STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY
Financial Statements for the Period Ended
September 30, 1998
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 25, 1998
Dear Standish Funds Shareholder:
Enclosed you will find the annual statement for your Standish Fund for the
fiscal year ending September 30, 1998.
As of that date, Standish, Ayer & Wood, Inc., the advisor, together with its
affiliate, Standish International Management Company, L.P., had approximately
$45 billion of assets under management including the $6.4 billion of assets
represented by the Standish Funds. Our principal clients are corporate pension
trusts, governmental pension funds, insurance companies, endowments and
foundations, and high net worth individuals. Standish, Ayer & Wood remains
independent and is owned by investment professionals active in the business.
Both assets under management and the professional staff grew considerably over
the past year, while the investment team and the clientele have remained
constant.
During the twelve months ending September 30, 1998, investment returns have
generally been positive. For example, larger capitalization U.S. common stocks
as reflected in the Standard and Poor's 500 Index provided a total return of
9.05%, while higher grade domestic taxable bonds as represented by the Lehman
Aggregate returned 11.49%. However, within the twelve-month period there has
been considerable volatility. The quarter ending September 30, 1998 was a
particularly difficult period for U.S. equities, especially smaller
capitalization U.S. stocks, emerging market bonds, and domestic bonds with
perceived credit risk.
Recent dramatic events have included Russia's de facto default on its debt,
extreme pressures on a very large hedge fund, trading losses by major financial
institutions, and disarray in the currency and credit markets. A major change
has taken place in investor perception of risk and in rapid deleveraging of the
global financial system.
Clearly all financial market participants are operating in a more difficult
environment. Standish, Ayer & Wood is devoted to producing superior long-term
returns through very disciplined investment philosophies designed to uncover
value. We remain confident we have the capability to do a superior job by
adhering to our disciplines.
We appreciate the opportunity to serve you and hope you will find the following
information helpful.
Sincerely yours,
/s/ Ted Ladd
Edward H. Ladd
Chairman
2
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
Management Discussion and Analysis
Your fund outperformed its benchmark and most other international equity funds
by a solid margin during the last twelve months, which was a period of tumult in
international equity markets. The Standish International Equity Fund's decline
for this period was -2.92% versus a decline of -8.35% for the MSCI EAFE index.
The recent twelve-month period witnessed extraordinary volatility in currency
markets, including collapses of currencies in much of Asia as well as Russia.
Equity prices also plunged in most Asian markets as dramatic currency
devaluations brought with them economic contraction, credit problems for banks
and a dismal environment for corporate profits. European equity markets also
went on a wild ride over the last twelve months, experiencing periods of
explosive upside returns as well as periods of panic selling when Russia's
problems became clear. Equity markets provided a wide range of investment
returns during the last year, with the index up in dollar terms by 40.1% in
Belgium, 30.0% in Finland, and 24.0% in Italy, while the Malaysian market fell
73.4% (and exited the index due to the imposition of capital controls),
Singapore was off 49.2%, and Hong Kong declined 47.2%, despite massive
intervention. Regionally, Europe was up in dollar terms by 8.3%, the Pacific
index was off 35.5%, and North America was up 8.8%. Emerging markets were sold
aggressively in this environment, falling 49.2% in dollar terms over the last
twelve months.
The fund was able to minimize losses and add value relative to the index and
most managers over the last year primarily due to superior security selection, a
Standish hallmark. Your fund outperformed its benchmark in Japan by more than
13%, in Germany by almost 6%, by more than 8% in Switzerland, by more than 10%
in Italy, and by smaller amounts in the U.K. and France. We also completely
overhauled and revamped our processes for establishing country weights last
November, and added value through our country weightings as well over the last
twelve months.
Our international equity strategy focuses on identifying companies with positive
relative business momentum selling at relatively attractive price multiples. Our
team of international equity analysts is aided in their search for such
companies by a series of investment models that have been systematized to rank
companies on the characteristics we find attractive. The characteristics of our
portfolio have consistently exhibited more positive earnings estimate activity
and lower price multiples than the index of international equities. Our analysts
also have succeeded in 1998 in populating your fund with securities of companies
whose reported earnings have exceeded average analysts' estimates two thirds of
the time while only half of all companies in our investable universe have
reported such "positive surprise". This success has been vital in our strong
relative performance over the last twelve months.
The fund also benefited from the overall slight tilt toward European stocks and
away from Asian markets. We were especially helped by the overweight position we
held in Belgium for most of the year and by our underweight position in Japan.
