SUPPLEMENT Dated December 21, 1995
TO THE PROSPECTUS OF
STANDISH SMALL CAPITALIZATION EQUITY FUND
Dated May 1, 1995
EXCHANGE OF SHARES
Effective immediately, shares of the Fund may be exchanged for shares
of one or more other funds in the Standish, Ayer & Wood family of funds. Shares
of the Fund redeemed in an exchange transaction are valued at their net asset
value next determined after the exchange request is received by the Trust.
Shares of a fund purchased in an exchange transaction are sold at their net
asset value next determined after the exchange request is received by the Trust
and payment for the shares is received by the fund into which your shares are to
be exchanged. Until receipt of the purchase price by the fund into which your
shares are to be exchanged (which may take up to three business days), your
money will not be invested. To obtain a current prospectus for any of the other
funds in the Standish, Ayer & Wood family of funds, please call the Trust at
(800) 221-4795. Please consider the differences in investment objectives and
expenses of a fund as described in its prospectus before making an exchange.
Written Exchanges
Shares of a Fund may be exchanged by written order to: "Standish, Ayer
& Wood Investment Trust, One Financial Center, Boston, Massachusetts 02111". A
written exchange request must (a) state the name of the current Fund, (b) state
the name of fund into which the current Fund shares will be exchanged, (c) state
the number of shares or the dollar amount to be exchanged, (d) identify the
shareholder's account numbers in both funds and (d) be signed by each registered
owner exactly as the shares are registered. Signature(s) must be guaranteed as
listed under "Written Redemption" below.
Telephonic Exchanges
Shareholders who complete the telephonic privileges portion of the
Fund's account application or who have previously elected telephonic redemption
privileges may exchange shares by calling (800) 221- 4795. The telephonic
privileges are not available to shareholders automatically; they must first
elect the privilege. Proper identification will be required for each telephonic
exchange. Please see "Telephonic Redemption" in the attached Prospectus for more
information regarding telephonic transactions.
General Exchange Information
All exchanges are subject to the following exchange restrictions: (i)
the fund into which shares are being exchanged must be registered for sale in
your state; (ii) exchanges may be made only between funds that are registered in
the same name, address and, if applicable, taxpayer identification number; and
(iii) unless waived by the Trust, the amount to be exchanged must satisfy the
minimum account size of the fund to be exchanged into. Exchange requests will
not be processed until payment for the shares of the current Fund have been
received. The exchange privilege may be changed or discontinued and may be
subject to additional limitations upon sixty (60) days' notice to shareholders,
including certain restrictions on purchases by market-timer accounts.
---------------------
The following revises and replaces the first paragraph under the
caption "Purchase of Shares" in the attached Prospectus:
<PAGE>
PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Trust, which
offers shares of the Fund to the public on a continuous basis. Shares are sold
at the net asset value per share next computed after the purchase order is
received by the Trust and payment for the shares is received by the Fund. Unless
waived by the Trust, the minimum initial investment is $100,000. Additional
investments may be made in amounts of at least $10,000.
---------------------
The following revises and replaces the information under the caption
"Written Redemption" in the attached Prospectus:
WRITTEN REDEMPTION
Shares of the Fund may be redeemed by written order to: "Standish, Ayer
& Wood Investment Trust, One Financial Center, Boston, Massachusetts 02111". A
written redemption request must (a) state the name of the Fund, (b) state the
number of shares or the dollar amount to be redeemed, (c) identify the
shareholder's account number and (d) be signed by each registered owner exactly
as the shares are registered. Signature(s) must be guaranteed by a member of
either the Securities Transfer Association's STAMP program or the New York Stock
Exchange's Medallion Signature Program, or by any one of the following
institutions, provided that such institution meets credit standards established
by Investors Bank & Trust Company, the Fund's transfer agent: (i) a bank; (ii) a
securities broker or dealer, including a government or municipal securities
broker or dealer, that is a member of a clearing corporation or has net capital
of at least $100,000; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, or a federal savings bank or association; or
(v) a national securities exchange, a registered securities exchange or a
clearing agency. Additional supporting documents may be required in the case of
estates, trusts, corporations, partnerships and other shareholders which are not
individuals. Redemption proceeds will normally be paid by check mailed within
seven days of receipt of a written redemption request in proper form. If shares
of the Fund to be redeemed were recently purchased by check, the Fund may delay
transmittal of redemption proceeds until such time as it has assured itself that
good funds have been collected for the purchase of such shares.
This may take up to fifteen (15) days.
---------------------
The following revises and supplements the information under the caption
"Investment Objective and Policies" in the attached Prospectus:
Other Investment Companies
The Fund may invest up to 10% of its total assets in the securities of
other investment companies but may not invest more than 5% of its total assets
in the securities of any one investment company or acquire more than 3% of the
voting securities of any other investment company. For example, the Fund may
invest in Standard & Poor's Depositary Receipts (commonly referred to as
"Spiders"), which are exchange-traded shares of a closed-end investment company
that are designed to replicate the price performance and dividend yield of the
Standard & Poor's 500 Composite Stock Price Index. The Fund will indirectly bear
its proportionate share of any management fees and other expenses paid by
investment companies in which it invests in addition to the advisory and
administration fees paid by the Fund. However, to the extent that the Fund
invests in a registered open-end investment company, the Adviser will waive its
advisory fees on the portion of the Fund's assets so invested.
