STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
Financial Statements for the Year Ended
December 31, 1998
[LOGO]
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STANDISH, AYER & WOOD INVESTMENT TRUST
February 25, 1999
Dear Standish, Ayer and Wood Investment Trust Shareholder:
We are writing to provide you with a review of developments at Standish, Ayer &
Wood, as they relate to the activities of the Investment Trust.
The financial markets had a wild year in 1998. Following the disarray in Asia
and, more directly, the de facto Russian default in mid-August, a large part of
the world's financial markets simply shut down. Many sectors of the U.S. markets
were paralyzed. Spurred by a second easing of monetary policy by the Federal
Reserve in mid-October, the markets reopened and staged a dramatic recovery.
Performance within subsets of the major asset classes varied greatly. Bonds
generally produced positive returns, but less liquid issues with any degree of
perceived credit risk underperformed. Emerging market securities were
eviscerated during the third quarter spasm and recovered only partially in the
fourth. By far the best returns in the U.S. equity markets were registered by a
relatively narrow group of higher price/earnings ratio, larger capitalization
stocks. The disparity in return between the larger cap stocks and smaller cap
stocks, as measured by the Standard & Poor's 500 and the Russell 2000 indexes
was an astounding 31%!
While some funds managed by Standish did well relative to their benchmarks and
most funds produced good absolute returns, too many underperformed their
benchmarks in 1998. In bonds, our holdings of corporate credits and mortgages
underperformed U.S. Treasury securities, the latter representing a significant
portion of the major indexes. In equities, our preference for lower
price/earnings ratios led to an overweighting in mid cap stocks that suffered
relative to larger cap stocks with significantly higher valuations.
We have expended considerable time and effort trying to learn the correct
lessons from 1998. We have determined that much of the underperformance was
generic to our style and that 1998 was an aberrant year, with valuation on
holiday in many sectors. We are deeply committed to the view that valuation is
extremely important in making investment judgments. We are dedicated to our
philosophy and unalterably convinced that our strategy of buying securities that
are inexpensive relative to their fundamentals is an excellent path to
sustainable excess returns over the long term.
Notwithstanding the chaotic markets, we are pleased that Standish has benefited
from extraordinary stability of both our clients and our professional team. At
the end of 1998, total assets under management for our clients were $46.2
billion, compared with $39.3 billion at the end of 1997. We have experienced
growth in virtually all asset categories, especially equities. The Standish
Funds increased assets from $5.7 billion to $6.5 billion during the year, with
about 75% of the growth representing additions from existing clients.
The Standish team has also grown significantly, from 232 members at the
beginning of 1998 to 276 members at the end of the year. Our 97 investment
officers have average investment experience of 15 years. Fifty-six officers have
advanced degrees (typically an MBA) and 65 have some advanced professional
accreditation (virtually all Chartered Financial Analysts). There have been no
changes in the 24 individuals (all with CFAs) who own Standish, Ayer & Wood.
1
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At the end of 1998, the Standish Board of Directors elected four new associate
directors: Susan Coan, one of the key managers in our taxable client group;
David Horsfall, head of our large bond trading operation; Phil Leonardi, a major
contributor to expanding our equity assets; and Jennifer Pline, who holds major
responsibilities for serving large, fixed income clients. We have elected 13 new
vice presidents and 17 new assistant vice presidents of Standish, Ayer & Wood.
In this environment, there are no shortages of challenges and opportunities. Our
first priority remains to produce superior long-term investment performance for
our clients. We believe we have the investment disciplines and the professional
team to achieve that goal. In those asset classes in which our returns were
subpar in 1998, we have a special impetus to produce superior results in the
future. With our portfolios attractively priced compared to the relevant
benchmarks, we see potential for significant excess return when the markets
become more focused on investment value.
We believe that we are in partnership with our clients. We would like to assure
you of our dedication to fulfilling your needs while expressing our great
appreciation for your confidence in Standish.
Sincerely yours,
/s/ Ted Ladd /s/ George Noyes
Edward H. Ladd, Chairman George W. Noyes, President
2
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
Management Discussion and Analysis
Global bond markets produced high, positive returns during the year with the
J.P. Morgan Hedged Global Government Bond Index returning 11.42%%.
Unfortunately, the market environment in 1998 did not favor our investing style
as the emerging market currency crisis caused a flight to government bonds. The
Fund underperformed the index with a return of 6.98% for the year.
Financial markets in 1998 were driven largely by the crisis in emerging market
economies. The year began with the emerging market currency crisis in full swing
in Asia, and by fall the Russian currency and capital markets had collapsed. By
year end Brazil and other Latin markets were seriously threatened. The effect of
the crisis was a reduction in world growth, lower commodity prices and a flight
into government bonds, primarily U.S. treasuries.
This flight to quality precipitated the collapse of several hedge funds,
including Long-Term Capital Management. As hedge funds unwound their positions,
credit-sensitive sectors of financial markets underperformed as liquidity was
removed from the market and investors purchased treasuries. The disinflationary
impact of the emerging market crisis positively affected developed bond markets
as central banks lowered rates to counter the negative growth impact of the
crisis.
During the year, the U.K. market posted the highest hedged returns among
developed markets. The U.K. started 1998 with relatively high short and
long-term interest rates. As the year progressed, the central bank was forced to
aggressively reduce interest rates in order to counter a rapidly slowing
economy. Other European markets produced low double-digit returns in the year.
There was only a few percentage points difference between the best and worst
performing European markets as yields had converged late in 1997 and early in
1998 in anticipation of European monetary union. The Euro was launched on
January 1, 1999 with very little disruption in business or capital markets
throughout Europe.
The U. S. market rallied during the year but modestly underperformed most
foreign markets. The U.S. economy has been relatively robust however inflation
performance has been excellent. Other dollar bloc markets such as the Australia,
Canada and New Zealand also produced low double-digit returns in the year. These
markets continue to benefit from low levels of inflation despite reasonable
economic growth.
The worst performing market in the year was the Japanese government bond market.
Japanese yields had reached historically low levels in the latter half of 1998
only to retreat by more than 100 basis points over the next few months. Despite
the ongoing economic weakness in Japan and the strength of the yen, bond yields
below 1% were clearly overvalued. Investors are unwilling to buy Japanese
government bonds at current yield levels due to the high budget deficit and
dramatic increase in the supply of Japanese bonds expected in 1999. The return
of the Japanese bond market hedged into dollars was only 5.58% for the year.
During the year the fund benefited from favorable country selection. The fund
benefited from an overweight in the U.K. and other European markets and an
underweight in the Japanese bond market. The fund was overweight the U.S. market
which detracted from performance modestly. Security selection negatively
impacted the performance of the portfolio. In particular, our weighting in
corporate bonds underperformed dramatically as investors sold credit-sensitive
sectors and bought government bonds. The Fund also suffered from a short
position in the Japanese yen as the yen rallied in the latter part of the year.
Duration of the portfolio has been longer than the index, which benefited the
fund in this period of declining interest rates.
We believe that we are well positioned to outperform in 1999. Global bond
markets still offer value in an environment where world growth is restrained by
the emerging market crisis. In addition, our portfolio holds a portion of
attractive, corporate securities that offer superior yield advantage relative to
government bonds. Although the road ahead is likely to be bumpy, we believe that
this is one of the best times to invest in corporate bonds that we have seen
since the early `90s. We believe that the yield advantage and potential for
spread contraction in our portfolio will add value relative to the index over
the next few years.
We appreciate your support during the year, and we look forward to working on
your behalf towards superior risk-adjusted returns in 1999.
