SUPPLEMENT Dated December 21, 1995
TO THE PROSPECTUS OF
STANDISH FIXED INCOME 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:
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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 $5,000.
---------------------
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.
2
<PAGE>
Prospectus dated May 1, 1995
PROSPECTUS
STANDISH FIXED INCOME FUND
One Financial Center
Boston, Massachusetts 02111
(800) 221-4795
Standish Fixed Income 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 is designed primarily, but not exclusively, for tax-exempt
institutional investors, such as pension and profit-sharing plans, foundations
and endowments. The Fund's investment objective is primarily to achieve a high
level of current income, consistent with preserving principal and liquidity, and
secondarily to seek capital appreciation when market factors such as declining
interest rates indicate that capital appreciation may be available without
significant risk to principal. The Fund will seek to achieve its investment
objective primarily through investing in a diversified portfolio of
investment-grade fixed-income securities with an average dollar-weighted
maturity of five to thirteen years. However, the Fund may invest up to 15% of
its net assets in securities which are classified by the rating agencies in the
highest category of non-investment grade securities, carry a high degree of risk
and are considered speculative by the rating agencies. 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 $5,000.
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 (the "SEC") 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 8
Calculation of Performance Data 9
Dividends and Distributions 9
Purchase of Shares 9
Redemption of Shares 9
Management 10
Federal Income Taxes 11
The Fund and Its Shares 12
Custodian, Transfer Agent and Dividend-Disbursing Agent 13
Independent Accountants 13
Legal Counsel 13
Appendix A 14
Tax Certification Instructions 15
1
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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
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees 0.32%
12b-1 Fees None
Other Expenses 0.06%
Total Fund Operating Expenses 0.38%
<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: $4 $12 $21 $48
You would pay the following expenses on the same investment,
assuming no redemption: $4 $12 $21 $48
</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 Adviser"
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 on the Fund's expenses for the fiscal year ended December 31, 1994.
THE INFORMATION IN THE TABLE AND HYPOTHETICAL EXAMPLE ABOVE 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%.
2
<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.
Year Ended December 31,
----------------------------------------------------------------
1994 1993 1992* 1991*
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value - beginning of period $21.25 $20.55 $20.96 $19.56
Income from investment operations:
Net investment income $1.25 $1.50 $1.59 $1.68
Net realized and unrealized gain (loss)
on investments (2.29) 1.45 (0.18) 1.66
---------- ---------- -------- --------
Total from investment operations ($1.04) $2.95 $1.41 $3.34
---------- ---------- -------- --------
Less distributions declared to shareholders:
From net investment income ($1.10) ($1.51) ($1.52) ($1.49)
In excess of net investment income - (0.04) - -
From realized gain (0.04) (0.70) (0.30) (0.45)
Tax return of capital (0.16) - - -
---------- ---------- -------- --------
Total distributions declared to shareholders ($1.30) ($2.25) ($1.82) ($1.94)
---------- ---------- -------- --------
Net asset value - end of period $18.91 $21.25 $20.55 $20.96
========== ========== ======== ========
Total return -4.86% 14.64% 6.88% 17.65%
Ratios (to average net assets)/Supplemental Da
Expenses 0.38% 0.40% 0.41% 0.46%
Net investment income 7.25% 7.07% 7.61% 8.28%
Portfolio turnover 122% 150% 217% 176%
Net assets at end of period (000 omitted) $1,642,933 $1,307,099 $919,909 $631,457
- ------------------------------------------------------------------------------------------------------------------------------------
(table continued)
3
<PAGE>
Year Ended December 31,
----------------------------------------------------------------
1990* 1989* 1988* 1987*+
----------------------------------------------------------------
Net asset value - beginning of period $19.54 $18.84 $18.99 $20.00
Income from investment operations:
Net investment income $1.76 $1.81 $1.72 $1.17
Net realized and unrealized gain (loss)
on investments (0.05) 0.69 (0.13) (1.07)
-------- -------- -------- --------
Total from investment operations $1.71 $2.50 $1.59 $0.10
-------- -------- -------- --------
Less distributions declared to shareholders:
From net investment income ($1.69) ($1.80) ($1.74) ($1.11)
In excess of net investment income - - - -
From realized gain - - - -
Tax return of capital - - - -
-------- -------- -------- --------
Total distributions declared to shareholders ($1.69) ($1.80) ($1.74) ($1.11)
-------- -------- -------- --------
Net asset value - end of period $19.56 $19.54 $18.84 $18.99
======== ======== ======== ========
Total return 9.23% 13.75% 8.53% 0.83%t
Ratios (to average net assets)/Supplemental Da ta:
Expenses 0.49% 0.53% 0.54% 0.59%t
Net investment income 9.07% 9.26% 8.94% 8.16%t
Portfolio turnover 107% 106% 119% 73%
Net assets at end of period (000 omitted) $397,267 $264,874 $198,836 $156,834
t Computed on an annualized basis.
