SUPPLEMENT Dated December 21, 1995
TO THE PROSPECTUS OF
STANDISH INTERNATIONAL EQUITY FUND
Dated May 1, 1995, as revised June 28, 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 the 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 (e) 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:
1
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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 $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.
2
<PAGE>
Prospectus dated May 1, 1995,
as revised June 28, 1995
PROSPECTUS
STANDISH INTERNATIONAL EQUITY FUND
One Financial Center
Boston, Massachusetts 02111
(800) 221-4795
Standish International 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 obtain long-term capital growth
through investment in a diversified portfolio of foreign securities. It is
expected that such capital growth will occur primarily as a result of
appreciation of the securities held in the Fund's portfolio; however, the Fund
may also take advantage of changes in currency exchange rates in an effort to
realize further capital appreciation. Standish International Management Company,
L.P., Boston, Massachusetts, is the Fund's investment adviser (the "Adviser").
The Fund seeks to achieve its investment objective primarily through investing
in securities of companies in countries represented in the Morgan Stanley
Capital International Europe, Australia and Far East Index (the "EAFE Index"),
Canada and, to a lesser extent, in countries considered by the Adviser to be
"Emerging Markets." When the Adviser determines that a particular country
represents a favorable investment opportunity for long-term growth of capital,
the Fund will generally acquire a group of securities designed to correspond to
the price and yield performance of a major market index of common stocks and
other equity securities in that country. However, the Fund is not an index fund
and may at times invest in specific sectors or industries which the Adviser
believes are relatively undervalued or which may experience above average growth
and may invest in individual securities that appear to be attractive
investments. The Fund normally will hold investments in no fewer than five
countries.
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 (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 8
Dividends and Distributions 8
Purchase of Shares 8
Redemption of Shares 9
Management 10
Federal Income Taxes 11
The Fund and Its Shares 12
Custodian 12
Transfer Agent and Shareholder Servicing Agent 12
Independent Accountants 12
Legal Counsel 12
Tax Certification Instructions 13
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
Exchange Fee None
Estimated Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees 0.80%
12b-1 Fees None
Other Expenses 0.43%
Total Fund Operating Expenses 1.23%
<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: $12 $38 $65 $144
You would pay the following expenses on the same investment,
assuming no redemption: $12 $38 $65 $144
</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 expenses for the Fund's 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 LESSER 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.
Per share data (for a share outstanding throughout each period):
Year Ended December 31,
-----------------------------------------------------------
1994 1993 1992* 1991*
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value - beginning of period $26.74 $19.78 $22.20 $20.16
Income from investment operations:
Net investment income $0.21 $0.26 $0.26 $0.33
Net realized and unrealized gain (loss)
on investments (2.08) $7.29 (2.47) 2.02
-------- ------- ------- -------
Total from investment operations ($1.87) $7.55 ($2.21) $2.35
-------- ------- ------- -------
Less distributions declared to shareholders:
From net investment income ($0.12) ($0.23) ($0.21) ($0.30)
In excess of net investment income - (0.36) - -
From realized gain (1.63) - - (0.01)
-------- ------- ------- -------
Total distributions declared to shareholders ($1.75) ($0.59) ($0.21) ($0.31)
-------- ------- ------- -------
Net asset value - end of period $23.12 $26.74 $19.78 $22.20
======== ======= ======= =======
Total return -6.99% 38.27% -9.95% 11.73%
Ratios (to average net assets)/Supplemental Data:
Expenses 1.23% 1.34% 1.53% 1.54%
Net investment income 1.52% 1.09% 1.18% 1.30%
Portfolio turnover 75% 98% 86% 27%
Net assets at end of period (000 omitted) $104,435 $92,419 $56,539 $47,077
- ------------------------------------------------------------------------------------------------------------------------------------
(table continued)
3
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Year Ended December 31,
-------------------------------------------
1990* 1989* 1988*+
----------- ---------- -----------
Net asset value - beginning of period $23.10 $20.07 $20.00
Income from investment operations:
Net investment income $0.55 $0.49 $0.06
Net realized and unrealized gain (loss)
on investments (2.67) 3.23 0.01
-------- ------- -------
Total from investment operations ($2.12) $3.72 $0.07
-------- ------- -------
Less distributions declared to shareholders:
From net investment income ($0.41) ($0.50) -
In excess of net investment income - - -
From realized gain (0.41) (0.19) -
-------- ------- -------
Total distributions declared to shareholders ($0.82) ($0.69) $0.00
-------- ------- -------
Net asset value - end of period $20.16 $23.10 $20.07
======== ======= =======
Total return -9.44% 18.79% 5.32%t
Ratios (to average net assets)/Supplemental Data:
Expenses 1.60% 1.60% 1.60%t
Net investment income 2.19% 2.29% 3.90%t
Portfolio turnover 48% 38% 0%
Net assets at end of period (000 omitted) $24,872 $19,141 $10,158
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>
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to obtain long-term capital growth
through investment in a diversified portfolio of foreign securities. It is
expected that such capital growth will occur primarily as a result of
appreciation of the securities held in the Fund's portfolio; however, the Fund
may also take advantage of changes in currency exchange rates in an effort to
realize further capital appreciation. Any income received on the Fund's
investments will be incidental to the Fund's long-term capital growth objective.