<PAGE>
Prospectus dated May 1, 1995
PROSPECTUS
STANDISH SMALL CAPITALIZATION EQUITY FUND
One Financial Center
Boston, Massachusetts 02111
(800) 221-4795
Standish Small Capitalization Equity Fund (the "Fund") is one fund in the
Standish, Ayer & Wood family of funds. The Fund is organized as a separate
diversified investment series of Standish, Ayer & Wood Investment Trust (the
"Trust"), an open-end management investment company. The Fund's investment
objective is to achieve long-term growth of capital through investment primarily
in equity securities of small companies which appear to be undervalued. The Fund
invests primarily in publicly traded securities, including securities being
issued in initial public offerings. The Fund does not normally invest in equity
securities which are restricted as to disposition by federal securities laws or
are otherwise illiquid. See "Investment Policies." Standish, Ayer & Wood, Inc.,
Boston, Massachusetts, is the Fund's investment adviser (the "Adviser").
Investors may purchase shares from the Fund without a sales commission or
other transaction charges. Unless waived by the Fund, the minimum initial
investment is $100,000. Additional investments may be made in amounts of at
least $10,000.
This Prospectus is intended to set forth concisely the information about
the Fund and the Trust that a prospective investor should know before investing.
Investors are encouraged to read this Prospectus and retain it for future
reference. Additional information about the Fund and the Trust is contained in a
Statement of Additional Information which has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
or writing the Trust at the telephone number or address listed above. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Expense Information 2
Financial Highlights 3
Investment Objective and Policies 4
Risk Factors and Suitability 7
Calculations of Performance Data 7
Dividends and Distributions 7
Purchase of Shares 7
Redemption of Shares 8
Management 9
Federal Income Taxes 10
The Fund and Its Shares 10
Custodian, Transfer Agent and Dividend-Disbursing Agent 11
Independent Accountants 11
Legal Counsel 11
Tax Certification Instructions 11
<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Estimated Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees 0.60%
12b-1 Fees None
Other Expenses 0.19%
----
Total Fund Operating Expenses 0.79%
====
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 yr. 3 yrs. 5 yrs. 10 yrs.
- ----------------------------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period: $9 $28 $49 $108
You would pay the following expenses on the same investment,
assuming no redemption: $9 $28 $49 $108
</TABLE>
The purpose of the above table is to assist the investor in
understanding the various costs and expenses of the Fund that an investor in the
Fund will bear directly or indirectly. See "Management - Investment Advisers"
and "Management Expenses." The figure shown in the caption "Other Expenses,"
which includes, among other things, custodian and transfer agent fees,
registration costs and payments for insurance and audit and legal services, is
based upon the Fund's expenses for the fiscal year ended December 31, 1994.
THE INFORMATION IN THE TABLE AND HYPOTHETICAL EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5%
ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN GREATER OR LESS THAN 5%.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The financial highlights for the years ended December 31, 1993 and 1994
have been audited by Coopers & Lybrand L.L.P., independent accountants, whose
report, together with the financial statements of the Fund, is incorporated into
the Statement of Additional Information.
Per share data (for a share outstanding Year Ended December 31,
throughout each period): --------------------------------------------------------------
1994 1993 1992* 1991* 1990*+
------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $48.97 $39.83 $39.99 $27.57 $26.24
------------ ----------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss) - ($0.07) ($0.11) ($0.04) $0.01
Net realized and unrealized gain (loss) on investments (1.84) 11.31 4.00 17.86 1.33
------------ ----------- ---------- ---------- -----------
Total from investment operations ($1.84) $11.24 $3.89 $17.82 $1.34
------------ ----------- ---------- ---------- -----------
Less distributions declared to shareholders:
From net investment income - - - - (0.01)
From realized gain (4.98) (2.10) (4.05) (5.35) -
From paid-in capital - - - (0.06) -
------------ ----------- ---------- ---------- -----------
Total distributions declared to shareholders ($4.98) ($2.10) ($4.05) ($5.41) ($0.01)
------------ ----------- ---------- ---------- -----------
Net asset value - end of period $42.15 $48.97 $39.83 $39.99 $27.57
============ =========== ========== ========== ===========
Total return -3.66% 28.21% 9.74% 64.71% 15.35% t
Ratios (to average net assets)/Supplemental Data:
Expenses 0.79% 0.88% 1.04% 0.87% 1.48% t
Net investment income (loss) -0.27% -0.18% -0.38% -0.15% 0.17% t
Portfolio turnover 130% 144% 101% 96% 13%
Net assets at end of period (000 omitted) $107,591 85,141 50,950 35,418 13,273
t Computed on an annualized basis.
* Audited by other auditors.
+ For the period from August 31, 1990 (start of business)to December 31, 1990.
Further information about the performance of the Fund is contained in the
Fund's Annual Report, which may be obtained from the Fund without charge.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to achieve long-term growth of capital
through investment primarily in equity securities of small companies. Under
normal circumstances at least 80% of the Fund's assets will be invested in such
securities. Equity securities include common stocks, securities convertible into
common stocks and options, futures and other strategic transactions based on
common stocks. The Fund invests in publicly traded securities, including
securities issued in initial public offerings. The Fund does not normally invest
in equity securities which are restricted as to disposition by federal
securities laws or are otherwise illiquid. As a temporary matter and for
defensive purposes, the Fund purchases investment grade short-term
interest-bearing securities, the amount of which will depend on market
conditions and the needs of the Fund. Because of the uncertainty inherent in all
investments, no assurance can be given that the Fund will achieve its investment
objective. The investment objective is a fundamental policy which may not be
changed without a vote of the shareholders. Investment policies which are not
fundamental policies may be changed by the Trustees of the Trust without the
approval of shareholders. The Fund's investment policies are described further
in the Statement of Additional Information.
Investment Policies
The common stocks of small growth companies in which the Fund invests have
market capitalizations up to and including $700 million. Market capitalization
is determined by multiplying the number of fully diluted equity shares by the
current market price per share. Morningstar Mutual Funds, a leading mutual fund
monitoring service, includes in the small-cap category all funds that invest in
companies with median market capitalizations of less than $1 billion.
