As filed with the Securities and Exchange Commission on May 1, 1996
Registration Nos. 33-10615
811-4813
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 12 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 79 /X/
(Check appropriate box or boxes.)
---------------
Standish, Ayer & Wood Investment Trust
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 375-1760
ERNEST V. KLEIN, Esq.
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b)
/X/ On May 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 0n January , 1996 pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / 0n (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number of shares pursuant
to Rule 24f-2 under the Investment Company Act of 1940, as amended. The
Registrant has its Rule 24F-2 Notice for its current fiscal year on or about
February 28, 1996.
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Title of Amount of Proposed Proposed
Securities Shares Maximum Maximum Amount
Being Being Offering Aggregate of Registration
Registered Registered Price Per Unit Offering Price Fee
- - ---------- ---------- -------------- -------------- ---
Shares of 2,003,386 $24.73 $49,543,735 $100.00*
Beneficial
Interest
</TABLE>
*This calculation has been made pursuant to Rule 24e-2 under the Investment
Company Act of 1940. During its fiscal year ended December 31, 1995, the
Registrant redeemed or repurchased 2,539,577 shares of beneficial interest, of
which 547,917 were utilized by the Registrant on its Rule 24f-2 Notice filed on
February 28, 1996 and 1,991,660 are being used herein for purposes of reducing
the filing fee payable herewith under Rule 24e-2. No fee is required for the
registration of such 1,991,660 shares. An additional 11,726 shares being
egistered hereby are valued at the public offering price of $24.73 as of April
19, 1996.
<PAGE>
<TABLE>
<CAPTION>
STANDISH, AYER & WOOD INVESTMENT TRUST*
Standish International Equity Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
Part A Prospectus
Form Item Cross-Reference
- - --------- ---------------
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis "Expense Information"
Item 3. Condensed Financial "Financial Highlights"
Information
Item 4. General Description Cover Page, "The Fund
of Registrant and Its Shares" and "Investment
Objective and Policies"
Item 5. Management of the Fund "Management" and "Custodian,
Transfer Agent and Dividend Disbursing Agent"
Item 6. Capital Stock and "The Fund and Its Shares",
Other Securities "Purchase of Shares",
"Redemption of Shares", "Dividends and Distributions"
and "Federal Income Taxes"
Item 7. Purchase of Securities Cover Page and "Purchase of
Being Offered Shares"
Item 8. Redemption or "Redemption of Shares"
Repurchase
Item 9. Pending Legal Not Applicable
Proceedings
- - -------------
* This Post-Effective Amendment to the Registrant's Registration Statement is
being filed with respect to the series of the Registrant set forth above and
does not affect the Prospectuses and Statements of Additional Information of any
additional series of the Registrant.
<PAGE>
Statement of Additional
Part B Information Cross-
Form Item Reference
--------- ---------
Item 10. Cover Page Cover Page
Item 11. Table of Contents "Contents"
Item 12. General Information
and History Not Applicable
Item 13. Investment Objectives "Investment Objective
and Policies and Policies" and "Investment
Restrictions"
Item 14. Management of the Fund "Management"
Item 15. Control Persons and "Management"
Principal Holders
of Securities
Item 16. Investment Advisory and "Management"
Other Services
Item 17. Brokerage Allocation "Portfolio Transactions"
Item 18. Capital Stock and "The Fund and Its Shares"
Other Securities
Item 19. Purchase, Redemption "Redemption of Shares" and
and Pricing of "Determination of Net Asset
Securities Being Value"
Offered
Item 20. Tax Status "Taxation"
Item 21. Underwriters Not Applicable
Item 22. Calculation of "Calculation of Performance
Performance Data Data"
Item 23. Financial Statements "Experts and Financial Statements"
</TABLE>
<PAGE>
Prospectus dated May 1, 1996
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 GDP Index (the "EAFE GDP
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 of the Fund from the Trust's principal
underwriter, Standish Fund Distributors, L.P. (the "Principal Underwriter"), at
the address and phone number listed above 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 to the Principal Underwriter 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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN SHARES OF THE FUND INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
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.
CONTENTS
Expense Information...........................................2
Financial Highlights..........................................3
Investment Objective and Policies.............................4
Risk Factors and Suitability..................................7
Calculation of Performance Data...............................8
Dividends and Distributions...................................8
Purchase of Shares............................................8
Exchange of Shares............................................9
Redemption of Shares.........................................9
Management...................................................10
Federal Income Taxes.........................................11
The Fund and Its Shares......................................12
Custodian....................................................13
Transfer Agent and Shareholder Servicing Agent...............13
Independent Accountants......................................13
Legal Counsel................................................13
Tax Certification Instructions..............................14
1
<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees 0.80%
12b-1 Fees None
Other Expenses 0.42%
Total Fund Operating Expenses 1.22%
<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 $67 $148
</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, 1995.
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, 1994 and
1995 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,
---------------------------------------------------------------------------------
1995 1994 1993 1992* 1991* 1990* 1989* 1988*,+
--------- ---------- -------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $23.12 $26.74 $19.78 $22.20 $20.16 $23.10 $20.07 $20.00
--------- ---------- -------- --------- --------- --------- --------- --------
Income from investment operations
Net investment income $0.04 $0.21 $0.26 $0.26 $0.33 $0.55 $0.49 $0.06
Net realized and unrealized gain (loss) on investme0.45 (2.08) 7.29 (2.47) 2.02 (2.67) 3.23 0.01
--------- ---------- -------- --------- --------- --------- --------- --------
Total from investment operations $0.49 ($1.87) $7.55 ($2.21) $2.35 ($2.12) $3.72 $0.07
--------- ---------- -------- --------- --------- --------- --------- --------
Less distributions declared to shareholders
From net investment income - ($0.12) ($0.23) ($0.21) ($0.30) ($0.41) ($0.50) -
In excess of net investment income - - (0.36) - - - - -
From realized gain (0.07) (1.63) - - (0.01) (0.41) (0.19) -
--------- ---------- -------- --------- --------- --------- --------- --------
Total distributions declared to shareholders ($0.07) ($1.75) ($0.59) ($0.21) ($0.31) ($0.82) ($0.69) $0.00
--------- ---------- -------- --------- --------- --------- --------- --------
Net asset value - end of period $23.54 $23.12 $26.74 $19.78 $22.20 $20.16 $23.10 $20.07
========= ========== ======== ========= ========= ========= ========= ========
Total return 2.14% (6.99%) 38.27% (9.95%) 11.73% (9.44%) 18.79% 5.32%t
Net assets at end of period (000 omitted) $59,473 $104,435 $92,419 $56,539 $47,077 $24,872 $19,141 $10,158
Ratios (to average net assets)/Supplemental Data
Expenses 1.22% 1.23% 1.34% 1.53% 1.54% 1.60% 1.60% 1.60%t
Net investment income 1.76% 1.52% 1.09% 1.18% 1.30% 2.19% 2.29% 3.90%t
Portfolio turnover 108% 75% 98% 98% 27% 48% 38% 0%
t Computed on an annualized basis.
* Audited by other auditors
+ For the period from August 31, 1988 (start of business) to December 31, 1988.
</TABLE>
Further information about the performance of the Fund is contained in the
Fund's Annual Report, which may be obtained from the Principal Underwriter
without charge.
3
<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 may differ from those included in the EAFE GDP Index, which
is a composite of all the markets of the countries included in the EAFE GDP
Index.) The Fund may at times emphasize specific sectors or industries that the
Adviser believes are relatively undervalued or 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 as individual
stocks, the Adviser may, with respect to no more than 50% of the Fund's total
assets, seek specific stocks that are undervalued or that may experience
above-average growth. 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.
The Fund intends to invest in securities of companies in countries included
in the EAFE GDP 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 GDP Index: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, The Netherlands, New Zealand, Norway,
4
<PAGE>
Singapore, Malaysia, Spain, Sweden, Switzerland, and 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 GDP 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 GDP 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 Eastern
securities markets. The stocks included in the national components of the EAFE
GDP Index are selected with reference to industry representation in the economy
of each nation. At December 31, 1995, the EAFE GDP Index included 1,112 stocks
with an aggregate market value of $5,259 billion, which represented 62.3% of the
total market value of all common stocks traded in the countries included in the
EAFE GDP Index. The Adviser intends to use the EAFE GDP Index as the standard of
comparison for its performance, and the Trustees of the Trust consider the EAFE
GDP Index an appropriate standard for such comparison. Neither Morgan Stanley
Capital International, the sponsor of the EAFE GDP 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 securities of 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 issuers in 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 5% 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.
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
5
<PAGE>
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 "high grade" preferred stocks and other fixed income securities,
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 proposed to be purchased by the Fund that is rated
differently by the two rating services, the higher rating is used in applying
the Fund's rating 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.
The Fund intends to spread investments broadly among countries. The Fund
will normally include in its portfolio securities of no fewer than five
different countries included in the EAFE GDP Index. 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 GDP Index.
6
<PAGE>
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 will attempt to limit its net loss
exposure resulting from Strategic Transactions entered into for such purposes to
not more than 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
7
<PAGE>
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 attempt to
limit its net loss exposure resulting from Strategic Transactions entered into
for non-hedging purposes to not more than 3% of its net assets at any one time.
Futures markets are highly volatile and the use of futures may increase the
volatility of the Fund's net asset value. Finally, entering into futures
contracts would create a greater ongoing potential financial risk than would
purchases of options where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of Strategic Transactions would reduce
net asset value and the net result may be less favorable than if the Strategic
Transactions had not been utilized. Further information concerning the Fund's
Strategic Transactions is set forth in the Statement of Additional Information.
Short-Selling
The Fund may make short sales, which are transactions in which the Fund
sells a security it does not own in anticipation of a decline in the market
value of that security. To complete such a transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund then is obligated to replace
the security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender amounts equal to any dividends or interest which
accrue during the period of the loan. To borrow the security, the Fund may also
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.
8
<PAGE>
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 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 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 must 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 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 repurchase agreements with commercial banks, brokers and
dealers considered creditworthy by the Adviser and which furnish collateral at
least equal in value to the amount of their repurchase obligation. If the other
party or "seller" of a repurchase agreement defaults, the Fund might suffer a
loss to the extent that the proceeds from the sale of the underlying securities
and other collateral held by the Fund in connection with the related repurchase
agreement are less than the repurchase price. In addition, in the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, a Fund could suffer losses, including loss of interest on or
principal of the security and costs associated with delay and enforcement of the
repurchase agreement. 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.
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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, swap
transactions, 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
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. 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.
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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. Certain non-fundamental policies and additional fundamental
policies adopted by the Fund are described in the Statement of Additional
Information.
RISK FACTORS AND SUITABILITY
The Fund is not intended to provide an investment program meeting all of
the requirements of an investor. 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 U.S. dollar denominated
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 in the Fund's portfolio 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.
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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 and
most Western European countries).
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
(or any shorter period since inception) 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.
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.
From time to time, the Fund may compare its performance with that of other
mutual funds with similar investment objectives, to stock and other relevant
indices, and to performance rankings prepared by recognized mutual fund
statistical services. In addition, the Fund's performance may be compared to
alternative investment or savings vehicles and/or to indices or indicators of
economic activity.
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.
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PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Principal
Underwriter, which offers the Fund's 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 in good order by the Principal Underwriter and
payment for the shares is received by the Fund's custodian. Please see the
Fund's account application or call the Principal Underwriter for instructions on
how to make payment of shares to the Fund's custodian. Unless waived by the
Fund, the minimum initial investment is $100,000. Additional investments may be
made in amounts of at least $10,000.
Shares of the Fund may also be purchased through securities dealers. 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 Principal Underwriter or its agent 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, provided that
payment for the shares is also received by the Fund's custodian 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 Principal Underwriter 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, the Principal
Underwriter, 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 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.
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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. The Fund's investment minimums do not apply to
accounts for which the Adviser or any of its affiliates serves as investment
adviser or to employees of the Adviser or any of its affiliates or to members of
such persons' immediate families. The Fund's investment minimums apply to the
aggregate value invested in omnibus accounts rather than to the investment of
the underlying participants in such omnibus accounts.
EXCHANGE OF SHARES
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 Principal Underwriter or its agent.
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
Principal Underwriter or its agent 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 Principal Underwriter 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 the Fund may be exchanged by written order to the Principal
Underwriter, 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 elect telephonic privileges may exchange shares by calling
the Principal Underwriter at (800) 221-4795. Telephonic privileges are not
available to shareholders automatically. Proper identification will be required
for each telephonic exchange. Please see "Telephone Transactions" below 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 by
the Fund's custodian. 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.
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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 by the Principal
Underwriter or its agent of a redemption request in proper form. Redemptions
will not be processed until a completed Share Purchase Application and payment
for the shares to be redeemed have been received.
Written Redemption
Shares of the Fund may be redeemed by written order to the Principal
Underwriter, One Financial Center, 26th Floor, Boston, Massachusetts 02111. A
written redemption request must (a) state the name of the Fund and 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(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 that are not
individuals. Redemption proceeds will normally be paid by check mailed within
three business days of receipt by the Principal Underwriter 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 in the case of
payments made by check.
Telephonic Redemption
Shareholders who elect telephonic privileges may redeem shares by calling
the Principal Underwriter at (800) 221-4795. Telephonic privileges are not
available to shareholders automatically. Redemption proceeds will be mailed or
wired in accordance with the shareholder's instruction on the account
application to a pre-designated account. Redemption proceeds will normally be
paid promptly after receipt of telephonic instructions, but no later than three
business days thereafter, except as described above for shares purchased by
check. 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
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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. Wire charges, if any,
will be deducted from redemption proceeds. Proper identification will be
required for each telephonic redemption.
Repurchase Order
In addition to telephonic and written redemption of Fund shares, the
Principal Underwriter may accept 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 the repurchase order by the Principal
Underwriter and the payment for the shares by the Fund's custodian. Brokers and
dealers are obligated to transmit repurchase orders to the Principal Underwriter
prior to the close of the Principal Underwriter's business day (normally 4:00
p.m.). Brokers and dealers may charge for their services in connection with a
repurchase of Fund shares, but neither the Fund nor the Principal Underwriter
imposes a charge for share repurchases.
Telephone Transactions
By maintaining an account that is eligible for telephonic exchange and
redemption privileges, the shareholder authorizes the Adviser, the Principal
Underwriter, the Fund and the Fund's custodian to act upon instructions of any
person to redeem and/or exchange shares from the shareholder's account. Further,
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 Principal Underwriter, nor the Trust, nor the Fund, 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
or exchange, 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. All telephone transaction requests will
be recorded. Shareholders may experience delays in exercising telephone
transaction privileges during periods of abnormal market activity. Accordingly,
during periods of volatile economic and market conditions, shareholders may wish
to consider transmitting redemption and exchange requests in writing.
* * * *
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. The Fund may eliminate duplicate mailings of Fund materials
to shareholders that have the same address of record.