The Fund seeks to achieve its investment objective by investing in at least five
countries. 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 and restrictions are described further in the Statement of
Additional Information.
Investment Policies
The Fund will seek to achieve its investment objective of long-term capital
growth by investing in a diversified portfolio of marketable securities of
foreign companies. Under normal circumstances at least 65% of the Fund's total
assets will consist of equity securities of foreign companies.
The Fund's investment strategy will emphasize the importance and
attractiveness of particular countries over that of individual stocks within a
given country. In determining the attractiveness of a particular country, the
Adviser will take into account such factors as current and anticipated future
political stability, government policies affecting business conditions, relative
economic behavior, market valuation considerations, social influences, prospects
for inflation and relative currency behavior and prospects. When the Adviser
determines that a particular country represents a favorable investment
opportunity for long-term growth of capital, the Fund will generally acquire a
group of securities designed to correspond to the price and yield performance of
a major equity market index in that country. (The major equity market indices of
particular countries differ from those included in the EAFE Index, which
contains a composite of all the markets included in the EAFE Index.) The Fund
may at times emphasize specific sectors or industries which the Adviser believes
are relatively undervalued or which may experience above average growth and may
invest in individual securities that appear to be attractive investments.
However, because the Fund intends to achieve its investment objective primarily
by evaluating countries as a whole rather than individual stocks, the Adviser
may seek specific stocks that are undervalued or that may experience
above-average growth to the extent of no more than 50% of the Fund's assets. In
determining the attractiveness of particular sectors or industries or of
specific stocks, the Adviser will evaluate the relative valuation and growth
fundamentals of the sector, industry or stock under consideration.
5
<PAGE>
The Fund intends to invest in securities of companies in countries included
in the EAFE Index, Canada and, to a lesser extent, in countries considered by
the Adviser to be "Emerging Markets." The following countries are currently in
the EAFE Index: Australia, Austria, Belgium, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Italy, Japan, The Netherlands, New Zealand, Norway,
Singapore/Malaysia, Spain, Sweden, Switzerland, the United Kingdom. However, the
Fund is not required to invest in all such countries and is not required to
invest in accordance with the weightings of the EAFE Index. The Fund will weight
its investments in individual countries according to the Adviser's evaluation of
investment opportunities represented by those countries. The EAFE Index (which
is composed of national market indices of unmanaged securities) is generally
considered by investment managers of global portfolios to be representative of
the composite price and yield performance of common stocks that are publicly
traded in European, Australian and Far East securities markets. The stocks
included in the national components of the EAFE Index are selected with
reference to industry representation in the economy of each nation. At December
31, 1994, the EAFE Index included 1078 stocks with an aggregate market value of
$4,199 billion, which represented 60% of the total market value of all common
stocks traded in the countries included in the EAFE Index. The Adviser intends
to use the EAFE Index as the standard of comparison for its performance, and the
Trustees of the Trust consider the EAFE Index an appropriate standard for such
comparison. Neither Morgan Stanley Capital International, the sponsor of the
EAFE Index, nor any of its affiliates, is a sponsor of, or in any other way
affiliated with, the Fund or the Adviser.
The Fund may invest up to 35% of its total assets in issuers located or
principally doing business in countries with emerging economies or securities
markets ("Emerging Markets"), provided that not more than 10% of its total
assets may be invested in the securities of any one Emerging Market. Investments
in securities of Emerging Markets issuers may be, in some cases, made through
investments in country funds and other investment companies. The Fund will not
invest more than 10% of its total assets in the securities of other investment
companies, will not invest more than 2 1/2% of its total assets in the
securities of any one investment company and will not own more than 3% of the
voting stock of any one investment company. The Fund will indirectly bear its
proportionate share of any expenses paid by other investment companies in which
it invests, in addition to the expenses paid by the Fund.