* Audited by other auditors.
+ For the period from March 27, 1987 (start of business) to December 31, 1987.
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>
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective
The Fund's investment objective is primarily to achieve a high level of
current income, consistent with conserving principal and liquidity, and
secondarily to seek capital appreciation when changes in interest rates or other
economic conditions indicate that capital appreciation may be available without
significant risk to principal. Such capital appreciation may result from an
improvement in the credit standing of an issuer whose securities are held by the
Fund or from a decline in interest rates or from a combination of both factors.
The Fund will seek to achieve its investment objective primarily through
investing in a diversified portfolio of fixed-income securities, generally of
investment grade, with an average dollar-weighted maturity of five to thirteen
years. 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
shareholders. Investment policies which are not fundamental policies may be
changed by the Trustees of the Trust without shareholder approval. The Fund's
investment policies are described further in the Statement of Additional
Information.
Investment Policies
The Fund may invest in a broad range of fixed-income securities, including
bonds, notes, mortgage-backed and asset-backed securities, preferred stock and
convertible debt securities. The Fund may purchase securities that pay interest
on a fixed, variable, floating (including inverse floating), contingent, in-kind
or deferred basis. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in such securities. Because the Fund is seeking a
high level of current income, the possibility that it will exercise the
conversion options of any high yield convertible debt securities it acquires is
remote. Investors should be aware that investing in mortgage-backed securities
involves risks of fluctuation in yields and market prices and of early
prepayments on the underlying mortgages.
The Fund will normally invest in U.S. dollar denominated securities, but
may invest up to 20% of its total assets in securities denominated in foreign
currencies; provided, however, that at any particular time, no more than 10% of
the Fund's total assets will be invested in foreign securities which are not
subject to currency hedging transactions back into U.S. dollars. See "Risk
Factors and Suitability" for a description of the risks associated with
investments in foreign securities.
Although the Fund is intended primarily for tax-exempt institutional
investors and will be managed without regard to potential tax considerations,
the Fund may invest up to 10% of its total assets in tax-exempt securities, such
as state and municipal bonds, if the Adviser believes they will provide
competitive returns. The Fund's distributions of the interest it earns from such
securities will not be tax-exempt. The Fund may adopt a temporary defensive
position during adverse market conditions by investing without limit in high
quality money market instruments, including short-term U.S. Government
securities, negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances, floating-rate notes and repurchase agreements.
5
<PAGE>
The Fund will not have more than 25% of the current value of its total
assets invested in any single industry, provided that this restriction shall not
apply to U.S. Government securities, including mortgage pass-through securities
(GNMAs). Rather, the Fund will invest in a broad range of bond market sectors,
especially those deemed by the Adviser to be undervalued and consequently
underpriced and offering higher yields relative to the market as a whole. Such
sectors include mortgage pass-throughs, electric, telephone and gas utilities,
industrials, bank holding companies, Eurodollar bonds and original issue
discount bonds (i.e., bonds which are offered by an issuer at a discount from
their stated par value and which, because of uncertainty about their quality,
are potentially more volatile). In order to achieve its investment objective,
the Fund will seek to add value by selecting undervalued investments, thus
taking advantage of lower prices and higher yields, rather than by varying the
maturities of its portfolio investments to reflect interest rate forecasts.
