<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Financial Statements
For the Six Months Ended June 30, 1997
(Unaudited)
[LOGO APPEARS HERE]
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Statement of Assets and Liabilities
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments at value (Note 1A) (identified cost, $936,397,122) $ 930,187,815
Receivable for investments sold 9,782,744
Receivable for Fund shares sold 568
Interest and dividends receivable 21,443,535
Receivable for premiums on written options 169,811
Unrealized appreciation on interest rate swap contracts (Note 6) 138,353
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 13,601,811
--------------
Total assets 975,324,637
Liabilities
Payable for investments purchased $ 9,471,506
Distribution payable 2,803,128
Payable for premium on purchased options 198,113
Payable to investment adviser (Note 2) 494
Options written, at value (premiums received, $3,350,339) (Note 6) 3,392,347
Accrued accounting, custody and transfer agent fees 211,478
Accrued expenses and other liabilities 22,533
----------------
Total liabilities 16,099,599
--------------
Net Assets $ 959,225,038
==============
Net Assets consist of
Paid-in capital $ 885,216,051
Undistributed net investment income 18,491,118
Accumulated net realized gain 48,797,089
Net unrealized appreciation 6,720,780
--------------
Total Net Assets $ 959,225,038
==============
Shares of beneficial interest outstanding 40,300,952
==============
Net asset value, offering price and redemption price per share
(Net assets/Shares outstanding) $ 23.80
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Statement of Operations
Six Months Ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Interest income 32,947,027
------------------
Total investment income 32,947,027
Expenses
Investment advisory fee (Note 2) 1,808,114
Accounting, custody and transfer agent fees 472,612
Legal and audit services 80,364
Insurance expense 20,437
Administration fee 19,225
Trustees fees (Note 2) 15,266
Registration costs 3,526
Miscellaneous 28,870
------------------
Total expenses 2,448,414
------------------
Net investment income 30,498,613
------------------
Realized and Unrealized Gain (loss) on Investments
Net realized gain (loss)
Investment security transactions (463,765)
Financial futures contracts 400
Written option transactions 3,733,807
Foreign currency transactions and forward foreign currency exchange contracts 45,933,040
------------------
Net realized gain 49,203,482
Change in unrealized appreciation (depreciation)
Investment securities (42,183,416)
Financial futures contracts (400)
Written option transactions (2,759,411)
Foreign currency and forward foreign currency exchange contracts 12,421,307
------------------
Net change in unrealized appreciation (depreciation) (32,521,920)
------------------
Net realized and unrealized gain 16,681,562
------------------
Net increase in net assets from operations $ 47,180,175
==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31,
(Unaudited) 1996
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets
From operations
Net investment income $ 30,498,613 $ 57,635,263
Net realized gain 49,203,482 57,382,433
Change in unrealized appreciation (depreciation) (32,521,920) 1,735,395
------------ --------------
Net increase (decrease) in net assets from operations 47,180,175 116,753,091
------------ --------------
Distributions to Shareholders
From net investment income (19,516,795) (88,136,980)
From net realized gains on investments (6,514,021) (24,989,660)
------------ --------------
