Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Financial Statements for the Period Ended
September 30, 1997
[STANDISH LOGO]
<PAGE>
Standish, Ayer & Wood Investment Trust
Chairman's Message
October 31, 1997
Dear Standish, Ayer & Wood Investment Trust Shareholder:
Enclosed you will find the annual statement for the Standish International
Equity Fund. Please note that it is a nine-month reporting period for the fiscal
year ending September 30, 1997, as the fund has changed its fiscal year end from
December to September in order to streamline our reporting process.
As of September 1997, Standish, Ayer & Wood managed assets for its clients of
approximately $36.7 billion, including the Standish mutual fund assets of $5.3
billion. The principal clients of the firm are corporate pension trusts, state
and local governmental units, insurance companies, endowments and foundations,
and high net worth individuals. The firm remains independent and is owned by
investment professionals active in the operation of the business.
During the last nine months, the financial markets have generally registered
very positive rates of return. The U.S. equity markets as measured by the
Standard & Poor's 500 Index or the Russell 2000 Growth Index have recorded total
rates of return of 29.64% and 23.02%, respectively. Foreign equity markets, as
benchmarked by the Morgan Stanley Capital International Index, have lagged
behind these strong domestic returns with a return of 10.42%.
During the last year, we at Standish have continued to add resources to both
investment research and shareholder servicing. We remain confident that we have
the resources and the organization to do a superior investment management job,
and we will be working hard to fulfill your expectations in the years ahead. We
appreciate the opportunity to serve you and hope you will find the attached
information helpful.
Sincerely yours,
/s/ Edward H. Ladd
Edward H. Ladd
Chairman
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Management Discussion & Analysis
Attractive returns in international equity markets during the first nine months
of 1997 were once again overshadowed by the continuing surge in U.S. equity
prices. The return of the MSCI EAFE index was 10.37%, while the Standish
International Equity Fund achieved a return of 7.65%.
So far in 1997, Europe has provided an attractive investment environment, while
the Pacific markets have been weak. All fourteen European markets in the EAFE
index rose at least 18% in local currency terms, with eight rising more than
40%. The strong dollar reduced the value of those returns to U.S. investors by
about 12% on average. In the Pacific, Hong Kong provided the best return, 5.4%
in both local and dollar terms, while Japan was virtually flat in local terms,
and down 5.3% in dollar terms. Emerging markets also provided starkly different
returns by region, with the MSCI EM Latin America Index up 44.5% in dollars, and
the MSCI EM Asia Index off 17.8%, in dollars. Altogether, emerging markets
trailed developed markets, as the MSCI Emerging Markets Index was up only 5.4%.
The year was one of considerable change for the Fund, as the portfolio was
extensively repositioned to focus on stock selection for the first time, after
eight years of relying solely on country weightings to add value. The good news
is that these new stock selection processes have worked well, adding value
across the total portfolio and in ten of the thirteen markets in which we were
invested. Unfortunately, our experience in country weighting was not as
positive. Our process of favoring markets with low relative price multiples
while avoiding markets with high relative price multiples did not work well in
the first nine months of 1997, as valuations continued to widen the divergence
between cheap and dear markets. During 1997, we have greatly reduced our
reliance upon our country weighting process, bringing country weightings closer
to those of the benchmark, while increasing the focus on our stock selection
process.
The Fund started the year significantly underweight in the core European markets
of Germany, Switzerland, and the Netherlands, holding overweights in many
smaller European markets such as Austria and Belgium, where price multiples were
relatively cheap. This strategy did not work well, as the core European markets
provided higher returns. We increased our exposure to core Europe during the
course of 1997 to a level similar to the benchmark. During the summer our small
overweight positions in Singapore and Malaysia performed poorly as a currency
crisis was exacerbated by government over-reaction in restricting trading.
Stock selection was particularly strong in Germany and Singapore where we
outperformed the index by 12%, and the U.K., Belgium and France, where we
outperformed the index by 7% each. These returns were achieved using a
disciplined process similar in philosophy to the security selection processes
followed by our domestic equity management at Standish. This process focuses on
companies with improving business momentum and reasonable valuation. Stock
selection will continue to be an increasingly important element in the Standish
International Equity Fund in the coming year.
We thank you for your continued support and will work diligently to earn and
reward that support in the coming year.