/s/ W. Charles Cook /s/ Richard S. Wood
W. Charles Cook Richard S. Wood
3
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
Comparison of Change in Value of $100,000 Investment in
Standish Global Fixed Income fund and the J.P. Morgan Hedged Global Index
Standish Global J.P. Morgan Global
Fixed Income Fund Hedged Index
----------------- ------------
Inception 1/3/1994 100000 100000
Jan-1994 101350 100330
Feb-1994 97950 98203
Mar-1994 95200 96828
Apr-1994 94237 96112
May-1994 92971 95487
Jun-1994 91805 94895
Jul-1994 93228 95929
Aug-1994 92313 95459
Sep-1994 91602 95001
Oct-1994 92212 95181
Nov-1994 92822 95829
Dec-1994 92923 95953
Jan-1995 93801 97268
Feb-1995 94731 98863
Mar-1995 95661 100297
Apr-1995 97598 101741
May-1995 101263 105251
Jun-1995 100635 105377
Jul-1995 102014 106083
Aug-1995 103447 107080
Sep-1995 104454 108472
Oct-1995 106013 109807
Nov-1995 108323 111904
Dec-1995 109774 113124
Jan-1996 111348 114266
Feb-1996 109718 112632
Mar-1996 109830 112869
Apr-1996 111026 113478
May-1996 111197 113898
Jun-1996 112677 114980
Jul-1996 113023 115624
Aug-1996 114465 116549
Sep-1996 118270 118764
Oct-1996 120839 120889
Nov-1996 124166 123150
Dec-1996 124076 122854
Jan-1997 125681 123899
Feb-1997 126793 124456
Mar-1997 125307 123585
Apr-1997 127058 125093
May-1997 128433 125931
Jun-1997 130309 127795
Jul-1997 133031 130517
Aug-1997 132398 130060
Sep-1997 135246 132245
Oct-1997 135886 133700
Nov-1997 136847 134555
Dec-1997 138574 136210
Jan-1998 140205 138145
Feb-1998 140137 138711
Mar-1998 141636 139613
Apr-1998 142117 140297
May-1998 143631 142050
Jun-1998 144158 143073
Aug-1998 144928 147272
Sep-1998 147527 151027
Oct-1998 144979 150695
Nov-1998 148306 151765
Dec-1998 148244 151765
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Statement of Assets and Liabilities
December 31, 1998
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<TABLE>
<S> <C> <C>
Assets
Investment in Standish Global Fixed Income Portfolio
("Portfolio"), at value (Note 1A) $ 461,587,582
--------------
Total assets 461,587,582
Liabilities
Distributions payable $ 2,939,988
Payable for Fund shares redeemed 45,000
Accrued trustees' fees and expenses (Note 3) 1,001
Accrued accounting, custody and transfer agent fees 3,360
Accrued expenses and other liabilities 72,699
------------
Total liabilities 3,062,048
--------------
Net Assets $ 458,525,534
==============
Net Assets consist of:
Paid-in capital $ 457,580,227
Accumulated net realized loss (81,177)
Undistributed net investment income 3,132,422
Net unrealized depreciation (2,105,938)
--------------
Total Net Assets $ 458,525,534
==============
Shares of beneficial interest outstanding 22,610,637
==============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.28
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Statement of Operations
Year Ended December 31, 1998
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<TABLE>
<S> <C> <C>
Investment Income (Note 1B)
Interest income allocated from Portfolio $ 25,444,254
Dividend income allocated from Portfolio (net of withholding taxes, $9,867) 88,602
Expenses allocated from Portfolio (1,949,322)
-------------
Net investment income allocated from Portfolio 23,583,534
Expenses
Registration fees $ 76,400
Legal and audit services 38,508
Accounting, custody and transfer agent fees 38,210
Trustees' fees and expenses (Note 3) 3,891
Amortization of organization expense 2,259
Insurance expense 1,125
Miscellaneous 12,500
------------
Total expenses 172,893
-------------
Net investment income 23,410,641
-------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions $ 7,445,153
Financial futures contracts 1,074,526
Written options transactions 823,231
Foreign currency transactions and forward foreign currency exchange
contracts (537,376)
------------
Net realized gain 8,805,534
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities 5,700,110
Financial futures contracts (263,701)
Written options (2,915,251)
Foreign currency and forward foreign currency exchange contracts (9,596,904)
------------
Change in net unrealized appreciation (depreciation) (7,075,746)
-------------
Net realized and unrealized gain on investments 1,729,788
-------------
Net Increase in Net Assets from Operations $ 25,140,429
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 23,410,641 $ 12,884,057
Net realized gain 8,805,534 10,546,991
Change in net unrealized appreciation (depreciation) (7,075,746) (1,136,691)
------------- -------------
Net increase in Net Assets from Investment Operations 25,140,429 22,294,357
------------ ------------
Distributions to Shareholders (Note 2)
From net investment income (23,734,875) (22,206,015)
From net realized gain (6,298,437) (226,916)
------------ ------------
Total distributions to shareholders (30,033,312) (22,432,931)
------------ ------------
Fund share (principal) Transactions (Note 5)
Net proceeds from sale of shares 195,822,857 112,813,437
Value of shares issued to shareholders in payment of distributions declared 22,737,669 11,302,354
Cost of shares redeemed (10,904,532) (23,945,357)
------------ ------------
Increase in Net Assets from Fund share transactions 207,655,994 100,170,434
------------ ------------
Total Increase in Net Assets 202,763,111 100,031,860
Net Assets
At beginning of year 255,762,423 155,730,563
------------ ------------
At end of year (including undistributed net investment income of $3,132,422
and distributions in excess of net investment income of $667,896,
respectively) $458,525,534 $255,762,423
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Financial Highlights
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<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1998 (1) 1997 (1) 1996 (1) 1995 1994 (2)
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 20.39 $ 20.09 $ 19.53 $ 17.99 $ 20.00
--------- ---------- ---------- ---------- ----------
Investment Operations:
Net investment income * 1.28 1.34 1.42 1.59 1.29
Net realized and unrealized gain (loss) on
investments 0.12 0.96 1.05 1.60 (2.70)
--------- ---------- ---------- ---------- ----------
Total from investment operations 1.40 2.30 2.47 3.19 (1.41)
--------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income (1.21) (1.98) (1.91) (1.65) --
From net realized gain on investments (0.30) (0.02) -- -- --
From tax return of capital -- -- -- -- (0.60)
--------- ---------- ---------- ---------- ----------
Total distributions to shareholders (1.51) (2.00) (1.91) (1.65) (0.60)
--------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year $ 20.28 $ 20.39 $ 20.09 $ 19.53 $ 17.99
========= ========== ========== ========== ==========
Total Return 6.98% 11.68% 13.03% 18.13% (7.06)%
Ratios/Supplemental Data:
Expenses (to average daily net assets)* (3) 0.56% 0.65% 0.65% 0.62% 0.65%+
Net investment income (to average daily net
assets)* 6.18% 6.42% 7.11% 7.69% 7.73%+
Portfolio turnover (4) -- -- 73% 163% 140%
Net Assets, End of Year (000's omitted) $458,526 $ 255,762 $ 155,731 $ 137,889 $ 135,232
- -------------------
* The investment adviser did not impose a portion of its investment advisory
fee and reimbursed the Fund for a portion of its operating expenses for the
years ended December 31, 1997 and December 31, 1994, respectively. If these
voluntary actions had not been taken, the net investment income per share and
the ratios would have been:
Net investment income per share -- $ 1.33 -- -- $ 1.27
Ratios (to average daily net assets):
Expenses (3) -- 0.66% -- -- 0.73%+
Net investment income -- 6.41% -- -- 7.65%+
</TABLE>
+ Computed on an annualized basis.
(1) Calculated based on average shares outstanding.
(2) For the period from January 3, 1994 (start of business) to December 31,
1994.