Investments are expected to emphasize companies involved with value added
products or services in expanding industries. At times, particularly when the
Adviser believes that securities of small companies are overvalued, the Fund's
portfolio may include securities of larger, more mature companies, provided that
the value of the securities of such larger, more mature companies shall not
exceed 20% of the Fund's net assets. As a temporary matter and for defensive
purposes, the Fund may invest all or a portion of its assets in short-term debt
securities or cash equivalents. The Fund will attempt to reduce risk by
diversifying its investments within the investment policy set forth above. The
Fund will invest in publicly traded equity securities and, excluding equity
securities received as distributions on portfolio securities, will not normally
hold equity securities which are restricted as to disposition under federal
securities laws or are otherwise illiquid or not readily marketable. The Fund
may participate in initial public offerings for previously privately held
companies which are expected to have market capitalizations of up to $700
million after the consummation of the offering and whose securities are expected
to be liquid after the offering. Such companies may have a more limited
operating history and/or less experienced management than other companies in
which the Fund invests, which may pose additional risks. See "Risk Factors and
Suitability."
<PAGE>
Foreign Securities
The Fund may invest up to 15% of its net assets in foreign equity
securities, including securities of foreign issuers that are listed on a United
States exchange or traded in the U.S. over-the-counter market and sponsored and
unsponsored American Depositary Receipts (ADRs). Securities of foreign issuers,
including emerging markets companies, will be selected for inclusion in the Fund
if the Adviser believes these securities will offer above average capital growth
potential. Investing in securities of foreign companies which are generally
denominated in foreign currencies and utilizing foreign currency transactions
involve certain risks of political, economic and legal conditions and
developments not typically associated with investing in United States companies.
Such conditions or developments might include favorable or unfavorable changes
in currency exchange rates, exchange control regulations (including currency
blockage), civil disorder, expropriation of assets of companies in which the
Fund invests, nationalization of such companies, imposition of withholding taxes
on dividend or interest payments, and possible difficulty in obtaining and
enforcing judgments against a foreign issuer. Also, foreign securities may not
be as liquid and may be more volatile than comparable domestic securities.
Furthermore, issuers of foreign securities are subject to different, often less
comprehensive, accounting, reporting and disclosure requirements than domestic
issuers. The Fund, in connection with its purchases and sales of foreign
securities, other than securities denominated in United States dollars, will
incur transaction costs in converting currencies. Also, foreign custodial costs
relating to the Fund's portfolio securities are higher than domestic custodial
costs. Fixed commissions on foreign stock exchanges are generally higher than
negotiated commissions on United States exchanges. Finally, transactions in
equity securities effected on some foreign stock exchanges, and consequently the
Fund's investments on such exchanges, may not be settled promptly and therefore
such investments may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries. Moreover, the economies of individual emerging market countries may
differ favorably or unfavorably from the U.S. economy in such respects as the
rate of growth of gross domestic product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Short Term Debt Securities; Money Market Instruments
The Fund will also invest uncommitted cash and cash needed to maintain
liquidity for redemptions in short-term debt securities and cash equivalents,
including short-term U.S. Government securities (direct obligations of the U.S.
Government backed by the full faith and credit of the United States and
securities issued by agencies and instrumentalities of the U.S. Government),
U.S. and foreign commercial paper, negotiable certificates of deposit,
non-negotiable fixed time deposits, bankers' acceptances and repurchase
agreements.
<PAGE>
When the Adviser deems it advisable because of market conditions, the Fund
may temporarily invest in short-term debt securities or retain cash or cash
equivalents without limit. Such investments will be limited to 20% of total
assets unless the Fund is in a defensive position.
The Fund's investments in money market securities (i.e., securities with
maturities of less than one year) will be limited to securities which are rated
P-1 by Moody's Investors Service, Inc. (Moody's) or A-1 by Standard & Poor's
Ratings Group ("Standard & Poor's"). The Fund will invest at least 95% of its
assets which are invested in short-term interest-bearing securities (i.e.,
securities with maturities of one to three years) in securities which are rated
at the time of investment Aaa, Aa or A by Moody's or AAA, AA, or A by Standard &
Poor's, or which, if not rated, are of comparable investment quality in the
opinion of the Adviser. Up to 5% of assets invested in such short-term
securities may be invested in securities which are rated Baa by Moody's or BBB
by Standard & Poor's, or which, if not rated, are of comparable investment
quality in the opinion of the Adviser. In the case of a security rated
differently by the two rating services the higher rating is used in applying the
5% limit.
In the event that the rating on a security held in the Fund's portfolio is
lowered by a rating service, such action will be considered by the Adviser in
its evaluation of the overall investment merits of that security, but will not
necessarily result in the sale of the security. Securities rated Baa by Moody's
and BBB by Standard & Poor's may have some speculative characteristics and
changes in economic conditions and other circumstances are more likely to lead
to weakened capacity to make principal and interest payments than is the case
with higher rated securities.
Strategic Transactions
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity market movements),
or to enhance potential gain. Such strategies are generally accepted as part of
modern portfolio management and are regularly utilized by many mutual funds and
other institutional investors. Techniques and instruments used by the Fund may
change over time as new instruments and strategies are developed or regulatory
changes occur.