/s/ Remi J. Browne
Remi Browne
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Comparison of Change in Value of $100,000 Investment in
Standish International Equity Fund and the EAFE Index
[GRAPHIC OMITTED]
[The following table was represented as a line graph in the printed materials.]
Standish
International
Equity Fund EAFE
----------- ----
Inception 12/8/88 100000 100000
12/31/88 100350 100600
1/31/89 101450 102411
2/28/89 99900 102923
3/30/89 99600 100864
4/30/89 103400 101772
5/31/89 100300 96276
6/30/89 100750 94640
7/31/89 110384 106564
8/31/89 110485 101769
9/30/89 112818 106450
10/31/89 106835 102192
11/30/89 110942 107302
12/31/89 119206 111272
1/31/90 118948 107155
2/28/90 117194 99654
3/30/90 119103 89290
4/30/90 116420 88576
5/31/90 123438 98674
6/30/90 126018 97785
7/31/90 132212 99154
8/31/90 117358 89536
9/30/90 102925 77091
10/31/90 110640 89117
11/30/90 109065 83859
12/31/90 107963 85201
1/31/91 110801 87927
2/28/91 120173 97380
3/31/91 115139 91537
4/30/91 116639 92434
5/31/91 118352 93358
6/30/91 111658 86543
7/31/91 116950 90792
8/31/91 115384 88976
9/30/91 119217 93995
10/31/91 121269 95320
11/30/91 115654 90840
12/31/91 120621 95527
1/31/92 120567 93493
2/29/92 119643 90146
3/31/92 114482 84196
4/30/92 115786 84592
5/31/92 120241 90251
6/30/92 115188 85973
7/31/92 112137 83772
8/31/92 111483 89025
9/30/92 109194 87244
10/31/92 107342 82672
11/30/92 107941 83450
12/31/92 108595 83884
1/31/93 108595 83884
2/28/93 111559 86417
3/31/93 116446 93952
4/30/93 119410 102868
5/31/93 120948 105039
6/30/93 120069 103400
7/31/93 123818 107019
8/31/93 132418 112798
9/30/93 130213 110204
10/31/93 139309 113598
11/30/93 135064 103715
12/31/93 150169 111204
1/31/94 159323 120611
2/28/94 152359 120274
3/31/94 141352 115090
4/30/94 145789 119970
5/31/94 146856 119286
6/30/94 141268 120968
7/31/94 146131 122141
8/31/94 150766 125036
9/30/94 145273 121097
10/31/94 147104 125130
11/30/94 142012 119111
12/31/94 139645 119861
1/31/95 132457 115259
2/28/95 129860 114936
3/31/95 132578 122097
4/30/95 137893 126687
5/31/95 138135 125180
6/30/95 135974 122989
7/31/95 142943 130646
8/31/95 138095 125662
9/30/95 139246 128116
10/31/95 134884 124672
11/30/95 138034 128141
12/31/95 142640 133304
1/31/96 145972 133851
2/29/96 145124 134303
3/31/96 146033 137150
4/30/96 153789 141138
5/31/96 152153 138541
6/30/96 153168 139321
7/31/96 147904 135249
8/31/96 146964 135545
9/30/96 151413 139146
10/31/96 148092 137722
11/30/96 155362 143202
12/31/96 153255 141360
1/31/97 149696 136412
2/28/97 152398 138643
3/31/97 150619 139143
4/30/97 150355 139881
5/31/97 160968 148987
6/30/97 168472 157196
7/31/97 170851 159743
8/31/97 157695 147810
9/30/97 114482 84196
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Statement of Assets and Liabilities
September 30, 1997
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments at value (Note 1A) (identified cost, $48,159,981) $48,697,402
Cash 319,680
Receivable for investments sold 2,526,237
Interest and dividends receivable 127,911
Receivable for variation margin on open financial futures
contracts (Note 6) 2,205
Unrealized appreciation on forward foreign currency exchange
contracts (Note 6) 2,905
Receivable for foreign dividend tax reclaims 69,227
Prepaid expenses 2,648
-----------
Total assets 51,748,215
Liabilities
Payable for investments purchased $ 1,816,611
Payable for Fund shares redeemed 375,615
Unrealized depreciation on forward foreign currency
exchange contracts (Note 6) 4,912
Accrued accounting, custody and transfer agent fees 25,155
Accrued expenses and other liabilities 28,585
-----------
Total liabilities 2,250,878