Investments in bonds with maturities of five to fifteen years will be
emphasized, and it is expected that the average dollar-weighted maturity of the
Fund's portfolio will vary from five to thirteen years.
Ratings
The Fund will generally invest in investment grade fixed-income securities,
i.e., securities which, at the date of investment, are rated within the four
highest grades as determined by Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa, A or Baa) or by Standard & Poor's Ratings Group ("Standard & Poor's")
(AAA, AA, A or BBB) or their respective equivalent ratings or, if not rated,
judged by the Adviser to be of equivalent credit quality to securities so rated.
Securities rated Baa by Moody's or BBB by Standard & Poor's and unrated
securities of equivalent credit quality are considered medium grade obligations
with speculative characteristics. Adverse changes in economic conditions or
other circumstances are more likely to weaken the issuer's capacity to pay
interest and repay principal on these securities than is the case for issuers of
higher rated securities.
The Fund may invest up to 15% of its net assets in securities rated either
Ba by Moody's or BB by Standard & Poor's or, if not rated, are judged by the
Adviser to be of equivalent credit quality to securities so rated ("BB Rated
Securities"). Securities rated Ba by Moody's or BB by Standard & Poor's, are
classified in the highest category of non-investment grade securities. Such
securities may be considered to be high-yield securities ("junk bonds"), carry a
high degree of risk and are considered speculative by the major credit rating
agencies. The Fund intends to avoid what it perceives to be the most speculative
areas of the BB Rated Securities universe. See "Risk Factors and Suitability"
for a description of the risks associated with investments in BB Rated
Securities.
It is anticipated that the average dollar-weighted rated credit quality of
the securities in the Fund's portfolio will be Aa or AA according to Moody's and
Standard & Poor's ratings, respectively, or comparable credit quality as
determined by the Adviser. In the case of a security that is rated differently
6
<PAGE>
by the two rating services, the higher rating is used in computing the Fund's
average dollar-weighted credit quality and in connection with the Fund's policy
regarding BB Rated Securities. In the event that the rating on a security held
in the Fund's portfolio is downgraded 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. In
determining whether securities are of equivalent credit quality, the Adviser may
take into account, but will not rely entirely on, ratings assigned by foreign
rating agencies. In the case of unrated sovereign, subnational and sovereign
related debt of foreign countries, the Adviser may take into account, but will
not rely entirely on, the ratings assigned to the issuers of such securities.
Appendix A sets forth excerpts from the descriptions of ratings of corporate
debt securities and sovereign, subnational and sovereign related debt of foreign
countries.
Mortgage-Backed Pass-Through Securities
Mortgage-backed "pass-through securities" are subject to regular payments
of principal and early prepayments of principal, which will affect the Fund's
current and total returns. While it is not possible to predict accurately the
life of a particular issue of mortgage-backed "pass-through securities" held by
the Fund, the actual life of any security is likely to be substantially less
than the original average maturity of the mortgage pool underlying the security
because unscheduled early prepayments of principal on the security owned by the
Fund will result from the prepayment, refinancing or foreclosure of the
underlying mortgage loans in the mortgage pool. For example, mortgagors may
speed up the rate at which they prepay their mortgages while interest rates
decline sufficiently to encourage refinancing. The Fund, when the monthly
payments (which may include unscheduled prepayments) on a security are
passed-through to it, may be able to reinvest them only at a lower rate of
interest. Because of the regular scheduled payments of principal and the early
unscheduled prepayments of principal, the mortgage-backed "pass-through
security" is less effective than other types of obligations as a means of
locking in attractive long-term interest rates. As a result, this type of
security may have less potential for capital appreciation during periods of
declining interest rates than other U.S. Government securities of comparable
maturities, although many issues of mortgage-backed "pass-through securities"
may have a comparable risk of decline in market value during periods of rising
interest rates. Although a security purchased at a premium above its par value
may carry a higher stated rate of return, both a scheduled payment of principal,
which will be made at par, and an unscheduled prepayment of principal generally
will decrease current and total returns and will accelerate the recognition of
income which, when distributed to shareholders, will be taxable as ordinary
income.