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 and the Adviser provide fully discretionary management services
and counseling and advisory services to a broad range of clients throughout the
United States and abroad. As of March 31, 1996, Standish or the Adviser served
as the investment adviser to each of the following fourteen funds in the
Standish, Ayer & Wood family of funds:
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Net Assets
Fund (March 31, 1996)
- - --------------------------------------------------------------------------------
Standish Controlled Maturity Fund $ 9,042,346
Standish Equity Portfolio 98,282,505
Standish Fixed Income Portfolio 2,299,158,500
Standish Fixed Income Fund II 10,102,031
Standish Global Fixed Income Portfolio 149,048,965
Standish Intermediate Tax Exempt Bond Fund 31,199,236
Standish International Equity Fund 51,980,946
Standish International Fixed Income Fund 761,073,675
Standish Massachusetts Intermediate
Tax Exempt Bond Fund 32,270,691
Standish Securitized Fund 53,357,787
Standish Short-Term Asset Reserve Fund 272,188,970
Standish Small Capitalization Equity Portfolio 196,260,876
Standish Small Cap Tax-Sensitive Equity Fund 1,588,743
Standish Tax-Sensitive Equity Fund 1,261,111
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,
1996, Standish managed approximately $29 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 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 0.80% of its average
daily net asset value. The Adviser believes that 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 fiscal year ended December 31,
1995, advisory fees paid to the Adviser represented 0.80% of the Fund's average
net daily assets.
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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 Principal
Underwriter 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 voluntarily agreed to limit the Fund's total operating
expenses 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. The Adviser may discontinue or modify such
limitation in the future at its discretion, although it has no current intention
to do so. The Adviser has also agreed to limit the Fund's total operating
expenses (excluding brokerage commissions, taxes and extraordinary expenses) to
the permissible limit applicable in any state in which shares of the Fund are
then qualified for sale. For the fiscal year ended December 31, 1995, expenses
borne by the Fund represented 1.22% of the Fund's average daily net assets.
Portfolio Transactions
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 generally 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. 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. The receipt and use of such computer
programs by the Adviser may also be considered a factor in the selection of
brokers for portfolio transactions 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 a 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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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 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 fourteen series that currently offer their shares
to the public 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 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 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.
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Inquiries concerning the Fund should be made by contacting the Principal
Underwriter at the 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
02110, 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 and Standish.
- - --------------------------------------------------------------------------------
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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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 TIN-related
certifications contained in the Account Purchase Application (Application) or
you are otherwise subject to backup withholding. The Fund will not impose backup
withholding as a result of your failure to make any certification, except the
certifications in the Application that directly relate to your TIN and backup
withholding status. Amounts withheld and forwarded to the IRS can be credited as
a payment of tax when completing your Federal income tax return.
For most individual taxpayers, the TIN is the social security number.
Special rules apply for certain accounts. For example, for an account
established under the Uniform Gift to Minors Act, the TIN of the minor should be
furnished. If you do not have a TIN, you may apply for one using forms available
at local offices of the Social Security Administration or the IRS, and you
should write "Applied For" in the space for a TIN on the Application.
Recipients exempt from backup withholding, including corporations and
certain other entities, should provide their TIN and underline "exempt" in
section 2(a) of the TIN section of the Application to avoid possible erroneous
withholding. Non-resident aliens and foreign entities may be subject to
withholding of up to 30% on certain distributions received from the Fund and
must provide certain certifications on IRS Form W-8 to avoid backup withholding
with respect to other payments. For further information, see Code Sections 1441,
1442 and 3406 and/or consult your tax adviser.
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STANDISH INTERNATIONAL EQUITY FUND
Investment Adviser
Standish International Management
Company, L.P.
One Financial Center
Boston, Massachusetts 02111
Principal Underwriter
Standish Fund Distributors, L.P.
One Financial Center
Boston, Massachusetts 02111
Custodian
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Legal Counsel
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
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May 1, 1996
STANDISH INTERNATIONAL EQUITY FUND
One Financial Center
Boston, Massachusetts 02111
(800) 221-4795
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the Prospectus dated May 1,
1996, as amended and/or supplemented from time to time (the "Prospectus"), of
Standish International Equity Fund (the "Fund"), a separate investment series of
Standish, Ayer & Wood Investment Trust (the "Trust"). This Statement of
Additional Information should be read in conjunction with the Fund's Prospectus
which may be obtained without charge from Standish Fund Distributors, L.P., the
Trust's principal underwriter (the "Principal Underwriter") at the address and
phone number set forth above.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
Contents
Investment Objective and Policies.............................2
Investment Restrictions.......................................7
Calculation of Performance Data...............................8
Management....................................................9
Redemption of Shares.........................................15
Portfolio Transactions.......................................15
Determination of Net Asset Value.............................16
The Fund and Its Shares......................................16
Taxation.....................................................16
Additional Information.......................................18
Experts and Financial Statements.............................18
Financial Statements.........................................19
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectus describes the investment objective of the Fund and
summarizes the investment policies it will follow. The following discussion
supplements the description of the Fund's investment policies in the Prospectus.
See the Prospectus for a more complete description of the Fund's investment
objective, policies and restrictions.
Repurchase Agreements
The Fund may enter into repurchase agreements collateralized by U.S.
Government obligations. A repurchase agreement is an agreement under which the
Fund acquires money market instruments (generally U.S. Government securities)
from a commercial bank, broker or dealer, subject to resale to the seller at an
agreed-upon price and date (normally the next business day). The resale price
reflects an agreed-upon interest rate effective for the period the instruments
are held by the Fund and is unrelated to the interest rate on the instruments.
The instruments acquired by the Fund (including accrued interest) must have an
aggregate market value in excess of the resale price and will be held by the
custodian bank for the Fund until they are repurchased. The Trustees will
monitor the standards that Standish International Management Company, L.P., the
Fund's investment adviser (the "Adviser"), will use in reviewing the credit
worthiness of any party to a repurchase agreement with the Fund.
The use of repurchase agreements involves certain risks. For example, if
the seller defaults on its obligation to repurchase the instruments acquired by
the Fund at a time when their market value has declined, the Fund may incur a
loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by the Fund are collateral for a loan by the Fund and
therefore are subject to sale by the trustee in bankruptcy. Finally, it is
possible that the Fund may not be able to substantiate its interest in the
instruments it acquires. While the Trustees acknowledge these risks, it is
expected that they can be controlled through careful documentation and
monitoring.
The Fund may not invest more than an aggregate of 15% of its net assets in
repurchase agreements having maturities of more than seven days; securities
subject to legal or contractual restrictions on resale or for which there are no
readily available market quotations; and other illiquid securities.
Strategic Transactions
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rate, 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
2
<PAGE>
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 will attempt to limit its net loss
exposure resulting from Strategic Transactions entered into for such purposes to
not more than 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, 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.
Risks of Strategic Transactions
The use of Strategic Transactions has associated risks 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
3
<PAGE>
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, they 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 attempt to limit its net
loss exposure resulting from Strategic Transactions entered into for non-hedging
purposes to not more than 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.
General Characteristics of Options
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Strategic Transactions involving options
require segregation of the Fund's assets in special accounts, as described below
under "Use of Segregated Accounts."
A put option gives the purchaser of the option, in consideration for the
payment of a premium, the right to sell, and the writer the obligation to buy
(if the option is exercised), the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, the Fund's
purchase of a put option on a security might be designed to protect its holdings
in the underlying instrument (or, in some cases, a similar instrument) against a
substantial decline in the market value by giving the Fund the right to sell
such instrument at the option exercise price. A call option, in consideration
for the payment of a premium, gives the purchaser of the option the right to
buy, and the seller the obligation to sell (if the option is exercised), the
underlying instrument at the exercise price. The Fund may purchase a call option
on a security, futures contract, index, currency or other instrument to seek to
protect the Fund against an increase in the price of the underlying instrument
that it intends to purchase in the future by fixing the price at which it may
purchase such instrument. An American style put or call option may be exercised
4
<PAGE>
at any time during the option period while a European style put or call option
may be exercised only upon expiration or during a fixed period prior thereto.
The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, exchange listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options and Eurodollar instruments
are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an
exchange listed put or call option is dependent, in part, upon the liquidity of
the option market. There is no assurance that a liquid option market on an
exchange will exist. In the event that the relevant market for an option on an
exchange ceases to exist, outstanding options on that exchange would generally
continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct agreement with
the Counterparty. In contrast to exchange listed options, which generally have
standardized terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price, premium,
guarantees and security, are set by negotiation of the parties. The Fund will
generally sell (write) OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. (To
the extent that the Fund does not do so, the OTC options are subject to the
Fund's restriction on illiquid securities.) The Fund expects generally to enter
into OTC options that have cash settlement provisions, although it is not
required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in the OTC option market. As a result, if the Counterparty fails to
make delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
5
<PAGE>
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with U.S.
Government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers" or broker dealers, domestic or foreign banks or other
financial institutions which have received, combined with any credit
enhancements, a long-term debt rating of A from Standard & Poor's Ratings Group
("S&P") or Moody's Investor Services, Inc. ("Moody's") or an equivalent rating
from any other nationally recognized statistical rating organization ("NRSRO")
or which issue debt that is determined to be of equivalent credit quality by the
Adviser. The staff of the Securities and Exchange Commission (the "SEC")
currently takes the position that, absent the buy-back provision discussed
above, OTC options purchased by the Fund, and portfolio securities "covering"
the amount of a Fund's obligation pursuant to an OTC option sold by it (the cost
of the sell-back plus the in-the-money amount, if any) are illiquid, and are
subject to the Fund's limitation on investing in illiquid securities. However,
for options written with "primary dealers" in U.S. Government securities
pursuant to an agreement requiring a closing purchase transaction at a formula
price, the amount which is considered to be illiquid may be calculated by
reference to a formula price.
If the Fund sells (writes) a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase the Fund's income. The sale (writing) of put options
can also provide income.
The Fund may purchase and sell (write) call options on securities, equity
securities (including convertible securities) and Eurodollar instruments that
are traded on U.S. and foreign securities exchanges and in the over-the-counter
markets, and on securities indices, currencies and futures contracts. All calls
sold by the Fund must be "covered" (i.e., the Fund must own the securities or
the futures contract subject to the call) or must meet the asset segregation
requirements described below as long as the call is outstanding. Even though the
Fund will receive the option premium to help offset any loss, the Fund may incur
a loss if the exercise price is below the market price for the security subject
to the call at the time of exercise. A call sold by the Fund also exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may require the Fund to hold a security or instrument which it might otherwise
have sold.
The Fund may purchase and sell (write) put options on securities including
equity securities (including convertible securities) and Eurodollar instruments
(whether or not it holds the above securities in its portfolio), and on
securities indices, currencies and futures contracts. The Fund will not sell put
options if, as a result, more than 50% of the Fund's assets would be required to
be segregated to cover its potential obligations under such put options other
than those with respect to futures and options thereon. In selling put options,
there is a risk that the Fund may be required to buy the underlying security at
a price above the market price.
6
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Options on Securities Indices and Other Financial Indices
The Fund may also purchase and sell (write) call and put options on
securities indices and other financial indices. Options on securities indices
and other financial indices are similar to options on a security or other
instrument except that, rather than settling by physical delivery of the
underlying instrument, they settle by cash settlement. For example, an option on
an index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the differential between
the closing price of the index and the exercise price of the option, which also
may be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount upon exercise
of the option. In addition to the methods described above, the Fund may cover
call options on a securities index by owning securities whose price changes are
expected to be similar to those of the underlying index, or by having an
absolute and immediate right to acquire such securities without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities in its
portfolio.
General Characteristics of Futures
The Fund may enter into financial futures contracts or purchase or sell put
and call options on such futures. Futures are generally bought and sold on the
commodities exchanges where they are listed and involve payment of initial and
variation margin as described below. The sale of futures contracts creates a
firm obligation by the Fund, as seller, to deliver to the buyer the specific
type of financial instrument called for in the contract at a specific future
time for a specified price (or, with respect to index futures and Eurodollar
instruments, the net cash amount). The purchase of futures contracts creates a
corresponding obligation by the Fund, as purchaser, to purchase a financial
instrument at a specific time and price. Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such position
upon exercise of the option.
The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
regulations of the Commodity Futures Trading Commission (the "CFTC") relating to
exclusions from regulation as a commodity pool operator. Those regulations
currently provide that the Fund may use commodity futures and option positions
(i) for bona fide hedging purposes without regard to the percentage of assets
committed to margin and option premiums, or (ii) for other purposes permitted by
the CFTC to the extent that the aggregate initial margin and option premiums
required to establish such non-hedging positions (net of the amount the
positions were "in the money" at the time of purchase) do not exceed 5% of the
net asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on such positions. Typically, maintaining a futures contract
or selling an option thereon requires the Fund to deposit, with its custodian
for the benefit of a futures commission merchant, as security for its
7
<PAGE>
obligations an amount of cash or other specified assets (initial margin) which
initially is typically 1% to 10% of the face amount of the contract (but may be
higher in some circumstances). Additional cash or assets (variation margin) may
be required to be deposited thereafter on a daily basis as the value of the
contract fluctuates. The purchase of an option on financial futures involves
payment of a premium for the option without any further obligation on the part
of the Fund. If the Fund exercises an option on a futures contract it will be
obligated to post initial margin (and potential subsequent variation margin) for
the resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur. The segregation requirements with respect to futures contracts and
options thereon are described below.
Currency Transactions
The Fund may engage in currency transactions with Counterparties in order
to hedge the value of portfolio holdings denominated in particular currencies
against fluctuations in relative value or to enhance potential gain. Currency
transactions include currency contracts, exchange listed currency futures,
exchange listed and OTC options on currencies, and currency swaps. A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional (agreed-upon) difference
among two or more currencies and operates similarly to an interest rate swap,
which is described below. A Fund may enter into over-the-counter currency
transactions with Counterparties which have received, combined with any credit
enhancements, a long term debt rating of A by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or (except for OTC currency options)
whose obligations are determined to be of equivalent credit quality by the
Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will
generally be limited to hedging involving either specific transactions or
portfolio positions. See "Strategic Transactions." Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of the Fund, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended wholly or partially to
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
8
<PAGE>
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value in
relation to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure. For example, the Fund may hold a French security and
the Adviser may believe that French francs will deteriorate against German
marks. The Fund would sell French francs to reduce its exposure to that currency
and buy German marks. This strategy would be a hedge against a decline in the
value of French francs, although it would expose the Fund to declines in the
value of the German mark relative to the U.S. dollar.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which certain of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Adviser considers that the Austrian schilling is
linked to the German deutschemark (the "D-mark"), the Fund holds securities
denominated in schillings and the Adviser believes that the value of schillings
will decline against the U.S. dollar, the Adviser may enter into a contract to
sell D-marks and buy dollars. Proxy hedging involves some of the same risks and
considerations as other transactions with similar instruments. Currency
transactions can result in losses to the Fund if the currency being hedged
fluctuates in value to a degree or in a direction that is not anticipated.
Further, there is the risk that the perceived linkage between various currencies
may not be present or may not be present during the particular time that the
Fund is engaging in proxy hedging. If the Fund enters into a currency hedging
transaction, the Fund will comply with the asset segregation requirements
described below.