-----------
Net Assets $49,497,337
===========
Net Assets consist of:
Paid-in capital $44,624,008
Undistributed net investment income 203,249
Accumulated net realized gain 4,140,985
Net unrealized appreciation 529,095
===========
Total Net Assets $49,497,337
===========
Shares of beneficial interest outstanding 2,100,374
===========
Net asset value, offering price and redemption price per share
(Net assets/Shares outstanding) $ 23.57
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Statements of Operations
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, 1997 December 31, 1996
-------------------- -------------------
<S> <C> <C>
Investment Income
Dividend income (net of foreign withholding
taxes of $136,256 and $90,911, respectively) $ 934,913 $ 771,708
Interest income 49,228 403,047
---------- -----------
Total investment income 984,141 1,174,755
Expenses
Investment advisory fee (Note 2) 300,055 410,099
Accounting, custody and transfer agent fees 157,669 183,804
Audit services 40,828 35,184
Legal fees 17,081 11,762
Registration fees 8,724 8,866
Insurance expense 3,346 2,683
Trustees fees (Note 2) 1,640 1,955
Miscellaneous 2,058 2,819
---------- -----------
Total expenses 531,401 657,172
Deduct --
Waiver of investment advisory fee (Note 2) (215,367) (402,258)
---------- -----------
Net expenses 316,034 254,914
---------- -----------
Net investment income 668,107 919,841
---------- -----------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss)
Investment security transactions 3,967,938 3,795,947
Financial futures contracts 192,113 744,905
Foreign currency transactions and forward
foreign currency exchange contracts 128,043 (20,322)
---------- -----------
Net realized gain 4,288,094 4,520,530
Change in unrealized appreciation (depreciation)
Investment securities (597,441) (1,582,054)
Financial futures contracts 1,602 (195,226)
Foreign currency and forward foreign
currency exchange contracts (210,758) 264,316
---------- -----------
Net change in unrealized appreciation
(depreciation) (806,597) (1,512,964)
---------- -----------
Net realized and unrealized gain 3,481,497 3,007,566
---------- -----------
Net increase in net assets from operations $4,149,604 $ 3,927,407
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended Year Ended
September 30, December 31, December 31,
1997 1996 1995
--------------- -------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations
Net investment income $ 668,107 $ 919,841 $ 1,535,925
Net realized gain 4,288,094 4,520,530 555,805
Change in unrealized appreciation
(depreciation) (806,597) (1,512,964) (1,331,247)
------------ ------------ -------------
Net increase in net assets from
operations 4,149,604 3,927,407 760,483
------------ ------------ -------------
Distributions to Shareholders
From net investment income (601,863) (993,584) --
From net realized gains on
investments (2,427,615) (2,991,390) (293,380)
------------ ------------ -------------
Total distributions to
shareholders (3,029,478) (3,984,974) (293,380)
------------ ------------ -------------
Fund Share (principal)
Transactions (Note 4)
Net proceeds from sale of shares 5,984,646 3,568,994 12,167,766
Net asset value of shares issued
to shareholders in payment of
distributions declared 2,684,361 3,425,523 272,750
Cost of shares redeemed (8,030,311) (18,671,701) (57,868,870)
------------ ------------ -------------
Net increase (decrease) in net
assets from Fund share
transactions 638,696 (11,677,184) (45,428,354)
------------ ------------ -------------
Net increase (decrease) in net
assets 1,758,822 (11,734,751) (44,961,251)
Net Assets