We thank you for your continued support and will work diligently to earn and
reward that support in the coming year.
Sincerely,
/s/ Remi J. Browne
Remi J. Browne
3
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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
[The following table was originally a line graph in the printed materials.]
Standish International
Equity Fund EAFE Index
----------- ----------
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 164972 156087
10/31/97 156573 144084
11/30/97 151463 142614
12/31/97 149469 143855
1/31/98 158452 150429
2/28/98 173265 160087
3/31/98 181617 165018
4/30/98 186344 166321
5/31/98 188866 165506
6/30/98 188017 166764
8/31/98 165944 147578
9/30/98 160148 143047
4
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Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Statement of Assets and Liabilities
September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments at value (Note 1A) (identified cost, $37,969,368) $ 35,519,822
Cash 1,593,458
Receivable for investments sold 164,513
Receivable for Fund shares sold 30,255
Dividends receivable 83,249
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 762
Receivable for foreign dividend tax reclaims 80,134
Prepaid expenses 2,325
-------------
Total assets 37,474,518
Liabilities
Payable for investments purchased $ 552,867
Payable for variation margin on financial futures contracts (Note 6) 31,019
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 13,990
Accrued trustees' fees and expenses (Note 2) 1,542
Accrued accounting, custody and transfer agent fees 29,080
Accrued expenses and other liabilities 30,017
------------
Total liabilities 658,515
-------------
Net Assets $ 36,816,003
=============
Net Assets consist of:
Paid-in capital $ 38,729,674
Undistributed net investment income 192,475
Accumulated net realized gain 477,869
Net unrealized depreciation (2,584,015)
=============
Total Net Assets $ 36,816,003
=============
Shares of beneficial interest outstanding 1,825,507
=============
Net Asset Value, offering price and redemption price per share
(Net Assets/Shares outstanding) $ 20.17
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Statement of Operations
For the Year Ended September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Dividend income (net of foreign withholding taxes of $137,512) $ 913,622
Interest income 50,711
-------------
Total investment income 964,333
Expenses
Investment advisory fee (Note 2) $ 336,046
Accounting, custody and transfer agent fees 183,677
Audit services 41,207
Trustees' fees and expenses (Note 2) 7,981
Registration fees 6,300
Insurance expense 5,459
Legal fees 1,740
Miscellaneous 13,225
------------
Total expenses 595,635
Deduct --
Waiver of investment advisory fee (Note 2) (175,579)
------------
Total expense deductions (175,579)
------------
Net expenses 420,056
-------------
Net investment income 544,277
-------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss)
Investment security transactions 524,627
Financial futures contracts 69,439
Foreign currency transactions and forward foreign
currency exchange contracts (28,881)
------------
Net realized gain (loss) 565,185
Change in unrealized appreciation (depreciation)
Investment securities (2,986,967)
Financial futures contracts (129,168)
Foreign currency and forward foreign currency exchange
contracts 3,025
------------
Net change in unrealized appreciation (depreciation) (3,113,110)
-------------
Net realized and unrealized loss (2,547,925)
-------------
Net Decrease in Net Assets from Operations $ (2,003,648)
=============
</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>
Year Ended Nine Months
September 30, Ended Year Ended
1998 September 30, 1997 December 31, 1996
--------------- ------------------ -----------------
<S> <C> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 544,277 $ 668,107 $ 919,841
Net realized gain 565,185 4,288,094 4,520,530
Change in unrealized appreciation (depreciation) (3,113,110) (806,597) (1,512,964)
------------- ------------ -------------
Net increase (decrease) in Net Assets from
Investment Operations (2,003,648) 4,149,604 3,927,407
------------- ------------ -------------
Distributions to Shareholders
From net investment income (567,912) (601,863) (993,584)
