Standish, Ayer & Wood Investment Trust
Global Fixed Income Fund
Financial Statements for the
Six Months Ended June 30, 1998
(Unaudited)
[STANDISH LOGO]
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investment in Standish Global Fixed Income Portfolio
("Portfolio"), at value (Note 1A) $ 390,733,465
Receivable for Fund shares sold 609,206
Deferred organization costs (Note 1D) 1,141
Prepaid expenses 772
-------------
Total assets 391,344,584
Liabilities
Distributions payable $ 1,471,087
Payable for Fund shares redeemed 634,051
Accrued trustees' fees and expenses (Note 3) 674
Accrued accounting and transfer agent fees 9,162
Accrued expenses and other liabilities 35,674
-----------
Total liabilities 2,150,648
-------------
Net Assets $ 389,193,936
=============
Net Assets consist of:
Paid-in capital $ 380,909,325
Accumulated net realized gain 3,343,205
Undistributed net investment income 1,137,743
Net unrealized appreciation 3,803,663
-------------
Total Net Assets $ 389,193,936
=============
Shares of beneficial interest outstanding 18,886,136
=============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.61
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Statement of Operations
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1B)
Interest income allocated from Portfolio $ 10,809,196
Dividend income allocated from Portfolio (net of withholding taxes, $5,994) 51,126
Miscellaneous income allocated from Portfolio 58,836
Expenses allocated from Portfolio (834,228)
------------
Net investment income allocated from Portfolio 10,084,930
Expenses
Registration fees $ 46,821
Accounting and transfer agent fees 20,445
Legal fees 7,078
Audit services 2,690
Trustees' fees and expenses (Note 3) 1,565
Amortization of organization expense (Note 1D) 1,118
Insurance expense 524
Miscellaneous 4,039
-----------
Net expenses 84,280
------------
Net investment income 10,000,650
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions $ (904,106)
Financial futures contracts 311,162
Written options transactions 11,115
Foreign currency transactions and forward foreign currency exchange
contracts 4,197,465
-----------
Net realized gain 3,615,636
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities (2,114,000)
Financial futures contracts (74,197)
Written options 178,468
Foreign currency and forward foreign currency exchange contracts 843,584
-----------
Change in net unrealized appreciation (depreciation) (1,166,145)
------------
Net realized and unrealized gain on investments 2,449,491
------------
Net Increase in Net Assets from Operations $ 12,450,141
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global 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 $ 10,000,650 $ 12,884,057
Net realized gain 3,615,636 10,546,991
Change in net unrealized appreciation (depreciation) (1,166,145) (1,136,691)
------------ ------------
Net increase in Net Assets from Investment Operations 12,450,141 22,294,357
------------ ------------
Distributions to Shareholders
From net investment income (8,195,011) (22,206,015)
From net realized gain (1,808,709) (226,916)
------------ ------------
Total distributions to shareholders (10,003,720) (22,432,931)
------------ ------------
Fund share (principal) Transactions (Note 5)
Net proceeds from sale of shares 127,588,424 112,813,437
Value of shares issued to shareholders in payment of distributions declared 7,111,399 11,302,354
Cost of shares redeemed (3,714,731) (23,945,357)
------------ ------------
Increase in Net Assets from Fund share transactions 130,985,092 100,170,434
------------ ------------
Total Increase in Net Assets 133,431,513 100,031,860
Net Assets
At beginning of period 255,762,423 155,730,563
------------ ------------
At end of period (including undistributed net investment income of
$1,137,743 and distributions in excess of net investment income of
$667,896, respectively) $389,193,936 255,762,423
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1998 -----------------------------------------------
(Unaudited) 1997 (1) 1996 (1) 1995 1994 (2)
----------- -------- -------- ---- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.39 $ 20.09 $ 19.53 $ 17.99 $ 20.00
-------- -------- -------- -------- --------
Investment Operations:
Net investment income * 0.61 1.34 1.42 1.59 1.29
Net realized and unrealized gain (loss) on
investments 0.21 0.96 1.05 1.60 (2.70)
-------- -------- -------- -------- --------
Total from investment operations 0.82 2.30 2.47 3.19 (1.41)
-------- -------- -------- -------- --------
Less distributions to shareholders:
From net investment income (0.50) (1.98) (1.91) (1.65) --
From net realized gain on investments (0.10) (0.02) -- -- --
From tax return of capital -- -- -- -- (0.60)
-------- -------- -------- -------- --------
Total distributions to shareholders (0.60) (2.00) (1.91) (1.65) (0.60)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 20.61 $ 20.39 $ 20.09 $ 19.53 $ 17.99
======== ======== ======== ======== ========
Total Return 4.03% 11.68% 13.03% 18.13% (7.06)%
Ratios/Supplemental Data:
Expenses (to average daily net assets)* (3) 0.57%+ 0.65% 0.65% 0.62% 0.65%+
Net investment income (to average daily net
assets)* 6.25%+ 6.42% 7.11% 7.69% 7.73%+
Portfolio turnover (4) -- -- 73% 163% 140%
Net Assets, End of Period (000's omitted) $389,194 $255,762 $155,731 $137,889 $135,232
</TABLE>
- -------------------
* The investment adviser did not impose a portion of its investment advisory
fee and reimbursed the Fund for a portion of its operating expenses for the
years ended December 31, 1997 and December 31, 1994, respectively. If these
voluntary actions had not been taken, the net investment income per share and
the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income per share -- $ 1.33 -- -- $ 1.27
Ratios (to average daily net assets):
Expenses (3) -- 0.66% -- -- 0.73%+
Net investment income -- 6.41% -- -- 7.65%+
</TABLE>
+ Computed on an annualized basis.