The Adviser will use various computer software programs and their output
developed by investment banking firms (including Morgan Stanley Capital
International) to analyze and evaluate particular foreign securities and to
perform fundamental securities analysis, which considers macroeconomic factors
as well as the long-term earnings prospects of particular companies. Subject to
obtaining best price and execution, the receipt and use of such computer
programs by the Adviser may be considered a factor in the selection of brokers
for portfolio transactions for the Fund. See "Portfolio Transactions."
6
<PAGE>
In addition to purchasing equity securities of foreign issuers in foreign
securities markets, the Fund may invest in sponsored or unsponsored American
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs").
Generally, ADRs in registered form are designed for use in the U.S. securities
markets and EDRs in bearer form are designed for use in European securities
markets. ADRs are denominated in U.S. dollars and represent an interest in the
right to receive securities of foreign issuers deposited in a U.S. bank or
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of non-U.S. issuers. However, by investing in ADRs rather than
directly in equity securities of non-U.S. issuers, the Fund will avoid currency
risks during the settlement period for either purchases or sales. EDRs are not
necessarily denominated in the same currency as the underlying securities which
they represent. For purposes of the Fund's investment policies, investments in
ADRs, EDRs and similar instruments will be deemed to be investments in the
underlying equity securities of the foreign issuers. The Fund may acquire
depositary receipts from banks that do not have a contractual relationship with
the issuer of the security underlying the depositary receipt to issue and secure
such depositary receipt. To the extent that the Fund invests in such unsponsored
depositary receipts there may be an increased possibility that the Fund may not
become aware of events affecting the underlying security and thus the value of
the related depositary receipt. In addition, certain benefits (i.e., rights
offerings) which may be associated with the security underlying the depositary
receipt may not inure to the benefit of the holder of such depositary receipt.
In seeking its objective, the Fund expects to invest primarily in common
stocks and other equity securities. However, the Fund may invest for capital
appreciation in any other type of security, including, but not limited to,
convertible bonds and stocks, preferred stocks, bonds, notes and other debt
securities of foreign issuers (including Euro-dollar securities), warrants,
rights, or obligations of the U.S. or foreign governments and their political
subdivisions. It is the present intention of the Fund not to invest more than
30% of its assets in fixed income securities (excluding cash equivalents) and to
invest only in preferred stocks and fixed income securities which are of at
least upper-medium grade, i.e., securities rated, at the time of investment, A
or better by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P") or, if unrated, determined to be of comparable credit
quality by the Adviser. In the case of a security that is rated differently by
the two rating services, the higher rating is used in applying the foregoing
policy. The Fund expects to invest in fixed income securities in circumstances
where, in the judgment of the Adviser, anticipated interest or currency exchange
rate changes would indicate that capital appreciation is possible.
The Fund may establish and maintain cash balances for liquidity purposes.
The Fund may also establish and maintain cash balances for temporary defensive
purposes without limitation in the event of, or in anticipation of, a general
decline in the market prices of the securities in which it invests. The Fund's
cash balances may be invested in U.S. as well as high quality foreign short-term
money market instruments, including, but not limited to, government obligations,
certificates of deposit, bankers' acceptances, commercial paper, short-term
corporate debt securities and repurchase agreements.
7
<PAGE>
The Fund intends to spread investments broadly among countries. The Fund
will normally include securities of no fewer than five different countries,
representing the major securities markets in the EAFE Index in its portfolio.
However, while maintaining investments in five countries, the Fund may invest a
substantial portion of its assets in one or more of those five countries. The
Fund also intends to invest, when conditions appear appropriate to the Adviser,
in each country whose stocks account for more than 1% of the market value of the
EAFE Index.
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 market 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, 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 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.
8
<PAGE>
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
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.
9
<PAGE>
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.
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.
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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 giving effect 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.
Repurchase Agreements
The Fund may enter into repurchase agreements, in which the Fund purchases
a security (the "underlying security") from a bank or well-established
securities dealer, who agrees to repurchase the underlying security at the same
price, plus interest at a specified rate. The underlying securities are limited
to those that are eligible investments for the Fund. Any repurchase agreement
acquired by the Fund will always be fully collateralized by cash or cash
equivalents, which will be marked to market every business day. The underlying
security will be held by the Fund's custodian bank until repurchased. Repurchase
agreements usually have a short duration, often less than one week. The Fund's
investments in repurchase agreements maturing in more than 7 days are subject to
the Fund's 15% limitation on investments in illiquid securities.
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 or "restricted securities") under the Securities Act of 1933,
as amended ("1933 Act"), including securities eligible for resale in reliance on
Rule 144A under the 1933 Act. 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.
