Standish, Ayer & Wood Investment Trust
International Fixed Income Fund
Financial Statements for the
Six Months Ended June 30, 1998
(Unaudited)
[LOGO]
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments at value (Note 1A) (identified cost, $1,323,202,762) $ 1,291,448,589
Foreign currency, at value (cost, $4,788,968) 4,863,489
Interest and dividends receivable 33,208,693
Receivable for Fund shares sold 122,504
Receivable for investments sold 14,624,996
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 57,344,781
Receivable for variation margin on open financial futures contracts (Note 6) 49,875
Tax reclaim receivable 28,609
Prepaid expenses 13,530
---------------
Total assets 1,401,705,066
Liabilities
Payable for investments purchased $30,160,924
Distribution payable 3,869,015
Payable for Fund shares redeemed 9,170
Unrealized depreciation on forward foreign currency exchange contracts
(Note 6) 15,774,327
Options written, at value (premiums received, $4,186,374) (Note 6) 2,826,417
Accrued trustees' fees and expenses (Note 2) 8,737
Accrued accounting, custody and transfer agent fees 173,499
Accrued expenses and other liabilities 52,135
-----------
Total liabilities 52,874,224
---------------
Net Assets $ 1,348,830,842
===============
Net Assets consist of:
Paid-in capital $ 1,309,950,558
Undistributed net investment income 10,273,912
Accumulated net realized gain 18,242,268
Net unrealized appreciation 10,364,104
---------------
Total Net Assets $ 1,348,830,842
===============
Shares of beneficial interest outstanding 58,259,625
===============
Net Asset Value, offering price and redemption price per share
(Net Assets/Shares outstanding) $ 23.15
===============
</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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Interest income (net of foreign withholding taxes of $32,441) $ 43,250,550
Miscellaneous income 331,980
------------
Total investment income 43,582,530
Expenses
Investment advisory fee (Note 2) $ 2,612,714
Accounting, custody and transfer agent fees 508,338
Registration fees 103,973
Audit services 31,099
Legal fees 24,770
Trustees' fees and expenses (Note 2) 18,373
Insurance expense 11,188
Miscellaneous 22,315
------------
Total expenses 3,332,770
------------
Net investment income 40,249,760
------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss)
Investment security transactions (13,911,179)
Financial futures contracts 501,872
Written option transactions 280,733
Foreign currency transactions and forward foreign currency exchange
contracts 31,924,719
------------
Net realized gain 18,796,145
Change in unrealized appreciation (depreciation)
Investment securities (3,840,064)
Financial futures contracts (67,612)
Written option transactions 784,579
Foreign currency and forward foreign currency exchange contracts (746,742)
------------
Net change in unrealized appreciation (depreciation) (3,869,839)
------------
Net realized and unrealized gain 14,926,306
------------
Net Increase in Net Assets from Operations $ 55,176,066
============
</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, 1998 December 31,
(Unaudited) 1997
------------------- --------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 40,249,760 $ 63,973,699
Net realized gain 18,796,145 74,075,302
Change in unrealized appreciation (depreciation) (3,869,839) (25,008,757)
-------------- ---------------
Net increase (decrease) in Net Assets from Investment Operations 55,176,066 113,040,244
-------------- ---------------
Distributions to Shareholders
From net investment income (28,419,237) (133,232,541)
From net realized gains on investments (8,235,370) (12,277,114)
-------------- ---------------
Total distributions to shareholders (36,654,607) (145,509,655)