From net realized gains on investments (4,215,438) (2,427,615) (2,991,390)
------------- ------------ -------------
Total distributions to shareholders (4,783,350) (3,029,478) (3,984,974)
------------- ------------ -------------
Fund Share (principal) Transactions (Note 4)
Net proceeds from sale of shares 6,057,674 5,984,646 3,568,994
Value of shares issued to shareholders in payment
of distributions declared 4,381,657 2,684,361 3,425,523
Cost of shares redeemed (16,333,667) (8,030,311) (18,671,701)
------------- ------------ -------------
Net increase (decrease) in Net Assets from
Fund share transactions (5,894,336) 638,696 (11,677,184)
------------- ------------ -------------
Total Increase (Decrease) in Net Assets (12,681,334) 1,758,822 (11,734,751)
Net Assets
At beginning of year 49,497,337 47,738,515 59,473,266
------------- ------------ -------------
At end of year (including undistributed net
investment income of $192,475, $203,249 and
$8,961, respectively) $ 36,816,003 $49,497,337 $ 47,738,515
============= ============ =============
</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
Year Ended Ended Year Ended December 31,
Sept. 30, Sept. 30, ------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 23.57 $ 23.25 $ 23.54 $ 23.12 $ 26.74 $ 19.78
--------- -------- -------- -------- ---------- ---------
Investment Operations
Net investment income* 0.32 0.39 0.47 0.04 0.21 0.26
Net realized and unrealized gain (loss) on
investments (1.17) 1.44 1.28 0.45 (2.08) 7.29
--------- -------- -------- -------- ---------- ---------
Total from investment operations (0.85) 1.83 1.75 0.49 (1.87) 7.55
--------- -------- -------- -------- ---------- ---------
Less distributions to shareholders
From net investment income (0.31) (0.30) (0.51) -- (0.12) (0.23)
In excess of net investment income -- -- -- -- -- (0.36)
From net realized gains on investments (2.24) (1.21) (1.53) (0.07) (1.63) --
--------- -------- -------- -------- ---------- ---------
Total distributions to shareholders (2.55) (1.51) (2.04) (0.07) (1.75) (0.59)
--------- -------- -------- -------- ---------- ---------
Net Asset Value, End of Year $ 20.17 $ 23.57 $ 23.25 $ 23.54 $ 23.12 $ 26.74
========= ======== ======== ======== ========== =========
Total Return (2.92)% 7.65% 7.44% 2.14% (6.99)% 38.27%
Ratios/Supplemental Data
Expenses (to average daily net assets)* 1.00% 0.84 %+ 0.50 % 1.22% 1.23 % 1.34%
Net investment income (to average daily
net assets)* 1.30% 1.78 %+ 1.80 % 1.76% 1.52% 1.09%
Portfolio Turnover 206% 155% 163% 108% 51% 63%
Net Assets, End of Year (000's omitted) $ 36,816 $49,497 $47,739 $59,473 $ 104,435 $ 92,419
- -------------------
* For the fiscal year ended September 30, 1998, 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:
Net investment income per share $ 0.22 $ 0.29 $ 0.27 -- -- --
Ratios (to average daily net assets):
Expenses 1.42% 1.42%+ 1.29% -- -- --
Net investment income 0.88% 1.20%+ 1.01% -- -- --
+ Computed on an annualized basis.
</TABLE>
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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES -- 96.2%
Australia -- 1.9%
Delta Gold NL 93,000 $ 130,756
Futuris Corp. Ltd. Ordinary Shares 152,000 127,628
National Australia Bank Ltd. 16,800 203,980
National Foods Ltd. Ordinary Shares 75,000 121,527
PMP Communications Ltd. 80,000 130,057
--------------
713,948
--------------
Austria -- 2.2%
Austrian Airlines 5,600 173,987
Bank Austria AG 6,200 265,986
BBAG Oester Brau Bete AG 4,800 247,232
Radex-Heraklith Indust. AG 4,300 140,562
--------------
827,767
--------------
Denmark -- 2.0%
Nordiske Kabel Traadfabri 2,200 164,567
Tele Danmark B Ordinary Shares 3,300 327,921
Unidanmark A/S 3,300 239,055
--------------
731,543
--------------
Finland -- 3.2%
Kesko Oy Osake 16,400 216,150
Merita Ltd. 51,200 261,867
Nokia AB 2,900 233,324
UPM-Kymmeme 16,700 381,076
Valmet A 7,500 87,784
--------------
1,180,201
--------------
France -- 9.3%
Accor French Ord 600 125,841
Banque National De Paris 4,100 219,553
Compagnie De Saint Gobain French 2,600 344,823
Esso Ste Anonyme Francaise 4,300 334,648
France Telecom SA 3,500 207,102
Groupe GTM 3,150 281,135
Havas Advertising 1,750 268,640
Paribas 2,100 113,204
Remy Cointreau* 9,000 140,085
Renault SA 12,700 507,790