At beginning of period 47,738,515 59,473,266 104,434,517
------------ ------------ -------------
At end of period (including
undistributed net investment
income of $203,249, $8,961 and
$103,026, respectively) $ 49,497,337 $ 47,738,515 $ 59,473,266
============ ============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Financial Highlights
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
1997 ----------------------------------------------------
(Note 1F) 1996 1995 1994 1993 1992+
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 23.25 $ 23.54 $ 23.12 $ 26.74 $ 19.78 $ 22.20
------- ------- ------- -------- ------- -------
Income from investment operations
Net investment income* 0.39 0.47 0.04 0.21 0.26 0.26
Net realized and
unrealized gain
(loss) on
investments 1.44 1.28 0.45 (2.08) 7.29 (2.47)
------- ------- ------- -------- ------- -------
Total from investment
operations 1.83 1.75 0.49 (1.87) 7.55 (2.21)
------- ------- ------- -------- ------- -------
Less distributions to shareholders
From net investment
income (0.30) (0.51) -- (0.12) (0.23) (0.21)
In excess of net
investment income -- -- -- -- (0.36) --
From net realized
gains on
investments (1.21) (1.53) (0.07) (1.63) -- --
------- ------- ------- -------- ------- -------
Total distributions
to shareholders (1.51) (2.04) (0.07) (1.75) (0.59) (0.21)
------- ------- ------- -------- ------- -------
Net asset value, end
of period $ 23.57 $ 23.25 $ 23.54 $ 23.12 $ 26.74 $ 19.78
======= ======= ======= ======== ======= =======
Total return 7.65% 7.44% 2.14% (6.99)% 38.27% (9.95)%
Ratios (to average daily net
assets)/Supplemental Data
Expenses 0.84%++ 0.50% 1.22% 1.23% 1.34% 1.53%
Net investment income 1.78%++ 1.80% 1.76% 1.52% 1.09% 1.18%
Portfolio Turnover 155% 163% 108% 75% 98% 98%
Average broker
commission per
share (1) $0.0137 $0.0092 -- -- -- --
Net assets, end of
period (000's
omitted) $49,497 $47,739 $59,473 $104,435 $92,419 $56,539
</TABLE>
* For the nine months ended September 30, 1997 and the year ended December 31,
1996, the investment adviser voluntarily agreed not to impose a portion of its
investment advisory fee. In the absence of this agreement, the net investment
income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income
per share $ 0.29 $ 0.27 -- -- -- --
Ratios (to average
daily net assets):
Expenses 1.42%++ 1.29% -- -- -- --
Net investment
income 1.20%++ 1.01% -- -- -- --
</TABLE>
- -------------
+ Audited by other auditors.
++ Computed on an annualized basis.
(1)Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1997
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
EQUITIES -- 98.0%
Austria -- 2.5%
Brau-Union Goess-Reininghaus 2,600 $ 155,652
Creditanstalt-Bankverein 7,500 473,671
Oemv AG 2,150 321,607
Wienerberger Baustoff Ind 1,300 271,825
----------
1,222,755
----------
Belgium -- 4.8%
Banque Bruxelles Lampert SA 1,550 400,432
Electrabel SA 1,700 357,333
Fortis AG 1,900 381,600
Glaverbel 2,850 464,976
Groupe Bruxelles Lambert SA 1,900 302,143
Petrofina SA 700 274,920
Soc Gen Belgique Parts De Res. NPV 1,900 177,209
----------
2,358,613
----------
Denmark -- 3.0%
Aarhus Oliefabrik 3,000 161,067
Dfds A/s 400 404,635
Nordiske Kabel Traadfabri 2,200 170,611
Radiometer 3,400 159,207
Sas Danmark 14,000 233,845
Unidanmark 5,700 369,782
----------
1,499,147
----------
Finland -- 2.3%
Merita Ltd. 67,000 319,066
Nokia AB 5,600 528,051
Upm-Kymmeme 10,700 298,423
----------
1,145,540
----------
France -- 4.6%
Accor French Ord 2,400 444,474
Compagnie Financiere Paribas French Ord 4,200 312,268
Elf Gabon SA 600 139,811
Labinal 600 172,254
Lafarge Coppee French 2,800 205,718
Renault SA* 18,200 540,956