Total distributions to shareholders (26,030,816) (113,126,640)
------------ --------------
Fund Share (principal) Transactions (Note 4)
Net proceeds from sale of shares 152,125,770 202,993,713
Net asset value of shares issued to shareholders in payment of distributions declared 20,572,850 86,471,969
Cost of shares redeemed (74,755,759) (256,496,190)
------------ --------------
Net increase in net assets from Fund share transactions 97,942,861 32,969,492
------------ --------------
Net increase in net assets 119,092,220 36,595,943
Net Assets
At beginning of period 840,132,818 803,536,875
------------ --------------
At end of period (including undistributed net investment income of $18,491,118 and
$7,509,300, respectively) $959,225,038 $ 840,132,818
============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1997 ---------------------------------------------------------------------
(Unaudited) 1996 * 1995 1994 1993 1992/1/
----------- ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 23.25 $ 23.21 $ 21.30 $ 24.22 $ 21.20 $ 22.05
------------- ------------ ---------- ----------- ----------- -----------
Income from investment operations
Net investment income 0.75 1.72 1.96 1.71 2.03 2.01
Net realized and unrealized
gain (loss) on investments 0.30 1.73 1.84 (3.93) 2.90 (0.25)
------------- ------------ ---------- ----------- ----------- -----------
Total from investment
operations 1.05 3.45 3.80 (2.22) 4.93 1.76
------------- ------------ ---------- ----------- ----------- -----------
Less distributions to shareholders
From net investment income (0.50) (2.64) (1.89) (0.20) (1.53) (2.03)
In excess of net investment
income -- -- -- -- (0.12) --
From net realized gains on
investments -- (0.77) -- -- (0.26) (0.54)
In excess of net realized gain
on investments -- -- -- -- -- (0.04)
From tax return of capital -- -- -- (0.50) -- --
------------- ------------ ---------- ----------- ----------- -----------
Total distributions to
shareholders (0.50) (3.41) (1.89) (0.70) (1.91) (2.61)
------------- ------------ ---------- ----------- ----------- -----------
Net asset value, end of period $ 23.80 $ 23.25 $ 23.21 $ 21.30 $ 24.22 $ 21.20
============= ============ ========== =========== =========== ===========
Total return 5.26% 15.28% 18.13% (9.22)% 23.77% 8.07%
<CAPTION>
Ratios (to average daily net assets)/Supplemental Data
<S> <C> <C> <C> <C> <C> <C>
Expenses 0.54%+ 0.53% 0.51% 0.51% 0.51% 0.59%
Net investment income 6.75%+ 7.17% 8.09% 7.69% 7.53% 8.37%
Portfolio Turnover 74% 226% 165% 158% 98% 175%
Net assets, end of period
(000 omitted) $ 959,225 $ 840,133 $ 803,537 $1,069,416 $1,131,201 $ 384,660
</TABLE>
+ Computed on an annualized basis.
* Calculated based on average shares outstanding.
/1/ Audited by other auditors.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Schedule of Investments - June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 93.2%
Corporate -- 0.5%
Real Estate -- 0.5%
Irsa Parcks Cvt 144A, REIT 4.500% 08/02/2003 $ 4,200,000 $ 4,809,000
------------
Total Corporate (Cost $4,200,000) 4,809,000
------------
Government/Other -- 85.4%
Argentina -- 1.6%
Bonos DEL Tesoro 8.750% 05/09/2002 2,700,000 2,698,650
City Of Buenos Aires 10.500% 05/28/2004 2,700,000 2,760,750
Government of Argentina 6.875% 03/31/2023 10,800,000 9,328,500
------------
14,787,900
------------
Australia -- 8.8%
FNMA Global 6.500% 07/10/2002 12,600,000 9,505,440
Government of Australia 10.000% 02/15/2006 32,700,000 29,316,497
Government of Australia 9.750% 03/15/2002 20,000,000 17,094,704
Government of Australia 10.000% 10/15/2007 9,925,000 9,052,291