In the course of pursuing its investment objective, the Fund may purchase
and sell (write) exchange-listed and over-the-counter put and call options on
securities, equity indices and other financial instruments; purchase and sell
financial futures contracts and options thereon; enter into various interest
rate transactions such as swaps, caps, floors or collars; and enter into various
currency transactions such as currency forward contracts, currency futures
contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). Strategic
Transactions may be used in an attempt to protect against possible changes in
the market value of securities held in or to be purchased for the Fund's
portfolio resulting from securities markets or currency exchange rate
<PAGE>
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, or to establish a position in the derivatives markets as a temporary
substitute for purchasing or selling particular securities. In addition to the
hedging transactions referred to in the preceding sentence, Strategic
Transactions may also be used to enhance potential gain in circumstances where
hedging is not involved although the Fund's net loss exposure resulting from
Strategic Transactions entered into for such purposes will not exceed 3% of the
Fund's net assets at any one time and, to the extent necessary, the Fund will
close out transactions in order to comply with this limitation. (Transactions
such as writing covered call options are considered to involve hedging for the
purposes of this limitation.) In calculating the Fund's net loss exposure from
such Strategic Transactions, an unrealized gain from a particular Strategic
Transaction position would be netted against an unrealized loss from a related
Strategic Transaction position. For example, if the Adviser believes that Fund
is underweighted in cyclical stocks and overweighted in consumer stocks, the
Fund may buy a cyclical index call option and sell a cyclical index put option
and sell a consumer index call option and buy a consumer index put option. Under
such circumstances, any unrealized loss in the cyclical position would be netted
against any unrealized gain in the consumer position (and vice versa) for
purposes of calculating the Fund's net loss exposure. The ability of the Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. The Fund
will comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. The Fund's activities involving
Strategic Transactions may be limited by the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. The writing of put and call options may result in losses
to the Fund, force the purchase or sale, respectively, of portfolio securities
at inopportune times or for prices higher than (in the case of purchases due to
the exercise of put options) or lower than (in the case of sales due to the
exercise of call options) current market values, limit the amount of
appreciation the Fund can realize on its investments or cause the Fund to hold a
security it might otherwise sell. The use of currency transactions can result in
the Fund incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements, or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain other risks. In particular, the variable degree of
correlation between price movements of futures contracts and price movements in
the related portfolio position of the Fund creates the possibility that losses
on the hedging instrument may be greater than gains in the value of the Fund's
position. The writing of options could significantly increase the Fund's
<PAGE>
portfolio turnover rate and, therefore, associated brokerage commissions or
spreads. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time, in
certain circumstances, these transactions tend to limit any potential gain which
might result from an increase in value of such position. The loss incurred by
the Fund in writing options on futures and entering into futures transactions is
potentially unlimited; however, as described above, the Fund will limit its net
loss exposure resulting from Strategic Transactions entered into for non-hedging
purposes to 3% of its net assets at any one time. Futures markets are highly
volatile and the use of futures may increase the volatility of the Fund's net
asset value. Finally, entering into futures contracts would create a greater
ongoing potential financial risk than would purchases of options where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value and the net
result may be less favorable than if the Strategic Transactions had not been
utilized. Further information concerning the Fund's Strategic Transactions is
set forth in the Statement of Additional Information.
Short-Selling
The Fund may make short sales, which are transactions in which the Fund
sells a security it does not own in anticipation of a decline in the market
value of that security. To complete such a transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund then is obligated to replace
the security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender amounts equal to any dividends or interest which
accrue during the period of the loan. To borrow the security, the Fund also may
be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is closed
out.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will: (a) maintain daily a segregated account not with the
broker, containing cash or U.S. Government securities, at such a level that (i)
the amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short; or (b) otherwise cover its short position.
<PAGE>
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on which
the Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates by an amount greater than premium
and transaction costs. This result is the opposite of what one would expect from
a cash purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium or
amounts in lieu of dividends or interest the Fund may be required to pay in
connection with a short sale.
The Fund's loss on a short sale as a result of an increase in the price of
the security sold short is potentially unlimited. The Fund may purchase call
options to provide a hedge against an increase in the price of a security sold
short by the Fund. When the Fund purchases a call option it has to pay a premium
to the person writing the option and a commission to the broker selling the
option. If the option is exercised by the Fund, the premium and the commission
paid may be more than the amount of the brokerage commission charged if the
security were to be purchased directly. See "Strategic Transactions" above.
The Fund anticipates that the frequency of short sales will vary
substantially in different periods, and it does not intend that any specified
portion of its assets, as a matter of practice, will be in short sales. However,
no securities will be sold short if, after effect is given to any such short
sale, the total market value of all securities sold short would exceed 5% of the
value of the Fund's net assets.
In addition to the short sales discussed above, the Fund may make short
sales "Against the box," a transaction in which the Fund enters into a short
sale of a security which the Fund owns. The proceeds of the short sale are held
by a broker until the settlement date at which time the Fund delivers the
security to close the short position. The Fund receives the net proceeds from
the short sale.
Portfolio Turnover
It is not the policy of the Fund to purchase or sell securities for trading
purposes. However, the Fund places no restrictions on portfolio turnover and it
may sell any portfolio security without regard to the period of time it has been
held. The Fund may therefore generally change its portfolio investments at any
time in accordance with the Adviser's appraisal of factors affecting any
particular issuer or market, or the economy in general. Portfolio turnover is
not expected to exceed 150% on an annual basis. (A rate of turnover of 100%
would occur, for example, if the value of the lesser of purchases or sales of
portfolio securities for a particular year equaled the average monthly value of
portfolio securities owned during the year (excluding securities with a maturity
date of one year or less at the date of acquisition).) A high rate of portfolio
turnover involves a correspondingly greater amount of transaction costs which
must be borne directly by the Fund and thus indirectly by its shareholders. It
may also result in the realization of larger amounts of short-term capital gains
which are taxable to shareholders as ordinary income and may, under certain
circumstances, make it more difficult for the Fund to qualify as a regulated
investment company under the Code.