-------------- ---------------
Fund Share (principal) Transactions (Note 4)
Net proceeds from sale of shares 303,770,989 390,048,325
Value of shares issued to shareholders in
payment of distributions declared 29,213,669 109,885,382
Cost of shares redeemed (175,370,336) (134,902,053)
-------------- ---------------
Net increase in Net Assets from Fund share transactions 157,614,322 365,031,654
-------------- ---------------
Total Increase in Net Assets 176,135,781 332,562,243
Net Assets
At beginning of period 1,172,695,061 840,132,818
-------------- ---------------
At end of period (including undistributed net investment income and
distributions in excess of net investment income of $10,273,912 and
$1,556,611, respectively) $1,348,830,842 $ 1,172,695,061
============== ===============
</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, 1998 --------------------------------------------------------------
(Unaudited) 1997 * 1996 * 1995 1994 1993
------------ ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 22.81 $ 23.25 $ 23.21 $ 21.30 $ 24.22 $ 21.20
---------- ----------- ---------- ---------- ----------- -----------
Investment Operations
Net investment income 0.71 1.54 1.72 1.96 1.71 2.03
Net realized and unrealized gain
(loss) on investments 0.27 1.16 1.73 1.84 (3.93) 2.90
---------- ----------- ---------- ---------- ----------- -----------
Total from investment operations 0.98 2.70 3.45 3.80 (2.22) 4.93
---------- ----------- ---------- ---------- ----------- -----------
Less distributions to shareholders
From net investment income (0.50) (2.86) (2.64) (1.89) (0.20) (1.53)
In excess of net investment
income -- -- -- -- -- (0.12)
From net realized gains on
investments (0.14) (0.28) (0.77) -- -- (0.26)
From tax return of capital -- -- -- -- (0.50) --
---------- ----------- ---------- ---------- ----------- -----------
Total distributions to shareholders (0.64) (3.14) (3.41) (1.89) (0.70) (1.91)
---------- ----------- ---------- ---------- ----------- -----------
Net Asset Value, End of Period $ 23.15 $ 22.81 $ 23.25 $ 23.21 $ 21.30 $ 24.22
========== =========== ========== ========== =========== ===========
Total Return 4.33% 11.86% 15.28% 18.13% (9.22)% 23.77%
Ratios/Supplemental Data
Expenses (to average daily net
assets) 0.51%+ 0.53% 0.53% 0.51% 0.51% 0.51%
Net investment income (to
average daily net assets) 6.16%+ 6.37% 7.17% 8.09% 7.69% 7.53%
Portfolio Turnover 86% 173% 226% 165% 158% 98%
Net Assets, End of Period
(000 omitted) $1,348,831 $ 1,172,695 $ 840,133 $ 803,537 $ 1,069,416 $ 1,131,201
</TABLE>
* Calculated based on average shares outstanding.
+ Computed on an annualized basis.
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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (a) (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 91.4%
Corporate -- 0.6%
Financial -- 0.6%
Conseco Finance Trust Cap. Notes 8.700% 11/15/2026 6,825,000 $ 7,710,066
------------
Total Corporate (Cost $7,670,497) 7,710,066
------------
Government/Other -- 84.6%
Argentina -- 0.7%
City of Buenos Aires 10.500% 05/28/2004 1,590,000 1,321,688
Cointel 10.375% 08/01/2004 10,000,000 8,175,000
------------
9,496,688
------------
Australia -- 1.1%
Australian Government 9.000% 09/15/2004 19,360,000 14,179,594
------------
Denmark -- 6.0%
Denmark Nykredit 7.000% 10/01/2026 88,940,000 13,215,242
Denmark Realkredit 8.000% 10/01/2026 48,728,000 7,243,839
Denmark Realkredit 7.000% 10/01/2026 13,562,000 2,015,124
Kingdom of Denmark+ 6.000% 12/10/1999 91,700,000 13,635,995
Kingdom of Denmark 8.000% 03/15/2006 200,000,000 34,731,078
Kingdom of Denmark+ 8.000% 11/15/2001 63,525,000 10,217,663
------------
81,058,941
------------
Finland -- 0.2%