New South Wales Treasury 0.000% 09/03/2010 15,600,000 4,613,307
News America Holdings 8.625% 02/07/2014 16,150,000 11,878,727
South Australia Government Finance 0.000% 12/21/2015 5,550,000 1,126,281
Treasury Corp. of Victoria 0.000% 08/31/2011 5,500,000 1,506,160
------------
84,093,407
------------
Belgium -- 0.6%
Kingdom of Belgium 5.000% 12/17/1999 610,000,000 5,805,805
------------
Brazil -- 1.0%
Republic of Brazil 6.875% 04/15/2024 11,000,000 9,240,000
------------
Canada -- 4.3%
Government of Canada 6.500% 06/01/2004 12,500,000 9,254,164
Government of Canada 7.750% 09/01/1999 5,400,000 4,129,573
Government of Canada 7.500% 03/01/2001 23,700,000 18,278,689
Government of Canada 6.250% 09/15/1998 12,900,000 9,545,626
------------
41,208,052
------------
Denmark -- 6.8%
Byggeriets Real Kredit 11.000% 10/01/2020 57,000 9,876
Byggeriets Real Kredit 11.000% 10/01/2017 96,000 16,633
Denmark Bullet 7.000% 11/15/2007 57,810,000 9,149,440
Denmark Nykredit 11.000% 10/01/2017 74,000 12,821
Denmark Nykredit 7.000% 10/01/2026 96,054,000 14,148,700
Denmark Realkredit 7.000% 10/01/2026 14,792,000 2,178,853
Kingdom of Denmark 9.000% 11/15/1998 48,000,000 7,717,605
Kingdom of Denmark 8.000% 05/15/2003 95,930,000 16,333,031
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Schedule of Investments - June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kingdom of Denmark 8.000% 11/15/2001 $ 93,000,000 $15,710,870
Kreditforningen Series 22A 11.000% 10/01/2017 228,000 39,503
------------
65,317,332
------------
Finland -- 1.0%
Government of Finland 6.000% 01/29/2002 950,000,000 9,791,963
------------
France -- 1.5%
France Oat ECU 5.500% 04/25/2007 13,100,000 14,661,229
------------
Germany -- 18.7%
Baden Wurttemburg 6.200% 11/22/2013 16,000,000 9,653,196
Bundesobligation 5.125% 11/21/2000 12,750,000 7,531,599
Deutschland Republic 7.375% 01/03/2005 18,330,000 11,768,186
Deutschland Republic 9.000% 01/22/2001 18,400,000 12,171,740
Deutschland Republic 7.250% 10/21/2002 20,290,000 12,861,383
Deutschland Republic 6.000% 02/16/2006 37,300,000 21,854,015
Deutschland Republic 6.000% 01/04/2007 11,300,000 6,610,289
Die Bundrep Deutschland DM1000 8.250% 09/20/2001 48,160,000 31,394,412
Federal Republic of Germany 8.375% 05/21/2001 48,730,000 31,888,890
Federal Republic of Germany 9.000% 10/20/2000 8,480,000 5,575,557
Federal Republic of Germany 8.000% 07/22/2002 7,225,000 4,739,219
Germany (Fed Rep) 8.875% 12/20/2000 13,930,000 9,165,293
Republic of South Africa 7.000% 10/01/2003 4,300,000 2,600,459
United Mexican States 10.375% 01/29/2003 17,200,000 11,323,703
------------
179,137,941
------------
Ireland -- 0.7%
Irish Gilts 6.250% 04/01/1999 4,520,000 6,873,822
------------
Italy -- 7.2%
BTPS 9.500% 05/01/2001 6,787,500,000 4,432,922
BTPS 9.500% 05/01/2001 6,787,500,000 4,432,922
BTPS Italian Government 6.250% 03/01/2002 6,400,000,000 3,781,424
BTPS Italian Government 6.250% 03/01/2002 7,800,000,000 4,608,611
Government of Italy 5.125% 07/29/2003 920,000,000 9,335,993
Government of Italy 10.500% 11/01/2000 2,766,666,667 1,832,984
Government of Italy 10.500% 11/01/2000 8,166,666,667 5,410,615
Government of Italy 10.500% 11/01/2000 8,166,666,667 5,410,615
Government of Italy 10.500% 11/01/2000 6,750,000,000 4,472,039
Government of Italy 10.500% 11/01/2000 4,550,000,000 3,014,486
Government of Italy 9.500% 05/01/2001 9,040,000,000 5,904,032
Government of Italy 9.500% 05/01/2001 2,660,000,000 1,737,248
Government of Italy (Strip) 0.000% 03/07/1999 5,920,000 6,204,726
Italy BTPS 10.500% 04/15/1998 6,700,000,000 4,048,649
Italy BTPS 10.500% 04/15/1998 6,700,000,000 4,048,649
------------
68,675,915