(3) Includes the Fund's share of Standish Global Fixed Income Portfolio's
allocated expenses for the six months ended June 30, 1998, the year ended
December 31, 1997 and for the period from May 3, 1996 to December 31,
1996.
(4) Portfolio turnover represents the rate of portfolio activity for the
period while the Fund invested directly in securities, including the
period from January 1, 1996 through May 2, 1996. The portfolio turnover
rates for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
The accompanying notes are an integral part of the financial statements.
8
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Notes to Financial Statements
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(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 Global Fixed Income Fund (the "Fund") is a separate
non-diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of Standish
Global Fixed 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 December 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. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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 $99,117 recognized during the period from November 1, 1998 to
December 31, 1998.
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.
9
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Notes to Financial Statements
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(2) Distributions to Shareholders:
Dividends from net investment income will be declared and distributed
quarterly. 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. 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. Distributions to shareholders are recorded on the
ex-dividend date. 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 foreign currency
exchange contracts, option and financial futures transactions. Permanent
book and tax basis differences relating to shareholder distributions will
result in reclassifications between paid-in capital, distributions in
excess of net investment income and accumulated net realized gain (loss).
(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 International Management Company, L.P. ("SIMCO") for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. The Trust pays no
compensation directly to its trustees who are affiliated with SIMCO or to
its officers, all of whom receive remuneration for their services to the
Trust from the SIMCO. Certain of the trustees and officers of the Trust
are limited partners or officers of SIMCO.
(4) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended December 31, 1998, aggregated $195,976,864 and $22,255,635,
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>
Year Ended Year Ended
December 31, 1998 December 31, 1997
--------------------- -------------------
<S> <C> <C>
Shares sold......................................... 9,481,481 5,385,323
Shares issued to shareholders in
payment of distributions declared................ 1,113,065 552,287
Shares redeemed..................................... (524,367) (1,149,790)
------------ ------------
Net increase........................................ 10,070,179 4,787,820
============ ============
</TABLE>
At December 31, 1998, two shareholders were record owners of approximately
18% and 15%, respectively, of the Fund's outstanding shares.
10
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
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Supplemental Tax Information (Unaudited)
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$789,425 as capital gain dividends for the year ended December 31, 1998.
All of this amount represents a 20% tax rate gain distribution.
11
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Report of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Global Fixed Income Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Standish, Ayer & Wood Investment Trust: Standish Global Fixed Income Fund (the
"Fund"), at December 31, 1998, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (herein referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
12
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Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 97.0%
Asset Backed -- 6.7%
Advanta Mortgage Trust 1997-4 M1 7.040% 01/25/2029 1,300,000 $1,311,578
BankBoston Home Equity 98-2 A7 6.140% 06/25/2013 5,000,000 4,970,508
Chase Credit Card Master Trust
1997-3 A Non-ERISA 6.777% 05/15/2007 900,000 908,543
Delta Funding Home Equity Line 1998-4 A7 6.190% 02/15/2031 2,750,000 2,731,738
Ford Credit Auto Trust 1998-C A5 5.860% 10/15/2002 4,550,000 4,604,742
IMC Home Equity 1997-7 A8 6.650% 02/20/2029 925,000 920,086
JC Penney Credit Card 1998-E 5.500% 11/15/2007 3,375,000 3,375,000
MBNA Credit Card 1998-J A 5.250% 02/15/2006 4,750,000 4,719,570
Oakwood Mortgage Investments 1997-C B2 7.700% 11/15/2027 1,475,000 1,267,809
Oakwood Mortgage Investments 1998-B B2 7.750% 04/15/2028 1,600,000 1,391,750
Residential Funding 1997-HS5 M1 7.010% 05/25/2027 900,000 903,797
RFC Series 1996 HS2 Al 7.600% 09/25/2012 350,000 360,117
TMS Home Equity 1995-C A3 6.550% 09/15/2021 500,000 503,281
Vanderbilt Mortgage Financial 1996-C B2 8.000% 11/07/2026 1,200,000 1,159,875
Vanderbilt Mtg 1998-A 1B2 Non-ERISA 7.690% 04/07/2028 1,424,000 1,343,900
World Omni Auto Lease 1997-A B Non-ERISA 144A 7.300% 06/25/2003 746,781 753,549
-----------
Total Asset Backed (Cost $31,811,123) 31,225,843
-----------
Collateralized Mortgage Obligations -- 0.9%
Bear Stearns Mtg 1998-2 B 6.750% 04/30/2030 1,669,411 1,628,197
Prudential Home Mortgage 1993-B 1B1
144A Non-ERISA 7.843% 04/28/2023 1,143,326 1,156,188
Residential Funding 1998-S4 A4 NAS 6.500% 02/25/2013 1,257,700 1,257,700
-----------
Total Collateralized Mortgage Obligations (Cost $4,107,360) 4,042,085
-----------
Convertible Corporate Bonds -- 0.3%
Integrated Health 5.750% 01/01/2001 1,750,000 1,548,750
-----------