<PAGE>
Investment Restrictions
The Fund has adopted certain fundamental policies which may not be changed
without the approval of the Fund's shareholders. These policies provide, among
other things, that the Fund may not: (i) invest, with respect to at least 75% of
its total assets, more than 5% in the securities of any one issuer (other than
the U.S. Government, its agencies or instrumentalities) or acquire more than 10%
of the outstanding voting securities of any issuer; (ii) issue senior
securities, borrow money, enter into reverse repurchase agreements or pledge or
mortgage its assets, except that the Fund may borrow from banks in an amount up
to 15% of the current value of its total assets as a temporary measure for
extraordinary or emergency purposes (but not investment purposes), and pledge
its assets to an extent not greater than 15% of the current value of its total
assets to secure such borrowings; however, the Fund may not make any additional
investments while its outstanding borrowings exceed 5% of the current value of
its total assets; (iii) make loans of portfolio securities, except that the Fund
may enter into repurchase agreements with respect to 10% of the value of its net
assets; (iv) invest 25% or more of its total assets in a single industry except
that this restriction shall not apply to U.S. Government securities, or (v)
purchase the securities of other investment companies, provided that the Fund
may make such a purchase as part of a merger, consolidation, or acquisition of
assets.
If any percentage restriction described above is adhered to at the time of
investment, a subsequent increase or decrease in the percentage resulting from a
change in the value of the Fund's assets will not constitute a violation of the
restriction. Additional fundamental policies adopted by the Fund are described
in the Statement of Additional Information.
RISK FACTORS AND SUITABILITY
The Fund is not intended to provide an investment program meeting all of
the requirements of an investor. The companies in which the Fund invests
generally reinvest their earnings, and dividend income should not be expected.
Additionally, notwithstanding the Fund's ability to diversify and spread risk by
holding securities of a number of portfolio companies, shareholders should be
able and prepared to bear the risk of investment losses which may accompany the
investments contemplated by the Fund.
Although investments in small companies may present greater opportunities
for growth, they also involve greater risks than are customarily associated with
investments in established companies. The securities of smaller companies may be
subject to more volatile market movements than securities of larger, more
established companies. Smaller companies may have limited product lines, markets
or financial resources, and they may depend upon a limited or less experienced
management group. The securities of smaller companies may be traded only on the
over-the-counter market or on a regional securities exchange and may not be
traded daily or in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Fund of portfolio securities to
meet redemptions or otherwise may require the Fund to sell securities at a
discount from market prices, over a longer period of time or during periods when
disposition is not desirable.
<PAGE>
The Fund's investments in foreign securities and its utilization of
Strategic Transactions and short sales also involve special risks, as discussed
above in the correspondingly captioned sections.
CALCULATION OF PERFORMANCE DATA
From time to time the Fund may advertise its total return. Total return
figures are based on historical earnings and are not intended to indicate future
performance.
The "total return" of the Fund refers to the average annual compounded
rates of return over 1, 5 and 10 year periods that would equate an initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation assumes the reinvestment of all
dividends and distributions, includes all recurring fees that are charged to all
shareholder accounts and deducts all nonrecurring charges at the end of each
period. If the Fund has been operating less than 1, 5 or 10 years, the time
period during which the Fund has been operating is substituted.
DIVIDENDS AND DISTRIBUTIONS
Dividends from short-term and long-term capital gains, if any, after
reduction by capital losses, will be declared and distributed at least annually,
as will any dividends from net investment income. Dividends from net investment
income and capital gains distributions, if any, are automatically reinvested in
additional shares of the Fund unless the shareholder elects to receive them in
cash.
PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Fund, which offers
its shares to the public on a continuous basis. Shares are sold at the net asset
value per share next computed after the purchase order is received by the Fund.
Unless waived by the Fund, the minimum initial investment is $100,000.
Additional investments may be made in amounts of at least $10,000.
Orders for the purchase of Fund shares received by dealers by the close of
regular trading on the New York Stock Exchange on any business day and
transmitted to the Fund by the close of its business day (normally 4:00 p.m.,
New York City time) will be effected as of the close of regular trading on the
New York Stock Exchange on that day. Otherwise, orders will be effected at the
net asset value per share determined on the next business day. It is the
responsibility of dealers to transmit orders so that they will be received by
the Fund by the close of its business day. Shares of the Fund purchased through
dealers may be subject to transaction fees, no part of which will be received by
the Fund or the Adviser.
The Fund's net asset value per share is computed on each day on which the
New York Stock Exchange is open as of the close of regular trading (currently
4:00 p.m., New York City time). The net asset value per share is calculated by
<PAGE>
determining the value of all the Fund's assets, subtracting all liabilities and
dividing the result by the total number of shares outstanding. Portfolio
securities are valued at the last sales prices, on the valuation date, on the
exchange or national securities market on which they are primarily traded.
Securities not listed on an exchange or national securities market, or
securities for which there are no reported transactions, are valued at the last
quoted bid prices. Securities for which quotations are not readily available and
all other assets will be valued at fair value as determined in good faith by the
Adviser in accordance with procedures approved by the Trustees. Additional
information concerning the Fund's valuation policies is contained in the
Statement of Additional Information.
In the sole discretion of the Adviser, the Fund may accept securities
instead of cash for the purchase of shares of the Fund. The Adviser will
determine that any securities acquired in this manner are consistent with the
investment objective, policies and restrictions of the Fund. The securities will
be valued in the manner stated above. The purchase of Fund shares for securities
instead of cash may cause an investor who contributes them to realize a taxable
gain or loss with respect to the securities transferred to the Fund.
The Trust reserves the right in its sole discretion (i) to suspend the
offering of the Fund's shares, (ii) to reject purchase orders when in the best
interest of the Fund and (iii) to modify or eliminate the minimum initial
investment in Fund shares.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed by any of the methods described below at
the net asset value per share next determined after receipt of a redemption
request in proper form. Redemptions will not be processed until a completed
Share Purchase Application and payment for the shares to be redeemed have been
received.