------------
Japan -- 5.4%
IBRD-Global Bond 4.500% 06/20/2000 2,850,000,000 27,205,065
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Schedule of Investments - June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interamer Development Bank 6.000% 10/30/2001 $ 770,000,000 $ 7,907,887
KFW International Finance 6.000% 11/29/1999 798,000,000 7,756,059
Kingdom of Spain 5.750% 03/23/2002 915,000,000 9,386,415
------------
52,255,426
------------
New Zealand -- 4.1%
Fernz Capital 9.800% 04/15/2002 19,000,000 13,672,962
Fletcher Challenge 14.500% 09/30/2000 8,500,000 6,831,499
Fletcher Challenge 11.250% 12/15/2002 13,000,000 9,987,072
Fletcher Challenge 10.000% 04/30/2005 5,325,000 3,937,962
Government Property Services 7.250% 03/15/1999 1,500,000 1,017,963
Lion Nathan Ltd. 0.000% 09/01/1997 5,793,293 3,894,375
------------
39,341,833
------------
Norway -- 0.4%
Union Bank of Norway 12.750% 10/26/2002 2,500,000 341,567
Vital Forsikring 7.850% 09/22/2003 25,600,000 3,806,318
------------
4,147,885
------------
Sweden -- 6.2%
Government of Sweden 5.500% 04/12/2002 55,000,000 6,985,162
Kingdom of Sweden 13.000% 06/15/2001 15,600,000 2,531,353
Kingdom of Sweden #1036 10.250% 05/05/2000 188,200,000 27,422,521
Sweden Government Bond 6.500% 10/25/2006 177,400,000 22,684,789
------------
59,623,825
------------
United Kingdom -- 17.1%
Alliance and Leicester Building Society 8.750% 12/07/2006 7,100,000 12,367,332
Bank of Greece 10.750% 09/06/2010 1,150,000 2,296,976
Bank of Greece 10.750% 09/06/2010 3,400,000 6,790,834
Birmingham Midshires Building Society 9.125% 01/05/2006 3,900,000 6,887,030
Inco Ltd. 15.750% 07/15/2006 996,000 2,426,297
Lond & Scot Marine Oil Cvt 7.750% 10/04/2005 250,000 409,873
MEPC PLC 12.000% 06/30/2006 1,250,000 2,631,670
Northern Rock Building Society 9.375% 10/17/2021 4,555,000 8,420,573
Royal Bank of Scotland 9.625% 06/22/2015 380,000 715,355
Smithkline Beecham Corp. 8.125% 11/25/1998 3,730,000 6,250,386
U.K. Treasury Bond 10.000% 02/26/2001 2,800,000 5,083,342
UK Gilts 7.000% 11/06/2001 13,665,000 22,661,155
UK Treasury 8.500% 12/07/2005 6,400,000 11,582,436
UK Treasury 8.000% 12/07/2000 2,720,000 4,655,037
UK Treasury 6.750% 11/26/2004 8,700,000 14,210,224
UK Treasury 9.000% 08/06/2012 12,800,000 24,849,952
UK Treasury 7.250% 12/07/2007 14,095,000 23,740,952
UK Treasury 7.500% 12/07/2006 4,540,000 7,757,992
------------
163,737,416
------------
Total Government/Other (Cost $824,829,879) 823,508,751
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Schedule of Investments - June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Agency -- 1.6%
Pass Thru Securities -- 1.6%
FHLMC 0.000% 07/24/1997 $ 1,027,000 $ 1,023,539
FHLMC Discount Note 0.000% 07/25/1997 9,000,000 8,966,970
FNMA Discount Note 0.000% 09/05/1997 5,000,000 4,949,600
------------
14,940,109
------------
Total U.S. Government Agency (Cost $14,940,251) 14,940,109
------------
U.S. Treasury Obligations -- 5.7%
Treasury Bonds -- 3.1%
U.S. Treasury Bond 8.125% 08/15/2019 5,150,000 5,875,017
U.S. Treasury Bond 6.500% 08/15/2005 24,000,000 23,932,560
------------
29,807,577
------------
Treasury Notes -- 2.6%
U.S. Treasury Note 6.500% 05/15/2005 25,300,000 25,252,436
Total U.S. Treasury Obligations (Cost $54,556,398) 55,060,013
----------------
TOTAL BONDS AND NOTES (COST $898,526,528) 893,508,873
----------------
<CAPTION>
Par Value
Security Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchased Options -- 0.5%
CAD Put/ITL Call, Str 1200, 0.000%, 4/2/98 38,000,000 396,226
HKD Put/USD Call, Str Pr 7.75, 0.000%, 2/5/98 17,200,000 201,240