Scor SA 8,200 487,407
Suez Lyonnaise Des Eaux-Dumex 2,300 391,661
--------------
3,421,889
--------------
Germany -- 10.9%
Agiv AG 8,500 198,420
BASF AG 6,700 253,852
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Germany (continued)
Berliner Kraft & Licht 6,500 $ 312,025
BHF Bank 4,500 145,448
Daimler Benz 5,000 418,388
DBV Holding AG Registered Shares 1,500 605,135
Escada AG 2,850 366,762
IKB Deutsche Industriebank AG 11,200 227,928
Krupp Fried AG Hoesch 1,500 188,993
Lufthansa AG 14,400 284,518
Mannesmann AG Dm50 3,500 320,524
Merck Kgaa 6,000 242,413
Phoenix AG 19,000 399,174
Rheinmetall AG Preferred Stock 1,800 34,800
--------------
3,998,380
--------------
Hong Kong -- 0.0%
Regal Hotel International 800 59
---------------
Ireland -- 2.6%
Allied Irish Banks PLC 37,400 547,030
DCC PLC 19,500 112,049
Fyffes PLC 1 56,600 97,147
Jurys Hotel Group 15,200 121,370
Unidare PLC Units 29,100 95,550
--------------
973,146
--------------
Italy -- 6.1%
Banca Commerciale Italiana Ordinary Shares 66,900 403,211
Banca Di Roma* 179,800 315,171
Burgo (Cartiere) Spaitalian Itl 5000 Ordinary Shares 40,100 225,612
ENI SPA 68,500 420,278
Istit Fin Priv Itl 1000 9,300 120,905
Magneti Marelli Spa 78,700 109,028
Olivetti* 121,600 255,636
R.A.S. Spa 13,000 137,191
Telecom Italia Mobile Ordinary Shares 45,100 262,946
--------------
2,249,978
--------------
Japan -- 18.7%
Amada Co. Ltd. 55,000 253,753
Aoyama Trading 8,000 170,487
Bridgestone Corp. Ordinary Shares 14,000 281,948
Chiba Bank 106,000 341,560
Chugoku Electric Power Co. Inc. 21,000 336,800
Citizen Watch Co., Ltd Ordinary Shares 20,000 135,482
Cosmo Oil Company Ltd 182,000 227,917
CSK Corp. 7,000 108,166
Daikin Industries Ltd. 31,000 215,899
Fuji Heavy Industries 53,000 276,353
Honda Motor Co. Ltd. 9,000 273,526
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Japan (continued)
Kandenko 18,000 $ 97,942
Kawasaki Kisen 212,000 310,509
KDD 5,000 155,621
Lion Corporation 110,000 381,838
Makino Milling 45,000 260,344
Makita Corp. 14,000 160,557
Marubeni Corp. Ordinary Shares 93,000 109,652
Mitsui Chemicals Inc. 101,000 289,205
Nintendo Corp. Ltd. 3,000 282,094
Nippon Shinpan Co. Ordinary Shares 125,000 164,775
Olympus Optical 42,000 461,062
Ono Pharmaceutical 14,000 336,287
Orient Corporation 216,000 404,951
Sumitomo Osaka Cement Co. Ltd. 172,000 283,413
Yoshitomi Pharmaceutical Industries 59,000 578,549
--------------
6,898,690
--------------
Netherlands -- 4.8%
ABN Amro Holdings 6,300 107,335
ASR Verzekeringsgroep NV 1,900 142,694
Gamma Holding 7,200 277,055
Hollandsche Beton Groep NV 8,100 99,310
ING Groep 4,700 211,788
Koninklijke Boskalis Westminster NV 10,700 141,410
Koninklijke Hoogovens Staalfabrieken Aandeel 4,900 137,318
Telegraaf Holdingsmij-CVA 12,800 294,846
Van Ommeren 11,800 361,998
--------------
1,773,754
--------------
Norway -- 1.6%
Christiania Bk Og Kreditkass Ordinary Shares 75,200 235,826
Norske Skogindustrier- A 7,100 178,508
SAS Norge SA - B Shares 15,380 155,921
--------------
570,255
--------------
Singapore -- 2.6%
Dairy Farm Intl Hlds 180,000 190,800
Sembcorp Industries* 681,553 447,912
Singapore Telecom Ltd. 186,000 310,551
--------------
949,263
--------------
Spain -- 3.0%
Bankinter - Banco Interc Esp 6,000 171,875
Repsol S.A. 7,400 312,500
Sevillana De Electricidad Esb500 30,800 359,854
Telefonica Ordinary Shares 7,600 277,083
--------------
1,121,312
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sweden -- 1.8%
BTL AB, Class A 34,500 $ 142,562
Celsius Industrier AB - Class B 7,600 143,013
Skandinaviska Enskilda Bank 17,700 154,158
Volvo Aktiebolag B Free 8,400 205,060
--------------
644,793
--------------
Switzerland -- 5.7%
Banca Gottardo - Class B 440 305,865
Cie Financ Richemont-Uts "A" 220 281,970
Grands Magasins Jelmoli Br 170 198,190
Nestle Registered Shares 155 309,102
Roche Holding AG - Genusschein 45 485,518
Vontobel Holding AG 175 216,691
Zurich Allied AG 580 288,530
--------------
2,085,866
--------------
United Kingdom -- 19.8%
Alliance & Leicester PLC 13,700 202,737
Alliance Unichem PLC 58,700 433,831
Allied Domecq PLC Ordinary Shares 35,200 254,170
Amec PLC 200,400 510,718
BG PLC 76,400 530,896
Billiton PLC 105,000 233,251
British Energy PLC 61,000 597,478
British Steel 50P Ordinary Shares 79,500 144,525