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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 be in excess of 100% 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). The Fund's
portfolio turnover rates are listed in the section captioned "Financial
Highlights."
Investment Restrictions
The Fund has adopted certain fundamental policies which may not be changed
without approval of the Fund's shareholders. These policies provide, among other
things, that the Fund may not: (i) with respect to at least 75% of its total
assets, invest 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 pledge or mortgage its assets, except that the Fund may borrow
from banks as a temporary measure for extraordinary or emergency purposes (but
not investment purposes) in an amount up to 15% of the current value of its
total assets, 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; or (iii) make loans, except that
the Fund may purchase or hold a portion of an issue of publicly distributed debt
instruments, purchase negotiable certificates of deposit and bankers'
acceptances, and enter into repurchase agreements.
As nonfundamental policies, which may be changed without a shareholders'
vote, the Fund has undertaken to a state securities authority that, so long as
the state authority requires and shares of the Fund are registered for sale in
that state, the Fund (1) will limit its purchases of warrants to 5% of net
assets, of which 2% may be warrants not listed on the New York or American Stock
Exchange, (2) will not invest in oil, gas and minerals leases, (3) will not
invest in real estate limited partnerships, and (4) will not invest more than an
aggregate of 15% of its net assets in securities for which an active and
substantial market does not exist at the time of purchase, repurchase agreements
which are not terminable within seven days and securities subject to legal or
contractual restrictions on resale.
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.
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RISK FACTORS AND SUITABILITY
The Fund is not intended to provide an investment program meeting all of
the requirements of an investor. Notwithstanding the Fund's ability to diversify
and spread risk by holding securities of a number of issuers, shareholders
should be able and prepared to bear the risk of investment losses which may
accompany the investments contemplated by the Fund.
Foreign Securities
Investing in securities of foreign companies, which are generally
denominated in foreign currencies, and the other investment practices of the
Fund involve certain risks of political, economic and legal conditions and
developments not typically associated with investing in securities of U.S.
companies. Such conditions or developments might include favorable or
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 securities denominated in U.S. dollars, will incur
transaction costs in converting currencies. Brokerage commissions in foreign
countries are generally fixed, and other transaction costs related to securities
exchanges are generally higher than in the United States. Most foreign equity
securities of the Fund are held by foreign subcustodians that satisfy certain
eligibility requirements. However, foreign subcustodian arrangements are
significantly more expensive than domestic custody. In addition, foreign
settlement of securities transactions is subject to local law and custom that is
not, generally, as well established or as reliable as U.S. regulation and custom
applicable to settlements of securities transactions and, accordingly, there is
generally perceived to be a greater risk of loss in connection with securities
transactions in many foreign countries. It is the current intention of the
Adviser not to engage in investment transactions on foreign stock exchanges
where customary settlement is not anticipated.
Emerging Markets
Investments in Emerging Markets involves risks in addition to those
generally associated with investments in foreign securities. Political and
economic structures in many Emerging Markets may be undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristics of more developed countries. As
a result, the risks described above relating to investments in foreign
securities, including the risks of nationalization or expropriation of assets,
may be heightened. In addition, unanticipated political or social developments
may affect the values of the Fund's investments and the availability to the Fund
of additional investments in such Emerging Markets. The small size and
inexperience of the securities markets in certain Emerging Markets and the
limited volume of trading in securities in those markets may make the Fund's
investments in such countries less liquid and more volatile than investments in
countries with more developed securities markets (such as the U.S., Japan or
most Western European countries).
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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 annually. 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 short-term and
long-term capital gains, 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 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.
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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 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 price.
Securities for which quotations are not readily available and all other assets
are valued at fair value as determined in good faith at the direction of 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. 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 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. The Fund currently determines its net asset value as of
the close of trading on the New York Stock Exchange (currently 4:00 p.m., New
York time). 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
International Equity Fund, One Financial Center, 26th Floor, Boston,
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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.
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.
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 (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 International Management Company, L.P. (the "Adviser"), One
Financial Center, Boston, MA 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 Delaware limited partnership which was organized in 1991 and is a
registered investment adviser under the Investment Advisers Act of 1940. The
general partner of the Adviser is Standish, Ayer & Wood, Inc. ("Standish"), One
Financial Center, Boston, MA 02111, which holds a 99.98% partnership interest.
The limited partners, who each hold a 0.01% interest in the Adviser, are Walter
M. Cabot, Sr., Chairman of the Board of the Adviser and a Director of and a
Senior Adviser to Standish, and D. Barr Clayson, the President of the Adviser
and a Managing Director of Standish. Richard S. Wood, a Vice President and
Director of Standish and the President of the Trust, is the Executive Vice
President of the Adviser. Standish assigned the investment advisory agreement to
the Adviser as of October 1, 1991.