Collateralized Mortgage Obligations (CMOs)
The issuer of a CMO effectively transforms a mortgage pool into obligations
comprised of several different maturities, thus creating mortgage securities
that appeal to short and intermediate term investors as well as the more
traditional long-term mortgage investor. CMOs are debt securities issued by
Federal Home Loan Mortgage Corporation, Federal National Mortgage Corporation
and by non-governmental financial institutions and other mortgage lenders and
are generally fully collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series which have different
maturities and are generally retired in sequence. CMOs are designed to be
retired as the underlying mortgage loans in the mortgage pool are repaid. In the
event of sufficient early prepayments on such mortgages, the class or series of
CMO first to mature generally will be retired prior to its maturity. Thus the
early retirement of a particular class or series of a CMO held by the Fund would
affect the Fund's current and total returns in the manner indicated above.
7
<PAGE>
In making investments in CMOs, the Adviser will take into account the
following considerations: the total return on CMOs will vary with interest
rates, which cannot be predicted; the maturity of the CMOs is variable and is
not known at the time of purchase; prepayments on the CMOs will depend upon
prevailing interest rates and the CMOs may have a shorter life than expected;
and, because CMOs are relatively new securities and have not been in existence
through all market cycles, the risks of investing in CMOs are not fully known.
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 or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities, 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 and fixed-income 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
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, to manage the effective maturity or duration of the Fund's portfolio,
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
8
<PAGE>
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 anticipates that the
Belgian franc will appreciate relative to the French franc, the Fund may take a
long forward currency position in the Belgian franc and a short foreign currency
position in the French franc. Under such circumstances, any unrealized loss in
the Belgian franc position would be netted against any unrealized gain in the
French franc 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
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
9
<PAGE>
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.
When-Issued Securities and "Delayed Delivery" Securities
The Fund may commit up to 15% of its net assets to purchase securities on a
"when-issued" or "delayed delivery" basis. Although the Fund would generally
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities, the Fund may dispose of a
when-issued or delayed delivery security prior to settlement if the Adviser
deems it appropriate to do so. The payment obligation and the interest rate on
these securities will be fixed at the time the Fund enters into the commitment,
but no income will accrue to the Fund until they are delivered and paid for.
Unless the Fund has entered into an offsetting agreement to sell the securities,
cash or liquid, high grade debt securities equal to the amount of the Fund's
commitment will be segregated and maintained with the custodian for the Fund to
secure the Fund's obligation and to ensure that it is not leveraged. The market
value of the securities when they are delivered may be less than the amount paid
by the Fund.
Repurchase Agreements
The Fund may invest up to 5% of its net assets in repurchase agreements
under normal circumstances. Repurchase agreements acquired by the Fund will
always be fully collateralized as to principal and interest by money market
instruments and will be entered into only with commercial banks, brokers and
dealers considered creditworthy by the Adviser. Investing in repurchase
agreements involves the risk of default by or the insolvency of the other party
to the repurchase agreement.
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.
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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.
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
a 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.
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Forward Roll Transactions
In order to enhance current income, the Fund may enter into forward roll
transactions with respect to mortgage-backed securities to the extent of 10% of
its net assets. In a forward roll transaction, the Fund sells a mortgage-backed
security to a financial institution, such as a bank or broker-dealer, and
simultaneously agrees to repurchase a similar security from the institution at a
later date at an agreed-upon price. The mortgage-backed securities that are
repurchased will bear the same interest rate as those sold, but generally will
be collateralized by different pools of mortgages with different prepayment
histories than those sold. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, such as repurchase agreements or other short-term securities, and
the income from these investments, together with any additional fee income
received on the sale and the amount gained by repurchasing the securities in the
future at a lower purchase price, will generate income and gain for the Fund
which is intended to exceed the yield on the securities sold. Forward roll
transactions involve the risk that the market value of the securities sold by
the Fund may decline below the repurchase price of those securities. At the time
the Fund enters into a forward roll transaction, it will place in a segregated
custodial account cash or liquid, high quality debt obligations having a value
equal to the repurchase price (including accrued interest) and will subsequently
monitor the account to insure that the equivalent value is maintained.
