
the Portfolio are allocated pro rata among all 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
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended March 31, 1999, SA&W
voluntarily agreed to limit the aggregate annual operating expenses of the
Fund and its pro-rata share of expenses allocated from 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 $42,745 for the six months ended March 31, 1999. 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, 1999 aggregated $17,828,009 and $20,531,236,
respectively.
(5) Shares of Beneficial Interest:
The Declaration of Trust permits the Trust 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 Year Ended
March 31, 1999 September 30, 1998
--------------------- ---------------------
<S> <C> <C>
Shares sold........................................ 379,918 584,804
Shares issued to shareholders in payment of
distributions declared........................... 322,771 592,338
Shares redeemed.................................... (430,439) (1,780,964)
--------------------- ---------------------
Net increase (decrease)............................ 272,250 (603,822)
===================== =====================
</TABLE>
At March 31, 1999, the Fund had one shareholder of record owning
approximately 14% of the Fund's outstanding shares.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Small Capitalization Equity Portfolio
Schedule of Investments - March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES -- 95.2%
Capital Goods -- 6.8%
Aviation Sales Co.* 42,300 $ 1,882,350
Eagle USA Airfreight, Inc.* 168,100 5,463,249
Kellstrom Industries, Inc.* 100,800 1,600,200
Kroll-Ogara Co.* 94,700 2,568,738
Waste Connections, Inc.* 61,300 1,463,538
---------------
12,978,075
---------------
Consumer Stable -- 1.4%
United Natural Foods, Inc.* 118,800 2,776,950
---------------
Early Cyclical -- 3.3%
Atlantic Coast Airlines, Inc.* 95,100 2,674,688
Excelsior-Henderson Motorcycle* 211,500 1,639,125
Midwest Express Holdings* 67,500 1,982,813
---------------
6,296,626
---------------
Energy -- 1.4%
Cal Dive International, Inc.* 83,800 1,749,325
Core Laboratories Inc.* 54,100 950,131
---------------
2,699,456
---------------
Financial -- 4.8%
FPIC Insurance Group, Inc.* 88,000 3,651,999
Indigo Aviation ADR* 123,800 897,550
Net.B@nk, Inc.* 38,300 2,604,400
Realty Information Group, Inc.* 71,200 2,082,600
---------------
9,236,549
---------------
Growth Cyclical -- 5.9%
Cinar Corp.* 103,300 2,375,900
Hibbet Sporting Goods, Inc.* 121,200 2,530,050
Stein Mart, Inc.* 142,200 1,422,000
Steiner Leisure Ltd.* 71,775 2,207,081
Tweeter Home Entertainment* 40,000 1,290,000
Wet Seal, Inc., Class A* 40,000 1,475,000
---------------
11,300,031
---------------
Health Care -- 11.5%
Brookdale Living Communities, Inc.* 95,600 1,649,100
Chirex, Inc.* 105,000 2,572,500
Closure Medical Corp.* 58,100 2,207,800
Coulter Pharmaceutical, Inc.* 66,400 1,444,200
</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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care (continued)
Cytyc Corp.* 105,900 $ 1,469,363
Emisphere Technologies, Inc.* 120,500 1,084,500
Impath, Inc.* 54,100 1,325,450
Inhale Therapeutic Systems* 52,800 1,432,200
Leukosite, Inc.* 146,400 1,207,800
Ligand Pharmaceuticals, Class B* 153,300 1,255,144
Novoste Corp.* 88,200 2,116,800
Parexel International Corp.* 104,900 2,170,119
Pharmaceutical Product Development* 33,200 1,114,275
Vical, Inc.* 103,900 1,064,975
---------------
22,114,226
---------------
Services -- 28.5%
24/7 Media, Inc.* 44,900 2,289,900
Abacus Direct Corp.* 39,700 3,255,399
AboveNet Communications, Inc* 29,900 3,913,162
Access Worldwide Communications, Inc.* 113,300 878,075
Charles River Associates, Inc.* 63,800 1,539,175
CN Maximus, Inc.* 99,600 2,900,850
Concentric Network Corp.* 46,400 3,468,399
Corporate Executive Board Co.* 70,400 1,856,800
Diamond Tech Partners, Inc.* 45,700 1,053,956
Education Management* 89,300 2,745,975
Emmis Broadcasting Corp., Class A* 39,700 1,985,000
F.Y.I., Inc.* 73,200 2,342,400
First Consulting Group, Inc.* 219,900 2,446,388
Getty Images, Inc.* 97,800 2,053,800
Gray Communications Systems, Class B 101,050 1,351,544
Meta Group, Inc. 53,400 821,025
Metro Networks, Inc.* 83,900 4,614,499
NCO Group, Inc.* 43,900 1,624,300
On Assignment, Inc.* 56,100 1,437,563