DEM Put/USD Call, Str P 1.715, 0.000%, 9/5/97 31,800,000 658,260
SPGB 8.4% Put/Str Pr 108.860, 0.000%, 7/30/97 1,205,000,000 6,025
BTPS 7.75% Put/Str Pr 104.990, 0.000%, 7/30/97 7,000,000,000 14,000
JGB 5.5% Put/Str Pr 113.37, 0.000%, 3/5/98 2,000,000,000 124,000
JGB 5.5% Put/Str Pr 115.84, 0.000%, 9/5/97 2,000,000,000 76,000
JGB Call, Str Pr 106.105, 0.000%, 7/3/97 3,800,000,000 --
CAD Put/ITL Call, Str Pr 1200.00, 0.000%, 5/11/98 28,500,000 328,121
JPY Put/USD Call, Str Pr 120.0, 0.000%, 5/14/98 24,000,000 211,200
DEM Put/USD Call, Str Pr 1.723, 0.000%, 6/24/98 16,000,000 437,600
DEM Put/USD Call, Str Pr 1.732, 0.000%, 9/2/97 17,450,000 256,515
SPGB 8% Call, Str Pr 109.62, 0.000%, 9/24/97 123,500,000 168,578
Belgian Government Str Pr 99.87, 0.000%, 8/25/97 640,000,000 16,000
SPGB 7.9% Put/Str Pr 108.80, 0.000%, 9/2/97 2,800,000,000 92,400
BUND 6% Call, Str Pr 102.20, 0.000%, 6/17/98 32,000,000 161,408
BTAN 4.75% Call, Str Pr 100.27, 0.000%, 9/9/97 96,000,000 94,752
BTPS 6.25% Call, Str Pr 100.42, 0.000%, 9/29/97 8,000,000,000 48,000
AUD 10% Call, Str Pr 117.84, 0.000%, 8/29/97 25,700,000 651,084
AUD 10% Call, Str Pr 124.06, 0.000%, 9/18/97 25,700,000 121,818
DBR 6.00% Call, Str Pr 101.79, 0.000%, 8/5/97 22,500,000 85,118
DEM DBR Put/Str Pr 98.61, 0.000%, 8/27/97 28,200,000 22,645
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Schedule of Investments - June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Value (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JGB #190 Nts Call, Str Pr 102.368, 0.000%, 8/14/97 $1,900,500,000 $ 150,140
BTPS 6.75% Put/Str Pr 96.84, 0.000%, 9/19/97 8,000,000,000 32,000
BTPS 7.75% Put/Str Pr 104.99, 0.000%, 7/30/97 7,000,000,000 14,000
BTPS 6.25% Call, Str Pr 100.42, 0.000%, 9/29/97 8,000,000,000 48,000
BTPS 6.25% Call, Str Pr 100.42, 0.000%, 9/29/97 8,000,000,000 48,000
BTPS 6.25% Call, Str Pr 100.42, 0.000%, 9/29/97 8,000,000,000 48,000
BTPS 6.75% Put/Str Pr 96.84, 0.000%, 9/19/97 8,000,000,000 32,000
BTPS 6.75% Put/Str Pr 96.84, 0.000%, 9/19/97 8,000,000,000 32,000
BTPS 6.75% Put/Str Pr 96.84, 0.000%, 9/19/97 8,000,000,000 32,000
Total Purchased Options (Cost $5,798,777) $4,607,130
-----------
SHORT-TERM INVESTMENTS -- 3.3%
Commercial Paper -- 1.8%
General Electric Credit Corp. 10,000,000 9,909,042
Merrill Lynch 1,000,000 991,289
Reynold Metals 5,000,000 4,973,875
Triple A One AB 1,399,000 1,387,243
-----------
Total Commercial Paper (Cost $17,261,454) 17,261,449
-----------
Repurchase Agreements -- 1.5%
Prudential-Bache Repurchase Agreement, dated 6/30/97, 5.27% due 7/1/97, to pay
$14,810,363 (Collateralized by FNMA FGPC's with rates ranging from 6.50% to
7.50% and maturity dates ranging from 4/1/24 to 8/1/24 with an aggregate market
value of $15,106,607), 14,810,363 14,810,363
-----------
Total Repurchase Agreements (Cost $14,810,363) 14,810,363
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $32,071,817) 32,071,812
----------------
TOTAL INVESTMENTS-- 97.0%(COST $936,397,122) $ 930,187,815
Other Assets, Less Liabilites-- 3.0% 29,037,223
----------------
NET ASSETS-- 100% $ 959,225,038
================
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
CAD - Canadian Dollar
AUD - Australian Dollar
DEM - German Deutschemark
HKD - Hong Kong Dollar
JPY - Japanese Yen
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Standish, Ayer & Wood Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end,
management investment company. Standish International Fixed Income
Fund (the "Fund") is a separate non-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, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded.