Illiquid and Restricted Securities
The Fund may not invest more than 15% of its net assets in illiquid
investments and securities that are subject to restrictions on resale (i.e.,
private placements) under the Securities Act of 1933, including securities
eligible for resale in reliance on Rule 144A under the 1933 Act ("restricted
securities"). Illiquid investments include securities that are not readily
marketable, repurchase agreements maturing in more than seven days, time
deposits with a notice or demand period of more than seven days, certain
over-the-counter options, and restricted securities, unless it is determined,
based upon continuing review of the trading markets for the specific restricted
security, that such restricted security is eligible for resale under Rule 144A
and is liquid. The Board of Trustees has adopted guidelines and delegated to the
Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Board of Trustees, however, retains oversight
focusing on factors such as valuation, liquidity and availability of information
and is ultimately responsible for such determinations. Investing in restricted
securities eligible for resale pursuant to Rule 144A could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities. The purchase price and subsequent valuation of restricted
and illiquid securities normally reflect a discount, which may be significant,
from the market price of comparable securities for which a liquid market exists.
Portfolio Turnover
Portfolio turnover is not expected to exceed 200% on an annual basis. A
rate of turnover of 100% would occur if the value of the lesser of purchases and
sales of portfolio securities for a particular year equaled the average monthly
value of portfolio securities owned during the year (excluding short-term
securities). A high rate of portfolio turnover (100% or more) involves a
correspondingly greater amount of brokerage commissions and other 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 net short-term capital
gains, distributions from 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.
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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 or securities or pledge or mortgage its assets, except
that the Fund may (a) borrow money from banks as a temporary measure for
extraordinary or emergency purposes (but not for investment purposes) in an
amount up to 15% of the current value of its total assets, (b) enter into
forward roll transactions, and (c) 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
bank borrowings exceed 5% of the current value of its total assets; or (iii)
lend portfolio securities, except that the Fund may enter into repurchase
agreements with respect to 5% of the value of its net 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 designed primarily for tax-exempt institutional investors such
as pension or profit-sharing plans, foundations and endowments which seek to
maximize total return and whose beneficiaries are in a position to benefit from
the tax-deferred reinvestment of the quarterly income dividends and any capital
gains distributions paid by the Fund. The Fund may also be suitable for other
investors, depending upon their investment goals and financial and tax
positions. Although the price of the Fund's shares may fluctuate more than
short-term money market instruments, the Fund will seek to keep such volatility
below that of longer-term debt securities by limiting the average term of
securities in its portfolio.
Yields on debt securities depend on a variety of factors, such as general
conditions in the money and bond markets, and the size, maturity and rating of a
particular issue. Debt securities with longer maturities tend to produce higher
yields and are generally subject to greater potential capital appreciation and
depreciation. The market prices of debt securities usually vary depending upon
available yields, rising when interest rates decline and declining when interest
rates rise.
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Foreign Securities
Investing in securities of foreign issuers and securities denominated in
foreign currencies or utilizing foreign currency transactions involves 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 unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage), 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 those denominated in U.S.
dollars, will incur transaction costs in converting currencies. Also, brokerage
costs in purchasing and selling corporate securities in foreign securities
markets are sometimes higher than such costs in comparable transactions in
domestic securities markets, and foreign custodial costs relating to the Fund's
portfolio securities are higher than domestic custodial costs.
BB Rated Securities
Investing in BB Rated Securities involves a higher degree of credit risk
(the risk that the issuer will not make interest or principal payments when due)
than investing in higher rated securities. In the event of an unanticipated
default, the Fund will experience a reduction in its income, and could expect a
decline in the market value of the securities so affected. More careful analysis
of the financial condition of each issuer of BB Rated Securities is therefore
necessary. During an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Periods of economic or political uncertainty and change can be
expected to result in volatility in prices of these securities.