Written Redemption
Shares of the Fund may be redeemed by written order to Standish Small
Capitalization Equity Fund, One Financial Center, Boston, Massachusetts 02111. A
written redemption request must (a) state the number of shares or the dollar
amount to be redeemed, (b) identify the shareholder's account number and (c) be
signed by each registered owner exactly as the shares are registered. Signature
guarantees, when required, must be obtained from any one of the following
institutions, provided that such institution meets credit standards established
by the Fund's Transfer Agent: (i) a bank; (ii) a securities broker or dealer,
including a government or municipal securities broker or dealer, that is a
member of a clearing corporation or has net capital of at least $100,000; (iii)
a credit union having authority to issue signature guarantees; (iv) a savings
and loan association, a building and loan association, a cooperative bank, or a
federal savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency. Additional supporting
documents may be required in the case of estates, trusts, corporations,
partnerships and other shareholders which are not individuals. Redemption
proceeds will normally be paid by check mailed within seven days of receipt of a
written redemption request in proper form. If shares to be redeemed were
recently purchased by check, the Fund may delay transmittal of redemption
proceeds until such time as it has assured itself that good funds have been
collected for the purchase of such shares. This may take up to fifteen (15)
days.
<PAGE>
Telephonic Redemption
Shareholders who complete the telephonic redemption portion of the Fund's
account application may redeem shares by calling (800) 221-4795. The telephonic
redemption privilege is not available to shareholders automatically; they must
first elect the privilege. Redemption proceeds will be mailed or wired in
accordance with the shareholder's instruction on the account application to a
pre-designated account. Wire charges, if any, will be deducted from redemption
proceeds. By maintaining an account that is eligible for redemption by
telephone, the shareholder authorizes the Adviser, the Trust and the Fund's
custodian to act upon instructions of any person to redeem shares from the
shareholder's account. Redemption proceeds will be sent only by check payable to
the shareholder of record at the address of record, unless the shareholder has
indicated, in the initial application for the purchase of shares, a commercial
bank to which redemption proceeds may be sent by wire. These instructions may be
changed subsequently only in writing, accompanied by a signature guarantee, and
additional documentation in the case of shares held by a corporation or other
entity or by a fiduciary such as a trustee or executor.
By maintaining a telephonic redemption account, the shareholder
acknowledges that, as long as the Fund employs reasonable procedures to confirm
that telephonic instructions are genuine, and follows telephonic instructions
that it reasonably believes to be genuine, neither the Adviser, nor the Trust,
nor the Fund's custodian, nor their respective officers or employees, will be
liable for any loss, expense or cost arising out of any request for a telephonic
redemption, even if such transaction results from any fraudulent or unauthorized
instructions. Depending upon the circumstances, the Fund intends to employ
personal identification or written confirmation of transactions procedures, and
if it does not, the Fund may be liable for any losses due to unauthorized or
fraudulent instructions. Redemption proceeds will normally be paid promptly
after receipt of telephonic instructions, but no later than seven days
thereafter, except as described above. Shareholders may experience delays in
exercising telephone redemption privileges during periods of abnormal market
activity. Accordingly, during periods of volatile economic and market
conditions, shareholders may wish to consider transmitting redemption requests
in writing.
Repurchase Order
In addition to written redemption of Fund shares, the Fund may accept wire
or telephone orders from brokers or dealers for the repurchase of Fund shares,
or from the Adviser with respect to accounts over which it has investment
discretion. The repurchase price is the net asset value per share next
determined after receipt of an order by a broker or dealer, which is obligated
to transmit the order to the Fund prior to the close of the Fund's business day
<PAGE>
(normally 4:00 p.m.). Brokers or dealers may charge for their services in
connection with a repurchase of Fund shares, but the Fund imposes no charge for
share repurchases.
* * * *
The proceeds paid upon redemption or repurchase may be more or less than
the cost of the shares, depending upon the market value of the Fund's portfolio
investments at the time of redemption or repurchase. The Fund intends to pay
cash for all shares redeemed, but under certain conditions, the Fund may make
payments wholly or partially in portfolio securities.
Because of the cost of maintaining shareholder accounts, the Fund may
redeem, at net asset value, the shares in any account which has a value of less
than $25,000 as a result of redemptions or transfers. Before doing so, the Fund
will notify the shareholder that the value of the shares in the account is less
than the specified minimum and will allow the shareholder 30 days to make an
additional investment in an amount which will increase the value of the account
to at least $25,000.
MANAGEMENT
Trustees
The Fund is a separate investment series of Standish, Ayer & Wood
Investment Trust, a Massachusetts business trust. Under the terms of the
Agreement and Declaration of Trust establishing the Trust, which is governed by
the laws of The Commonwealth of Massachusetts, the Trustees of the Trust are
ultimately responsible for the management of its business and affairs.
Investment Adviser
Standish, Ayer & Wood, Inc. (the Advisers), One Financial Center, Boston,
Massachusetts 02111, serves as investment adviser to the Fund pursuant to an
investment advisory agreement with the Trust and manages the Fund's investments
and affairs subject to the supervision of the Trustees of the Trust.