Total S.A., Series B 2,500 286,837
Vallourec 2,200 149,182
----------
2,251,500
----------
Germany -- 9.4%
Agiv AG* 28,200 685,189
Commerzbank AG 24,800 896,828
Continental AG Dm50 19,000 490,451
The accompanying notes arean integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1997
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Germany (continued)
Daimler Benz 7,000 $ 579,393
DBV Holding AG Registered Shares 1,900 698,950
Deutsche Telekom AG 17,000 330,060
Douglas Holding AG 10,000 393,415
Heidelberger Zement AG 7,365 589,534
----------
4,663,820
----------
Hong Kong -- 3.6%
Great Eagle Holdings Ltd. 157,000 433,152
Hang Lung Development Co. 103,000 193,662
Hong Kong Telecom 56,000 126,640
Jardine Intl. Motor Holdings Ordinary Shares 112,000 120,850
Johnson Electric Holdings-500 101,000 275,389
Regal Hotel International 800 207
Swire Pacific Ltd., Class A 50,000 382,826
Wing Lung Bank 44,000 260,981
----------
1,793,707
----------
Ireland -- 3.4%
Allied Irish Banks PLC 47,000 414,812
CRH PLC 30,400 346,099
Fii Fyffes PLC 1 300,000 436,200
Hibernian Group PLC 49,300 333,322
Smurfit (Jefferson) Group 51,500 172,226
----------
1,702,659
----------
Italy -- 2.9%
Credito Italiano 119,500 323,455
ENI SPA 48,700 307,330
Ifi istit Fin Priv Itl 1000 25,300 347,162
Istituto Nazionale Delle Assoc Ordinary Shares 123,000 195,571
Telecom Italia Spa 40,122 268,716
----------
1,442,234
----------
Japan -- 25.8%
Ajinomoto Co. Inc. 57,000 501,619
Amada Co., Ltd. 28,000 162,491
Bank Of Kyoto 52,000 254,280
Best Denki Co.+ 64,000 419,759
Casio Computer Co. Ltd. 46,000 412,453
Chichibu Onoda Cement Corp. 98,000 266,052
Fuji Bank 25,000 276,048
Fuji Electric Co. 83,000 252,204
Gunma Bank 37,000 316,397
Higo Bank 39,000 241,220
Hitachi Chemical 36,000 270,486
Hokkaido Electric Power 13,000 209,381
The accompanying notes arean integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1997
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Japan (continued)
Hokuetsu Paper Mills 71,000 $ 380,789
Japan Radio 37,000 282,607
Joyo Bank 57,000 290,560
Kandenko 41,000 253,591
Kikkoman Corp. 40,000 237,443
Kokusai Electric 27,000 479,701
Kokuyo Co. Ltd 13,000 308,676
Konica Corporation 38,000 203,171
Kyodo Printing Co. 44,000 258,265
Kyowa Hakko Kogyo+ 74,000 396,264
Matsushita Electric Works 26,000 271,980
Minolta Co. Ltd. 53,000 250,809
Nichicon Corp. 48,000 593,773
Nippon Shinpan Co Ordinary Shares 142,000 287,655
Nippon Telegraph and Telephone Corp. 50 460,772
Nippon Yusen Kabushiki Kaish 90,000 302,615
Nissan Fire & Marine Insurance 117,000 480,822
Nissan Motors 65,000 388,543
Ono Pharmaceutical 21,000 625,903
Sakura Bank Ltd. 40,000 191,615
Seino Transportation Co. Ltd. 41,000 371,025
Sumitomo Rubber 58,000 329,846
Sumitomo Warehouse+ 89,000 409,348
Tokyo Electric Power Co., Inc. 18,000 346,700
Toshiba Tungaloy 59,000 205,729
Toyo Suisan Kaisha Ltd. 37,000 340,971
Yamaha Motor 28,000 241,760
-----------
12,773,323
-----------
Malaysia -- 2.7%
Faber Group Berhad* 263,000 133,605
Golden Hope Plantations Bhd 164,000 238,325
Petronas Dagangan Berhad 112,000 179,310
Public Bank Berhad Ord 110,000 83,313
Renong Berhad 233,000 229,557
RJ Reynolds Berhad 81,000 138,408
Systems Telekom Malaysia 43,500 131,920
Technology Resources Industries 113,000 137,075
UMW Holdings 31,000 62,038
-----------
1,333,551
-----------
Netherlands -- 8.0%
ASR Verzekeringsgroep NV 6,800 344,352
Gamma Holding 6,700 366,971
ING Groep 12,930 595,486
KLM Royal Dutch Ari Ord 18,300 640,860
Pakhoed Holding NV Rotter 7,700 273,531
The accompanying notes arean integral part of the financial statements.