Total Convertible Corporate Bonds (Cost $1,559,461) 1,548,750
-----------
Corporate -- 14.8%
Bank Bonds -- 1.9%
Bank United Corp. Notes+ 8.875% 05/01/2007 775,000 796,561
City National Bank Corp. Notes+ 6.375% 01/15/2008 900,000 913,842
First Security Bank Sub. Notes 5.875% 11/01/2003 1,250,000 1,249,113
First Union Notes 6.500% 12/01/2028 2,225,000 2,236,548
GS Escrow Corp. 144A Notes 7.125% 08/01/2005 730,000 719,284
GS Escrow Corp. 144A Senior Notes 7.000% 08/01/2003 620,000 611,497
Imperial Credit Capital Trust Notes+ 9.980% 12/31/2026 375,000 415,255
Providian Corp. Cap 144A Notes 9.525% 02/01/2027 825,000 840,799
Star Banc Corp. Notes 5.875% 11/01/2003 1,000,000 1,003,430
-----------
8,786,329
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial -- 3.4%
Advanta Capital Trust I+ 8.990% 12/17/2026 750,000 $ 337,500
Amresco Inc. Corp. Senior Sub Notes+ 9.875% 03/15/2005 600,000 420,000
Colonial Realty Notes 7.000% 07/14/2007 700,000 641,175
Conseco Finance Trust Cap. Notes+ 8.796% 04/01/2027 250,000 228,687
Conseco Finance Trust II 8.700% 11/15/2026 2,225,000 2,015,450
Conseco Finance Trust Notes 6.800% 06/15/2005 900,000 832,770
Crescent Real Estate Notes 7.125% 09/15/2007 900,000 782,927
Criimi Mae Corp. Notes+ 9.125% 12/01/2002 1,075,000 677,250
EOP Operating LP Notes 6.376% 02/15/2002 500,000 495,390
ERP REIT 144A Notes 8.500% 05/15/1999 500,000 503,955
Health Care REIT Inc. Senior Notes 7.625% 03/15/2008 500,000 483,157
Kaufman & Broad Home Corp. Senior Notes+ 7.750% 10/15/2004 500,000 496,900
Liberty Mutual Insurance Co. 144A Notes 7.697% 10/15/2097 850,000 850,884
MMI Capital Trust Notes+ 7.625% 12/15/2027 1,300,000 1,125,068
Orion Capital Trust Notes+ 7.701% 04/15/2028 1,200,000 1,094,376
Pindo Deli Financial Notes 10.250% 10/01/2002 200,000 118,000
Reliastar Financial Corp. Notes 6.500% 11/15/2008 2,225,000 2,265,273
Simon Debartolo Group LP Notes+ 6.750% 07/15/2004 925,000 913,151
Simon Debartolo Group LP Notes NCL+ 6.875% 10/27/2005 425,000 415,884
Wellsford REIT Senior Notes+ 9.375% 02/01/2002 1,000,000 1,071,410
-----------
15,769,207
-----------
Industrial Bonds -- 9.5%
American Standard Corp. Notes 7.375% 04/15/2005 1,000,000 1,000,678
Aramark Services Notes 6.750% 08/01/2004 2,000,000 2,019,202
Choice Hotels Senior Notes 7.125% 05/01/2008 750,000 743,618
Coastal Corp. Notes 7.420% 02/15/2037 525,000 534,377
Cominco Ltd. Notes+ 6.875% 02/15/2006 525,000 457,309
Conmed Corp. Notes 9.000% 03/15/2008 700,000 700,000
CSX Notes 6.250% 10/15/2008 1,275,000 1,293,551
Enterprise Corp. 144A Notes 7.000% 06/15/2000 500,000 504,385
Enterprise Corp. Notes 6.375% 05/15/2003 950,000 931,741
Flag Limited Senior Notes 8.250% 01/30/2008 925,000 906,500
Horseshoe Gaming LLC Notes 9.375% 06/15/2007 450,000 463,500
IMC Global Notes 7.625% 11/01/2005 2,225,000 2,260,689
Lilly Industries Inc. Notes 7.750% 12/01/2007 300,000 304,833
Loewen Group International Notes 7.600% 06/01/2008 750,000 600,000
McLeod USA Inc. 144A Senior Notes 9.500% 11/01/2008 300,000 316,500
McLeod USA Senior Notes+ 8.375% 03/15/2008 1,150,000 1,144,250
Methanex Corp. Notes 7.400% 08/15/2002 250,000 252,403
News America Inc. Deb Notes 144A 7.625% 11/30/2028 1,875,000 2,001,113
News America Inc. Deb Notes NCL 7.125% 04/08/2028 2,700,000 2,714,499
Panamsat Notes 6.000% 01/15/2003 3,050,000 2,997,723
Panamsat Notes+ 6.125% 01/15/2005 1,500,000 1,462,837
Panavision Inc. Step Up Sub Notes 0.000% 02/01/2006 1,000,000 550,000
Revlon Worldwide Senior Notes+ 0.000% 03/15/2001 7,925,000 4,477,625
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Bonds (continued)
Sinclair Broadcast Senior Sub 144A Notes+ 8.750% 12/15/2007 750,000 $ 757,500
Southland Corp. Senior Sub Notes+ 5.000% 12/15/2003 500,000 440,000
Stage Stores Inc. Notes 8.500% 07/15/2005 400,000 348,000
Tenet Healthcare Corp. 144A Senior Notes 7.625% 06/01/2008 275,000 279,125
Tenet Healthcare Corp. 144A Senior Sub Notes 8.125% 12/01/2008 1,175,000 1,204,375
Tenet Healthcare Corp. Notes+ 8.625% 12/01/2003 525,000 558,563
Tenet Healthcare Corp. Senior Notes+ 8.000% 01/15/2005 250,000 253,750
Time Warner Inc. Notes 6.625% 05/15/2029 4,475,000 4,553,134
Tricon Global Restaurant Inc. Senior Notes+ 7.450% 05/15/2005 775,000 792,235
U.S. Filter Corp. NC '03 6.500% 05/15/2003 1,800,000 1,757,288
USA Waste Services Inc. Senior Notes 6.500% 12/15/2002 1,200,000 1,221,148
Viacom Inc. Senior Notes 7.750% 06/01/2005 750,000 819,285
Westinghouse Credit Corp. Deb Notes+ 8.875% 06/14/2014 975,000 1,122,128
Westinghouse Electric Deb Notes 7.875% 09/01/2023 600,000 636,600
Worldcom Inc. Senior Notes 6.950% 08/15/2028 550,000 591,432
-----------
43,971,896
-----------
Total Corporate (Cost $71,715,163) 68,527,432
-----------
Government/Other -- 61.7%
Argentina -- 0.1%
Cointel 144A Notes NCL 10.375% 08/01/2004 500,000 335,000
-----------
Denmark -- 4.4%
Danske Kredit 5.000% 10/01/2029 7,142,000 1,054,013
Denmark Bullet 7.000% 11/15/2007 6,000,000 1,135,930
Denmark Nykredit 5.000% 10/01/2029 8,700,000 1,283,942
Denmark Nykredit 7.000% 10/01/2026 5,254,000 842,303
Denmark Realkredit 8.000% 10/01/2026 1,000 162
Denmark Realkredit 7.000% 10/01/2026 2,017,000 323,358
Denmark Unikredit Realkredit 6.000% 10/01/2029 48,650,000 7,513,345
Kingdom of Denmark 8.000% 11/15/2001 46,500,000 8,134,219
-----------
20,287,272
-----------
France -- 1.7%
France Oat 6.000% 10/25/2025 20,700,000 4,383,921
Remy Cointreau 144A ECU 10.000% 07/30/2005 3,550,000 3,625,281
-----------
8,009,202
-----------
Germany -- 16.1%
Baden Nurttemberg+ 6.200% 11/22/2013 2,000,000 1,325,894
Bundes Obligation Ser 114 Notes 6.500% 03/15/2000 6,850,000 4,267,483
Bundes Obligation Ser 115 Notes 5.875% 05/15/2000 10,600,000 6,584,617
Bundes Obligation Ser 116 Notes 5.750% 08/22/2000 4,000,000 2,495,800
Colt Telecom Group PLC 144A Notes 7.625% 07/31/2008 8,625,000 5,084,031
Depfa Bank 144A Notes 4.750% 07/15/2008 6,800,000 4,232,661