Securities (including restricted securities) for which quotations
are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees.
Short-term instruments with less than sixty-one days remaining to
maturity when acquired by the 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. Repurchase agreements--
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase
agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market
value of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. Securities transactions and income--
Securities transactions are recorded as of trade date. Interest
income is determined on the basis of interest accrued, adjusted for
amortization of premium or discount on long-term debt securities
when required for federal income tax purposes. Realized gains and
losses from securities sold are recorded on the identified cost
basis. The 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.
D. 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.
E. Foreign currency transactions--
Investment security valuations, other assets and liabilities
initially expressed in foreign currencies are converted into U.S.
dollars based upon current exchange rates. Purchases and sales of
foreign investment securities and income and expenses are converted
into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions.
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Section 988 of the Internal Revenue Code provides that gains or
losses on certain transactions attributable to fluctuations in
foreign currency exchange rates must be treated as ordinary income
or loss. For financial statement purposes, such amounts are included
in net realized gains or losses.
F. Distributions to shareholders-
Distributions to shareholders are recorded on the ex-dividend date.
Distributions in excess of net realized gain on investments, written
options, and foreign currency arise because of certain timing
differences. Dividends from net investment income and distributions
from capital gains, if any, are reinvested in additional shares of
the Fund unless the shareholder elects to receive them in cash.
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 options, futures and foreign currency
transactions. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications between
paid-in-capital, undistributed net investment income and accumulated
net realized gain (loss).
(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
monthly at the annual rate of 0.40% of the Fund's average daily net
assets. The Trust pays no compensation directly to its trustees who
are affiliated with SIMCO or to its officers, all of whom receive
remuneration for their services to the Trust from SIMCO. Certain of
the trustees and officers of the Trust are directors 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>
U.S. Government Securities.............................. $ 84,217,845 $ 14,914,017
================== ==================
Investments (non-U.S. government securities)............ $705,855,543 $610,331,789
================== ==================
</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>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
Shares sold....................................................... 6,425,587 8,454,273
Shares issued to shareholders in payment of distributions
declared...................................................... 870,369 3,702,434
Shares redeemed................................................... (3,131,504) (10,643,614)
-------------- ----------------
Net increase/(decrease)........................................... 4,164,452 1,513,093
============== ================
</TABLE>
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30 ,1997, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost.............................................. $ 936,397,122
=================
Gross unrealized appreciation............................... $ 17,604,415
Gross unrealized depreciation............................... (23,813,723)
-----------------
Net unrealized appreciation (depreciation).................. $ (6,209,308)
=================
</TABLE>
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes
as described below. However, the instruments may also be used to
enhance potential gain in circumstances where hedging is not
involved. The nature, risks and objectives of these instruments are
set forth more fully in the Fund's Prospectus and Statement of
Additional Information.
The Fund trades the following 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 may use options to seek to hedge
against risks of market exposure and changes in security prices and
foreign currencies, as well as to seek to enhance returns. Writing
puts and buying calls tend to increase the Fund's exposure to the
underlying instrument. Buying puts and writing calls tend to
decrease the Fund's exposure to the underlying instrument, or hedge
other Fund investments. Options, both held and written by the Fund,
are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of
any open purchased option is shown in the Schedule of Investments.