Risks of Currency Transactions
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risks that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market which may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
9
<PAGE>
Combined Transactions
The Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions
(including forward currency contracts) and multiple interest rate transactions,
structured notes and any combination of futures, options, currency and interest
rate transactions ("component transactions"), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars
Among the Strategic Transactions into which the Fund may enter are interest
rate, currency and index swaps and the purchase or sale of related caps, floors
and collars. The Fund expects to enter into these transactions primarily for
hedging purposes, including, but not limited to, preservation of return or
spread on a particular investment or portion of its portfolio, protection
against currency fluctuations, as a duration management technique or protection
against an increase in the price of securities the Fund anticipates purchasing
at a later date. Swaps, caps, floors and collars may also be used to enhance
potential gain in circumstances where hedging is not involved although, as
described above, the Fund's net loss exposure resulting from swaps, caps, floors
and collars and other Strategic Transactions entered into for such purposes will
not exceed 3% of the Fund's net assets at any one time. The Fund will not sell
interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain rate of return within a predetermined range of
interest rates or values.
10
<PAGE>
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Currency swaps usually involve the
delivery of a gross payment stream in one designated currency in exchange for
the gross payment stream in another designated currency. Therefore, unlike
interest rate and index swaps, the entire payment stream under a currency swap
is subject to the risk that the other party to the swap will default on its
contractual delivery requirements. The Fund will not enter into any swap, cap,
floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from an NRSRO or which issue debt that is determined to be of equivalent
credit quality by the Adviser. If there is a default by the Counterparty, the
Fund may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed. Swaps, caps, floors and collars are considered illiquid for purposes
of the Fund's policy regarding illiquid securities, unless it is determined,
based upon continuing review of the trading markets for the specific security,
that such security is liquid. The Board of Trustees has adopted guidelines and
delegated to the Adviser the daily function of determining and monitoring the
liquidity of swaps, caps, floors and collars. 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. The staff of the SEC currently takes the position that swaps,
caps, floors and collars are illiquid, and are subject to the Fund's limitation
on investing in illiquid securities.
Eurodollar Contracts
The Fund may make investments in Eurodollar contracts. Eurodollar contracts
are U.S. dollar-denominated futures contracts or options thereon which are
linked to the London Interbank Offered Rate ("LIBOR"), although foreign
currency-denominated instruments are available from time to time. Eurodollar
futures contracts enable purchasers to obtain a fixed rate for the lending of
funds and sellers to obtain a fixed rate for borrowings. The Fund might use
Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed income instruments are
linked.
Risks of Strategic Transactions Outside the United States
When conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) lesser availability than in the United States of data on which
to make trading decisions, (ii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during non-business hours in the
United States, (iii) the imposition of different exercise and settlement terms
and procedures and margin requirements than in the United States, (iv) lower
trading volume and liquidity, and (v) other complex foreign political, legal and
economic factors. At the same time, Strategic Transactions may offer advantages
such as trading in instruments that are not currently traded in the United
States or arbitrage possibilities not available in the United States.
11
<PAGE>
Use of Segregated Accounts
The Fund will hold securities or other instruments whose values are
expected to offset its obligations under the Strategic Transactions. The Fund
will not enter into Strategic Transactions that expose the Fund to an obligation
to another party unless it owns either (i) an offsetting position in securities
or other options, futures contracts or other instruments or (ii) cash,
receivables or liquid, high grade debt securities with a value sufficient to
cover its potential obligations. The Fund may have to comply with any applicable
regulatory requirements designed to make sure that mutual funds do not use
leverage in Strategic Transactions, and if required, will set aside cash and
other assets in a segregated account with its custodian bank in the amount
prescribed. In that case, the Fund's custodian would maintain the value of such
segregated account equal to the prescribed amount by adding or removing
additional cash or other assets to account for fluctuations in the value of the
account. Assets held in a segregated account would not be sold while the
Strategic Transaction is outstanding, unless they are replaced with similar
assets. As a result, there is a possibility that segregation of a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
Special Considerations
Because of the following considerations, shares of the Fund should not be
considered a complete investment program. The following information supplements
the discussion of the risk considerations in the Prospectus.
It is contemplated that most foreign securities will be purchased and sold
in over-the-counter markets (but persons affiliated with the Fund will not act
as principals in such purchases and sales) or on stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market. Foreign
stock markets are generally not as developed or efficient as those in the United
States. While growing in volume, they usually have substantially less volume
than the New York Stock Exchange, and securities of some foreign companies are
less liquid and more volatile than securities of comparable United States
companies. Similarly, volume and liquidity in most foreign bond markets are less
than in the United States and price volatility can at times be greater than in
the United States. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on United States exchanges, although the Fund
will endeavor to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States.
12
<PAGE>
The dividends and interest payable on certain of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes and in some
cases capital gains from such securities may also be subject to foreign tax,
thus reducing the net amount of income or gain available for distribution to the
Fund's shareholders. See "Taxation."
Investors should understand that the expense ratio of the Fund can be
expected to be higher than that of investment companies investing in domestic
securities since the cost of maintaining the custody of foreign securities and
the rate of advisory fees paid by the Fund are higher.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental policies in addition to
those described under "Investment Objective and Policies -- Investment
Restrictions" in the Prospectus. The Fund's fundamental policies cannot be
changed unless the change is approved by the lesser of (i) 67% or more of the
voting securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding voting securities of the Fund. The Fund
may not:
1. 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.
2. 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.
3. 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.
4. Invest more than 25% of the current value of its total assets in any
single industry (not including obligations of the U.S. Government or its
agencies and instrumentalities).
5. Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities the Fund may be
deemed to be an underwriter under the Securities Act of 1933.
6. Purchase real estate or real estate mortgage loans, although the Fund may
purchase marketable securities of companies which deal in real estate,
real estate mortgage loans or interests therein.
7. Purchase securities on margin (except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities).
8. Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts and options on financial
futures contracts and engage in foreign currency exchange transactions.
13
<PAGE>
The following restrictions are not fundamental policies and may be changed
by the Trustees without shareholder approval, in accordance with applicable
laws, regulations or regulatory policy. The Fund may not:
a. Make short sales of securities unless (a) after effect is given to any
such short sale, the total market value of all securities sold short would
not exceed 5% of the value of the Fund's net assets or (b) at all times
during which a short position is open it owns an equal amount of such
securities, or by virtue of ownership of convertible or exchangeable
securities it has the right to obtain through the conversion or exchange
of such other securities an amount equal to the securities sold short.
b. Invest in companies for the purpose of exercising control or management.
c. Purchase the securities of other investment companies, provided that the
Fund may make such a purchase (a) in the open market involving no
commission or profit to a sponsor or dealer (other than the customary
broker's commission), provided that immediately thereafter (i) not more
than 10% of the Fund's total assets would be invested in such securities,
(ii) not more than 5% of the Fund's total assets would be invested in the
securities of any one investment company and (iii) not more than 3% of the
voting stock of any one investment company would be owned by the Fund, or
(b) as part of a merger, consolidation, or acquisition of assets.
d. Purchase or write options, except to the extent described above under
"Strategic Transactions."
e. Invest in interests in oil, gas or other exploration or development
programs.
f. Invest more than 5% of the assets of the Fund in the securities of any
issuers which together with their corporate parent have records of less
than three years' continuous operation, including the operation of any
predecessor, other than obligations issued or guaranteed by the U.S.
Government or its agencies, and securities fully collateralized by such
securities.
g. Invest in securities of any company if any officer or director (Trustee)
of the Fund or of the Fund's investment adviser owns more than 1/2 of 1%
of the outstanding securities of such company and such officers and
directors (Trustees) own in the aggregate more than 5% of the securities
of such company.
h. Invest more than an aggregate of 15% of the net assets of the Fund in (a)
repurchase agreements which are not terminable within seven days, (b)
securities subject to legal or contractual restrictions on resale or for
which there are no readily available market quotations and (c) in other
illiquid securities.
14
<PAGE>
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, except with respect to restriction (g) above.
In order to permit the sale of shares of the Fund in certain states, the
Board may, in its sole discretion, adopt restrictions on investment policy more
restrictive than those described above. Should the Board determine that any such
more restrictive policy is no longer in the best interest of the Fund and its
shareholders, the Fund may cease offering shares in the state involved and the
Board may revoke such restrictive policy. Moreover, if the states involved shall
no longer require any such restrictive policy, the Board may, in its sole
discretion, revoke such policy.
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.
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, the Fund may, from time to time, advertise
certain total return information. The average annual total return of the Fund
for a period is computed by subtracting the net asset value per share at the
beginning of the period from the net asset value per share at the end of the
period (after adjusting for the reinvestment of any income dividends and capital
gain distributions), and dividing the result by the net asset value per share at
the beginning of the period. In particular, the average annual total return of
the Fund ("T") is computed by using the redeemable value at the end of a
specified period of time ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of time ("n") according to the formula P(1+T)n=ERV.
The average annual total return quotations for the Fund for the one and
five year periods ended December 31, 1995, and since inception (December 8, 1988
to December 31, 1995) are 2.14%, 5.73% and 5.14%, respectively. These
performance quotations should not be considered as representative of the Fund's
performance for any specified period in the future.
In addition to average annual return quotations, the Fund may quote
quarterly and annual performance on a net (with management and administration
fees deducted) and gross basis as follows:
15
<PAGE>
Quarter/Year Net Gross
- - --------------------------------------------------------------------------------
1Q89 (0.75)% (0.05)%
2Q89 1.16 1.25
3Q89 11.97 12.37
4Q89 5.67 5.70
1989 18.79 20.20
1Q90 (0.10) 0.29
2Q90 5.81 6.21
3Q90 (18.32) (17.92)
4Q90 4.90 5.31
1990 (9.44) (7.93)
1Q91 6.65 6.96
2Q91 (3.03) (2.70)
3Q91 6.77 7.12
4Q91 1.18 1.64
1991 11.73 13.31
1Q92 (5.09) (4.75)
2Q92 0.62 1.05
3Q92 (5.20) (4.03)
4Q92 (0.55) (0.16)
1992 0.95 0.55
1Q93 7.23 7.57
2Q93 3.11 3.48
3Q93 8.45 8.77
4Q93 15.32 15.64
1993 38.27 40.01
1Q94 (5.87) (5.57)
2Q94 (0.06) 0.22
3Q94 2.84 3.17
4Q94 (3.87) (3.59)
1994 (6.99) (5.83)
Quarter/Year Net Gross
- - --------------------------------------------------------------------------------
1Q95 (5.07) (4.78)
2Q95 2.57 2.86
3Q95 2.41 2.68
4Q95 2.31 2.68
1995 2.01 3.26
16
<PAGE>
These performance quotations should not be considered as representative of
the Fund's performance for any specified period in the future.
The Fund's performance may be compared in sales literature to the
performance of other mutual funds having similar objectives or to standardized
indices or other measures of investment performance. In particular, the Fund may
compare its performance to the Morgan Stanley Europe, Australia, Far East Index
(EAFE) and the Morgan Stanley Europe, Australia, Far East GDP-Index (EAFE-GDP).
The EAFE-Index is generally considered to be representative of the performance
of unmanaged common stocks that are publicly traded in European, Australian and
Far Eastern securities markets and is based on month-end market capitalization.
The EAFE GDP Index is similar to the EAFE-Index, but is based on gross domestic
product weights of each country included in the EAFE Index using year-end data.
Comparative performance may also be expressed by reference to a ranking prepared
by a mutual fund monitoring service or by one or more newspapers, newsletters or
financial periodicals. Performance comparisons may be useful to investors who
wish to compare the Fund's past performance to that of other mutual funds and
investment products. Of course, past performance is not a guarantee of future
results.
17
<PAGE>
MANAGEMENT
Trustees and Officers
The Trustees and executive officers of the Trust are listed below. All
executive officers of the Trust are affiliates of Standish, Ayer & Wood, Inc.,
the Fund's investment adviser.
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*D. Barr Clayson, 7/29/35 Vice President and Trustee Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Chairman and Director,
Boston, MA 02111 Standish International
Management Company, L.P.
Samuel C. Fleming, 9/30/40 Trustee Chairman of the Board
c/o Decision Resources, Inc. and Chief Executive Officer,
1100 Winter Street Decision Resources, Inc.;
Waltham, MA 02154 through 1989, Senior V.P.
Arthur D. Little
Benjamin M. Friedman, 8/5/44 Trustee William Joseph Maier
c/o Harvard University Professor of Political Economy,
Cambridge, MA 02138 Harvard University
John H. Hewitt, 4/11/35 Trustee Trustee, The Peabody Foundation; Trustee,
P.O. Box 307 Visiting Nurse Alliance of Vermont
So. Woodstock, VT 05071 and New Hampshire
*Edward H. Ladd, 1/3/38 Trustee and Vice President Chairman of the Board
c/o Standish, Ayer & Wood, Inc. and Managing Director,
One Financial Center Standish, Ayer & Wood, Inc. since 1990;
Boston, MA 02111 formerly President of Standish, Ayer & Wood, Inc.
Director of
Standish International Management Company, L.P.
Caleb Loring III, 11/14/43 Trustee Trustee, Essex Street Associates
c/o Essex Street Associates (family investment trust office);
P.0. Box 5600 Director, Holyoke Mutual Insurance Company
Beverly Farms, MA 01915
*Richard S. Wood, 5/21/54 President and Trustee Vice President, Secretary,
c/o Standish, Ayer & Wood, Inc. and Managing Director,
One Financial Center Standish, Ayer & Wood, Inc.;
Boston, MA 02111 Executive Vice President and Director,
Standish International Management Company, L.P.
Richard C. Doll, 7/8/48 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President and Director,
Boston, MA 02111 Standish International Management Company, L.P.
James E. Hollis III, 11/21/48 Executive Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
David W. Murray, 5/5/40 Treasurer and Secretary Vice President, Treasurer and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Treasurer,
Boston, MA 02111 Standish International Management Company, L.P.
18
<PAGE>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- - --------------------------------------------------------------------------------------------------------------------
Caleb F. Aldrich, 9/20/57 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA O2111
Beverly E. Banfield, 7/6/56 Vice President Vice President and Compliance Officer,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Assistant Vice President and Compliance Officer,
Boston, MA 02111 Freedom Capital Management Corp.
(1989-1992)
Nicholas S. Battelle, 6/24/42 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Walter M. Cabot, 1/16/33 Vice President Senior Advisor and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center prior to 1991, President,
Boston, MA 02111 Harvard Management Company
Senior Advisor and Director of
Standish International Management Company, L.P.
David H. Cameron, 11/2/55 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Director of
Boston, MA 02111 Standish International Management
Company, L.P.
Karen K. Chandor, 2/13/50 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Lavinia B. Chase, 6/4/46 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Susan B. Coan, 5/1/52 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA O2111
W. Charles Cook II, 7/16/63 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President,
Boston, MA 02111 Standish International Management Company, L.P.
Joseph M. Corrado, 5/13/55 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
19
<PAGE>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- - --------------------------------------------------------------------------------------------------------------------
Dolores S. Driscoll, 2/17/48 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Director,
Boston, MA 02111 Standish International Management Company, L.P.
Mark A. Flaherty, 4/24/59 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President
Boston, MA 02111 Standish International Management Company, L.P.
Maria D. Furman, 2/3/54 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Vice President and Director,
Boston, MA 02111 Standish International Management Company, L.P.