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Germany (continued)
Deutschland Republic 7.250% 10/21/2002 5,925,000 $4,038,512
Deutschland Republic 6.500% 07/04/2027 450,000 338,823
Die Bundrep Deutschland Dm1000+ 8.250% 09/20/2001 35,173,000 23,794,740
Exide Holding Europe 144A Notes 9.125% 04/15/2004 1,700,000 999,520
Federal Republic of Germany 8.375% 05/21/2001 4,520,000 3,029,062
Fresenius Med Global 7.375% 02/01/2008 3,970,000 2,447,309
German Unity Fund 8.500% 02/20/2001 7,450,000 4,947,447
German Unity Fund 8.000% 01/21/2002 3,000,000 2,040,497
Texon International PLC 144A Senior Notes 10.000% 02/01/2008 10,025,000 4,811,615
Treuhandanstalt 6.500% 04/23/2003 6,100,000 4,101,434
-----------
74,539,445
-----------
Italy -- 0.4%
BTPS 6.000% 05/15/2000 3,300,000,000 2,069,756
-----------
Japan -- 8.0%
Austria Republic+ 6.250% 10/16/2003 370,000,000 4,004,331
European Investment Bank 4.625% 02/26/2003 363,000,000 3,646,275
European Investment Bank 6.625% 03/15/2000 300,000,000 2,844,402
Government of Italy+ 5.125% 07/29/2003 975,000,000 10,059,450
IBRD-Global Bond 5.250% 03/20/2002 300,000,000 3,005,837
IBRD-Global Bond 4.750% 12/20/2004 262,000,000 2,733,322
Kingdom of Spain+ 5.750% 03/23/2002 428,000,000 4,348,318
South Africa 3.350% 06/17/2004 175,000,000 1,443,115
Spanish Government 4.750% 03/14/2005 480,000,000 5,007,273
-----------
37,092,323
-----------
Netherlands -- 2.6%
Netherlands Government 9.000% 05/15/2000 13,700,000 7,842,943
Netherlands Government 9.000% 10/16/2000 6,900,000 4,032,344
-----------
11,875,287
-----------
New Zealand -- 3.8%
Fernz Capital 9.800% 04/15/2002 4,100,000 2,291,302
Fletcher Challenge 14.500% 09/30/2000 500,000 285,417
Fletcher Challenge+ 11.250% 12/15/2002 1,900,000 1,072,829
Fletcher Challenge CVT 10.000% 04/30/2005 1,000,000 547,269
New Zealand Government 8.000% 04/15/2004 7,475,000 4,398,067
New Zealand Government 10.000% 03/15/2002 7,200,000 4,306,181
New Zealand Government 7.000% 07/15/2009 7,900,000 4,660,730
-----------
17,561,795
-----------
Norway -- 0.2%
Vital Forsikring 7.850% 09/22/2003 6,000,000 815,766
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sweden -- 3.3%
Kingdom of Sweden #1030 13.000% 06/15/2001 18,700,000 $2,812,642
Kingdom of Sweden #1033 10.250% 05/05/2003 10,000,000 1,554,861
Sweden Government Bond #1038 6.500% 10/25/2006 53,000,000 7,619,528
Swedish Government Bond #1042 5.000% 01/15/2004 23,400,000 3,052,055
-----------
15,039,086
-----------
United Kingdom -- 15.8%
Alliance and Leicester Building Society+ 8.750% 12/07/2006 3,700,000 7,147,324
Bank of Greece 10.750% 09/06/2010 350,000 832,141
Bank of Greece 10.750% 09/06/2010 699,700 1,663,568
Birmingham Midshires Building Society+ 9.125% 01/05/2006 750,000 1,460,139
Capital Shopping Euro Notes 6.875% 03/05/2013 1,550,000 2,755,471
CSW Investments+ 8.875% 09/27/2006 2,500,000 4,770,722
Deutsche Bank 0.000% 02/28/2001 410,000 589,499
European Investment Bank 7.625% 12/07/2006 2,400,000 4,622,060
FNMA Global Bond+ 6.875% 06/07/2002 1,910,000 3,331,478
GTD Export Finance Corp. 0.000% 09/29/2000 940,000 1,417,080
IBRD Notes 6.875% 07/14/2000 2,480,000 4,203,629
Inco Ltd.+ 15.750% 07/15/2006 200,000 503,653
IPC Magazines 144A 0.000% 03/15/2008 3,120,000 2,774,544
Northern Rock Building Society+ 9.375% 10/17/2021 1,950,000 4,482,736
P & O Steam Navigation 11.500% 07/03/2014 900,000 2,290,510
Republic of Argentina 11.500% 08/14/2001 1,010,000 1,670,428
Slough Estates 7.125% 02/17/2010 1,050,000 1,884,935
Stagecoach Holdings PLC 7.625% 10/31/2007 1,725,000 3,101,524
UK Treasury Gilt 7.750% 09/08/2006 8,110,000 16,316,726
UK Treasury Gilt 10.000% 09/08/2003 2,150,000 4,393,901
William Hill Finance 10.625% 04/30/2008 1,475,000 2,513,039
-----------
72,725,107
-----------
Yankee Bonds -- 5.3%
Asia Pulp and Paper Global Financial Notes 11.750% 10/01/2005 275,000 181,500
Canada Notes 5.250% 11/05/2008 2,000,000 2,009,200
Edperbrascan Ltd. Notes 7.375% 10/01/2002 500,000 500,480
Gruma SA Notes 7.625% 10/15/2007 525,000 459,795
IBRD Notes 5.750% 02/06/2008 1,000,000 946,361
ING Barings NV 0.000% 02/12/1999 2,000,000 2,270,000
Inter Amer Dev Bank Notes 5.750% 02/26/2008 6,200,000 6,402,306
Inter Amer Dev Bank Notes 6.375% 08/01/2000 900,000 914,814
Merita Bank Perpetual Step Up 144A 7.500% 12/29/2049 250,000 249,233
Petro Canada Senior Notes 7.000% 11/15/2028 1,225,000 1,207,997
Petroleos Mexicanos Notes 9.250% 03/30/2018 50,000 41,000
Republic of Panama 144A Notes 7.875% 02/13/2002 3,295,000 3,146,725
Republic of Panama Notes 8.875% 09/30/2027 50,000 46,781
Se Banken Perpetual 10 Yr. Step Up 144A 8.125% 09/06/2049 1,500,000 1,531,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yankee Bonds (continued)
TPSA Finance 144A Senior Notes 7.750% 12/10/2008 2,250,000 $2,232,900
Tyco International Group 144A Notes 6.125% 11/01/2008 2,250,000 2,257,178
------------
24,398,070
------------
Total Government/Other (Cost $273,771,676) 284,748,109
------------
Non-Agency -- 0.9%
Pass Thru Securities -- 0.9%
Chase Commercial Mortage Sec 6.6
1997-2D Non-ERISA 6.600% 12/25/2007 500,000 476,094
GMAC Mortgage Corp. 1996-C1 F Non-ERISA 7.860% 11/15/2006 1,000,000 829,688
GMAC Mortgage Corp. 1997-C1 E Non-ERISA 7.085% 11/15/2010 900,000 886,500
Mortgage Capital Funding 1997-MC2 D Non-ERISA 7.117% 11/20/2007 725,000 719,789
Resolution Trust Corp. 1993-C3 E Non-ERISA 7.100% 12/25/2024 1,124,789 1,122,504
------------
Total Non-Agency (Cost $4,141,022) 4,034,575
------------
U.S. Government Agency -- 7.5%
Pass Thru Securities -- 7.5%
FHLMC 5.750% 07/15/2003 1,500,000 1,538,670
FNMA# 6.500% 03/01/2029 7,500,000 7,549,199
FNMA 6.000% 05/15/2008 2,125,000 2,243,193
FNMA 8.000% 12/01/2012 1,635,694 1,687,840
FNMA 8.500% 12/01/2028 9,494,100 9,942,126
03/15/2017 -
GNMA 8.000% 08/15/2027 1,678,279 1,748,243
GNMA 9.000% 12/15/2017 989,836 1,061,599
GNMA 8.000% 11/15/2017 1,651,264 1,732,275