The Adviser is a Massachusetts corporation incorporated in 1933 and is a
registered investment adviser under the Investment Advisers Act of 1940. The
Adviser provides fully discretionary management services and counseling and
advisory services to a broad range of clients throughout the United States. The
Adviser also provides investment advisory services to certain other funds of the
Trust, acting as sole investment adviser to Standish Equity Fund, Standish Fixed
Income Fund, Standish Intermediate Tax Exempt Bond Fund, Standish Massachusetts
Intermediate Tax Exempt Bond Fund and Standish Securitized Fund, which had net
assets of $94 million, $1.8 billion, $28 million, $31 million and $54 million,
respectively, at March 31, 1995, and as co-investment adviser to Consolidated
Standish Short-Term Asset Reserve Fund, which had net assets of $258 million at
March 31, 1995. An affiliate of the Adviser, Standish International Management
Company, L.P., acts as investment adviser to Standish International Equity Fund,
Standish International Fixed Income Fund, and Standish Global Fixed Income Fund,
which had net assets of $89 million, $1.1 billion and $135 million at March 31,
1995. Corporate pension funds are the largest asset under active management by
the Adviser. The Adviser's clients also include charitable and educational
endowment funds, financial institutions, trusts and individual investors. As of
March 31, 1995, the Adviser managed approximately $24 billion of assets.
<PAGE>
The Fund's portfolio manager is Nicholas S. Battelle, who has been
primarily responsible for the day-to-day management of the Fund's portfolio
since its inception as a registered investment company in August, 1990. During
the past five years, Mr. Battelle has served as a Director of the Adviser.
Subject to the supervision and direction of the Trustees of the Trust, the
Adviser manages the Fund's portfolio in accordance with its stated investment
objective and policies, recommends investment decisions for the Fund, places
orders to purchase and sell securities on behalf of the Fund, and permits the
Fund to use the name "Standish." The Adviser provides all necessary office space
and services of executive personnel for administering the affairs of the Fund.
For these services, the Fund pays a fee monthly at the annual rate of 0.60% of
average daily net asset value. In addition, the Adviser has agreed to limit the
Fund's aggregate annual operating expenses (excluding brokerage commissions,
taxes and extraordinary expenses) to the lower of (a) 1.5% of the Fund's average
daily net assets, or (b) the permissible limit applicable in any state in which
shares of the Fund are then qualified for sale. If the expense limit is
exceeded, the compensation due the Adviser for such fiscal year shall be
proportionately reduced by the amount of such excess by a reduction or refund
thereof at the time such compensation is payable after the end of each calendar
month, subject to readjustment during the fiscal year. For the fiscal year ended
December 31, 1994, the Fund paid advisory fees in the amount of $557,359 which
represented 0.60% of the Fund's average net assets.
Expenses
The Fund bears all expenses of its operations other than those incurred by
the Adviser under the investment advisory agreement. Among other expenses, the
Fund will pay investment advisory fees; bookkeeping, share pricing and
shareholder servicing fees and expenses; custodian fees and expenses; legal and
auditing fees; expenses of prospectuses, statements of additional information
and shareholder reports which are furnished to existing shareholders;
registration and reporting fees and expenses; and Trustees' fees and expenses.
The Adviser bears, without subsequent reimbursement, the distribution expenses
attributable to the offering and sale of Fund shares. Expenses of the Trust
which relate to more than one series are allocated among such series by the
Adviser in an equitable manner, primarily on the basis of relative net asset
values. For the fiscal year ended December 31, 1994, expenses borne by the Fund
amounted to $735,426, which represented 0.79% of the Fund's average net assets.
<PAGE>
Portfolio Transactions
Subject to the supervision of the Trustees of the Trust, the Adviser
selects the brokers and dealers that execute orders to purchase and sell
portfolio securities for the Fund. The Adviser will seek to obtain the best
available price and most favorable execution with respect to all transactions
for the Fund.
Subject to the consideration of best price and execution and to applicable
regulations, the receipt of research and sales of Fund shares may also be
considered factors in the selection of brokers that execute orders to purchase
and sell portfolio securities for the Fund.
FEDERAL INCOME TAXES
The Fund presently qualifies and intends to continue to qualify for
taxation as a "regulated investment company" under the Code. If it qualifies for
treatment as a regulated investment company, the Fund will not be subject to
federal income tax on income (including capital gains) distributed to
shareholders in the form of dividends or capital gain distributions in
accordance with certain timing requirements of the Code.
The Fund will be subject to nondeductible 4% excise tax under the Code to
the extent that it fails to meet certain distribution requirements with respect
to each calendar year. Certain distributions made in order to satisfy the Code's
distribution requirements may be declared by the Fund during October, November
or December of the year but paid during the following January. Such
distributions will be taxable to taxable shareholders as if received on December
31 of the year the distributions are declared, rather than the year in which the
distributions are received.
Shareholders which are taxable entities or persons will be subject to
federal income tax on dividends and capital gain distributions made by the Fund.
Dividends paid by the Fund from net investment income, certain net foreign
currency gains, and any excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income, whether
received in cash or Fund shares. The portion of such dividends attributable to
qualifying dividends the Fund receives, if any, may qualify for the 70%
corporate dividends received deduction, subject to certain holding period
requirements and debt financing limitations under the Code. Dividends paid by
the Fund from net capital gain (the excess of net long-term capital gain over
net short-term capital loss), called "capital gain distributions," will be
taxable to shareholders as long-term capital gains, whether received in cash or
Fund shares and without regard to how long the shareholder has held shares of
the Fund. Capital gain distributions do not qualify for the corporate dividends
received deduction. Dividends and capital gain distributions may also be subject
to state and local or foreign taxes.
The Fund anticipates that it may be subject to foreign withholding taxes or
other foreign taxes on income (possibly including capital gains) on certain
foreign investments (if any), which will reduce the yield on those investments.
Such taxes may be reduced or eliminated pursuant to an income tax treaty in some
cases. The Fund does not expect to qualify to pass such foreign taxes and any
associated tax deductions or credits through to its shareholders.