Anne P. Herrmann, 1/26/56 Vice President Mutual Fund Administrator,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Ann S. Higgins, 4/8/35 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Denise B. Kneeland, 8/19/51 Vice President Senior Operations, Manager,
c/o Standish, Ayer &Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center since December 1995 formerly
Boston, MA 02111 Vice President Scudder, Stevens and Clark
Raymond J. Kubiak, 9/3/57 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Phillip D. Leonardi, 4/24/62 Vice President Vice President, Standish, Ayer & Wood, Inc.
c/o Standish, Ayer & Wood, Inc. since November 1993; formerly, Investment Sales,
One Financial Center Cigna Corporation (1993) and
Boston, MA 02111 Travelers Corporation (1984-1993)
Laurence A. Manchester, 5/24/43 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
George W. Noyes, 11/12/44 Vice President President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Director of
Boston, MA 02111 Standish International Management Company, L.P.
Arthur H. Parker, 8/12/35 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Jennifer A. Pline, 3/8/60 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
20
<PAGE>
Name, Address and Date of Birth Position Held Principal Occupation
With Trust During Past 5 Years
- - --------------------------------------------------------------------------------------------------------------------
Howard B. Rubin, 10/29/59 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Executive Vice President and Director
Boston, MA 02111 Standish International Management Company, L.P.
Michael C. Schoeck, 10/24/55 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc. since August, 1993;
One Financial Center formerly, Vice President,
Boston, MA 02111 Commerzbank, Frankfurt, Germany
Vice President,
Standish International Management Company, L.P.
Austin C. Smith, 7/25/52 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Stephen A. Smith, 3/13/49 Vice President Vice President, since November 2, 1993;
c/o Standish, Ayer & Wood, Inc. formerly, Standish, Ayer & Wood, Inc. Consultant
One Financial Center Cambridge Associates
Boston, MA 02111
David C. Stuehr, 3/1/58 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
James W. Sweeney, 5/15/59 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center Executive Vice President and Director,
Boston, MA 02111 Standish International Management Company, L.P.
Ralph S. Tate, 4/2/47 Vice President Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc. since April, 1990;
One Financial Center formerly Vice President, Aetna Life & Casualty
Boston, MA 02111 President and Director,
Standish International Management Company, L.P.
Michael W. Thompson, 3/31/56 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Christopher W. Van Alstyne, 3/24/60 Vice President Vice President,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Formerly Regional Marketing Director,
Boston, MA 02111 Gabelli-O'Connor Fixed Income Management
*Indicates that Trustee is an interested person of the Trust for purposes
of the 1940 Act. Compensation of Trustees and Officers
</TABLE>
21
<PAGE>
Compensation of Trustees and Officers
The Fund pays no compensation to the Trust's Trustees affiliated with the
Adviser or to the Trust's officers. None of the Trust's Trustees or officers
have engaged in any financial transactions (other than the purchase or
redemption of the Fund's shares) with the Trust or the Adviser.
The following table sets forth all compensation paid to the Trust's
Trustees as of the Fund's fiscal year ended
December 31, 1995:
<TABLE>
<CAPTION>
Pension or Retirement Total Compensation
Aggregate Compensation Benefits Accrued as from Fund and
Name of Trustee from the Fund Part of Fund's Expenses Other Funds in Complex*
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
D. Barr Clayson $0 $0 $0
Phyllis L. Cothran** 0 0 0
Richard C. Doll*** 0 0 0
Samuel C. Fleming 950 0 46,000
Benjamin M. Friedman 860 0 41,750
John H. Hewitt 860 0 41,750
Edward H. Ladd 0 0 0
Caleb Loring, III 860 0 41,750
Richard S. Wood 0 0 0
* As of the date of this Statement of Additional Information, there were 18 funds in the fund complex.
** Ms. Cothran resigned as a Trustee effective January 31, 1995.
*** Mr. Doll resigned as a Trustee effective December 6, 1995.
</TABLE>
22
<PAGE>
Certain Shareholders
At February 1, 1996, Trustees and officers of the Trust as a group
beneficially owned (i.e., had voting and/or investment power) less than 1% of
the then outstanding shares of the Fund. At that date, each of the following
persons beneficially owned 5% or more of the then outstanding shares of the
Fund:
Percentage of
Name and Address Outstanding Shares
- - --------------------------------------------------------------------------------
Allendale Mutual Insurance Co. 6%
Allendale Park
P.O. Box 7500
Johnston, RI 02919
Wentworth Institute of Technology 6%
c/o State Street Bank & Trust A/C #SB01
P.O. Box 1992
Boston, MA 02105
Bingham Dana & Gould 6%
Trust Department
150 Federal Street
Boston, MA 02110
Keystone Carbor Company 5.5%
P.O. Box 831575
ATTN: SAS/Mutual Funds
Dallas, TX 75283
The Cannon Foundation Inc. 5%
P.O. Box 548
Concord, NC 28026-0548
Lumber Mill Mutual Insurance 5%
One Speen Street
Framingham, MA 01701-0916
Fletcher Allen Health Care Depreciation Fund 5%
Colchester Avenue
Burlington, VT 05401
Norcal Mutual Insurance Company 5%
50 Fremont Street
San Francisco, CA 94105
Investment Adviser
Standish International Management Company, L.P. (the "Adviser"), serves as
investment adviser to the Fund pursuant to an investment advisory agreement with
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, Senior Adviser and a Director to Standish, and
D. Barr Clayson, the Chairman of the Adviser and a Managing Director of
Standish. The Adviser succeeded Standish as the Fund's investment adviser as of
October 1, 1991.
23
<PAGE>
The following, constituting all of the Directors and all of the
shareholders of Standish, are Standish's controlling persons: Caleb F. Aldrich,
Nicholas S. Battelle, Walter M. Cabot, Sr., David H. Cameron, Karen K. Chandor,
D. Barr Clayson, Richard C. Doll, Dolores S. Driscoll, Mark A. Flaherty, James
E. Hollis II, Raymond J. Kubiak, Edward H. Ladd, Laurence A. Manchester, David
W. Murray, George W. Noyes, Maria D. Furman, Arthur H. Parker, Howard B. Rubin,
Austin C. Smith, David C. Stuehr, James J. Sweeney, Ralph S. Tate, and Richard
S. Wood.
Certain services provided by the Adviser under the advisory agreement are
described in the Prospectus. In addition to those services, the Adviser provides
the Fund with office space for managing its affairs, with the services of
required executive personnel, and with certain clerical services and facilities.
These services are provided without reimbursement by the Fund for any costs
incurred. Under the investment advisory agreement, the Adviser is paid a fee
based upon a percentage of the Fund's average daily net asset value computed as
described in the Prospectus. This fee is paid monthly. The rate at which the fee
is paid is described in the Prospectus. For services to the Fund during the
years ended December 31, 1993, 1994 and 1995, the Adviser received fees of
$575,972, $841,166 and $704,283, respectively.
Pursuant to the investment advisory agreement, the Fund bears expenses of
its operations other than those incurred by the Adviser pursuant to the
investment advisory agreement. Among other expenses, the Fund will pay share
pricing and shareholder servicing fees and expenses; custodian fees and
expenses; legal and auditing fees and expenses; expenses of prospectuses,
statements of additional information and shareholder reports; registration and
reporting fees and expenses; and Trustees' fees and expenses. The Adviser has
voluntarily agreed to limit certain Total Fund Operating Expenses (excluding
brokerage commissions, taxes, litigation, indemnification and other
extraordinary expenses) to 1.60% of the Fund's average daily net assets, and
will reduce its fee or make other arrangements so that expenses will not exceed
such limit. The Adviser may discontinue or modify such limitation in the future
at its discretion, although it has no current intention to do so.
Unless terminated as provided below, the investment advisory agreement
continues in full force and effect for successive periods of one year, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event (ii) by vote of a
majority of the Trustees of the Trust who are not parties to the investment
advisory agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. The investment advisory agreement may be terminated at any time
without the payment of any penalty by vote of the Trustees of the Trust or by
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund or by the Adviser, on sixty days' written notice to the other
parties. The investment advisory agreement terminates in the event of its
assignment as defined in the 1940 Act.
In an attempt to avoid any potential conflict with portfolio transactions
for the Fund, the Adviser and the Trust have adopted extensive restrictions on
personal securities trading by personnel of the Adviser and its affiliates.
These restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings of
securities. These restrictions are a continuation of the basic principle that
the interests of the Fund and its shareholders come before those of the Adviser,
its affiliates and their employees.
24
<PAGE>
Distributor of the Trust
Standish Fund Distributors, L.P. (the "Principal Underwriter"), an
affiliate of the Adviser, serves as the Trust's exclusive principal underwriter
and holds itself available to receive purchase orders for the Fund's shares. In
that capacity, the Principal Underwriter has been granted the right, as agent of
the Trust, to solicit and accept orders for the purchase of the Fund's shares in
accordance with the terms of the Underwriting Agreement between the Trust and
the Principal Underwriter. Pursuant to the Underwriting Agreement, the Principal
Underwriter has agreed to use its best efforts to obtain orders for the
continuous offering of the Fund's shares. The Principal Underwriter receives no
commissions or other compensation for its services, and has not received any
such amounts in any prior year. The Underwriting Agreement shall continue in
effect with respect to the Fund until two years after its execution and for
successive periods of one year thereafter only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding shares or by the Trustees of the Trust or (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Underwriting Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Underwriting Agreement will terminate automatically if assigned by either party
thereto and is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested persons" of the Trust, or by a vote of the holders of a majority of
the Fund's outstanding shares, in any case without payment of any penalty on not
more than 60 days' written notice to the other party. The offices of the
Principal Underwriter are located at One Financial Center, 26th Floor, Boston,
Massachusetts 02111.
REDEMPTION OF SHARES
Detailed information on redemption of shares is included in the Prospectus.
The Fund may suspend the right to redeem shares or postpone the date of
payment upon redemption for more than seven days (i) for any period during which
the New York Stock Exchange is closed (other than customary weekend or holiday
closings) or trading on the exchange is restricted; (ii) for any period during
which an emergency exists as a result of which disposal by the Fund of
securities owned by it or determination by the Fund of the value of its net
assets is not reasonably practicable; or (iii) for such other periods as the SEC
may permit for the protection of shareholders of the Fund.
The Fund intends to pay in cash for all shares redeemed, but under certain
conditions, the Fund may make payment wholly or partly in portfolio securities.
Portfolio securities paid upon redemption of Fund shares will be valued at their
then current market value. The Fund has elected to be governed by the provisions
of Rule 18f-1 under the 1940 Act which limits the Fund's obligation to make cash
redemption payments to any shareholder during any 90-day period to the lesser of
$250,000 or 1% of the Fund's net asset value at the beginning of such period. An
investor may incur brokerage costs in converting portfolio securities received
upon redemption to cash.
25
<PAGE>
PORTFOLIO TRANSACTIONS
The Adviser is responsible for placing the Fund's portfolio transactions
and will do so in a manner deemed fair and reasonable to the Fund and not
according to any formula. The primary consideration in all portfolio
transactions will be prompt execution of orders in an efficient manner at the
most favorable price. Many transactions in foreign equity securities are
executed by broker-dealers in foreign countries in which commission rates are
fixed and, therefore, are not negotiable (as such rates are in the United
States) and are generally higher than in the United States. In selecting
broker-dealers and in negotiating commissions, the Adviser will consider the
firm's reliability, the quality of its execution services on a continuing basis
and its financial condition. When more than one firm is believed to meet these
criteria, preference may be given to firms which also sell shares of the Fund.
In addition, if the Adviser determines in good faith that the amount of
commissions charged by a broker is reasonable in relation to the value of the
brokerage and research services provided by such broker, the Fund may pay
commissions to such broker in an amount greater than the amount another firm may
charge. Research services may include (i) furnishing advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities, (ii)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts, and (iii) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing other accounts; not all of
these services may be used by the Adviser in connection with the Fund. The
investment advisory fee paid by the Fund under the advisory agreement will not
be reduced as a result of the Adviser's receipt of research services.
For the fiscal years ended December 31, 1993, 1994 and 1995, brokerage
commissions paid by the Fund on portfolio transactions totaled $447,337,
$240,006, and $439,738, respectively. Brokerage commissions of $439,738 paid
during the fiscal year ended December 31, 1995 were paid on portfolio
transactions aggregating $208,418,956 executed by brokers who provided research
and other statistical and factual information. At December 31, 1995, the Fund
held the following amounts of securities of its regular brokers or dealers:
Prudential Corp. (58,534), Cie Financiere Paribus (122,008), Societe Generale
French Ord (284,039), Morgan Stanley Asia Pacific Fund (193,937), Daiwa
Securities (701,883).
The Adviser places portfolio transactions for other advisory accounts. The
Adviser will seek to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities for the Fund and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations, the main factors considered by the Adviser will be the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held, and opinions of the persons
responsible for recommending the investment.
26
<PAGE>
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is calculated each day on which the
New York Stock Exchange is open as of the close of regular trading (currently
4:00 p.m. New York City time). Currently the New York Stock Exchange is not open
on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset value
of the Fund's shares is computed by dividing the value of all securities and
other assets of the Fund less all liabilities by the number of shares
outstanding, and rounding to the nearest cent per share. Expenses and fees,
including the investment advisory fee, are accrued daily and taken into account
for the purpose of determining net asset value.
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. 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.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of regular trading on the New York Stock
Exchange. The values of such securities used in computing the net asset value of
the Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of regular trading on the
New York Stock Exchange. Occasiony, events which affect the values of such
securities and such exchange rates may occur between the times at which they are
determined and the close of regular trading on the New York Stock Exchange and
will therefore not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities are valued at their fair value as determined
in good faith by the Trustees.
THE FUND AND ITS SHARES
The Fund is an 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, as amended from time to time (the "Declaration"). Under the
Declaration, the Trustees have authority to issue an unlimited number of shares
of beneficial interest, par value $.01 per share, of the Fund. Each share
represents an equal proportionate interest in the Fund with each other share and
27
<PAGE>
is entitled to such dividends and distributions as are declared by the Trustees.
Shareholders are not entitled to any preemptive, conversion or subscription
rights. All shares, when issued, will be fully paid and non-assessable by the
Trust. Upon any liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets available for distribution.
Pursuant to the Declaration, the Trustees may create additional funds by
establishing additional series of shares in the Trust. The establishment of
additional series would not affect the interests of current shareholders in the
Fund. As of the date of this Statement of Additional Information, the Trustees
have established fourteen other series of the Trust that publicly offer their
shares. Pursuant to the Declaration, the Board may establish and issue multiple
classes of shares for each series of the Trust. As of the date of this Statement
of Additional Information, the Trustees do not have any plan to establish
multiple classes of shares for the Fund. Pursuant to the Declaration of Trust
and subject to shareholder approval (if then required), the Trustees may
authorize the Fund to invest all of its investable assets in a single open-end
investment company that has substantially the same investment objectives,
policies and restrictions as the Fund. As of the date of this Statement of
Additional Information, the Board does not have any plan to authorize the Fund
to so invest its assets.
All Fund shares have equal rights with regard to voting and shareholders of
the Fund have the right to vote as a separate class with respect to matters as
to which their interests are not identical to those of shareholders of other
classes of the Trust, including the approval of an investment advisory contract
and any change of investment policy requiring the approval of shareholders.
Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Declaration disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of this disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or a Trustee. The
Declaration also provides for indemnification from the assets of the Trust for
all losses and expenses of any Trust shareholder held liable for the obligations
of the Trust. Thus, the risk of a shareholder incurring a financial loss on
account of his or its liability as a shareholder of the Trust is limited to
circumstances in which both inadequate insurance existed and the Trust would be
unable to meet its obligations. The possibility that these circumstances would
occur is remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Delaration also provides that no series of the
Trust is liable for the obligations of any other series. The Trustees intend to
conduct the operations of the Trust to avoid, to the extent possible, ultimate
liability of shareholders for liabilities of the Trust.
TAXATION
Each series of the Trust, including the Fund, is treated as a separate
entity for accounting and tax purposes. The Fund has qualified and elected to be
treated as a "regulated investment company" under Subchapter M of the Code and
intends to continue to so qualify in the future. As such and by complying with
28
<PAGE>
the applicable provisions of the Code regarding the sources of its income, the
timing of its distributions, and the diversification of its assets, the Fund
will not be subject to Federal income tax on its investment company taxable
income (i.e., all income, after reduction by deductible expenses, other than its
"net capital gain," which is the excess, if any, of its net long-term capital
gain over its net short-term capital loss) and net capital gain which are
distributed to shareholders in accordance with the timing requirements of the
Code.
The Fund will be subject to a 4% non-deductible federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, it will also not be required to pay any Massachusetts income tax.
The Fund will not distribute net capital gains realized in any year to the
extent that a capital loss is carried forward from prior years against such
gain. For federal income tax purposes, the Fund is permitted to carry forward a
net capital loss in any year to offset its own net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in federal income
tax liability to the Fund and, as noted above, would not be distributed as such
to shareholders.
Limitations imposed by the Code on regulated investment companies like the
Fund may restrict the Fund's ability to enter into futures, options and currency
forward transactions.
Certain options, futures and forward foreign currency transactions
undertaken by the Fund may cause the Fund to recognize gains or losses from
marking to market even though its positions have not been sold or terminated and
affect the character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or loss) and timing
of some capital gains and losses realized by the Fund. Also, certain of the
Fund's losses on its transactions involving options, futures or forward
contracts and/or offsetting portfolio positions may be deferred rather than
being taken into account currently in calculating the Fund's taxable income or
gain. Certain of the applicable tax rules may be modified if the Fund is
eligible and chooses to make one or more of certain tax elections that may be
available. These transactions may therefore affect the amount, timing and
character of the Fund's distributions to shareholders. The Fund will take into
account the special tax rules (including consideration of available elections)
applicable to options, futures or forward contracts in order to minimize any
potential adverse tax consequences.
The federal income tax rules applicable to interest rate or currency swaps,
caps, floors and collars are unclear in certain respects, and the Fund may be
required to account for these instruments under tax rules in a manner that,
under certain circumstances, may limit its transactions in these instruments.
29
<PAGE>
If the Fund acquires stock in certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. Certain elections may, if available, ameliorate these adverse tax
consequences, but any such election would require the Fund to recognize taxable
income or gain without the concurrent receipt of cash. The Fund may limit and/or
manage its stock holdings in passive foreign investment companies to minimize
its tax liability or maximize its return from these investments.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities, if
any, certain foreign currency futures and options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders. Any such
transactions that are not directly related to the Fund's investment in stock or
securities, possibly including speculative currency positions or currency
derivatives not used for hedging purposes, may increase the amount of gain it is
deemed to recognize from the sale of certain investments held for less than
three months, which gain is limited under the Code to less than 30% of its
annual gross income, and could under future Treasury regulations produce income
not among the types of "qualifying income" from which the Fund must derive at
least 90% of its annual gross income.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in the Code.
Specifically, if more than 50% of the value of the Fund's total assets at the
close of any taxable year consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received) their
pro rata shares of foreign income taxes paid by the Fund even though not
actually received by them, and (ii) treat such respective pro rata portions as
foreign income taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign income taxes paid by the Fund, although
30
<PAGE>
such shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credit. Tax-exempt shareholders will ordinarily not benefit from this election.
Each year that the Fund files the election described above, its shareholders
will be notified of the amount of (i) each shareholder's pro rata share of
foreign income taxes paid by the Fund and (ii) the portion of Fund dividends
which represents income from each foreign country.
Distributions from the Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Fund's Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to capital gains.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the amount of cash they would have received had they elected to receive
the distributions in cash, divided by the number of shares received.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price is often attributable to undistributed net investment income
and/or realized or unrealized appreciation in the Fund's portfolio.
Consequently, subsequent distributions from such income and/or appreciation may
be taxable to such investor even if the net asset value of the investor's shares
is, as a result of the distributions, reduced below the investor's cost for such
shares, and the distributions in reality represent a return of a portion of the
purchase price.
Upon a redemption (including a repurchase) of shares of the Fund, a
shareholder may realize a taxable gain or loss, depending upon the difference
between the redemption proceeds and the shareholder's tax basis in his shares.
Such gain or loss will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands and will be long-term or short-term,
depending upon the shareholder's tax holding period for the shares. Any loss
realized on a redemption may be disallowed to the extent the shares disposed of
are replaced with other shares of the Fund within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of, such as
pursuant to automatic dividend reinvestments. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized upon the redemption of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such shares.
31
<PAGE>
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
ADDITIONAL INFORMATION
The Fund's Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission, which may be obtained from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment
of the fee prescribed by the rules and regulations promulgated by the
Commission.
EXPERTS AND FINANCIAL STATEMENTS
The financial statements as of December 31, 1995 included in this Statement
of Additional Information have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report appearing elsewhere
herein, and have been so included in reliance upon the authority of the report
of Coopers & Lybrand L.L.P. as experts in accounting and auditing. The Fund's
financial highlights for the fiscal years ended December 31, 1990, 1991 and 1992
were audited by Deloitte & Touche L.L.P., independent auditors, and have been
similarly included in reliance upon the expertise of that firm. Coopers &
Lybrand L.L.P., independent accountants, will audit the Fund's financial
statements for the fiscal year ending December 31, 1996.
32
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Financial Statements for the Year Ended
December 31, 1995
1
<PAGE>
Standish, Ayer & Wood Investment Trust
Chairman's Message
January 29, 1996
Dear Standish, Ayer & Wood Investment Trust Shareholder:
I am pleased to have an opportunity to review the major developments at
Standish, Ayer & Wood during this past year as they relate to the activities of
the Investment Trust. The major news for our clients in 1995 was the spectacular
performance of the U.S. investment markets. While we would, of course, like to
claim credit for producing the full extent of these splendid returns, the
reality is obvious: The markets themselves are beyond our control. For the year
as a whole, U.S. stocks, as represented by the Standard and Poor's 500 Index,
produced a total return of 37.6%, and higher grade intermediate-term bonds, as
represented by the Lehman Brothers Aggregate Index, provided a total return of
18.5%. Nearly as surprising, stock and bond prices marched steadily upward
throughout the year, a persistent and almost uninterrupted advance.
Even after the subdued markets of 1994, neither we nor most other investment
managers expected 1995 to be anywhere near as good as it turned out to be. In
this context, we are generally pleased by our investment performance. In most
asset classes, we kept pace with or modestly exceeded market returns. We adhered
to our established investment philosophies, which are designed to add reasonably
consistent increments of value. Our clients seem to be pleased by our efforts as
we continue to have very little client turnover.
As a firm, we have registered moderate growth during the year. Reflecting some
flow of new clients as well as market appreciation, our clients' assets under
management at the end of 1995 totalled $29.4 billion, an increase from $24.4
billion at the end of 1994. We are particularly pleased by the growth in new
assets managed for insurance companies and by the increases in assets of both
large capitalization and small capitalization U.S. common stocks.
The asset class of greatest disappointment in 1995 was international equities.
Not only did the asset class continue to provide subpar returns, but our
portfolios underperformed the international equity markets. These results
reflect judgments early in 1995 to hedge a portion of the currency exposure back
to dollars and to have a moderate stake in emerging markets. While we believe we
have rectified those problems, we are not satisfied with the results and are
working vigorously to improve future performance. We are also counseling our
clients not to lose faith in the international equity asset class despite its
recent disappointing returns.
The figure for total Standish assets under management includes about $1.6
billion managed in conjunction with Standish International Management Company,
L.P. (SIMCO), our affiliate that manages overseas assets for domestic clients
and U.S. assets for overseas clients. It also includes $3.9 billion in the
Standish Investment Trust, our mutual fund organization. In addition, the asset
total reflects an increase over the last few years in the assets we manage in
private, non-mutual fund vehicles.
We introduced two new mutual funds at mid-year 1995, namely the Standish Fixed
Income Fund II (which is designed to parallel the Standish Fixed Income Fund but
exclude the purchase of both nondollar bonds and below-investment-grade
securities), and the Standish Controlled Maturity Fund (which is designed for
investors who wish less volatility and interest rate risk than traditional
intermediate-maturity bonds).
At the beginning of 1996, we introduced two additional mutual funds, the
Standish Tax-Sensitive Equity Fund and the Standish Small Cap Tax-Sensitive
Equity Fund. At Standish we have noted for some time the adverse impact for
taxable investors of high portfolio turnover, which triggers capital gains,
possibly including short-term gains that may result in an even greater tax
liability for investors. We believe there is a major opportunity through both
separate account management and these funds to improve aftertax returns by
limiting the portfolio turnover and managing capital gains.
2
<PAGE>
During 1995, Standish acquired all remaining interests in the business of the
joint venture between Consolidated Investment Corp. (CIC) and Standish, entered
into over seven years ago. Consolidated had been formed by Trigon (previously
Blue Cross/Blue Shield of Virginia) to manage shorter-term taxable and tax
exempt fixed income portfolios. We and Trigon agreed that it was best to have
this unit operating under one owner.
Standish continues to be proud of its structure as an independent management
firm with ownership in the hands of investment professionals active in the
business. There were no changes during 1995 either in corporate structure or in
the people who own the enterprise.
We appreciate the opportunity to serve you, and we remain confident that we have
the resources and the organization to do a superior job. We will be working hard
to fulfill your expectations in 1996.
Sincerely yours,
Edward H. Ladd
Chairman
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Management Discussion
The 1995 return for the Standish International Equity Fund (SIEF) was +2.14%
whereas the return on the GDP weighted Europe, Australia and Far East Index
(EAFE) was +11.15%. The market capitalization weighted EAFE index returned
11.22%. The most important investment decisions during 1995 were:
o a gradual elimination of our defensive currency hedge during the course of
the year.
o reducing our emerging market weight to 15% around the middle of the year.
o maintaining our overweight position in the Japanese equity market for most
of the year.
o a reduction in the weight assigned to the core European markets of
Germany, France and the U.K., and a corresponding build up in the smaller
markets of Norway, Denmark and Spain.
A number of key events had significant influence on the Fund's results.
o Currencies continued to strengthen against the U.S. dollar during the
first half of the year. Our remaining hedged currency position affected
results negatively.
o Emerging markets disappointed for the second year, underperforming the
EAFE index by 16.2%, adversely affecting relative performance versus the
index.
o The Japanese market fell steeply during the first half of the year. Though
it managed to recover by 35% between July and December, full year
performance remained weak.
All in all, 1995 was a year of two halves. The dollar's decline during the early
months affected most markets negatively. When the greenback started to rally
during the second quarter, European markets rose. Japan, however, was still hurt
by its banking crisis, trade conflicts and weak political leadership.
During the second half of the year the picture reversed. Japan rose steeply
helped by a declining yen and first indications of economic recovery as well as
hope of an end of the banks' troubles. In Europe, however, doubts emerged about
the sustainability of growth prospects for both 1995 and 1996. This resulted in
a general downward revision of earnings expectations. Markets therefore
struggled to make significant headway.
Emerging markets, finally, never received the foreign portfolio inflows on which
they critically depend. U.S. investors stayed at home, supporting their own
highly successful market.
We made three fundamental changes to the management of the Fund:
1. We decided to fully expose the portfolio to foreign currencies from the
end of 1995 thereby choosing to abstain from significant currency hedging
in the future.
2. We also decided to cap our emerging markets weight at 15%. This level
gives us sufficient exposure to an attractive asset class, without
dominating Fund results in a down year for emerging markets.
3. Finally, we thought it appropriate to switch benchmarks from the market
cap weighted EAFE index to the GDP weighted index. The rationale is
largely a more balanced spread of market weights in this benchmark. This
should, over time, result in lower risk for our investors through better
diversification.
Our use of derivatives in the fund was largely restricted to currency hedging
and the use of index futures in Japan, U.K. Spain and Italy, which represents an
efficient way to gain market exposure. During the first quarter we were
sporadically engaged in call and put writing activities on major market indices.
We remain confident that international stocks are an attractive investment
compared to other asset classes. Our Fund retains a balanced mix of large and
small developed markets as well as a good cross section of inexpensive emerging
markets. We should be well positioned to participate in the opportunities ahead
of us.
Michael Schoeck
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Comparison of Change in Value of $100,000 Investment in Standish
International Equity Fund and the EAFE GDP Index
The following is a description of the graphical chart omitted from electronic
format:
This line chart shows the cumulative performance of the Standish International
Equity Fund compared with the EAFE GDP Index for the period December 8, 1988 to
December 31, 1995, based upon a $100,000 investment. Also included are the
average annual total returns for one year, five year, and since inception.