Paxson Communications Corp.* 145,900 1,249,269
Pinnacle Holdings, Inc.* 123,900 1,873,988
Scandinavian Broadcast Systems* 182,200 5,853,174
Strayer Education Inc. 51,000 1,887,000
Valley Media, Inc.* 40,500 921,375
Wilmar Industries, Inc.* 36,200 536,213
---------------
54,899,229
---------------
</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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Technology -- 31.6%
Applied Micro Circuits Corp.* 84,400 $ 3,608,099
ATMI, Inc.* 156,000 3,120,000
C-Net, Inc.* 32,300 2,975,638
Cree Research, Inc.* 57,400 2,694,213
Digital River, Inc.* 60,400 2,416,000
Infospace.com, Inc.* 40,700 3,604,493
Intervu, Inc.* 51,500 2,285,313
Landmark Systems Corp.* 127,300 1,153,656
Lecroy Corp.* 114,900 1,780,950
MarketWatch.com, Inc.* 13,300 982,538
Mercury Interactive Corp.* 65,600 2,337,000
Micrel, Inc.* 62,800 3,143,925
Onemain.com Inc.* 67,000 2,428,750
Pervasive Software, Inc.* 160,800 2,874,300
Photronics, Inc.* 161,300 3,004,213
Preview Travel, Inc.* 122,300 2,323,700
Qlogic Corp.* 48,400 3,248,849
SBS Technologies, Inc.* 70,000 1,260,000
Security First Technologies* 24,500 1,800,750
Semtech Corp.* 68,900 2,196,188
TheGlobe.com, Inc.* 27,900 1,454,288
TSI International Software Ltd.* 34,400 1,679,150
Unitrode Corp.* 161,600 2,292,700
USWeb Corp.* 51,750 2,134,688
Veeco Intruments Inc.* 37,900 1,399,931
VerticalNet, Inc.* 25,300 2,628,038
---------------
60,827,370
---------------
TOTAL EQUITIES (COST $153,565,620) 183,128,512
---------------
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 2.0%
U.S. Government Agency -- 0.2%
FHLMC Discount Note+ 0.000% 06/24/1999 300,000 296,640
---------------
Total U.S. Government Agency (Cost $296,640) 296,640
---------------
</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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Repurchase Agreements -- 1.8%
Prudential-Bache Repurchase Agreement, dated 3/31/99, due 4/1/99, with a
maturity value of $3,541,573 and an effective yield of 4.15%, collateralized by
a U.S. Government Agency Obligation with a rate of 5.941%, a maturity date of 3/01/21
and a market value of $3,612,002. $ 3,541,165
---------------
Total Repurchase Agreements (Cost $3,541,165) 3,541,165
---------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,837,805) 3,837,805
---------------
TOTAL INVESTMENTS -- 97.2% (COST $157,403,425) $ 186,966,317
Other Assets, Less Liabilities -- 2.8% 5,423,653
---------------
NET ASSETS -- 100% $ 192,389,970
===============
</TABLE>
Notes to the Schedule of Investments:
FHLMC - Federal Home Loan Mortgage Corporation
* 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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value (Note 1A) (identified cost, $157,403,425) $ 186,966,317
Receivable for investments sold 6,987,123
Interest and dividends receivable 2,570
Receivable from Investment Adviser (Note 2) 1,840
Receivable for daily variation margin on open financial futures contracts
(Note 5) 15,750
Deferred organization costs (Note 1E) 31,213
Prepaid expenses 1,287
-------------
Total assets 194,006,100
Liabilities
Payable for investments purchased $ 1,571,477
Accrued accounting and custody fees 19,346
Accrued trustees' fees and expenses (Note 2) 3,809
Due to custodian 603
Accrued expenses and other liabilities 20,895
-----------
Total liabilities 1,616,130
-------------
Net Assets (applicable to investors' beneficial interests) $ 192,389,970
=============
</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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1C)
Interest income $ 138,210
Dividend income 51,061
-------------
Total income 189,271
Expenses
Investment advisory fee (Note 2) $ 514,335
Accounting and custody fees 74,606
Legal and audit services 24,068
Trustees fees and expenses (Note 2) 8,871
Amortization of organization expense (Note 1E) 7,447
Insurance expense 4,362
Registration fees 3,990
Miscellaneous 1,594
-----------
Total expenses 639,273
Deduct:
Waiver of investment advisory fee (Note 2) (6,921)
-----------
Net expenses 632,352
-------------
Net investment loss (443,081)
-------------
Realized and Unrealized Gain (Loss)
Net realized gain
Investment security transactions 2,904,719
Financial futures contracts 8,916
-----------
Net realized gain 2,913,635
Change in unrealized appreciation (depreciation)