This amount reflects each contract's exposure to the underlying
instrument at period end. Losses may arise from changes in the value
of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparties do not perform
under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are
exercised or are closed are added to or offset against the proceeds
or amount paid on the transaction to determine the realized gain or
loss. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities, except purchased
options on foreign currency which is included in realized gains and
losses on foreign currency transactions. 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 six months
ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Written Put Option Transactions
---------------------------------------------------------------------------------------------------------
Number of Contracts Premiums
------------------- ------------
<S> <C> <C>
Outstanding, beginning of period...................... 11 $ 2,214,967
Options written....................................... 32 4,158,322
Options exercised..................................... (1) (50,700)
Options expired....................................... (8) (1,088,056)
Options closed........................................ (20) (3,739,863)
------------- -----------
Outstanding, end of period............................ 14 $ 1,494,670
============= ===========
</TABLE>
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Written Call Option Transactions
---------------------------------------------------------------------------------------------------------
Number of Contracts Premiums
------------------- -----------
<S> <C> <C>
Outstanding, beginning of period...................... 9 $ 1,145,695
Options written....................................... 13 197,525
Options exercised..................................... 0 0
Options expired....................................... (5) (274,478)
Options closed........................................ (6) (586,290)
--------------- -----------
Outstanding, end of period............................ 11 $ 482,452
=============== ===========
<CAPTION>
Written Cross Currency Option Transactions
---------------------------------------------------------------------------------------------------------
Number of Contracts Premiums
------------------- -----------
<S> <C> <C>
Outstanding, beginning of period...................... 5 $ 1,372,083
Options written....................................... 4 1,182,465
Options exercised..................................... 0 0
Options expired....................................... 0 0
Options closed........................................ (4) (1,181,331)
--------------- -----------
Outstanding, end of period............................ 5 $ 1,373,217
=============== ===========
</TABLE>
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 or upon
the closing of the contract. Forward currency exchange contracts are
used by the Fund primarily to protect the value of the Fund's
foreign securities from adverse currency movements. Unrealized
appreciation and depreciation of forward currency exchange contracts
is included in the Statement of Assets and Liabilities.
At June 30, 1997, the Fund held the following forward foreign
currency and cross currency exchange contracts:
Forward Foreign Currency Contracts:
<TABLE>
<CAPTION>
U.S.$ U.S.$
Local Principal Contract U.S.$ Market Aggregate Unrealized
Contracts to Receive Amount Value Date Value Face Amount Gain/(Loss)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Danish Krone 131,508,201 7/16-10/28/97 19,863,974 20,061,876 (197,902)
European Currency Unit 18,724,875 7/7/97 21,096,193 21,131,021 (34,828)
Finnish Markka 40,563,948 7/23/97-1/21/98 7,833,723 7,960,205 (126,482)
Deutsche Mark 122,974,170 7/31/97-6/3/98 70,893,076 74,383,761 (3,490,685)
British Pound Sterling 11,261,760 6/30-7/7/97 18,746,658 18,700,366 46,292
Greek Drachma 2,372,150 8/1/97-1/12/98 8,594 9,266 (672)
Italian Lira 101,720,660,145 7/2/97-1/20/98 59,790,055 61,199,538 (1,409,483)
Japanese Yen 1,115,638,889 8/5/97 9,789,105 9,129,614 659,491
</TABLE>
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Norwegian Krone 71,444,729 7/16-7/21/97 9,771,945 10,155,235 (383,290)
Spanish Peseta 5,266,980,589 7/29/97-1/20/98 35,760,010 36,561,549 (801,539)
Swedish Krona 3,666,000 6/16/97 472,468 469,008 3,460
Swiss Franc 16,750,000 7/21-8/4/97 11,512,753 14,546,244 (3,033,491)
----------------- -----------------------------------------------------------
Total 108,522,545,456 265,538,554 274,307,683 (8,769,129)
================= ===========================================================
</TABLE>
<TABLE>
<CAPTION>
U.S.$ U.S.$