5
<PAGE>
<TABLE>
<CAPTION>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Portfolio of Investments
December 31, 1995
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- -----------------
Common and Preferred Stocks and Warrants- 85.1%
- - ---------------------------------------------------------------
Commingled Funds- 2.8%
- - ---------------------------------------------------------------
<S> <C> <C>
GT Greater Europe Fund (USD) 38,800 $ 485,000
Latin America Invest Fund (USD) 17,400 256,650
Latin American Equity Fund Inc (USD) 19,500 251,062
Morgan Stanley Asia Pacific Fund (USD) 14,500 193,937
TCW Emerging Markets OPP Fund(USD) 47,200 477,900
-----------------
Total Commingled $ 1,664,549
AFRICA- 0.4%
South Africa- 0.4%
- - ---------------------------------------------------------------
New South Africa Fund (USD) 17,000 $ 255,000
-----------------
Total Africa $ 255,000
CENTRAL/SOUTH AMERICA- 3.3%
Argentina- 0.7%
- - ---------------------------------------------------------------
Cointel Cvt Pfd 7% 7,000 $ 395,500
-----------------
Brazil- 1.5%
- - ---------------------------------------------------------------
Banco Bradesco Regd Pfd 9,494,900 $ 83,040
Aracruz Cellulose Adr (USD) 2,800 21,700
Electricas Brasil Adr (USD) 6,700 90,450
Telecomunicacoes Brasileiras (USD) 5,200 245,700
Usiminas Adr (USD) 3,200 25,600
Vale Do Rio Doce Adr (USD) 3,400 139,400
Banco Itau Pref 181,700 50,664
Energetica de Minas** 2,408,300 53,274
Cervejaria Brahma Pref 137,200 56,468
Itausa Pref 76,800 41,881
Petroleo Brasile** 442,500 37,785
Telecomunicacoes de Sao Paulo** 277,600 40,844
-----------------
$ 886,806
-----------------
Chile- 1.1%
- - ---------------------------------------------------------------
Chile Fund (USD) 25,200 $ 655,200
-----------------
Total Central/South America $ 1,937,506
6
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- -----------------
EUROPE- 39.1%
Austria- 1.4%
- - ---------------------------------------------------------------
Austrian Airlines** 18$ 30,665
Constantia Iso Holdings** 198 10,973
Constantia Verpackun** 50 3,389
Creditanstalt Bank 2,673 147,868
Ea Generali 342 102,211
Lenzing Aus Ord 295 24,843
Oemv 1,395 120,794
Oest Elektrizitaets 1,476 88,516
Oesterreichische Brau Bete Ag** 605 27,481
Radex-Heraklith Industries CS** 729 22,003
Wienerberger Baustoff Ind 370 73,231
Z-laenderbank Bank** 2,617 210,810
-----------------
$ 862,784
-----------------
Denmark- 6.0%
- - ---------------------------------------------------------------
Carlsberg B 5,251$ 292,598
D/S 1912 B Danish 2,200 419,176
D/S Svendborg B 1,500 412,525
Danisco Ord 6,569 316,447
Den Danske Bank** 6,365 438,192
FLS Industries B 1,859 143,686
ISS International Service System B 3,493 78,483
Novo-Nordisk 3,403 464,882
Sophus Berendsen As Ord Cl B 2,823 317,145
Tele Danmark B 7,366 401,182
Unidanmark** 6,052 299,157
-----------------
$ 3,583,473
-----------------
Finland- 1.6%
- - ---------------------------------------------------------------
Cultor Free Finland 80$ 33,044
Kansallis Osake Pankki 94,900 78,397
Kesko Oy Osake 5,200 64,555
Kone B Free 700 58,309
Kymmene Oy 3,500 92,363
Metra AB 700 28,753
Nokia Corp - Adr A (USD) 8,800 342,100
Outokumpu Oy 5,400 85,502
Repola 6,900 129,836
Sampo Insurance Co. 800 42,774
-----------------
$ 955,633
-----------------
7
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- ----------------
France- 8.0%
- - ---------------------------------------------------------------
Accor French Ord 64 $ 83,327
Air Liquide French Ord 1,675 276,806
Alcatel Alsthom Ords 1,615 138,941
Axa 3,525 237,035
Banque Nationale De Paris 2,200 99,028
Bouygues French 50 Frf Ord 1,200 120,623
Carrefour Supermarche 540 326,916
Casino (Etabl Econ) French Ord 1,500 43,617
Chargeurs French Ord 287 57,429
Compagnie De St Gobain 1,696 184,547
Compagnie Financiere De Suez 4,349 179,011
Compagnie Financiere Paribas 2,230 122,008
Credit Foncier De France 1,215 17,529
Generale Des Eaux French Ord 2,652 264,200
Groupe Danone 1,471 242,194
L'Oreal Frf Ord 1,155 308,549
Lafarge Coppee Ord Frf25 2,090 134,408
Le Grand French Ord Frf10 850 130,942
LVMH Louis Vuitton Moet Hennesy 1,650 342,944
Lyonnaise Des Eaux Ord 1,338 128,551
Peugeot Sa 1,275 167,835
Rhone Poulenc 3,400 72,676
Sanofi French Ord 1,700 108,737
Societe Generale French Ord 2,304 284,039
Societe Nat Elf Aquitaine 4,976 365,836
Thomson C S F Frf20 French Ord 2,703 60,091
Total CIE Francaise Petroles 3,600 242,445
-----------------
$ 4,740,264
-----------------
Germany- 3.2%
- - ---------------------------------------------------------------
Allianz Ag Holdg Ger Reg Shs $3 161,495
Bayer Ag German Ord 611 160,935
Bayerische Vereins Bank Ag Ger Ord 2,030 60,179
BMW Ord 131 67,004
Daimler Benz Ag German Ord 312 156,760
Deutsche Bank 5dm 3,440 162,712
Douglas Holding 770 27,113
Dresdner Bank 5dm 2,190 58,369
Henkel N V Pref 161 60,445
Hoechst Ord 217 58,742
Linde Ag German Ord 119 69,313
Mannesmann Ag German Ord 346 109,964
Preussag Ag Ger 478 133,388
8
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- ---------------
Germany (continued)
- - ---------------------------------------------------------------
Rheinisch-Westfael Elecktrik Pfd Cnv 230 64,022
Siemens Ag German Ord 530 289,527
Veba Ag German Ord 5,710 241,989
-----------------
$ 1,881,957
-----------------
Norway- 7.6%
- - ---------------------------------------------------------------
Bergensen A 11,423 $ 226,997
Christiana Bank 145,500 337,326
Den Norske Bank 143,600 371,422
Dyno Industrier 6,044 141,077
Hafslund A Free 18,863 490,867
Kvaerner B Free 9,767 326,563
Norsk Hydro 22,579 947,231
Norske Skog A Free 7,024 206,047
Orkla Borregaard 7,037 349,042
Petroleum Geo Services 6,200 153,518
Saga Petroleum 30,500 406,468
Transocean Drilling 11,300 195,147
Uni Storebrand As 64,900 358,247
-----------------
$ 4,509,952
-----------------
Portugal- 1.3%
- - ---------------------------------------------------------------
Portugal Fund (USD) 69,300 $ 770,962
-----------------
Spain- 6.8%
- - ---------------------------------------------------------------
Acerinox Sa 70$ 70,926
Acerinox Rights 120 12,089
Alba Finance Corp. Sa 1,524 93,475
Argentaria Corp Bancaria de Espana 6,147 252,360
Autopistas Acesa Ords 11,957 135,484
Banco Bilbao Vizcaya Ord 10,502 376,827
Banco Central S A Spanish Regstrd 6,756 136,462
Banco De Santander Par Esp 750 7,281 364,080
Corporacion Mapf 1,764 98,346
Ebro Agicolas 5,938 60,457
Empresa Nacional Elec (Endesa) 11,688 659,303
Formanto de Construcciones y Contra 719 54,903
Gas Natural Sdg 1,805 280,109
Iberdrola Spanish Ord Esp 500 40,574 369,793
Inmobiliaria Metrop 2,312 75,934
Repsol S A 13,158 429,453
Telefonica Nacional De Espana 40,374 556,928
-----------------
$ 4,026,929
-----------------
9
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- -----------------
United Kingdom- 3.2%
- - ---------------------------------------------------------------
Abbey National 6,482 $ 63,961
British Petroleum Co. Plc 15,449 129,074
B.A.T. Industries Ltd English Ord 9,853 86,753
Barclay's Bank Plc Ord Stk $1 9,480 108,694
BOC Group 3,393 47,431
Boots Plc Co. 7,407 67,285
British Gas Plc 20,202 79,612
British Telecom Plc Ord 25p 14,683 80,643
BTR Ltd. Ord 18,910 96,525
Cable & Wireless Fplc Eng Reg 10,756 76,764
Cadbury Schweppes Fplc Eng Reg 8,321 68,617
Carlton Communications 5,921 88,695
General Electric Ltd 12,188 67,129
Glaxo Holdings Plc 9,043 128,376
Grand Metropolitan 10,065 72,379
Guinness Plc English Ord 25p 8,671 63,700
Hanson Trust Plc English Ord 25p 17,255 51,534
Lloyd TSB Group 18,892 97,023
Markes & Spencer Plc English Ord 16,026 111,889
Prudential Corp. 9,102 58,535
Rank Organisation 11,361 82,143
RTZ Ords Regd** 4,332 62,909
Unilever Ltd Ord 5p Shs GBP 3,095 63,505
Zeneca Group Ord 4,196 81,083
-----------------
$ 1,934,259
-----------------
Total Europe $ 23,266,213
PACIFIC RIM- 39.5%
Australia- 0.0%
- - ---------------------------------------------------------------
Southern Equity 210 $ 0
-----------------
India- 1.0%
- - ---------------------------------------------------------------
Arvind Mills Gdr (USD) 7,587 $ 31,107
Bombay Fund** (USD) 44,400 377,400
Grasim Gdr (USD) 5,263 105,260
Reliance Industries Gdr (USD) 4,878 65,267
S.I.V. South India Viscos 3Gdr+1wt (USD) 2,782 22,256
-----------------
$ 601,290
-----------------
10
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- -----------------
Indonesia- 1.5%
- - ---------------------------------------------------------------
Astra International** 63,900 $ 132,601
Bank International Indonesia 14,000 46,330
Ciputra Development** 20,000 31,455
Hanjaya Mandala Sampoerna 16,700 173,639
Indah Kiat Pulp & Paper** 41,866 30,636
Indocement Tunggal Prakarsa** 52,600 176,367
Indorama Synthetics** 16,250 58,745
International Nickel Indonesia** 17,200 32,311
Inti Indorayon Utama** 15,000 15,727
Japfa Comfeed 14,600 7,175
Kalbe Farma 28,780 97,442
Sumalindo Fgn Shares 16,900 13,659
Tjiwi Kimia** 575 527
Unilever Indonesia 5,071 60,923
-----------------
$ 877,537
-----------------
Japan- 31.7%
- - ---------------------------------------------------------------
Asahi Bank 33,000 $ 414,292
Bank of Tokyo 23,000 402,028
Bridgestone Corp. 33,000 522,646
Canon Inc. 17,000 307,001
Dai Nippon Printing 19,000 321,101
Dai-ichi Kangyo Bank 30,000 588,122
Daiwa Securities 46,000 701,883
Fuji Bank 27,000 594,495
Fuji Photo Film 10,000 287,784
Fujitsu Ltd. 42,000 466,441
Hitachi Ltd. 50,000 502,173
Industrial Bank of Japan 25,000 755,673
Ito Yokado 12,000 737,035
Japan Airlines 43,000 284,452
Kawasaki Steel 78,000 271,173
Kinki Nippon Railway 62,000 467,021
Kobe Steel Ltd.** 74,000 227,967
Matsushita Electric 24,000 389,377
Mitsubishi Corp. 32,000 392,467
Mitsubishi Heavy 221,000 1,756,475
Mitsubishi Trust 26,000 431,869
Mitsui & Co 73,000 638,706
Mitsui Trust & Banking 17,000 185,514
Nippon Denso Ltd. 12,000 223,660
Nippon Express 41,000 393,568
Nippon Steel Corp. 126,000 430,748
11
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- -----------------
Japan (continued)
- - ---------------------------------------------------------------
Nissan Motors 51,000 $ 390,565
NKK Corp.** 159,000 426,866
Nomura Securities Co. 2,000 43,457
Osaka Gas Co. Ltd. 103,000 355,104
Sakura Bank 41,000 518,686
Sankyo Co. 16,000 358,474
Seven-Eleven Japan 5,000 351,521
Shimizu Corp. 64,000 648,962
Sumitomo Bank 30,000 634,476
Sumitomo Corp. 55,000 557,701
The Tokyo Electric Co. 13,130 349,964
Tokai Bank 28,000 389,377
Tokyo Gas 114,000 400,734
Toyota Motor 35,000 740,222
-----------------
$ 18,859,780
-----------------
Korea- 1.2%
- - ---------------------------------------------------------------
Korea Equity Fund (USD) 66,200 $ 546,150
Korean Investment Fund Inc. (USD) 18,500 187,312
-----------------
$ 733,462
-----------------
Malaysia- 1.5%
- - ---------------------------------------------------------------
Edaran Otomobil Nasional 3,000 $ 22,563
Genting Berhad 11,000 91,829
Magnum Corporation 12,000 22,681
Malayan Banking Berhard 19,000 160,110
Malaysian International Shipping 11,000 28,805
Public Bank 14,000 19,626
Resorts World 16,000 85,686
Sime Darby 37,200 98,878
Technology Resource Industries 15,000 44,300
Telecom Malaysia Bhd 16,000 124,749
Tenaga National 20,000 78,756
United Engineers Bhd 14,000 89,309
-----------------
$ 867,292
-----------------
Taiwan- 1.4%
- - ---------------------------------------------------------------
ROC Taiwan Fund (USD) 12,200 $ 128,100
Taiwan Index Fund (USD) 73,700 700,150
-----------------
$ 828,250
-----------------
12
<PAGE>
Portfolio of Investments
(continued)
Value
Security Shares (Note 1A)
- - --------------------------------------------------------------- ----------------- -----------------
Thailand- 1.2%
- - ---------------------------------------------------------------
Thai Fund Inc. Com (USD) 32,400 $ 724,950
-----------------
Total Pacific Rim $ 23,492,561
-----------------
Total Common and Preferred Stocks and Warrants $ 50,615,829
----------------
(identified cost, $47,855,062)
Par Value
Bonds- 9.2% Rate Maturity Value (Note 1A)
- - --------------------------------------------------------------- --------- ----------- --------------- -----------------
Convertible Bonds- 0.5%
- - ---------------------------------------------------------------
Essar Gujarat Cvt 5.50 8/5/$8 50,000 $ 48,750
Industrial Credit & Invt ++ 2.50 4/3/00 180,000 147,150
Gujarat Ambuja Cvt ++ 3.50 6/30/99 40,000 52,800
Sterlite Industries Ltd ++ 3.50 6/30/99 50,000 41,000
-----------------
$ 289,700
-----------------
Federal Agency Bonds- 5.7%
- - ---------------------------------------------------------------
Tennessee Valley Authority Notes* 4.13 01/12/96 1,400,000 $ 1,399,594
Federal Farm Credit Bank Notes* 5.66 02/01/96 500,000 500,234
Federal Home Loan Mortgage Corp. Notes* 7.24 02/05/96 500,000 500,891
Federal Home Loan Mortgage Corp. Notes* 6.84 02/28/96 1,000,000 1,002,158
-----------------
$ 3,402,877
-----------------
U.S. Treasury Bonds- 3.0%
- - ---------------------------------------------------------------
U.S. Treasury Notes* 5.88 05/31/96 1,750,000 $ 1,754,375
-----------------
Total Bonds $ 5,446,952
-----------------
(identified cost- $53,346,473)
Par Value
Short Term Obligations- 0.8% Rate+ Maturity Value (Note 1A)
- - --------------------------------------------------------------- --------- ----------- ----------------- -----------------
U.S. Treasury Bills- 0.5%
- - ---------------------------------------------------------------
U.S. Treasury Bills* 5.06 03/14$96 300,000 $ 297,042
-----------------
Federal Agency Discount Notes- 0.3%
- - ---------------------------------------------------------------
Federal National Motrgage Association 5.60 03/06/96 200,000 $ 198,060
-----------------
Total Short Term Obligations $ 495,102
-----------------
(identified cost $494,494)
13
<PAGE>
Portfolio of Investments
(continued)
Value
(Note 1A)
-----------------
Total Investments- 95.1% $ 56,557,883
-----------------
(identified cost $53,840,967)
Other assets, less liabilities- 4.9% $ 2,915,383
-----------------
Net Assets- 100% $ 59,473,266
=================
* Denotes all or part of a security pledged as a margin deposit (see note 6)
** Non-income producing security
+ Rate noted is yield to maturity (unaudited)
++ This security is restricted but eligible for resale under 144A
(USD) U.S. dollar denominated
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Statement of Assets and Liabilities
December 31, 1995
Assets
<S> <C> <C>
Investments, at value (Note 1A) (identified cost, $53,840,967) $56,557,883
Cash and foreign currency, at value (cost, $2,404,024) 2,394,413
Receivable for investments sold 409,551
Interest and dividends receivable 287,886
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 93,974
Receivable for foreign dividend tax reclaims 114,110
----------------
Total assets $59,857,817
Liabilities
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) $163,380
Payable for daily variation margin on financial futures contract (Note 6) 3,183
Accrued investment advisory fee (Note 2) 144,253
Accrued trustee fees ( Note 2) 715
Accrued expenses and other liabilities 73,020
----------------
Total liabilities $384,551
----------------
Net Assets $59,473,266
================
Net Assets consist of
Paid-in capital $55,556,834
Undistributed net investment income 103,026
Accumulated undistributed net realized gain (loss) 964,750
Net unrealized appreciation (depreciation) 2,848,656
----------------
Total $59,473,266
================
Shares of beneficial interest outstanding 2,526,165
================
Net asset value, offering price, and redemption price per share $23.54
================
(Net assets/Shares outstanding)
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Statement of Operations
Year Ended December 31, 1995
Investment income
Dividend income (net of foreign withholding taxes of $201,232) $1,568,774
Interest income 1,033,239
----------------
Total income $2,602,013
Expenses
Investment advisory fee (Note 2) $704,283
Trustee fees 3,323
Accounting, custody and transfer agent fees 281,364
Registration Costs 7,569
Audit services 53,430
Legal services 9,066
Insurance expense 2,902
Miscellaneous 4,151
----------------
Total expenses $1,066,088
----------------
Net investment income $1,535,925
----------------
Realized and unrealized gain (loss)
Net realized gain (loss)
Investment securities $3,580,427
Written options 1,065,547
Financial futures (1,802,594)
Interest rate swaps (13,989)
Foreign currency and foreign exchange contracts (2,273,586)
----------------
Net realized gain (loss) $555,805
Change in net unrealized appreciation (depreciation)
Investment securities ($931,522)
Written options (53,504)
Financial futures (403,423)
Interest rate swaps (40,326)
Translation of assets and liabilities in foreign currencies,
and foreign exchange contracts 97,528
----------------
Change in net unrealized appreciation (depreciation) ($1,331,247)
----------------
Net gain (loss) ($775,442)
----------------
Net increase (decrease) in net assets from operations $760,483
================
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Statement of Changes in Net Assets
Year Ended December 31,
-----------------------------------
1995 1994
---------------- ----------------
Increase (decrease) in Net Assets
From operations
<S> <C> <C>
Net investment income $1,535,925 $1,528,502
Net realized gain (loss) 555,805 3,252,426
Change in net unrealized appreciation (depreciation) (1,331,247) (12,618,271)
---------------- ----------------