GNMA 8.000% 07/15/2026 242,341 251,882
GNMA 8.000% 09/15/2026 195,317 203,007
GNMA 8.000% 12/15/2026 71,429 74,241
GNMA 8.000% 12/15/2026 70,398 73,170
GNMA 8.000% 08/15/2027 1,455,369 1,512,667
GNMA 8.000% 12/15/2027 1,490,079 1,548,743
Tenneesee Valley Authority Notes 5.375% 11/13/2008 3,400,000 3,424,320
------------
Total U.S. Government Agency (Cost $34,550,910) 34,591,175
------------
U.S. Treasury Obligations -- 4.2%
Treasury Notes -- 4.2%
U.S. Treasury Note+ 6.625% 04/30/2002 8,400,000 8,889,551
U.S. Treasury Note+ 6.250% 06/30/2002 250,000 262,423
U.S. Treasury Note+ 5.625% 12/31/1999 475,000 479,603
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Notes (continued)
U.S. Treasury Note+ 6.625% 06/30/2001 8,710,000 $9,111,443
U.S. Treasury Note+ 5.875% 11/15/1999 475,000 479,897
------------
Total Treasury Notes (Cost $19,285,286) 19,222,917
------------
TOTAL BONDS AND NOTES (COST $440,942,001) 447,940,886
------------
<CAPTION>
Shares
---------------
<S> <C> <C>
PREFERRED STOCKS -- 1.0%
Equity Office Properties Trust 144A CVT 6,000 228,750
Equity Residential Properties Pfd 9.65 3,000 77,250
Fuji JGB Inv. L.L.C. Pfd 144A Step Up(a) 1,875,000 1,359,375
Merita Bank Preferred Step Up 144A Notes 7.15% 650,000 628,901
Pinto Totta Intl Pfd 144A Step Up 550 504,350
Societe Generale Preferred Step Up NC '07 1,400,000 1,284,500
Texaco Capital LLC FLT Ser B(a) 14,000 300,125
------------
TOTAL PREFERRED STOCKS (COST $4,714,069) 4,383,251
------------
<CAPTION>
Contract
Size (1)
---------------
<S> <C> <C>
PURCHASED OPTIONS -- 1.2%
JPY Put/NZD Call, Strike Price 73.50, 4/6/99 12,700,000 5,347
BTP 6.75% Put, Strike Price 105.290, 1/31/00 4,545,000,000 --
BTP 6.75% Put, Strike Price 105.49, 2/3/00 4,545,000,000 --
BTP 6.75% Put, Strike Price 107.69, 2/7/00 9,085,000,000 --
JGB 2.00% Put, Strike Price 99.00, 1/25/99 642,400,000 37,259
Fujibank 9.87% Call, Strike Price 6.37, 2/26/99 19,000 37
JPY Put/USD Call, Strike Price 155.00, 6/15/99 8,000,000 8,800
JPY Put/USD Call, Strike Price 150.00, 6/9/99 3,800,000 6,080
JGB 3.00% Put, Strike Price 110.00, 6/2/99 1,550,000,000 609,150
JPY Put/USD Call, Strike Price 128.00, 11/12/99 4,400,000 95,920
DEM Put/USD Call, Strike Price 1.85, 2/17/99 7,700,000 --
JPY Put/USD Call, Strike Price 150.00, 8/26/99 7,800,000 35,490
BRL Put/USD Call, Strike Price 1.35, 9/9/99 8,700,000 952,650
JPY Put/USD Call, Strike Price 125.00, 10/14/99 5,000,000 118,500
JPY Put/USD Call, Strike Price 127.00, 11/10/99 8,925,000 200,813
JPY Put/USD Call, Strike Price 138.00, 9/8/99 6,525,000 63,730
UST 6.125% Call, Strike Price 110.43, 1/22/99 38,000 68,875
UST 5.500% Call, Strike Price 104.391, 2/25/99 77,500 158,027
UST 5.5% Call, Strike Price 113.391, 3/30/99 45,000 12,656
UST 5.5% Call, Strike Price 105.891, 3/1/99 38,500 56,246
UST 5.625% Call, Strike Price 110.00, 4/9/99 46,250 22,402
UST 5.625% Put, Strike Price 99.258, 2/1/99 38,500 1,203
DBR 5.625% Call, Strike Price 109.62, 2/22/99 6,975,000 159,853
DBR 4.75% Call, Strike Price 96.12, 4/13/99 7,385,000 203,811
DEM 4.75% Call, Strike Price 94.53, 11/18/99 14,900,000 513,111
DBR 6.00% Call, Strike Price 112.88, 10/22/99 15,050,000 167,943
FRF 5.25% Call, Strike Price 108.15, 10/25/99 50,000,000 219,050
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract Value
Security Size (1) (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DBR 5.625% Call, Strike Price 115.10, 10/1/99 15,150,000 $ 217,236
DEM 5.625% Call, Strike Price 109.10, 11/23/99 7,500,000 233,985
FRF 5.25% Call, Strike Price 106.66, 8/24/99 29,500,000 159,831
DBR 4.75% Call, Strike Price 104.90, 11/2/99 14,900,000 183,255
JGB 2.6% Call, Strike Price 120.061, 4/13/99 468,500,000 469
UST 6.125% Call, Strike Price 111.031, 2/1/99 71,500 129,035
UST 5.625% Call, Strike Price 108.188, 4/22/99 91,250 89,824
DBR 6.00% Call, Strike Price 112.66, 10/22/99 4,670,000 55,195
OBL 4.5% Call, Strike Price 103.35, 5/19/03 22,535,000 114,929
JPY Put, Strike Price 116.95, 12/24/99 9,175,000 399,113
UST 6.125% Call, Strike Price 113.438, 5/31/99 38,000 103,313
DBR 5.25% Call, Strike Price 110.76, 12/15/99 7,600,000 44,688
UST 4.25% Call, Strike Price 99.594, 3/8/99 56,000 23,625
-------------
TOTAL PURCHASED OPTIONS (COST $7,879,015) 5,471,451
-------------
<CAPTION>
Par
Value (1)
--------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 3.1%
U.S. GOVERNMENT AGENCY -- 2.6%
FHLMC Discount Note 0.000% 01/07/99 12,000,000 11,994,720
-------------
Repurchase Agreements -- 0.5%
Prudential-Bache Repurchase Agreement, dated 12/31/98, due 1/4/99, with a
maturity value of $2,389,275 and an effective yield of 3.95%, collateralized by
a U.S. Treasury Bond with a rate of 9.875%, a maturity date of 11/15/15 and a
market value of $2,443,579. 2,388,227
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $14,377,827) 14,382,947
-------------
TOTAL INVESTMENTS -- 102.3% (COST $467,912,912) $472,178,535
Other Assets, Less Liabilities -- (2.3)% (10,590,819)
=============
NET ASSETS -- 100% $461,587,716
=============
</TABLE>
Notes to the 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.
FNMA - Federal National Mortgage Association
FHLMC - Federal Home Loan Mortgage Corporation
GNMA - Government National Mortgage Association
IBRD - International Bank for Reconstruction and Development
JGB Japanese Government Bond
OBL Bundesobligation
REIT - Real Estate Investment Trust
UST United States Treasury
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
Notes to the Schedule of Investments (continued):
BRL Brazilian Real
BTP British Pound
DBR Deutsche Bundes Republik
DEM German Mark
FRF French Franc
JPY Japanese Yen
NZD New Zealand Dollar
USD United States Dollar
(1) 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 12/31/98.
+ Denotes all or part of security pledged as a margin deposit (Note 5) or
collateral for delayed delivery transactions (Note 6).