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1997
Value
Security Shares (Note 1A)
- --------------------------------------------------------------------------------
Netherlands (continued)
Philips Electronics NV Ordinary Shares 3,300 $ 280,016
Royal Dutch Petroleum Co. 25,600 1,436,986
----------
3,938,202
----------
Singapore -- 1.8%
First Capital Corp-Singapore Ordinary Shares 36,000 80,523
Haw Par Bros Ordinary Shares 151,000 293,309
Overseas Union Bank 37,000 164,552
Robinson & Co. 58,000 278,810
Singapore Telecom Ltd. 58,000 98,247
----------
915,441
----------
Switzerland -- 6.7%
Grands Magasins Jelmoli Br 450 363,279
Julius Baer Holdings 200 308,425
Nestle Registered Shares 330 461,312
Novartis AG 900 1,384,807
Vontobel Holding AG 1,050 814,325
----------
3,332,148
----------
United Kingdom -- 16.5%
Amec PLC 181,700 440,386
Anglian Water PLC 32,100 424,533
Bank Of Scotland 46,000 380,553
Barclays PLC 1P Ordinary Shares 35,300 955,098
BG PLC 104,000 452,876
British Petroleum Co. PLC 34,200 516,684
English China Clays PLC 123,000 561,450
General Accident PLC 38,300 674,857
Hazlewood Foods PLC 192,000 463,799
I M I PLC Ordinary Shares 64,700 428,623
Kwik Save Group PLC 97,000 546,213
Lex Service PLC Ordinary Shares 88,000 636,302
Royal & Sun Alliance Insurance Group 55,300 525,847
Smith and Nephew Associated 175,000 534,426
Transport Development Group PLC 119,000 373,024
Unigate PLC 26,300 240,100
----------
8,154,771
----------
TOTAL EQUITIES (COST $47,989,968) 48,527,411
----------
The accompanying notes arean integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1997
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 0.4%
U.S. Government -- 0.4%
FHLB+ 5.800%+ 12/17/1997 $172,000 $ 169,991
-----------
Total U.S. Government (Cost $170,013) 169,991
-----------
TOTAL BONDS AND NOTES (COST $170,013) 169,991
-----------
TOTAL INVESTMENTS -- 98.4% (COST $48,159,981) $48,697,402
Other Assets, Less Liabilities -- 1.6% 799,935
===========
NET ASSETS -- 100% $49,497,337
===========
</TABLE>
Notes to the Schedule of Investments:
FHLB - Federal Home Loan Bank
* Non-income producing security.
+ Denotes all or part of security pledged as collateral to cover margin
requirements on open financial futures contracts (Note 6).
+ Rate noted is yield to maturity.
The accompanying notes arean integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
(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 Equity Fund (the "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 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. 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--
Dividends from net investment income and capital gains distributions, if
any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. 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 treatment of 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).
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
F. Change in fiscal year end--
The Board of Trustees voted on July 12, 1997 to change the fiscal year end
of the Fund from December 31 to September 30, effective September 30,
1997.
(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 0.80% of the Fund's average daily net assets. SIMCO voluntarily
agreed to limit total Fund operating expenses to 1.00% of the Fund's
average daily net assets for the period April 1, 1997 to September 30,
1997. Prior to April 1, 1997, SIMCO voluntarily agreed to limit total Fund
operating expenses to 0.50% of the Fund's average daily net assets. This
agreement is voluntary and temporary and may be discontinued or revised by
SIMCO at any time. For the nine months ended September 30, 1997 and the
year ended December 31, 1996, SIMCO voluntarily waived a portion of its
investment advisory fee in the amount of $215,367 and $402,258,
respectively. 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 or
its affiliates.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
investments, were as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
------------------------ ------------------------
Purchases Sales Purchases Sales
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government Securities ..... $ 392,507 -- $23,042,519 $26,292,529
=========== =========== =========== ===========
Investments (non-U.S. Government
Securities) .................... $75,499,625 $76,910,303 $50,287,925 $58,275,201
=========== =========== =========== ===========
</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:
Nine Months
Ended Year Ended Year Ended
September 30, December 31, December 31,
1997 1996 1995
------------ ------------ ------------
Shares sold ................. 258,881 147,664 535,762
Shares issued to shareholders
in payment of distributions
declared .................. 109,893 144,612 12,155
Shares redeemed ............. (322,069) (764,772) (2,539,577)
------------ ------------ ------------
Net increase/(decrease) ..... 46,705 (472,496) 1,991,660
============ ============ ============
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
(5) Federal Income Tax Basis of Investment Securities: The cost and unrealized
appreciation (depreciation) in value of the investment securities owned at
September 30, 1997, as computed on a federal income tax basis, were as
follows:
Aggregate Cost.................................. $48,209,363
===========
Gross unrealized appreciation................... $3,599,881
Gross unrealized depreciation................... (3,111,842)
-----------
Net unrealized appreciation (depreciation)...... $488,039
===========
(6) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek 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 may use options to seek to hedge against risks of
market exposure and changes in securities 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 Net
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 contracts' 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 are 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. During the nine months ended
September 30, 1997, the Fund had no written option transactions, nor were
there any open written option contracts at September 30, 1997.