Net increase (decrease) in net assets from operations $760,483 ($7,837,343)
---------------- ----------------
Distributions to shareholders
From net investment income - ($487,390)
From realized capital gains ($293,380) (6,997,377)
---------------- ----------------
Total distributions to shareholders ($293,380) ($7,484,767)
---------------- ----------------
Fund share (principal) transactions (Note 4)
Net proceeds from sale of shares $12,167,766 $27,044,199
Net asset value of shares issued to shareholders in
payment of distributions declared 272,750 6,686,655
Cost of shares redeemed (57,868,870) (6,393,310)
---------------- ----------------
Increase (decrease) in net assets from Fund share transactions ($45,428,354) $27,337,544
---------------- ----------------
Net increase (decrease) in net assets ($44,961,251) $12,015,434
Net assets
At beginning of period $104,434,517 $92,419,083
---------------- ----------------
At end of period (including undistributed net investment income of $103,026
and $0 at December 31, 1995 and December 31,
1994, respectively) $59,473,266 $104,434,517
================ ================
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Financial Highlights
Year ended December 31,
-----------------------------------------------------------
1995 1994 1993 1992* 1991*
--------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $23.12 $26.74 $19.78 $22.20 $20.16
--------- ---------- --------- --------- ---------
Income from investment operations
Net investment income $0.04 $0.21 $0.26 $0.26 $0.33
Net realized and unrealized gain (loss) 0.45 (2.08) 7.29 (2.47) 2.02
--------- ---------- --------- --------- ---------
Total from investment operations $0.49 ($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 (0.07) (1.63) - - (0.01)
--------- ---------- --------- --------- ---------
Total distributions declared to shareholders ($0.07) ($1.75) ($0.59) ($0.21) ($0.31)
--------- ---------- --------- --------- ---------
Net asset value - end of period $23.54 $23.12 $26.74 $19.78 $22.20
========= ========== ========= ========= =========
Total return 2.14% (6.99%) 38.27% (9.95%) 11.73%
Ratios (to average net assets)/Supplemental Data
Expenses 1.22% 1.23% 1.34% 1.53% 1.54%
Net investment income 1.76% 1.52% 1.09% 1.18% 1.30%
Portfolio turnover 108% 75% 98% 98% 27%
Net assets at end of period (000 omitted) $59,473 $104,435 $92,419 $56,539 $47,077
* Audited by other auditors
</TABLE>
18
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund Series
Notes to Financial Statements
(1).....Significant Accounting Policies:
Standish, Ayer & Wood Investment Trust (Trust) is organized as a
Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish International Equity Fund (Fund) is a separate,
diversified investment series of the Trust.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
A. Investment security valuations--
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded.
Securities (including restricted securities) for which quotations are
not readily available are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees.
Short term instruments with less than sixty-one days remaining to
maturity when acquired by the Fund are valued at amortized cost. If the
Fund acquires a short term instrument with more than sixty days
remaining to its maturity, it is valued at current market value until
the sixtieth day prior to maturity and will then be valued at amortized
cost based upon the value on such date unless the trustees determine
during such sixty-day period that amortized cost does not represent
fair value.
B. Securities transactions and income--
Securities transactions are recorded as of trade date. Interest income
is determined on the basis of interest accrued, adjusted for
amortization of premium or discount on debt securities when required
for federal income tax purposes. Dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. The Fund does not isolate that
portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from
changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
C. Federal taxes--
As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal
year.
D. Foreign currency transactions--
Investment security valuations, other assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based
upon current exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars
based upon currency exchange rates prevailing on the respective dates
of such transactions.
Section 988 of the Internal Revenue Code provides that gains or losses
on certain transactions attributable to fluctuations in foreign
currency exchange rates must be treated as ordinary income or loss. For
financial statement purposes, such amounts are included in net realized
gains or losses.
E. Distributions to shareholders--
Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications to paid-in capital.
19
<PAGE>
(2).....Investment Advisory Fee:
The investment advisory fee paid to Standish International Management
Company L.P. (SIMCO), for overall investment advisory and
administrative services, and general office facilities, is paid
quarterly at the annual rate of 0.8% of the Fund's average daily net
assets. The investment adviser has agreed that total Fund operating
expenses for any fiscal year will not exceed 1.6% of the Fund's average
daily net assets. The Fund pays no compensation directly to its
trustees who are affiliated with the investment adviser or to its
officers, all of whom receive remuneration for their services to the
Fund from the investment adviser. Certain of the trustees and officers
of the Trust are partners or officers of SIMCO.
(3).....Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
investments, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------- ----------------
<S> <C> <C>
Investments (non-U.S. government securities) $61,675,692 $95,948,589
================ ================
U.S. government securities $17,926,616 $33,031,095
================ ================
</TABLE>
(4).....Shares of Beneficial Interest:
The Declaration of Trust permits the trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a
par value of one cent per share. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
Shares sold 535,762 1,028,347
Shares issued to shareholders in
payment of distributions declared 12,155 285,009
Shares redeemed (2,539,577) (251,784)
---------------- ----------------
Net increase (decrease) (1,991,660) 1,061,572
================ ================
</TABLE>
(5).....Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciaton) in value of the
investment securities owned at December 31, 1995, as computed on a
federal income tax basis, are as follows:
Aggregate cost $53,936,491
================
Gross unrealized appreciation $5,462,203
Gross unrealized depreciation (2,840,811)
----------------
Net unrealized appreciation (depreciation) $2,621,392
================
20
<PAGE>
(6).....Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these investments are set forth more
fully in the Fund's Prospectus and Statement of Additional Information.
The Fund trades the following financial instruments with off-balance
sheet risk:
Options--
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before
a certain date. The Fund uses options to hedge against risks of market
exposure and changes in securities prices and foreign currencies, as
well as to enhance returns. Options, both held and written by the Fund,
are reflected in the accompanying Statement of Net Assets and
Liabilities at market value. Premiums received from writing options
which expire are treated as realized gains. Premiums received from
writing options which are exercised or are closed are added to or
offset against the proceeds or amount paid on the transaction to
determine the realized gain or loss. If a put option written by the
Fund is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund, as writer of an option, has no control
over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in
the price of the security underlying the written option. A summary of
such transactions for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
Written Put Option Transactions
- - --------------------------------------------------------------------------------------------------
Number
of Contracts Premiums
---------------- ---------------
<S> <C> <C>
Outstanding, beginning of year 13 $123,689
Options written 34 514,990
Options exercised (3) (24,200)
Options expired (11) (207,270)
Options closed (33) (407,209)
---------------- ---------------
Outstanding, end of year 0 $0
================ ===============
Written Call Option Transactions
- - --------------------------------------------------------------------------------------------------
Number
of Contracts Premiums
---------------- ---------------
Outstanding, beginning of year 9 $117,996
Options written 27 611,169
Options exercised (18) (246,263)
Options expired (3) (30,300)
Options closed (15) (452,602)
---------------- ---------------
Outstanding, end of year 0 $0
================ ===============
</TABLE>
21
<PAGE>
Forward currency exchange contracts--
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign
currency at a fixed price on a future date. Risks may arise upon
entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements
in the value of a foreign currency relative to the U.S. dollar and
other foreign currencies. The forward foreign currency and cross
currency exchange contracts are marked to market using the forward
foreign currency rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized
until the contract settlement date. Forward currency exchange contracts
are used by the fund primarily to protect the value of the Fund's
foreign securities from adverse currency movements. At December 31,
1995, the Fund held the following forward foreign currency exchange
contracts:
<TABLE>
<CAPTION>
Local U.S. $ U.S. $
Principal Contract U.S. $ Aggregate Unrealized
Contracts to Receive Amount Value Date Market Value Face Amount Gain/(Loss)
- - --------------------------------------- --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Great British Pound 503,444 2/8/96 - 3/1/96 $780,140 $779,232 $908
Italian Lira 5,182,050,000 2/12/96 - 4/2/96 3,236,737 3,213,859 22,878
Japanese Yen 528,462,154 1/4/96 - 2/6/96 5,120,486 5,278,500 (158,014)
---------------- ---------------- ----------------
$9,137,363 $9,271,591 ($134,228)
================ ================ ================
Local U.S. $ U.S. $
Principal Contract U.S. $ Aggregate Unrealized
Contracts to Deliver Amount Value Date Market Value Face Amount Gain/(Loss)
- - --------------------- --------------- --------------- ---------------- ---------------- ----------------
Great British Pound 503,444 2/8/96 - 3/1/96 $780,140 $786,663 $6,523
Japanese Yen 314,570,000 1/2/96 - 3/21/96 3,067,460 3,125,759 58,299
---------------- ---------------- ----------------
$3,847,600 $3,912,422 $64,822
================ ================ ================
</TABLE>
22
<PAGE>
Futures contracts--
The Fund may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices
at a fixed price on a future date. The Fund is required to deposit
either in cash or securities an amount equal to a certain percentage of
the contract amount. Subsequent payments are made or received by the
Fund each day, dependent on the daily fluctuations in the value of the
underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. There are several risks in
connection with the use of futures contracts as a hedging device. The
change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not
correlate with changes in the value of hedged investments. In addition,
there is the risk that the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market. The Fund enters
into financial futures transactions primarily to manage its exposure to
certain markets and to changes in securities prices and foreign
currencies.
At December 31, 1995, the Fund held the following futures contracts:
<TABLE>
<CAPTION>
Expiration Underlying Face Unrealized
Contract Position Date Amount at Value Gain/(Loss)
- - ------------------------------ ---------------- ---------------- -----------------------------------
<S> <C> <C> <C> <C>
Topix Futures (19) long 3/13/96 $2,888,073 $115,777
MIB30 Index Futures (41) long 3/5/96 3,671,938 83,443
---------------- ----------------
$6,560,011 $199,220
================ ================
</TABLE>
At December 31, 1995, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
Interest rate swap contracts--
Interest rate swaps involve the exchange by the Fund with another party
of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect
to a notional amount of principal. Credit and market risk exist with
respect to these instruments.
The Fund expects to enter into these transactions primarily for hedging
purposes including, but not limited to, preserving a return or spread
on a particular investment or portion of its portfolio, protecting
against currency fluctuations, as a duration management technique or
protecting against an increase in the price of securities the Fund
anticipates purchasing at a later date. At December 31, 1995, the Fund
had no open interest rate swap contracts.
23
<PAGE>
Report of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish International Equity Fund Series:
We have audited the accompanying statement of assets and liabilities of
Standish, Ayer & Wood Investment Trust: Standish International Equity Fund
Series (the "Fund"), including the schedule of portfolio investments, as of
December 31, 1995, and the related statement of operations for the year then
ended, and changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the three years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period to
December 31, 1992, were audited by other auditors, whose report, dated February
12, 1993, expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Standish, Ayer & Wood Investment Trust: Standish International Equity Fund
Series as of December 31, 1995, the results of its operations for the year then
ended and the changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the three years in the period
then ended, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 13, 1996
24
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A of Standish International Equity Fund:
Financial Highlights
Included in Part B of Standish International Equity Fund:
Independent Auditors' Report
Schedule of Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Exhibits:
(1) Agreement and Declaration of Trust dated August 13, 1986*
(1A) Certificate of Designation of Standish Fixed Income Fund**
(1B) Certificate of Designation of Standish International Fund**
(1C) Certificate of Designation of Standish Securitized Fund**
(1D) Certificate of Designation of Standish Short-Term Asset
Reserve Fund**
(1E) Certificate of Designation of Standish Marathon Fund*
(1F) Certificate of Amendment dated November 21, 1989*
(1G) Certificate of Amendment dated November 29, 1989*
(1H) Certificate of Amendment dated April 24, 1990*
1
<PAGE>
(1I) Certificate of Designation of Standish Equity Fund**
(1J) Certificate of Designation of Standish International Fixed
Income Fund**
(1K) Certificate of Designation of Standish Intermediate Tax Exempt
Bond Fund*
(1L) Certificate of Designation of Standish Massachusetts
Intermediate Tax Exempt Bond Fund*
(1M) Certificate of Designation of Standish Global Fixed Income
Fund*
(1N) Certificate of Designation of Standish Controlled Maturity
Fund and Standish Fixed Income Fund II*
(1O) Certificate of Designation of Standish Tax- Sensitive Small
Cap Equity Fund and Standish Tax-Sensitive Equity Fund**
(2) Bylaws of the Registrant*
(3) Not applicable
(4) Not applicable
(5) Form of Investment Advisory Agreement between the Registrant
and Standish, Ayer & Wood, Inc. relating to Standish
International Fund*
(5A) Form of Assignment of Investment Advisory Agreement*
(6) Underwriting Agreement between the Registrant and Standish
Fund Distributors, L.P.**
(7) Not applicable
(8) Master Custody Agreement between the Registrant and Investors
Bank & Trust Company**
(9A) Transfer Agency and Service Agreement between the Registrant
and Investors Bank & Trust Company**
(9B) Master Administration Agreement between Registrant and
Investors Bank & Trust Company**
(10) Opinion and Consent of Counsel***
2
<PAGE>
(11A) Opinion and Consent of Independent Public Accountants***
(11B) Consent of Independent Public Accountants***
(12) Not applicable
(13) Form of Initial Capital Agreement between the Registrant and
Standish, Ayer & Wood, Inc.**
(14) Not applicable
(15) Not applicable
(16) Performance Calculations**
(17) Financial Data Schedule of Standish International Equity
Fund***
(18) Not applicable
(19A) Power of Attorney (Richard S. Wood)**
(19B) Power of Attorney (David W. Murray)**
(19C) Power of Attorney (Samuel C. Fleming)**
(19D) Power of Attorney (Benjamin M. Friedman)**
(19E) Power of Attorney (John H. Hewitt)**
(19F) Power of Attorney (Edward H. Ladd)**
(19G) Power of Attorney (Caleb Loring III)**
(19H) Power of Attorney (D. Barr Clayson)**
(19I) Power of Attorney for Standish, Ayer & Wood Master Portfolio
(Richard S. Wood)**
(19J) Power of Attorney for Standish, Ayer & Wood Master Portfolio
(Samuel C. Fleming, Benjamin M. Friedman, John H. Hewitt,
Edward H. Ladd, Caleb Loring III, Richard S. Wood and D. Barr
Clayson)**
--------------------
* Filed as an exhibit to Registration
Statement No. 33-10615 and incorporated
herein by reference thereto.