Government of Finland 10.000% 09/15/2001 15,000,000 3,182,335
------------
France -- 1.9%
France Oat ECU 5.250% 04/25/2008 150,000,000 25,502,919
------------
Germany -- 25.9%
Baden Wurttemburg+ 6.200% 11/22/2013 16,000,000 9,469,847
Deutschland Republic+ 7.375% 01/03/2005 28,780,000 18,339,291
Deutschland Republic 9.000% 01/22/2001 44,700,000 27,579,010
Deutschland Republic+ 7.250% 10/21/2002 31,490,000 19,353,810
Deutschland Republic 6.750% 04/22/2003 21,500,000 13,072,428
Deutschland Republic+ 6.500% 07/15/2003 31,525,000 19,023,106
Deutschland Republic 6.500% 10/14/2005 13,600,000 8,354,823
Deutschland Republic+ 6.000% 01/04/2007 64,800,000 38,865,664
Die Bundrep Deutschland Dm1000+ 8.250% 09/20/2001 48,160,000 29,785,681
Exide Holding Corp. 9.125% 04/15/2004 10,000,000 5,558,628
Exide Holding Europe 144A 9.125% 04/15/2004 2,900,000 1,612,002
Federal Republic of Germany+ 8.375% 05/21/2001 49,230,000 30,286,797
Federal Republic of Germany+ 8.000% 07/22/2002 27,225,000 17,072,846
Federal Republic of Germany+ 6.875% 05/12/2005 45,000,000 28,095,133
</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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (a) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fresenius Med Global 7.375% 02/01/2008 18,900,000 $ 10,610,343
German Unity Fund+ 8.500% 02/20/2001 40,250,000 24,628,637
German Unity Fund+ 8.000% 01/21/2002 17,500,000 10,838,772
Haus Limited 4.043% 05/01/2035 7,990,588 4,419,573
Texon International PLC 10.000% 02/01/2008 17,100,000 9,481,610
Treuhandanstalt 7.500% 09/09/2004 29,500,000 18,837,251
United Mexican States+ 10.375% 01/29/2003 7,200,000 4,446,239
------------
349,731,491
------------
Japan -- 16.7%
Austria Republic 4.500% 09/28/2005 1,170,000,000 10,193,023
Austria Republic 6.250% 10/16/2003 800,000,000 7,252,679
European Investment Bank 4.625% 02/26/2003 1,894,000,000 15,839,173
Government of Finland+ 6.000% 01/29/2002 850,000,000 7,228,805
Government of Italy+ 5.125% 07/29/2003 1,300,000,000 11,186,383
IBRD-Global Bond 4.750% 12/20/2004 2,890,000,000 25,240,029
Italy Euroyen Notes 3.750% 06/08/2005 3,225,000,000 26,747,475
Italy Euroyen Notes 5.000% 12/15/2004 1,450,000,000 12,765,549
Kingdom of Spain+ 5.750% 03/23/2002 2,945,000,000 24,997,415
OKB 4.300% 02/14/2001 1,400,000,000 11,021,083
Republic of Portugal 4.500% 03/15/2002 1,370,000,000 11,139,930
South Africa 3.350% 06/17/2004 625,600,000 4,596,014
Spanish Government 4.750% 03/14/2005 1,850,000,000 16,173,542
Spanish Kingdom Euryen 3.100% 09/20/2006 1,410,000,000 11,360,935
World Bank 5.250% 03/20/2002 3,450,000,000 28,822,072
------------
224,564,107
------------
Netherlands -- 1.1%
Netherlands Government 9.000% 10/16/2000 26,000,000 14,077,433
------------
New Zealand -- 1.9%
Fernz Capital+ 9.800% 04/15/2002 19,000,000 10,288,650
Fletcher Challenge 14.500% 09/30/2000 8,500,000 4,915,869
Fletcher Challenge 10.000% 04/30/2005 5,725,000 3,227,224
Fletcher Challenge 11.250% 12/15/2002 13,000,000 7,412,568
------------
25,844,311
------------
Norway -- 1.2%
Norway Government 7.000% 05/31/2001 90,000,000 12,312,018
Vital Forsikring 7.850% 09/22/2003 25,600,000 3,592,900
------------
15,904,918
------------
Philippines -- 0.8%
ING Barings NV 0.000% 02/12/1999 10,500,000 10,841,250
------------
South Africa -- 0.4%
Euro Bank Recon & Development 0.000% 12/31/2015 200,000,000 2,985,075
IBRD-Global Bond 0.000% 12/31/2025 638,600,000 2,382,836
------------
5,367,911
------------
</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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (a) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sweden -- 7.1%
Government of Sweden+ 5.500% 04/12/2002 95,500,000 $ 12,359,309
Kingdom of Sweden+ 13.000% 06/15/2001 121,500,000 18,740,436