# Delayed delivery contract (Note 6).
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value (Note 1A) (identified cost, $467,912,912) $ 472,178,535
Foreign currency, at value (identified cost, $2,188) 2,183
Interest and dividends receivable 8,743,250
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 2,672,042
Receivable for investments sold 7,861,113
Deferred organization costs (Note 1F) 34,895
Reclaim receivable 633,623
Prepaid expenses 6,676
--------------
Total assets 492,132,317
--------------
Liabilities
Payable for delayed delivery transactions (Note 6) $15,077,095
Payable for daily variation margin on open financial futures contracts 5,187
Options written, at value (premiums received $6,330,474) (Note 5) 9,153,988
Unrealized depreciation on forward foreign currency exchange contracts
(Note 5) 6,242,501
Accrued trustees' fees and expenses (Note 2) 4,522
Accrued accounting and custody fees 33,453
Accrued expenses and other liabilities 27,855
------------
Total liabilities 30,544,601
--------------
Net Assets (applicable to investors' beneficial interests) $ 461,587,716
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Statement of Operations
Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1C)
Interest income $ 25,444,262
Dividend income (net of foreign withholding taxes of $9,867) 88,602
-------------
Total income 25,532,864
Expenses
Investment advisory fee (Note 2) $ 1,514,971
Accounting and custody fees 332,180
Legal and audit services 36,007
Licensing fees 21,000
Trustees' fees and expenses (Note 2) 18,568
Amortization of organization expense (Note 1F) 14,936
Insurance expense 10,160
Miscellaneous 1,500
------------
Total expenses 1,949,322
-------------
Net investment income 23,583,542
-------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Investment securities transactions 7,445,154
Financial futures contracts 1,074,526
Written options transactions 823,231
Foreign currency transactions and forward foreign currency exchange
contracts (537,375)
------------
Net realized gain 8,805,536
Change in unrealized appreciation (depreciation)
Investment securities 5,700,112
Financial futures contracts (263,701)
Written options (2,915,252)
Foreign currency and forward foreign currency exchange contracts (9,596,907)
------------
Change in net unrealized appreciation (depreciation) (7,075,748)
-------------
Net realized and unrealized gain 1,729,788
-------------
Net Increase in Net Assets from Operations $ 25,313,330
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
--------------------- ---------------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 23,583,542 $ 12,971,199
Net realized gain 8,805,536 10,546,998
Change in net unrealized appreciation
(depreciation) (7,075,748) (1,136,692)
------------ ------------
Net increase in Net Assets from Investment
Operations 25,313,330 22,381,505
------------ ------------
Capital Transactions
Contributions 195,976,864 112,195,968
Withdrawals (22,255,635) (31,838,814)
------------ ------------
Increase in net assets resulting from
capital transactions 173,721,229 80,357,154
------------ ------------
Total Increase in Net Assets 199,034,559 102,738,659
Net Assets
At beginning of year 262,553,157 159,814,498
------------ ------------
At end of year $461,587,716 $262,553,157
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Supplemental Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996 (1)
-------- -------- --------
<S> <C> <C> <C>
Ratios:
Expenses (to average daily net assets) 0.51% 0.61% 0.62%+
Net investment income (to average daily net
assets) 6.22% 6.47% 7.17%+
Portfolio Turnover 162% 176% 111%
Net assets, end of year (000s omitted) $461,588 $262,553 $159,814
</TABLE>
- -------------------------------------------------------
(1) For the period May 3, 1996 (commencement of operations) through December
31, 1996.
+ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Global Fixed Income Portfolio (the "Portfolio") is a separate
non-diversified investment series of the Portfolio Trust.
At December 31, 1998 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 December 31, 1998 is 99.9%.
The following is a summary of significant accounting policies consistently
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
agreements' underlying investments to ensure the existence of a proper
level of collateral.
C. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or discount on long-term debt securities when required for federal
income tax purposes. Realized gains and losses from securities sold are
recorded on the identified cost basis. The Portfolio does not isolate that
portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes
in market prices of securities held. Such fluctuations are included with
the net realized and unrealized gain or loss from investments.
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
26
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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.
E. Foreign currency transactions
Investment security valuations, other assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. Deferred organization expense
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 International Management
Company, L.P. ("SIMCO") for overall investment advisory services is paid
monthly at the annual rate of 0.40% of the Portfolio's average daily net
assets. The advisory agreement provides that if the total annual operating
expenses of the Portfolio (excluding brokerage commissions, taxes and
extraordinary expenses) in any fiscal year exceed 0.65% of the Portfolio's
average daily net assets, the compensation due the adviser shall be
reduced by the amount of the excess. 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
investments, for the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- --------------
<S> <C> <C>
U.S. Government Securities...................... $ 281,401,374 $ 246,221,718
=============== ==============
Investments (non-U.S. Government Securities).... $ 551,117,850 $ 329,302,052
=============== ==============
</TABLE>
27
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
(4) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at December 31, 1998, as computed on a federal
income tax basis, were as follows:
Aggregate Cost.......................... $ 468,261,504
=================
Gross unrealized appreciation........... $ 15,357,813
Gross unrealized depreciation........... (11,440,782)
-----------------
Net unrealized appreciation............. $ 3,917,031
=================
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used 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:
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 put 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 the Portfolio's investments. Options, both
held and written by the Portfolio, are reflected in the accompanying
Statement of Assets and Liabilities at market value. The underlying value
of any open purchased option is shown in the schedule of investments. This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts,
or if the counterparties do not perform under the 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 year ended December 31, 1998 is as follows:
28
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Written Put Option Transactions
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Contracts Premiums
--------------- ---------------
<S> <C> <C>
Outstanding, beginning of period........................ . 2 $ 96,770
Options written........................................... 23 1,724,997
Options expired........................................... (4) (184,270)
Options closed............................................ (7) (348,004)
--------------- ---------------
Outstanding, end of period................................ 14 $ 1,289,493
=============== ===============
</TABLE>
Written Call Option Transactions
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Contracts Premiums
--------------- ---------------
<S> <C> <C>
Outstanding, beginning of period........................ . 3 $ 99,629
Options written........................................... 20 1,725,206
Options exercised......................................... (1) (139,117)
Options expired........................................... (6) (340,485)
Options closed............................................ (3) (296,367)
--------------- ---------------
Outstanding, end of period................................ 13 $ 1,048,866
=============== ===============
</TABLE>
Written Cross Currency Option Transactions
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Contracts Premiums
--------------- ---------------
<S> <C> <C>
Outstanding, beginning of period.......................... 14 $ 1,166,297
Options written........................................... 24 4,514,231
Options expired........................................... (7) (297,723)
Options closed............................................ (16) (1,390,690)
--------------- ---------------
Outstanding, end of period................................ 15 $ 3,992,115
=============== ===============
</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
29
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 December 31, 1998, 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. $
Principal Contract U.S. $ Aggregate Unrealized
Contracts to Deliver Amount Value Date Market Value Face Amount Gain/(Loss)
------------------------------ -------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Argentinean Peso 4,989,066 1/06 - 4/06/99 4,979,430 4,906,609 (72,821)
British Pound Sterling 42,501,462 1/20 - 5/10/99 70,473,154 70,519,838 46,684
Canadian Dollar 6,692,352 1/29/99 4,375,564 4,319,040 (56,524)
Danish Krone 161,981,630 1/11 - 5/06/99 25,575,093 24,839,748 (735,345)