Local Principal Contract U.S.$ Market Aggregate Unrealized
Contracts to Receive Amount Value Date Value Face Amount Gain/(Loss)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australian Dollar 125,119,492 7/1-10/31/97 94,394,248 95,894,133 1,499,885
Canadian Dollar 58,863,688 9/24-12/18/97 42,954,514 42,857,153 (97,361)
Czech Koruna 13,885,470 8/27/97 418,310 486,552 68,242
Danish Krone 646,802,997 7/10-12/16/97 97,890,225 103,819,153 5,928,928
European Currency Unit 37,449,750 7/7-10/7/97 42,267,137 42,986,255 719,118
Finnish Markka 40,023,968 7/23/97-1/21/98 7,728,067 8,484,148 756,081
Deutsche Mark 408,644,655 7/9/97-1/21/98 235,514,557 247,200,936 11,686,379
British Pound Sterling 108,777,780 7/7-11/7/97 180,739,735 176,886,944 (3,852,791)
Greek Drachma 3,782,901,750 8/1/97-6/3/98 13,705,104 14,468,856 763,752
Irish Punt 4,579,630 7/17-11/19/97 6,934,929 7,061,583 126,654
Italian Lira 180,931,681,359 7/2/97-1/20/98 106,304,015 107,054,808 750,793
Japanese Yen 10,300,391,059 8/5-9/18/97 90,677,976 88,146,460 (2,531,516)
New Zealand Dollar 57,665,004 8/13-9/15/97 39,166,555 39,509,634 343,079
Norwegian Krone 105,699,897 7/16-7/21/97 14,457,389 16,761,278 2,303,889
Spanish Peseta 6,382,976,029 7/29/97-1/20/98 43,360,157 44,596,190 1,236,033
Swedish Krona 483,808,968 6/16/97 62,564,808 63,903,876 1,339,068
----------------- -----------------------------------------------------------
Total 203,489,271,496 1,079,077,726 1,100,117,959 21,040,233
================= ===========================================================
</TABLE>
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Forward Foreign Cross Currency Contracts
<TABLE>
<CAPTION>
U.S.$ U.S.$
U.S.$ Market Market Contract Unrealized
Contracts to Deliver Value In Exchange For Value Value Date Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Belgian Franc 17,825,269 Deutsche Mark 17,811,821 04/24/98 (13,448)
French Franc 16,709,307 Deutsche Mark 16,678,154 09/08/97 (31,153)
French Franc 16,653,355 Deutsche Mark 16,588,301 09/03/97 (65,054
Deutsche Mark 15,483,575 Finnish Markka 15,452,868 01/21/98 (30,707)
French Franc 15,001,218 Greek Drachma 15,358,077 01/12/98 356,859
Finnish Markka 15,558,524 Deutsche Mark 15,483,575 01/21/98 (74,949)
Greek Drachma 15,352,820 French Franc 15,001,218 01/12/98 (351,602)
Deutsche Mark 12,392,339 Greek Drachma 13,691,253 08/01/97 1,298,914
French Franc 12,605,386 CCzech Koruna 12,399,788 08/27/97 (205,598)
Swiss Franc 11,801,598 Norwegian Krone 12,713,514 07/21/97 911,916
Italian Lira 13,727,914 Deutsche Mark 12,392,339 08/01/97 (1,335,575)
Swiss Franc 11,512,753 Danish Krone 12,199,320 08/04/97 686,567
Norwegian Krone 12,185,814 Swiss Franc 11,801,598 7/21/97 (384,216)
CCzech Koruna 11,981,478 French Franc 12,605,386 08/27/97 623,908
Greek Drachma 8,614,032 Deutsche Mark 8,468,369 06/03/98 (145,663)
Deutsche Mark 7,594,530 Spanish Peseta 7,600,147 01/20/98 5,617
Deutsche Mark 7,594,530 Italian Lira 7,679,421 01/20/98 84,891
-------------------- ------------- -------------------
Total 222,594,442 223,925,149 1,330,707
==================== ============= ===================
</TABLE>
16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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. Buying futures tends to increase the
Fund's exposure to the underlying instrument, while selling futures
tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund 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. Losses may arise if there is an
illiquid secondary market or if the counterparties do not perform
under the contract's terms. The Fund enters into financial futures
transactions primarily to manage its exposure to certain markets and
to changes in security prices and foreign currencies. Gains and
losses are realized upon the expiration or closing of the futures
contracts. At June 30, 1997, the Fund held no 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. If forecasts of
interest rates and other market factors are incorrect, investment
performance will diminish compared to what performance would have
been if these investment techniques were not used. Even if the
forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a
liquid secondary market may not always exist, or a counterparty to a
transaction may not perform. The 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. Gains and losses are realized upon the
expiration or closing of the swap contracts. At June 30, 1997, the
Fund held an interest rate swap contract with a notional amount of
12,750,000 Deutsche Marks and an expiration date of 12/16/2000,
which had unrealized appreciation of $138,354.
17
<PAGE>
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