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.
16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
At September 30, 1997, the Fund held the following forward foreign
currency exchange contracts:
<TABLE>
<CAPTION>
U.S.$ U.S.$
Local Contract U.S. $ Aggregate Unrealized
Contracts to Principal Value Market Face Appreciation/
Receive Amount Date Value Amount (Depreciation)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Danish Krone $ 991,786 10/02/97 $ 147,929 $ 147,528 $ 401
-----------------------------------
$ 147,929 $ 147,528 $ 401
===================================
U.S.$ U.S.$
Local Contract U.S. $ Aggregate Unrealized
Contracts to Principal Value Market Face Appreciation/
Deliver Amount Date Value Amount (Depreciation)
------------------------------------------------------------------------------
German Deutshe
Mark $ 12,223 10/01/97 $ 6,940 $ 6,941 $ 1
British Pound
Sterling $ 478,307 10/02/97 $ 772,766 $ 767,854 $ (4,912)
Malaysian Ringgit $ 252,531 10/02/97 $ 77,743 $ 80,246 $ 2,503
-----------------------------------
$ 857,449 $ 855,041 $ (2,408)
===================================
</TABLE>
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 contracts' terms. The Fund
enters into financial futures transactions primarily to manage its
exposure to certain markets and to changes in securities prices and
foreign currencies. Gains and losses are realized upon the expiration or
closing of the futures contracts.
At September 30, 1997, the Fund held the following futures contracts:
<TABLE>
<CAPTION>
Underlying Unrealized
Expiration Face Amount Appreciation/
Contract Position Date at Value (Depreciation)
--------------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Eurotop 100 Futures
(3 contracts) Long 12/23/97 $ 673,500 $ 25,050
Topix Futures (3
contracts) Long 12/12/97 $ 359,518 $ (19,454)
============= =============
1,033,018 5,596
============= =============
</TABLE>
At September 30, 1997, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
17
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
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 assets 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. During the nine months ended
September 30, 1997, the Fund did not enter into any interest rate swap
contract transactions. Gains and losses are realized upon the expiration
of closing of the swap contracts. At September 30, 1997, the Fund had no
open interest rate swap contracts.
(7) Concentration of Credit Risk:
The Fund has a relatively large concentration of portfolio securities
invested in companies domiciled in Japan. The Fund may be more susceptible
to political, social and economic events adversely affecting Japanese
companies than funds not so concentrated.
(8) Tax Information -- Unaudited
The Fund paid distributions of $0.6945 from long term capital gains during
the nine months ended September 30, 1997. Pursuant to section 852 of the
Internal Revenue Code, the Fund designates $1,327,630 as capital gain
dividends for the nine months ended September 30, 1997. All of this amount
represents a 28% tax rate gain distribution.
The Fund paid foreign taxes of $136,256 and the Fund recognized $1,071,169
of foreign source income during the nine months ended September 30, 1997.
Pursuant to section 853 of the Internal Revenue Code the Fund designates
$0.0649 per share of foreign taxes paid and $0.5100 per share (for a share
outstanding at September 30, 1997) of income earned from foreign sources
in the nine months ended September 30, 1997.
18
<PAGE>
Report of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust and the
Shareholders of Standish International Equity Fund:
We have audited the accompanying statement of assets and liabilities of
Standish, Ayer & Wood Investment Trust: Standish International Equity Fund
(the "Fund"), including the schedule of investments, as of September 30,
1997, and the related statements of operations for the nine months ended
September 30, 1997 and the year ended December 31, 1996, the statements of
changes in net assets for the nine months ended September 30, 1997 and the
two years in the period ended December 31, 1996 and the financial
highlights for the nine months ended September 30, 1997 and the four years
in the period ended December 31, 1996. 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 the
year ended 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 September 30, 1997 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 as of September 30, 1997, and the results of its operations for the
nine months ended September 30, 1997 and the year ended December 31, 1996,
changes in its net assets for the nine months ended September 30, 1997 and
the two years in the period ended December 31, 1996 and the financial
highlights for the nine months ended September 30, 1997 and the four years
in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 11, 1997
19
<PAGE>
[GRAPHIC OMITTED] Standish, Ayer & Wood, Inc.
One Financial Center
Boston, Massachusetts 02111-2662
(617) 350-6100