BB Rated Securities generally offer a higher yield, but may be subject to a
higher risk of default in interest or principal payments than higher rated
securities. The market prices of BB Rated Securities are generally less
sensitive to interest rate changes than higher rated securities, but are
generally more sensitive to adverse economic or political changes or, in the
case of corporate issuers, to individual company developments. BB Rated
Securities also may have less liquid markets than higher rated securities, and
their liquidity, as well as their value, may be more severely affected by
adverse economic conditions. Adverse publicity and investor perceptions of the
market, as well as newly enacted or proposed legislation, may also have a
negative impact on the market for BB Rated Securities.
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For the fiscal year ended December 31, 1994, the Fund's investments, on
a dollar weighted basis, calculated at the end of each month, had the following
credit quality characteristics:
INVESTMENTS PERCENTAGE
U.S. Government Securities 31%
U.S. Government Agency Securities 14%
Bonds:
Aaa or AAA 13%
Aa or AA 5%
A or A 11%
Baa or BBB 12%
Ba or BB 14%
----
100%
CALCULATION OF PERFORMANCE DATA
From time to time the Fund may advertise its yield and total return. Both
yield and 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.
The "yield" of the Fund is computed by dividing the net investment income
per share earned during the period stated in the advertisement by the maximum
offering price per share on the last day of the period (using the average number
of shares entitled to receive dividends). For the purpose of determining net
investment income, the calculation includes among expenses of the Fund all
recurring fees that are charged to all shareholder accounts and any nonrecurring
charges for the period stated.
DIVIDENDS AND DISTRIBUTIONS
Dividends on shares of the Fund from net investment income will be declared
and distributed quarterly. Dividends from short-term and long-term capital
gains, if any, after reduction by capital losses, will be declared and
distributed at least annually. 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 $5,000.
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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 they will be received by the
Fund before 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 each day on which the New
York Stock Exchange is open as of the close of regular trading on the exchange
(currently 4:00 p.m., New York City time). The net asset value per share is
calculated by 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 sale prices, on the valuation day,
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 were no reported transactions, are valued at the last
quoted bid prices. Securities for which quotations are not readily available and
all other assets are valued at fair value as determined in good faith by the
Adviser in accordance with procedures approved by the Trustees. Money market
instruments with less than sixty days remaining to maturity when acquired by the
Fund are valued on an amortized cost basis unless the Trustees determine that
amortized cost does not represent fair value. If the Fund acquires a money
market 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.
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 shares of the Fund for
securities instead of cash may cause an investor who contributed 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.
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Written Redemption
Shares of the Fund may be redeemed by written order to Standish Fixed
Income Fund, One Financial Center, 26th Floor, 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. 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.
Telephonic Redemption
Shareholders who complete the telephonic redemption portion of the Fund's
account application may redeem shares by calling (800) 221-4795. Such 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.
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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 promptly prior to the close of the Fund's
business day (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 $50,000 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 $50,000.
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 "Adviser"), One Financial Center, Boston,
Massachusetts 02111, serves as investment adviser to the Fund pursuant to an
investment advisory agreement 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.
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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 Small Capitalization
Equity Fund, Standish Equity Fund, Standish Intermediate Tax Exempt Bond Fund,
Standish Massachusetts Intermediate Tax Exempt Bond Fund and Standish
Securitized Fund, which had net assets of $121 million, $94 million, $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. The Adviser is the
managing general partner of Standish International Management Company, L.P.
("SIMCO"), which is the 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,
respectively, 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.
The Fund's portfolio manager is Caleb F. Aldrich, who has been primarily
responsible for the day-to-day management of the Fund's portfolio since January
1, 1993. During the past five years, Mr. Aldrich has served as a Director (1992)
and Vice President of the Adviser.
Subject to the supervision and direction of the Trustees, the Adviser
manages the Fund's portfolio in accordance with its stated investment objectives
and policies, recommends investment decisions for the Fund, places orders to
purchase and sell securities on behalf of the Fund, administers the affairs of
the Fund and permits the Fund to use the name "Standish." The fee for the
Adviser's services was reduced effective September 13, 1989 from a monthly fee
at the annual rate of 0.40% of the Fund's average daily net asset value to a
monthly fee at the annual rate of 0.40% of the Fund's first $250,000,000 of
average daily net asset value and 0.35% of the average daily net asset value in
excess of $250,000,000. Effective April 17, 1991, the Adviser voluntarily
undertook to reduce the fee on average daily net assets in excess of
$500,000,000 to 0.30% of average daily net asset value calculated on a daily
basis. For the fiscal year ended December 31, 1994, advisory fees amounted to
.33% 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 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 and SIMCO 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
$5,664,511, which represented 0.38% of the Fund's average net assets.