Kingdom of Sweden 10.250% 05/05/2003 75,000,000 11,632,555
Sweden Government Bond+ 6.500% 10/25/2006 304,500,000 42,133,487
Swedish Government 5.000% 01/15/2004 84,000,000 10,666,875
-------------
95,532,662
-------------
United Kingdom -- 15.9%
Alliance and Leicester Building Society+ 8.750% 12/07/2006 7,100,000 13,189,087
Bank of Greece+ 10.750% 09/06/2010 4,550,000 9,747,086
Birmingham Midshires Building Society+ 9.125% 01/05/2006 3,900,000 7,308,263
Capital Shopping Euro Notes 6.875% 03/05/2013 5,600,000 9,154,737
CSW Investments+ 8.875% 09/27/2006 13,070,000 24,023,567
Deutsche Bank 0.000% 02/28/2001 865,000 1,204,712
FNMA Global Bond 6.875% 06/07/2002 3,400,000 5,684,644
GTD Export Finance Corp. 0.000% 09/29/2000 6,190,000 8,801,332
Inco Ltd.+ 15.750% 07/15/2006 996,000 2,474,820
IPC Magazines 0.000% 03/15/2008 11,000,000 10,467,765
Northern Rock Building Society+ 9.375% 10/17/2021 10,665,000 23,191,296
P & O Steam Navigation+ 11.500% 07/03/2014 6,150,000 14,707,368
Republic of Argentina 11.500% 08/14/2001 3,950,000 6,759,388
Slough Estates 7.125% 02/17/2010 5,100,000 8,654,938
Smithkline Beecham Corp.+ 8.125% 11/25/1998 3,730,000 6,230,349
Stagecoach Holdings PLC 7.625% 10/31/2007 8,490,000 14,387,291
UK Gilt Stock 9.500% 10/25/2004 4,675,000 9,143,943
UK Gilt Stock 9.500% 04/18/2005 8,200,000 16,222,532
UK Treasury 7.750% 09/08/2006 3,750,000 6,961,032
UK Treasury 8.500% 07/16/2007 3,400,000 6,676,748
United Mexican States 8.750% 05/30/2002 6,100,000 9,827,512
-------------
214,818,410
-------------
Yankee Bonds -- 3.7%
Asia Pulp and Paper Global Financial 11.750% 10/01/2005 4,600,000 4,048,000
Gruma SA 144A Notes 7.625% 10/15/2007 925,000 879,213
Jamaica Government 144A Notes 9.625% 07/02/2002 4,900,000 4,753,000
Lithuania Government 144A Notes 7.125% 07/22/2002 3,650,000 3,531,375
Republic of Argentina(b) 9.150% 11/30/2002 20,700,000 20,751,750
Republic of Lithuania Regs Notes 7.125% 07/22/2002 1,200,000 1,161,000
Republic of Panama 7.875% 02/13/2002 15,680,000 15,342,880
-------------
50,467,218
-------------
Total Government/Other (Cost $1,170,286,333) 1,140,570,188
-------------
</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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (a) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations -- 6.2%
Treasury Bonds -- 2.8%
U.S. Treasury Bond+ 8.125% 08/15/2019 4,045,000 $ 5,220,558
U.S. Treasury Bond 6.625% 02/15/2027 28,725,000 32,436,845
-------------
37,657,403
-------------
Treasury Notes -- 3.4%
U.S. Treasury Inflation Index Note 3.375% 01/15/2007 12,400,000 12,331,822
U.S. Treasury Note 6.625% 04/30/2002 3,550,000 3,680,356
U.S. Treasury Note+ 6.500% 08/15/2005 26,360,000 27,817,972
U.S. Treasury Note++ 6.625% 06/30/2001 2,700,000 2,778,894
-------------
46,609,044
-------------
Total U.S. Treasury Obligations (Cost $83,702,181) 84,266,447
-------------
TOTAL BONDS AND NOTES (COST $1,261,659,011) 1,232,546,701
-------------
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.4%
<S> <C> <C>
Sumitomo Bank Step Up 144A 6,200,000 6,184,500
-------------
TOTAL PREFERRED STOCKS (COST $6,348,725) 6,184,500
-------------
<CAPTION>
Contract Value
Security Size (c) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchased Options -- 0.6%
JPY Put/NZD Call, Strike Price 73.50, 4/6/99 46,365,000 572,469
JPY Put/USD Call, Strike Price 145.00, 5/19/99 26,800,000 573,520
JPY Put, Strike Price 145.00, 11/16/98 26,900,000 414,260
USD Put/DEM Call, Strike Price 1.70, 5/21/99 26,775,000 203,490
USD Put/DEM Call, Strike Price 1.78, 8/4/98 26,525,000 95,490
UST 5.625% Call, Strike Price 101.39, 7/9/98 115,000 3,594
UST 6.125% Call, Strike Price 105.0156, 7/9/98 345,000 13,477