British Telecommunications PLC 19,300 256,751
Courtaulds Textiles PLC 52,000 167,861
Hammerson Prop Inv & Dev Ordinary Shares 33,300 225,741
Hazlewood Foods PLC 118,100 367,193
Lex Service PLC 60,900 355,934
National Westminster 33,100 444,035
Royal Bank of Scotland Group PLC 27,200 312,972
Sainsbury J PLC 30,000 287,216
Signet Group PLC* 638,000 281,830
Stakis PLC Ordinary Shares 208,500 297,563
Unigate PLC 41,400 315,117
United Assurance Group PLC 24,500 244,134
United Utilities PLC 24,000 387,780
Vodafone Group PLC 36,900 428,194
--------------
7,279,927
--------------
TOTAL EQUITIES (COST $37,870,317) 35,420,771
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Schedule of Investments - September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 0.3%
U.S. Government Agency -- 0.3%
FNMA Discount Note+ 0.000% 12/4/1998 $100,000 $ 99,051
--------------
Total U.S. Government Agency (Cost $99,051) 99,051
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $99,051) 99,051
--------------
TOTAL INVESTMENTS-- 96.5% (COST $37,969,368) $ 35,519,822
Other Assets, Less Liabilities-- 3.5% 1,296,181
==============
NET ASSETS-- 100% $ 36,816,003
==============
</TABLE>
Notes to the Schedule of Investments:
CVA - Certificaten Van Aandelen
FNMA - Federal National Mortgage Association
* Non-income producing security.
+ 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.
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.
The Fund elected to defer to its fiscal year ending September 30, 1999
losses of $155,911 recognized during the period from November 1, 1997
to September 30, 1998.
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.
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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).
(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 fiscal year ended
September 30, 1998. This agreement is voluntary and temporary and may
be discontinued or revised by SIMCO at any time. For the fiscal year
ended September 30, 1998, SIMCO voluntarily waived a portion of its
investment advisory fee in the amount of $175,579. 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>
Year Ended Nine Months Ended
September 30, 1998 September 30, 1997
----------------------------- -----------------------------
Purchases Sales Purchases Sales
-------------- ------------- ------------- --------------
<S> <C> <C>
U.S. Government
Securities............................. $ 444,094 -- $ 392,507 --
============== ============= ============= ==============
Investments (non-U.S. Government
Securities) $ 83,013,299 $ 94,513,395 $ 75,499,625 $ 76,910,303
============== ============= ============= ==============
</TABLE>
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trust to issue an unlimited number
of full and fractional shares of beneficial interest having a par value
of one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Year Ended
September 30, 1998 September 30, 1997 December 31, 1996
-------------------- --------------------- ---------------------
<S> <C> <C> <C>
Shares sold............................. 264,292 258,881 147,664
Shares issued to shareholders in payment
of distributions declared............ 231,061 109,893 144,612
Shares redeemed......................... (770,220) (322,069) (764,772)
-------------------- --------------------- ---------------------
Net increase/(decrease)................. (274,867) 46,705 (472,496)
==================== ===================== =====================
</TABLE>
At September 30, 1998, the Fund had three shareholders of record owning
approximately 12%, 11% and 10% of the Fund's outstanding shares.
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, 1998, as computed on a
federal income tax basis, were as follows:
Aggregate Cost........................................ $ 38,003,202
===============
Gross unrealized appreciation......................... $ 2,111,156
Gross unrealized depreciation......................... (4,594,536)
===============
Net unrealized appreciation (depreciation)............ $ (2,483,380)
===============
(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
year ended September 30, 1998, the Fund did not write any option
transactions, nor were there any open written option contracts at
September 30, 1998.