Investment securities 47,116,289
Financial futures contracts 171,670
-----------
Change in net unrealized appreciation (depreciation) 47,287,959
-------------
Net realized and unrealized gain 50,201,594
-------------
Net Increase in Net Assets from Operations $ 49,758,513
=============
</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>
Six Months Ended
March 31, 1999 Year Ended
(Unaudited) September 30, 1998
-------------------- -----------------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment loss $ (443,081) $ (1,283,618)
Net realized gain 2,913,635 24,075,476
Change in net unrealized appreciation
(depreciation) 47,287,959 (86,183,360)
------------ -------------
Net increase (decrease) in Net Assets
from Investment Operations 49,758,513 (63,391,502)
------------ -------------
Capital Transactions
Contributions 18,270,662 39,862,755
Withdrawals (29,436,019) (96,838,761)
------------ -------------
Decrease in Net Assets resulting from
capital transactions (11,165,357) (56,976,006)
------------ -------------
Total Increase (Decrease) in Net Assets 38,593,156 (120,367,508)
Net Assets:
At beginning of period 153,796,814 274,164,322
------------ -------------
At end of period $192,389,970 $ 153,796,814
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Small Capitalization Equity Portfolio
Supplemental Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Nine Months May 3, 1996
Six Months Ended Year Ended Ended (commencement of
March 31, 1999 September 30, September 30, operations) to
(Unaudited) 1998 1997 December 31, 1996
--------------------- ------------------ ---------------- --------------------
<S> <C> <C> <C> <C>
Ratios:
Expenses (to average daily net
assets) 0.74%+ 0.74% 0.71%+ 0.73%+
Net investment loss (to average
daily net assets) (0.52)%+ (0.57)% (0.54)%+ (0.43)%+
Portfolio Turnover 76% 107% 70% 76%
Net assets, end of period (000's
omitted) $192,390 $153,797 $274,164 $246,652
</TABLE>
- -----------------------------------------------------------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion of its investment advisory fee. If this voluntary action had
not been taken, the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Ratios (to average daily net assets):
Expenses 0.75%+ -- -- --
Net investment loss (0.53)%+ -- -- --
</TABLE>
+ Computed on an annualized basis.
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.
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 (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 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. SA&W has voluntarily agreed to limit the total Portfolio's
operating expenses (excluding brokerage commissions, taxes, and
extraordinary expenses) to 0.74% of the Portfolio's average daily net
assets for the six months ended March 31, 1999. Pursuant to this agreement
SA&W voluntarily did not impose $6,921 of its investment advisory fee. 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
March 31, 1999
--------------------------------------
Purchases Sales
------------------ ------------------
<S> <C> <C>
U.S. Government Securities............... $ -- $ --
================== ==================
Investments (non-U.S. Government
Securities).............................. $ 129,537,519 $ 141,839,806
================== ==================
</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, 1999, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost........................................................ $ 157,481,625
=================
Gross unrealized appreciation......................................... $ 40,826,252
Gross unrealized depreciation......................................... $ (11,263,360)
-----------------
Net unrealized appreciation........................................... $ 29,562,892
=================
</TABLE>
(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 (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended March 31, 1999.
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, 1999:
<TABLE>
<CAPTION>
Underlying
Face Amount at Unrealized
Contract Position Expiration Date value Depreciation
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mid Cap 400 (30 contracts) Long 06/18/99 $ 5,524,500 $ (58,700)
==========
</TABLE>
At March 31, 1999, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
18