UST 6.125% Call, Strike Price 109.516, 11/9/98 267,500 363,633
DEM 6.00% Call, Strike Price 106.78, 5/12/99 47,340,000 396,425
DBR 6.00% Call, Strike Price 108.10, 8/27/98 22,100,000 97,793
BTP 6.75% Put, Strike Price 105.49, 2/3/00 7,095,000,000 21,285
BTP 6.75% Put, Strike Price 107.69, 2/7/00 8,735,000,000 52,410
DBR 5.625% Call, Strike Price 103.30, 11/27/98 22,100,000 233,464
JGB 2.00% Put, Strike Price 99.00, 1/25/99 2,975,000,000 119,000
Fujibank 9.87% Call, Strike Price 6.37, 2/26/99 67,500 209,250
BTP 6.75% Put, Strike Price 105.29, 1/1/07 7,095,000,000 21,285
</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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract Value
Security Size (c) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BTP 6.75% Put, Strike Price 105.29, 7/1/07 7,095,000,000 $ 21,285
BTP 6.75% Put, Strike Price 105.29, 7/1/07 7,095,000,000 21,285
BTP 6.75% Put, Strike Price 105.49, 2/3/00 7,095,000,000 21,285
BTP Put, Strike Price 105.49, 2/3/00 7,095,000,000 21,285
BTP 6.75% Put, Strike Price 107.69, 2/7/00 8,735,000,000 52,410
BTP 6.75% Put, Strike Price 107.69, 2/7/00 8,735,000,000 52,410
BTP 6.75% Put, Strike Price 107.69, 2/7/00 8,735,000,000 52,410
BTP 6.75% Put, Strike Price 107.69, 2/7/00 8,735,000,000 52,410
JPY Put/USD Call, Strike Price 155.00, 6/15/99 31,950,000 523,980
JPY Put/USD Call, Strike Price 150.00, 6/9/99 13,500,000 207,900
JPY Put/USD Call, Strike Price 145.00, 12/7/98 38,000,000 547,200
UST 5.625% Call, Strike Price 103.906, 11/20/98 134,000 50,250
UST 5.625% Call, Strike Price 104.859, 12/18/98 134,000 33,500
DBR 6.00% Call, Strike Price 108.445, 12/10/98 38,500,000 138,677
DBR 6.00% Call, Strike Price 109.81, 12/14/98 39,700,000 68,721
DBR 5.625% Call, Strike Price 104.35, 12/1/98 23,850,000 188,630
JGB 2.60% Call, Strike Price 108.516, 11/27/98 3,700,000,000 240,500
JGB 2.60% Call, Strike Price 109.811, 12/3/98 1,680,500,000 87,386
JGB 3.00% Put, Strike Price 110.00, 6/2/99 5,586,500,000 988,811
JGB 3.00% Put, Strike Price 111.40, 12/2/98 5,576,000,000 791,792
-----------------
TOTAL PURCHASED OPTIONS (COST $10,029,829) 7,552,972
-----------------
SHORT-TERM INVESTMENTS -- 3.3%
U.S. Government Agency -- 1.2%
FHLMC Discount Note 5.470% 07/09/1998 12,000,000 11,985,240
FNMA Discount Note 5.600% 07/27/1998 4,100,000 4,083,559
-----------------
16,068,799
-----------------
Commercial Paper -- 0.3%
Ford Motor Credit Corp. 6.000% 07/02/1998 4,000,000 3,998,000
-----------------
Repurchase Agreements -- 1.8%
Prudential Bache Repurchase Agreement, dated 6/30/98, due 7/01/98, with a
maturity value of $25,101,326 and an effective yield of 5.32%, collateralized by
U.S. Government Agency Obligations with rates ranging from 6.70% to 7.93%,
maturity dates ranging from 1/05/07 to 2/01/19, and with an aggregate market value
of $25,600,471. 25,097,617
-----------------
TOTAL SHORT-TERM INVESTMENTS (COST $45,165,197) 45,164,416
-----------------
TOTAL INVESTMENTS-- 95.7%(COST $1,323,202,762) $ 1,291,448,589
Other Assets, Less Liabilities-- 4.3% 57,382,253
-----------------
NET ASSETS-- 100% $ 1,348,830,842
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to the Schedule of Investments:
144A- Securities exempt from registration under Rule 144A of the Securities Act
of 1933.
These securities may be resold in transactions exempt from registration.
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
IBRD - International Bank for Reconstruction and Development
BTP - British Pound
DBR - Deutsche Bundes Republik
DEM - German Deutsche Mark
JGB - Japanese Government Bond
JPY - Japanese Yen
NZD - New Zealand Dollar
OKB - Oesterreich Kontrollbank Bank
USD - United States Dollar
UST - United States Treasury
(a) Par value denominated in local currency.