3
<PAGE>
** Filed as an exhibit to Registration
Statement No. 33-8214 and incorporated
herein by reference thereto.
*** Filed herewith.
Item 25. Persons Controlled by or under Common Control
with Registrant
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 26. Number of Holders of Securities
Set forth below is the number of record holders, as of April 1, 1996,
of the shares of each series of the Registrant.
Number of Record
Title of Class Holders
- - -------------- -------
Shares of beneficial interest, par value $.01, of:
Standish Fixed Income Fund 431
Standish Securitized Fund 15
Standish Short-Term Asset 107
Reserve Fund
Standish International Fixed 195
Income Fund
Standish Global Fixed Income Fund 49
Standish Equity Fund 146
Standish Small Capitalization 419
Equity Fund
Standish Massachusetts Intermediate 87
Tax Exempt Bond Fund
Standish Intermediate Tax Exempt 100
Bond Fund
Standish International Equity Fund 207
Standish Controlled Maturity Fund 10
Standish Fixed Income Fund II 4
Standish Small Cap Tax-Sensitive 46
Equity Fund
Standish Tax-Sensitive Equity Fund 24
Item 27. Indemnification
Under the Registrant's Agreement and Declaration of Trust, any past or
present Trustee or officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to which he may be a
party or is otherwise involved by reason of his being or having been a Trustee
or officer of the Registrant. The Agreement and Declaration of Trust of the
4
<PAGE>
Registrant does not authorize indemnification where it is determined, in the
manner specified in the Declaration, that such Trustee or officer has not acted
in good faith in the reasonable belief that his actions were in the best
interest of the Registrant. Moreover, the Declaration does not authorize
indemnification where such Trustee or officer is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by any such Trustee, officer or controlling person
against the Registrant in connection with the securities being registered, and
the Commission is still of the same opinion, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers
The business and other connections of the officers and Directors of
Standish, Ayer & Wood, Inc. ("Standish, Ayer & Wood"), the investment adviser to
all series of the Registrant other than Standish International Equity Fund,
Standish Global Fixed Income Fund Standish International Fixed Income Fund are
listed on the Form ADV of Standish, Ayer & Wood as currently on file with the
Commission (File No. 801-584), the text of which is hereby incorporated by
reference.
The business and other connections of the officers and partners of
Standish International Management Company, L.P. ("Standish International"), the
investment adviser to Standish International Equity Fund, Standish Global Fixed
Income Fund and Standish International Fixed Income Fund, are listed on the Form
ADV of Standish International as currently on file with the Commission (File No.
801-639338), the text of which is hereby incorporated by reference.
5
<PAGE>
The following sections of each such Form ADV are incorporated herein by
reference:
(a) Items 1 and 2 of Part 2;
(b) Section IV, Business Background, of
each Schedule D.
Item 29. Principal Underwriter
(a) Prior to or concurrent with the effectiveness of this
Post-Effective Amendment to the Registrant's Registration Statement on Form N-1A
it is expected that Standish Fund Distributors, L.P. will serve as the principal
underwriter of each of the series of the Registrant as listed in Item 26 above.
(b) Directors and Officers of Standish Fund Distributors, L.P.:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- - ---- ---------------- ---------------
James E. Hollis, III Chief Executive Officer Vice President
Beverly E. Banfield Chief Operating Officer Vice President
The General Partner of Standish Fund Distributors, L.P. is Standish,
Ayer & Wood, Inc.
(c) Not applicable.
Item 30. Location of Accounts and Records
The Registrant maintains the records required by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 inclusive thereunder at
its principal office, located at One Financial Center, Boston, Massachusetts
02111. Certain records, including records relating to the Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main offices of the Registrant's transfer and
dividend disbursing agent and custodian.
Item 31. Management Services
Not applicable
6
<PAGE>
Item 32. Undertakings
(a) Not applicable.
(b) With respect to each of Standish Small Cap
Tax-Sensitive Equity Fund and Standish Tax- Sensitive
Equity Fund, the Registrant undertakes to file a
post-effective amendment, using financial statements
which need not be certified, within four to six
months from the effective date of the Post-Effective
Amendment to its Registration Statement registering
shares of such Funds.
(c) The Registrant undertakes to furnish each person to
whom a Prospectus is delivered a copy of Registrant's
latest annual report to shareholders, upon request
and without charge.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement (which satisfies all the
requirements for filing pursuant to Rule 485(b) under the Securities Act of
1933) to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston and The Commonwealth of Massachusetts on the 23rd day of
April, 1996.
STANDISH, AYER & WOOD
INVESTMENT TRUST
/s/ David W. Murray
David W. Murray, Treasurer
The term "Standish, Ayer & Wood Investment Trust" means and refers to
the Trustees from time to time serving under the Agreement and Declaration of
Trust of the Registrant dated August 13, 1986, a copy of which is on file with
the Secretary of State of The Commonwealth of Massachusetts. The obligations of
the Registrant hereunder are not binding personally upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Registrant, but
bind only the trust property of the Registrant, as provided in the Agreement and
Declaration of Trust of the Registrant. The execution of this Registration
Statement has been authorized by the Trustees of the Registrant and this
Registration Statement has been signed by an authorized officer of the
Registrant, acting as such, and neither such authorization by such Trustees nor
such execution by such officer shall be deemed to have been made by any of them,
but shall bind only the trust property of the Registrant as provided in its
Declaration of Trust.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
Richard S. Wood* Trustee and President April 23, 1996
- - ----------------------
Richard S. Wood (principal executive
officer)
David W. Murray* Treasurer (principal April 23, 1996
- - ----------------------
David W. Murray financial and accounting
officer) and Secretary
D. Barr Clayson* Trustee and Vice April 23, 1996
- - ----------------------
D. Barr Clayson President
Samuel C. Fleming* Trustee April 23, 1996
Samuel C. Fleming
Benjamin M. Friedman* Trustee April 23, 1996
Benjamin M. Friedman
John H. Hewitt* Trustee April 23, 1996
John H. Hewitt
Edward H. Ladd* Trustee April 23, 1996
Edward H. Ladd
Caleb Loring III* Trustee April 23, 1996
Caleb Loring III
*By: /s/ David W. Murray
David W. Murray
Attorney-In-Fact
</TABLE>
9
<PAGE>
EXHIBIT INDEX
Exhibit
(10) Opinion and Consent of Counsel
(11A) Opinion and Consent of Independent Public Accountants
(11B) Consent of Independent Public Accountants
(17A) Financial Data Schedule of Standish International Equity Fund
10
HALE AND DORR
60 State Street
Boston, MA 02109
April 25, 1996
Standish, Ayer & Wood Investment Trust
One Financial Center
Boston, Massachusetts 02111
RE: Post-Effective Amendment No. 12 to Registration Statement on
Form N-1A (File Nos. 33-10615; 811-4813)
(the "Registration Statement")
Ladies and Gentlemen:
Standish, Ayer & Wood Investment Trust (the "Trust") is a Massachusetts
business trust created under a written Declaration of Trust dated August 13,
1986, and executed and delivered in Boston, Massachusetts on that date, as
amended from time to time (as so amended, the "Declaration of Trust"). The
beneficial interests thereunder are represented by transferable shares of
beneficial interest, $0.01 par value per share.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided.
Pursuant Article VI, Section 6.1(a) of the Declaration of Trust, the number of
shares of beneficial interest authorized to be issued under the Declaration of
Trust is unlimited and the Trustees are authorized to establish and designate
one or more separate, distinct and independent funds, and to authorize a
separate series of shares for each such fund, as they deem necessary or
desirable. Pursuant to Article VI, Section 6.1(d) of the Declaration of Trust,
the Trustees may issue shares of any series for such consideration, including
property, on such terms as they may determine (or for no consideration if
pursuant to a share dividend or split up), all without action or approval of the
Shareholders.
<PAGE>
Pursuant to Article VI, Section 6.1(b) of the Declaration of Trust, the
Trustees have established nineteen separate series of shares designated
"Standish Fixed Income Fund", "Standish Securitized Fund", "Standish Short-Term
Asset Reserve Fund", "Standish Small Capitalization Equity Fund", "Standish
International Equity Fund", "Standish International Fixed Income Fund",
"Standish Emerging Markets Fund", "Standish Massachusetts Intermediate Tax
Exempt Bond Fund", "Standish Intermediate Tax Exempt Bond Fund", "Standish
Equity Fund", "Standish Global Fixed Income Fund" "Standish Controlled Maturity
Fund", "Standish Fixed Income Fund II", "Standish Small Cap Tax- Sensitive
Equity Fund," "Standish Tax-Sensitive Equity Fund", "Standish Fixed Income Asset
Fund", "Standish Global Fixed Income Asset Fund", "Standish Equity Asset Fund"
and "Standish Small Capitalization Asset Fund".
We understand that you are about to register under the Securities Act
of 1933, as amended, 2,003,386 shares of beneficial interest of the Trust by
Post-Effective Amendment No. 12 to the Trust's Registration Statement (the
"Shares") consisting of 2,003,386 Shares of Standish International Equity Fund.
We have examined the Declaration of Trust, the By-laws, as amended from
time to time, of the Trust, resolutions of the Board of Trustees, a certificate
of the Treasurer of the Trust to the effect that the Trust or its agent received
the consideration for each of the Shares in accordance with the terms of the
Declaration of Trust, and such other documents as we have deemed necessary or
appropriate for the purposes of this opinion, including, but not limited to,
originals or copies certified or otherwise identified to our satisfaction, of
such documents, Trust records and other instruments. In our examination of such
documents, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as certified or photostatic copies.
For purposes of this opinion letter, we have not made an independent
review of the laws of any state or jurisdiction other than The Commonwealth of
Massachusetts and express no opinion with respect to the laws of any
jurisdiction other than the laws of The Commonwealth of Massachusetts. Further,
we express no opinion as to compliance with any state or federal securities
laws, including the securities laws of The Commonwealth of Massachusetts.
Our opinion below, as it relates to the non-assessability of the
Shares, is qualified to the extent that under Massachusetts law, shareholders of
a Massachusetts business trust may be held personally liable for the obligations
of the Trust. In this regard, however, please be advised that the Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust and
provides that the Trustees of the Trust shall use their best efforts to ensure
that every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or officers of the Trust shall recite to the effect that
the same was executed or made by or on behalf of the Trust or by them as
Trustees or officers, and not individually and that the obligations of such
<PAGE>
instrument are not binding upon any of them or the shareholders personally, but
are binding only upon the Trust property or the assets of the particular series
in question, as the case may be. Also, the Declaration of Trust provides for
indemnification out of Trust property for all loss and expense of any
shareholder charged or held to be personally liable for any obligation or
liability of the Trust; provided, however, no Trust property may be used to
indemnify any shareholder of any series of the Trust other than Trust property
allocated or belonging to that series.
We are of the opinion that all necessary Trust action precedent to the
issuance of the Shares has been duly taken, and that all such Shares may legally
and validly be issued for cash, and when sold will be fully paid and
non-assessable by the Trust upon receipt by the Trust or its agent of
consideration thereof in accordance with the terms described in the Trust's
Declaration and the Registration Statement, subject to compliance with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and applicable state laws regulating the sale of securities.
We consent to your filing this opinion with the Securities and Exchange
Commission as an Exhibit to Post- Effective Amendment No. 12 to the Registration
Statement. Except as provided in this paragraph, this opinion may not be relied
upon by, or filed with, any other parties or for any other purpose.
Very truly yours,
/s/Hale and Dorr
HALE AND DORR
Consent Of Independent Accountants
We consent to the inclusion in Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A ( 1993 Act File Number 33-10615) of
Standish, Ayer & Wood Investment Trust, Standish, International Equity Fund
Series, (the Fund) of our report dated February 13, 1996, on our audit of the
financial statements and financial highlights of the Fund, which report is
included in the Annual Report to Shareholders for the year ended December 31,
1995, which is also included in this Registration Statement.
We also consent to the references to our Firm under the caption "The Funds
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 22, 1996
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent in this Post-Effective Amendment No 12 to Registration Statement No.
33-10615 of Standish International Equity Fund Series of Standish, Ayer & Wood
Investment Trust to the reference to us under the heading "Experts and Financial
Statements" appearing in the Statement of Additional Information, which is a
part of such Registration Statement.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Standish International Equity Fund
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 53,840,967
<INVESTMENTS-AT-VALUE> 56,557,883
<RECEIVABLES> 811,547
<ASSETS-OTHER> 2,488,387
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59,857,817
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 384,551
<TOTAL-LIABILITIES> 384,551
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,556,834
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 103,026
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 964,750
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,848,656
<NET-ASSETS> 59,473,266
<DIVIDEND-INCOME> 1,568,774
<INTEREST-INCOME> 1,033,239
<OTHER-INCOME> 0
<EXPENSES-NET> 1,066,088
<NET-INVESTMENT-INCOME> 1,535,925
<REALIZED-GAINS-CURRENT> 555,805
<APPREC-INCREASE-CURRENT> (1,331,247)
<NET-CHANGE-FROM-OPS> 760,483
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 293,380
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 535,762
<NUMBER-OF-SHARES-REDEEMED> 2,539,577
<SHARES-REINVESTED> 12,155
<NET-CHANGE-IN-ASSETS> (44,961,251)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,653,431)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 704,283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,066,088
<AVERAGE-NET-ASSETS> 87,491,876
<PER-SHARE-NAV-BEGIN> 23.12
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.45
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.54
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