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Standish and the Adviser provide 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 two
other funds of the Trust, Standish International Fixed Income Fund and Standish
Global Fixed Income Fund, which had net assets of $1.1 billion and $135 million,
respectively, as of March 31, 1995. Standish also provides investment advisory
services to other funds of the Trust, acting as sole investment adviser to
Standish Fixed Income Fund, Standish Securitized Fund, Standish Equity Fund,
Standish Small Capitalization Equity Fund, Standish Intermediate Tax Exempt Bond
Fund and Standish Massachusetts Intermediate Tax Exempt Bond Fund which had net
assets of $1.8 billion, $54 million, $94 million, $121 million, $28 million, and
$31 million, respectively, as of March 31, 1995, and as co-investment adviser to
Consolidated Standish Short-Term Asset Reserve Fund, which had net assets of
$258 million as of March 31, 1995. Corporate pension funds are the largest asset
under active management by Standish. Standish's clients also include charitable
and educational endowment funds, financial institutions, trusts and individual
investors. As of March 31, 1995, Standish managed approximately $24 billion in
assets.
The Fund's portfolio manager is Michael C. Schoeck, who has been primarily
responsible for the day-to-day management of the Fund's portfolio since July 1,
1994. Prior thereto, Mr. Schoeck was the Fund's co-portfolio manager since
January 1, 1994. During the past five years, Mr. Schoeck has served as Vice
President of the Adviser since August 1993 and as Vice President of Commerzbank,
Frankfurt, Germany prior thereto.
Subject to the supervision and direction of the Trustees, 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, administers the affairs of
the Fund and permits the Fund to use the identifying name "Standish." For these
services, the Fund pays a fee monthly at the annual rate of .80% of its average
daily net asset value. This fee is generally competitive with fees of other
investment companies which primarily invest in foreign equity securities;
because of the complexity of managing the Fund's portfolio, the fee is higher
than that paid by most other investment companies investing primarily in U.S.
securities. For the year ended December 31, 1994, advisory fees paid to the
Adviser totalled $841,166, or 0.80% of the Fund's average net assets.
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<PAGE>
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
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 Standish and the Adviser in an equitable manner. The Adviser has
agreed to limit the Fund's total operating expenses for any fiscal year to not
more than 1.60% of the Fund's average daily net assets and will reduce its fee
or make other arrangements to the extent that expenses would otherwise exceed
such limit. For the fiscal year ended December 31, 1994, expenses borne by the
Fund amounted to $1,239,224, which represented 1.23% of average net assets.
Portfolio Transactions
Although it is not the policy of the Fund to purchase or sell securities
for trading purposes, the Fund places no restrictions on portfolio turnover and
may sell portfolio securities without regard to the period of time they have
been held. Portfolio turnover is not expected to be in excess of 100% on an
annual basis. Subject to the supervision of the Trustees, 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 services 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.
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<PAGE>
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. No portion of such dividends is expected to
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.
The Fund anticipates that it will be subject to foreign withholding taxes
or other foreign taxes on income (possibly including capital gains) on certain
of its foreign investments, which will reduce the yield or return from those
investments. Such taxes may be reduced or eliminated pursuant to an income tax
treaty in some cases.
The Fund may qualify to make an election to pass the qualifying foreign
taxes it pays through to its shareholders, who would then include their share of
such taxes in their gross incomes (in addition to the actual dividends and
capital gain distributions received from the Fund) and might be entitled,
subject to certain conditions and limitations under the Code, to a federal
income tax credit or deduction for their share of such taxes. Tax-exempt
shareholders generally will not benefit from this election. If the Fund makes
this election, it will provide necessary information to its shareholders
regarding any foreign taxes passed through to them. If the Fund does not make
this election, it may deduct the foreign taxes it pays in computing the net
income it must distribute to shareholders to satisfy the Code's distribution
requirements.
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.
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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, as amended (the "1940 Act"), 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 non-assessable. 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.
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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 1940 Act,
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
Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York
11201, serves as custodian of all cash and securities of the Fund.
TRANSFER AGENT AND SHAREHOLDER
SERVICING AGENT
Investors Bank & Trust Company, 24 Federal Street, Boston, Massachusetts
11201, serves as the Fund's transfer and shareholder servicing agent and
provides the calculation of the Fund's net asset value.
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.Investment Adviser
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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 W-8 to avoid backup withholding
with respect to other payments. For further information, see Code Sectors 1441,
1442 and 3406 and/or consult your tax adviser.
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