(b) Variable Rate Security; rate indicated is as of 6/30/98.
(c) Contract size denominated in local currency.
+ Denotes all or part of security pledged as a margin deposit (Note 6).
++ Denotes all or part of security pledged as collateral to cover margin
requirements on open financial futures contracts (Note 6).
The accompanying notes are an integral part of the financial statements.
11
<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.
12
<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, for the six month period ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------------ -------------------
<S> <C> <C>
U.S. Government Securities........................... $ 203,863,549 $ 278,821,212
================== ===================
Investments (non-U.S. Government Securities)......... $ 1,072,098,950 $ 806.635,226
================== ===================
</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, 1998 Year Ended
(Unaudited) December 31, 1997
-------------------- -------------------
<S> <C> <C>
Shares sold............................................ 13,080,682 16,174,061
Shares issued to shareholders in payment of
distributions declared.............................. 1,262,606 4,756,614
Shares redeemed........................................ (7,503,293) (5,647,545)
---------- ------------
Net increase........................................... 6,839,995 15,283,130
========== ============
</TABLE>
At June 30, 1998, two shareholders were record owners of approximately 12%
and 11% respectively of the total outstanding shares of the Fund.
13
<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, 1998, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost....................................................... $1,323,202,762
==============
Gross unrealized appreciation........................................ 21,060,653
Gross unrealized depreciation........................................ (52,814,826)
--------------
Net unrealized appreciation (depreciation)........................... $ (31,754,173)
==============
</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, 1998, is as follows:
<TABLE>
<CAPTION>
Written Put Option Transactions
--------------------------------------------------------------------------------------------
Number of Contracts Premiums
---------------------- ------------
<S> <C> <C>
Outstanding, beginning of period....................... 2 $ 451,112
Options written........................................ 7 1,663,235
Options expired........................................ (2) (451,112)
Options closed......................................... (1) (273,041)
----------- -----------
Outstanding, end of period............................. 6 $ 1,390,194
=========== ===========
</TABLE>
14
<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....................... 3 $ 481,566
Options written........................................ 2 221,907
Options expired........................................ (3) (481,566)
---------- ----------
Outstanding, end of period............................. 2 $ 221,907
========== ==========
<CAPTION>
Written Cross Currency Option Transactions
------------------------------------------------------------------------------------------
Number of Contracts Premiums
--------------------- -----------
<S> <C> <C>
Outstanding, beginning of period....................... 14 $ 5,631,852
Options written........................................ 11 3,340,693
Options expired........................................ (5) (925,292)
Options closed......................................... (13) (5,472,980)
--------- -----------
Outstanding, end of period............................. 7 $ 2,574,273
========= ===========
</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, 1998, the Fund held the following forward foreign currency and
cross currency exchange contracts:
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
U.S.$ U.S.$
Local Principal Contract U.S.$ Market Aggregate Face Unrealized
Contracts to Receive Amount Value Date Value Amount Gain/(Loss)
------------------------------- ---------------- ----------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 6,731,000 11/09/98 6,650,530 6,350,000 300,530
Australian Dollar 119,015,030 7/31-10/21/98 73,629,534 71,876,191 1,753,343
Danish Krone 274,662,170 7/01-8/06/98 39,920,209 40,474,937 (554,728)
German Deutsche Mark 118,664,585 7/15-9/18/98 65,822,068 67,706,341 (1,884,273)