<PAGE>
Redemptions and repurchases of shares are taxable events on which a
shareholder may recognize a gain or loss. Special rules recharacterize as
long-term any losses on the sale or exchange of Fund shares with a tax holding
period of six months or less, to the extent the shareholder received a capital
gain distribution with respect to such shares.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on dividends, capital gain
distributions, and the proceeds of redemptions or repurchases of shares, if they
fail to furnish the Fund with their correct taxpayer identification number and
certain certifications or if they are otherwise subject to backup withholding.
Individuals, corporations and other shareholders that are not U.S. persons under
the Code are subject to different tax rules and may be subject to nonresident
alien withholding at the rate of 30% (or a lower rate provided by an applicable
tax treaty) on amounts treated as ordinary dividends from the Fund and, unless a
current IRS Form W-8 or an acceptable substitute is furnished to the Fund, to
backup withholding on certain payments from the Fund.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent, if any, the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied.
After the close of each calendar year, the Fund will send a notice to
shareholders that provides information about the federal tax status of
distributions to shareholders for such calendar year.
THE FUND AND ITS SHARES
The Fund is a separate investment series of Standish, Ayer & Wood
Investment Trust, an unincorporated business trust organized under the laws of
The Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust dated August 13, 1986. Under the Agreement and Declaration of Trust, the
Trustees have authority to issue an unlimited number of shares of beneficial
interest, par value $.01 per share, of the Fund. Each share of the Fund is
entitled to one vote. All Fund shares have equal rights with regard to voting,
redemption, dividends, distributions and liquidation, and shareholders of the
Fund have the right to vote as a separate class with respect to certain matters
under the Investment Company Act of 1940 and the Agreement and Declaration of
Trust. Shares of the Fund do not have cumulative voting rights. Fractional
shares have proportional voting rights and participate in any distributions and
dividends. When issued, each Fund share will be fully paid and nonassessable.
Shareholders of the Fund do not have preemptive or conversion rights.
Certificates representing shares of the Fund will not be issued. On August 31,
1990 the Fund became the successor to Standish Small Equity Fund Limited
Partnership (the Partnership), a limited partnership organized and existing
under the Uniform Limited Partnership Act of The Commonwealth of Massachusetts,
pursuant to an Agreement and Plan of Reorganization.
<PAGE>
The Trust has established thirteen series and may establish additional
series at any time. Each series is a separate taxpayer, eligible to qualify as a
separate regulated investment company for federal income tax purposes. The
calculation of the net asset value of a series and the determination of the tax
consequences of investing in a series will be determined separately for each
series.
The Trust is not required to hold annual meetings of shareholders. Special
meetings of shareholders may be called from time to time for purposes such as
electing or removing Trustees, changing a fundamental policy, or approving an
investment advisory agreement.
If less than two-thirds of the Trustees holding office have been elected by
shareholders, a meeting of shareholders of the Trust will be called to elect
Trustees. Under the Agreement and Declaration of Trust and the Investment
Company Act of 1940, the record holders of not less than two-thirds of the
outstanding shares of the Trust may remove a Trustee by votes cast in person or
by proxy at a meeting called for the purpose or by a written declaration filed
with each of the Trust's custodian banks. Except as described above, the
Trustees will continue to hold office and may appoint successor Trustees.
Whenever ten or more shareholders of the Trust who have been such for at least
six months, and who hold in the aggregate shares having a net asset value of at
least $25,000 or at least 1% of the outstanding shares, whichever is less, apply
to the Trustees in writing stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting, and such
application is accompanied by a form of communication and request which they
wish to transmit, the Trustees shall within five (5) business days after receipt
of such application either (1) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books of the Trust;
or (2) inform such applicants as to the approximate number of shareholders of
record and the approximate cost of mailing to them the proposed communication or
form of request.
Inquiries concerning the Fund should be made by contacting the Fund at the
Fund's address and telephone number listed on the cover of this Prospectus.
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT
Investors Bank & Trust Company, 24 Federal Street, Boston, Massachusetts
02110, serves as the Fund's transfer and dividend-disbursing agent and as
custodian of all cash and securities of the Fund.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, serves as independent accountants for the Trust and will audit the Fund's
financial statements annually.
LEGAL COUNSEL
Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust and to the Adviser.
- --------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or in the Statement of Additional Information, and, if given or made,
such other information or representations must not be relied upon as having been
authorized by the Trust. This Prospectus does not constitute an offering in any
jurisdiction in which such offering may not be lawfully made.
<PAGE>
TAX CERTIFICATION INSTRUCTIONS
Federal law requires that taxable distributions and proceeds of redemptions
and exchanges be reported to the IRS and that 31% be withheld if you fail to
provide your correct Taxpayer Identification Number (TIN) and the certifications
contained in the Account Purchase Application (Application) or you are otherwise
subject to backup withholding. Amounts withheld and forwarded to the IRS can be
credited as a payment of tax when completing your Federal income tax return.
For most individual taxpayers, the TIN is the social security number.
Special rules apply for certain accounts. For example, for an account
established under the Uniform Gift to Minors Act, the TIN of the minor should be
furnished. If you do not have a TIN, you may apply for one using forms available
at local offices of the Social Security Administration or the IRS, and you
should write "Applied For" in the space for a TIN on the Application.
Recipients exempt from backup withholding, including corporations and
certain other entities, should provide their TIN and underline "exempt" in
section 2(a) of the TIN section of the Application to avoid possible erroneous
withholding. Non-resident aliens and foreign entities may be subject to
withholding of up to 30% on certain distributions received from the Fund and
must provide certain certifications on IRS Form W-8 to avoid backup withholding
with respect to other payments. For further information, see Code Sections 1441,
1442 and 3406 and/or consult your tax adviser.
<PAGE>