European Currency Unit 3,550,000 4/30/99 4,188,408 4,240,475 52,067
French Franc 24,591,186 2/12/99 4,406,212 4,391,283 (14,929)
German Deutsche Mark 120,987,269 1/20 - 5/06/99 72,812,274 73,079,736 267,462
Greek Drachma 91,010,000 4/22/99 319,074 293,922 (25,152)
Hong Kong Dollar 30,734,480 10/14/99 3,927,333 3,865,000 (62,333)
Italian Lira 11,155,200,000 4/29/99 6,782,934 6,830,774 47,840
Japanese Yen 5,166,953,180 2/05 - 3/29/99 46,070,177 41,179,023 (4,891,154)
Netherlands Guilder 23,927,365 4/15/99 12,797,948 12,968,761 170,813
Norwegian Krone 6,741,381 1/19/99 888,124 875,220 (12,904)
New Zealand Dollar 35,358,158 2/11 - 4/15/99 18,604,441 18,633,559 29,118
Polish Zloty 4,212,648 7/24/2000 1,130,760 999,679 (131,081)
Swedish Krona 140,976,274 1/19 - 3/02/99 17,489,505 17,685,312 195,807
------------ ------------ -----------
$294,820,431 $289,627,979 $(5,192,452)
============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Local U.S. $ U.S. $
Principal Contract U.S. $ Aggregate Unrealized
Contracts to Receive Amount Value Date Market Value Face Amount Gain/(Loss)
------------------------------ ------------ --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Argentinean Peso 3,322,629 1/06/99 3,324,357 3,304,247 20,110
11/03/98 -
Canadian Dollar 6,695,689 1/29/99 4,377,746 4,411,142 (33,396)
Danish Krone 26,843,604 3/16/99 4,239,390 4,298,416 (59,026)
German Deutsche Mark 14,208,256 1/20 - 2/17/99 8,542,478 8,684,395 (141,917)
Hong Kong Dollar 19,838,740 10/14/99 2,535,046 2,425,311 109,735
Italian Lira 7,492,080,240 4/29/99 4,555,569 4,540,655 14,914
Japanese Yen 3,543,868,142 1/11 - 3/29/99 31,494,059 29,920,752 1,573,307
New Zealand Dollar 114,141 3/11/99 60,057 62,789 (2,732)
Polish Zloty 4,212,648 7/24/2000 1,130,760 1,025,000 105,760
Swedish Krona 23,722,166 1/19/99 2,940,174 3,059,346 (119,172)
------------ ------------ -----------
$63,199,636 $61,732,053 $1,467,583
============ ============ ===========
</TABLE>
30
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Forward Foreign Cross Currency Exchange Contracts
<TABLE>
<CAPTION>
U.S. $
U.S. $ U.S. $ Contract Unrealized
Contracts to Deliver Market Value In Exchange For Market Value Value Date Gain/(Loss)
------------------------- -------------- -------------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Greek Drachma 589,122 German Deutsche Mark 573,080 4/22/99 (16,042)
Greek Drachma 756,737 German Deutsche Mark 738,971 4/22/99 (17,766)
German Deutsche Mark 904,863 Greek Drachma 976,839 4/22/99 71,976
Greek Drachma 930,192 German Deutsche Mark 904,862 4/22/99 (25,330)
Greek Drachma 1,271,263 German Deutsche Mark 1,236,646 4/22/99 (34,617)
German Deutsche Mark 1,975,617 Greek Drachma 2,128,746 4/22/99 153,129
German Deutsche Mark 1,975,617 Greek Drachma 2,121,857 4/22/99 146,240
Greek Drachma 2,023,113 German Deutsche Mark 1,975,617 4/22/99 (47,496)
Australian Dollar 2,597,622 New Zealand Dollar 2,647,598 3/11/99 49,976
Greek Drachma 2,620,434 German Deutsche Mark 2,473,291 4/22/99 (147,143)
New Zealand Dollar 2,707,656 Australian Dollar 2,597,622 3/11/99 (110,034)
German Deutsche Mark 3,046,371 Greek Drachma 3,282,494 4/22/99 236,123
British Pound Sterling 4,501,554 New Zealand Dollar 4,396,948 11/05/99 (104,606)
------------ ------------ ------------
$25,900,161 $26,054,571 $154,410
============ ============ ============
</TABLE>
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 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 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 contract's terms. The
Portfolio enters into financial futures transactions primarily to seek to
manage its exposure to certain markets and to changes in security prices
and foreign currencies. Gains and losses are realized upon the expiration
or closing of the futures contracts. At December 31, 1998, the Portfolio
held the following futures contracts:
<TABLE>
<CAPTION>
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Depreciation
---------------------------------- ---------------- ------------------ ------------------- --------------
<S> <C> <C> <C> <C>
U.S. 10 Year Note (166 Contracts) Long 3/31/99 $ 19,779,938 $ 124,310
==============
</TABLE>
At December 31, 1998 the Portfolio had segregated sufficient cash
and/or securities to cover margin requirements on open futures
contracts.
31
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Interest rate swap contracts
Interest rate swaps involve the exchange by the Portfolio with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to
a notional amount of principal. Credit and market risk exist with respect
to these instruments. If forecasts of interest rates and other market
factors are incorrect, investment performance will be diminished compared
to what performance would have been if these investment techniques were
not used. Even if the forecasts are correct, there are risks that the
positions may correlate imperfectly with the asset or liability being
hedged, a liquid secondary market may not always exist, or a counterparty
to a transaction may not perform. The Portfolio expects to enter into
these transactions primarily for hedging purposes including, but not
limited to, preserving a return or spread on a particular investment or
portion of its portfolio, protecting against currency fluctuations,
managing duration or protecting against an increase in the price of
securities the Portfolio anticipates purchasing at a later date. Gains and
losses are realized upon the expiration or closing of the swap contracts.
At December 31, 1998, the Portfolio held no interest rate swap contracts.
(6) Delayed Delivery Transactions:
The Fund 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 December 31, 1998, the Fund entered into the following delayed delivery
transactions:
When Issued
<TABLE>
<CAPTION>
Type Security Settlement Date Payable Amount
------------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C>
Buy FNMA 3/15/99 $ 7,528,125
Buy GNMA 2/22/99 7,548,970
------------------------
$ 15,077,095
========================
</TABLE>
32
<PAGE>
Independent Auditors' Report
To the Trustees of Standish, Ayer & Wood Master Portfolio and Investors of
Standish Global Fixed Income Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplemental data present fairly, in all material
respects, the financial position of Standish Global Fixed Income Portfolio, at
December 31, 1998, the results of its operations, the changes in its net assets
and the supplemental data for the periods indicated therein, in conformity with
generally accepted accounting principles. These financial statements and
supplemental data (herein referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998, by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
33
<PAGE>
[This page intentionally left blank]
34
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
(800) 729-0066
www.standishfunds.com
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Standish,
Ayer & Wood Investment Trust form N-SAR for the period ended December 31, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> Standish Global Fixed Income Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 461,587,582
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 461,587,582
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,062,048
<TOTAL-LIABILITIES> 3,062,048
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 457,580,227
<SHARES-COMMON-STOCK> 22,610,637
<SHARES-COMMON-PRIOR> 12,540,458
<ACCUMULATED-NII-CURRENT> 3,132,422
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (81,177)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,105,938)
<NET-ASSETS> 458,525,534
<DIVIDEND-INCOME> 88,602
<INTEREST-INCOME> 25,444,254
<OTHER-INCOME> (1,949,322)
<EXPENSES-NET> 172,893
<NET-INVESTMENT-INCOME> 23,410,641
<REALIZED-GAINS-CURRENT> 8,805,534
<APPREC-INCREASE-CURRENT> (7,075,746)
<NET-CHANGE-FROM-OPS> 25,140,429
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,734,875
<DISTRIBUTIONS-OF-GAINS> 6,298,437
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,481,481
<NUMBER-OF-SHARES-REDEEMED> (524,367)
<SHARES-REINVESTED> 1,113,065
<NET-CHANGE-IN-ASSETS> 202,763,111
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,536,278
<OVERDISTRIB-NII-PRIOR> (667,896)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 172,893
<AVERAGE-NET-ASSETS> 378,999,493
<PER-SHARE-NAV-BEGIN> 20.39
<PER-SHARE-NII> 1.28
<PER-SHARE-GAIN-APPREC> 0.12
<PER-SHARE-DIVIDEND> (1.21)
<PER-SHARE-DISTRIBUTIONS> (0.30)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.28
<EXPENSE-RATIO> 0.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Standish,
Ayer & Wood Investment Trust form N-SAR for the year ended December 31, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> Standish Global Fixed Income Portfolio
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 467,912,912
<INVESTMENTS-AT-VALUE> 472,178,535
<RECEIVABLES> 17,237,986
<ASSETS-OTHER> 2,715,796
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 492,132,317
<PAYABLE-FOR-SECURITIES> 15,077,095
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,467,506
<TOTAL-LIABILITIES> 30,544,601
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 395,257,658
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 66,330,058
<NET-ASSETS> 461,587,716
<DIVIDEND-INCOME> 88,602
<INTEREST-INCOME> 25,444,262
<OTHER-INCOME> 0
<EXPENSES-NET> 1,949,322
<NET-INVESTMENT-INCOME> 23,583,542
<REALIZED-GAINS-CURRENT> 8,805,536
<APPREC-INCREASE-CURRENT> (7,075,748)
<NET-CHANGE-FROM-OPS> 25,313,330
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 199,034,559
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,514,971
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,949,322
<AVERAGE-NET-ASSETS> 379,287,852
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