Hong Kong Dollar 273,465,680 12/29/98-10/14/99 33,952,165 34,231,791 (279,626)
Irish Punt 488,569 7/20/98 680,124 712,408 (32,284)
Japanese Yen 3,072,850,479 9/28/98 22,482,901 22,511,725 (28,824)
New Zealand Dollar 41,400,815 8/13/98-3/11/99 21,381,586 22,697,696 (1,316,110)
Republic of Korea Won 20,201,600,000 8/03/98 14,276,749 11,349,419 2,927,330
South African Commercial Rand 40,450,000 10/20/98 6,416,448 7,321,267 (904,819)
-------------- --------------- ------------
Total $ 285,212,314 $ 285,231,775 $ (19,461)
============== =============== ============
<CAPTION>
U.S.$ U.S.$
Local Principal Contract U.S.$ Market Aggregate Face Unrealized
Contracts to Deliver Amount Value Date Value Amount Gain/(Loss)
------------------------------- ---------------- ----------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 81,173,823 10/06/98-4/06/99 80,254,020 77,454,818 (2,799,202)
Australian Dollar 137,746,546 7/31-10/21/98 85,215,293 89,536,989 4,321,696
Danish Krone 728,254,929 7/13-9/16/98 105,948,073 106,048,865 100,792
Finnish Marka 19,227,600 8/26/98 3,511,493 3,587,239 75,746
French Franc 152,925,000 8/11/98 25,281,373 25,919,492 638,119
German Deutsche Mark 714,967,242 7/09-9/29/98 396,467,658 402,024,219 5,556,561
Bristish Pound Sterling 128,793,295 7/07-12/10/98 214,253,339 210,506,927 (3,746,412)
Hong Kong Dollar 362,428,680 12/29/98-10/14/99 44,669,179 44,850,000 180,821
Irish Punt 203,047 7/20/98 282,656 293,187 10,531
Japanese Yen 35,152,325,531 7/28-11/27/98 256,782,802 276,678,258 19,895,456
Netherlands Guilder 30,000,000 9/25/98 14,798,351 14,858,841 60,490
New Zealand Dollar 97,722,794 8/10-12/17/98 50,363,286 53,853,739 3,490,453
Norwegian Krone 125,317,789 7/16/98 16,471,945 16,592,234 120,289
Polish Zlotty 83,383,197 9/18/98 23,100,184 20,750,000 (2,350,184)
Republic of Korea Won 20,201,600,000 8/03/98 14,276,749 21,400,000 7,123,251
South African Commercial Rand 127,294,711 10/20-10/23/98 20,188,059 24,331,258 4,143,199
Swedish Krona 663,957,522 7/17-8/31/98 83,221,179 84,998,023 1,776,844
-------------- ---------------- -------------
Total $1,435,085,639 $ 1,473,684,089 $ 38,598,450
============== ================ =============
</TABLE>
16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Forward Foreign Cross Currency Exchange Contracts
<TABLE>
<CAPTION>
U.S.$
U.S.$ Market U.S.$ Market Contract Unrealized
Contracts to Deliver Value In Exchange For Value Value Date Gain/(Loss)
----------------------- ---------------- ---------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
German Deutsche Mark 1,686,030 Greek Drachma 1,743,888 4/22/99 57,858
Irish Punt 9,374,570 Belgian Franc 9,718,779 7/20/98 344,209
German Deutsche Mark 12,926,230 Greek Drachma 13,323,020 4/22/99 396,790
Greek Drachma 8,200,927 German Deutsche Mark 8,078,894 4/22/99 (122,033)
Belgian Franc 9,718,779 Irish Punt 9,242,551 7/20/98 (476,228)
French Franc 9,618,623 Irish Punt 9,110,047 7/20/98 (508,576)
Irish Punt 9,224,859 French Franc 9,618,623 7/20/98 393,764
Belgian Franc 9,718,779 Irish Punt 9,234,087 7/20/98 (484,692)
Irish Punt 9,384,724 Belgian Franc 9,718,779 7/20/98 334,055
German Deutsche Mark 11,240,200 Greek Drachma 11,604,012 4/22/99 363,812
Australian Dollar 11,961,838 New Zealand Dollar 11,675,502 3/11/99 (286,336)
New Zealand Dollar 11,940,345 Australian Dollar 11,961,838 3/11/99 21,493
German Deutsche Mark 19,999,885 Polish Zloty 22,957,234 9/18/98 2,957,349
-------------- ------------- -----------
Total $134,995,789 $ 137,987,254 $ 2,991,465
============== ============= ===========
</TABLE>
17
<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. Pursuant to margin requirements, the Fund
deposits 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, 1998, the
Fund held the following open futures contracts:
<TABLE>
<CAPTION>
Underlying
Expiration Face/amount at Unrealized
Contract Position Date value Gain/(loss)
------------------------------------ ------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
US 10 Yr. Note (113 Contracts) Long 9/30/98 $12,864,344 $ 69,500
US Long Bond (CBT) (102 Contracts) Long 9/30/98 12,606,563 24,437
---------
$ 93,937
=========
</TABLE>
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, 1998,
the Fund held no open interest rate swap contracts.
18
<PAGE>
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Standish, Ayer & Wood Investment Trust
One Financial Center
Boston, MA 02111
(800) 221-4795
1011-98