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
16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 September 30, 1998, the Fund held the following forward foreign
currency exchange contracts:
<TABLE>
<CAPTION>
U.S.$
U.S.$ Unrealized
Local Principal Contract U.S. $ Aggregate Appreciation/
Contracts to Receive Amount Value Date Market Value Face Amount (Depreciation)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Austrian Schilling 185,210 10/02/98 $ 15,722 $ 15,722 $ --
Italian Lira 615,349,882 10/01/98 372,593 371,987 606
Japanese Yen 52,656,000 12/10/98 389,599 403,589 (13,990)
--------------------------------------------------------------------------------------------------------------
$777,914 $791,298 $(13,384)
==============================================
<CAPTION>
U.S.$
U.S.$ Unrealized
Local Principal Contract U.S. $ Aggregate Appreciation/
Contracts to Deliver Amount Value Date Market Value Face Amount (Depreciation)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 10,791,200 12/10/98 $79,844 $80,000 $156
--------------------------------------------------------------------------------------------------------------
$79,844 $80,000 $156
==============================================
</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. Pursuant to the 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 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, 1998,
the Fund held the following open financial futures contracts:
<TABLE>
<CAPTION>
Underlying
Face/amount at Unrealized
Contract Position Expiration Date value Gain/(Loss)
------------------------------------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Eurotop 100 Futures (4 contracts) Long 12/22/98 $ 920,000 $ (99,960)
Topix Futures (4 contracts) Long 12/16/98 305,676 (23,612)
===================
$ (123,572)
===================
</TABLE>
17
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish International Equity Fund
- --------------------------------------------------------------------------------
Tax Information -- Unaudited
Pursuant to section 852 of the Internal Revenue Code, the Fund
designates $975,083 as capital gains dividends for the year ended
September 30, 1998. Of this amount $516,188 represents a 20% tax rate
gain distribution and $458,895 represents a 28% tax rate gain
distribution.
The Fund paid foreign taxes of $137,512 and the Fund recognized
$1,051,134 of foreign source income during the year ended September 30,
1998.
18
<PAGE>
Report of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust and the
Shareholders of Standish International Equity Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Standish, Ayer & Wood Investment Trust: Standish International Equity
Fund (the "Fund"), at September 30, 1998, the results of its
operations, the changes in its net assets and the financial highlights
for each of the periods indicated therein, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (herein referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at September
30, 1998, by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 18, 1998
19
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
(800) 729-0066
www.standishfunds.com
98-384
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Standish,
Ayer & Wood Investment Trust form N-SAR for the period ended September 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000799295
<NAME> Standish International Equity Fund
<SERIES>
<NUMBER> 2
<NAME> Standish International Equity Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 37,969,368
<INVESTMENTS-AT-VALUE> 35,519,822
<RECEIVABLES> 358,151
<ASSETS-OTHER> 1,596,545
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37,474,518
<PAYABLE-FOR-SECURITIES> 552,867
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,648
<TOTAL-LIABILITIES> 658,515
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,729,674
<SHARES-COMMON-STOCK> 1,825,507
<SHARES-COMMON-PRIOR> 2,100,374
<ACCUMULATED-NII-CURRENT> 192,475
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 477,869
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,584,015)
<NET-ASSETS> 36,816,003
<DIVIDEND-INCOME> 913,622
<INTEREST-INCOME> 50,711
<OTHER-INCOME> 0
<EXPENSES-NET> 420,056
<NET-INVESTMENT-INCOME> 544,277
<REALIZED-GAINS-CURRENT> 565,185
<APPREC-INCREASE-CURRENT> (3,113,110)
<NET-CHANGE-FROM-OPS> (2,003,648)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (567,912)
<DISTRIBUTIONS-OF-GAINS> (4,215,438)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 264,292
<NUMBER-OF-SHARES-REDEEMED> 770,220
<SHARES-REINVESTED> 231,061
<NET-CHANGE-IN-ASSETS> (12,681,334)
<ACCUMULATED-NII-PRIOR> 203,249
<ACCUMULATED-GAINS-PRIOR> 4,140,985
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 336,046
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 595,635
<AVERAGE-NET-ASSETS> 41,970,584
<PER-SHARE-NAV-BEGIN> 23.57
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> (1.17)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> (2.24)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.17
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