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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 and dealers 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. Only a small portion, if any, of such dividends
may qualify for the 70% corporate dividends received deduction 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.
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<PAGE>
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.
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 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.
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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.
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 special 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.
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CUSTODIAN, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT
Investors Bank & Trust Company, 24 Federal Street, Boston, Massachusetts
02110, serves as the Fund's transfer agent 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.
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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.
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APPENDIX A
KEY TO MOODY'S CORPORATE BOND RATINGS AND FOR SOVEREIGN, SUBNATIONAL AND
SOVEREIGN RELATED ISSUES
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
STANDARD & POOR'S RATINGS DEFINITIONS
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
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BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB - Debt rated BB is regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
STANDARD & POOR'S CHARACTERISTICS OF
SOVEREIGN DEBT OF FOREIGN COUNTRIES
AAA -Stable, predictable governments with demonstrated track record of
responding flexibly to changing economic and political circumstances
Key players in the global trade and financial system:
-Prosperous and resilient economies, high per capita incomes
-Low fiscal deficits and government debt, low inflation
-Low external debt
AA -Stable, predictable governments with demonstrated track record of
responding to changing economic and political circumstances
-Tightly integrated into global trade and financial system
-Differ from AAAs only to a small degree because:
-Economies are smaller, less prosperous and generally more vulnerable to
adverse external influences (e.g., protection and terms of trade shocks)
-More variable fiscal deficits, government debt and inflation -Moderate to
high external debt.
A -Politics evolving toward more open, predictable forms of governance in
environment of rapid economic and social change
-Established trend of integration into global trade and financial system
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-Economies are smaller, less prosperous and generally more vulnerable to
adverse external influences (e.g., protection and terms of trade shocks),
but
-Usually rapid growth in output and per capita incomes
-Manageable through variable fiscal deficits, government debt and
inflation
-Usually low but variable debt.
-Integration into global trade and financial system growing but untested
-Low to moderate income developing economies but variable performance and
quite vulnerable to adverse external influences
-Variable to high fiscal deficits, government debt and inflation
-Very high and variable debt, often graduates of Brady plan but track
record not well established.
BBB --Political factors a source of significant uncertainty, either because
system is in transition or due to external threats, or both, often in
environment of rapid economic and social change
-Integration into global trade and financial system growing but untested
-Economies less prosperous and often more vulnerable to adverse external
influences
-Variable to high fiscal deficits, government debt and inflation
-High and variable external debt.
BB --Political factors a source of major uncertainty, either because system is
in transition or due to external threats, or both, often in environment of
rapid economic and social change
-Integration into global trade and financial system growing but untested
-Low to moderate income developing economies, but variable performance and
quite vulnerable to adverse external influences
-Variable to high fiscal deficits, government debt and inflation
-Very high and variable debt, often graduates of Brady Plan but track
record not well established
BB -Political factors a source of major uncertainty, either because system is
in transition or due to external threats, or both, often in environment of
rapid economic and social change
In the case of sovereign, subnational and sovereign related issuers, the
Fund uses the foreign currency or domestic (local) currency rating
depending upon how a security in the Fund's portfolio is denominated. In
the case where the Fund holds a security denominated in a domestic (local)
currency and one of the rating services does not provide a domestic
(local) currency rating for the issuer, the Fund will use the foreign
currency rating for the issuer; in the case where the Fund holds a
security denominated in a foreign currency and one of the rating services
does not provide a foreign currency rating for the issuer, the Fund will
treat the security as being unrated.
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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 WA8 to avoid backup withholding
with respect to other payments. For further information, see IRC 1441, 1442 and
3406 and/or consult your tax adviser.
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