(1) Calculated based on average shares outstanding.
(2) For the period from January 3, 1994 (start of business) to December 31,
1994.
(3) Includes the Fund's shares of Standish Global Fixed Income Portfolio's
allocated expenses for the six months ended June 30, 1998, the year ended
December 31, 1997 and for the period from May 3, 1996 to December 31,
1996.
(4) Portfolio turnover represents the rate of portfolio activity for the
period while the Fund invested directly in securities, including the
period from January 1, 1996 through May 2, 1996. The portfolio turnover
rates for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global 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 Global Fixed Income Fund (the "Fund") is a separate
non-diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of Standish
Global Fixed Income Portfolio (the "Portfolio"), a subtrust of Standish,
Ayer & Wood Master Portfolio (the "Portfolio Trust"), which is organized
as a New York trust, and has the same investment objective as the Fund.
The value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (approximately
100% at June 30, 1998). The performance of the Fund is directly affected
by the performance of the Portfolio. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of the 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
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted
accounting principles. 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. Deferred organization expense
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized on a straight-line basis through
December, 1998.
E. Other
All net investment income and realized and unrealized gains and losses of
the Portfolio are allocated pro rata among all of the investors in the
Portfolio.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(2) Distributions to Shareholders:
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. In determining the amounts of its
dividends, the Fund will take into account its share of the income, gains
or losses, expenses, and any other tax items of the Portfolio. Dividends
from net investment income and capital gains distributions, if any, are
reinvested in additional shares of the Fund unless a 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 treatments for foreign currency, forward foreign currency
exchange contracts, option and financial futures 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).
(3) Investment Advisory Fee:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish International Management Company, L.P. ("SIMCO") for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. For the six months ended June
30, 1998, SIMCO voluntarily agreed to limit total annual operating
expenses of the Fund and Portfolio (excluding brokerage commissions, taxes
and extraordinary expenses) to 0.65% 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 the SIMCO. Certain of the trustees
and officers of the Trust are limited partners or officers of SIMCO.
(4) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 1998, aggregated $127,415,202 and $11,769,188,
respectively.
(5) 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 Year Ended
June 30, 1998 December 31, 1997
--------------------- -------------------
<S> <C> <C>
Shares sold......................................... 6,178,986 5,385,323
Shares issued to shareholders in
payment of distributions declared................ 345,160 552,287
Shares redeemed..................................... (178,468) (1,149,790)
--------- ----------
Net increase........................................ 6,345,678 4,787,820
========= ==========
</TABLE>
At June 30, 1998, three shareholders were record owners of approximately
24%, 13% and 11%, respectively, of the Fund's outstanding shares.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 91.6%
Asset Backed -- 3.1%
Advanta Mortgage Trust 1997-4 M1 7.040% 01/25/2029 1,300,000 $1,314,016
Chase Credit Card Master Trust
1997-3 A Non-ERISA 6.777% 05/15/2007 900,000 906,855
IMC Home Equity 1997-7 A8 6.650% 02/20/2029 925,000 939,742
Oakwood Mortgage Investments 1997-C B2 7.700% 11/15/2027 1,475,000 1,487,445
Oakwood Mortgage Investments 1998-B B2 7.750% 04/15/2028 1,600,000 1,619,000
Residential Funding 1997-HS5 M1 7.010% 05/25/2027 900,000 907,734
RFC Series 1996 HS2 A1 7.600% 09/25/2012 350,000 362,906
TMS Home Equity 1995-C A3 6.550% 09/15/2021 500,000 503,203
UCFC Home Equity Loan Trust 1996 A1 A5 6.500% 03/15/2016 500,000 506,719
Vanderbilt Mortgage 1996-C B2 8.000% 11/07/2026 1,200,000 1,236,000
Vanderbilt Mtg 1998-A 1B2 Non-ERISA 7.690% 04/07/2028 1,424,000 1,444,025
World Omni Auto Lease 1997-A B Non-ERISA 144A 7.300% 06/25/2003 750,000 756,445
----------
Total Asset Backed (Cost $11,847,137) 11,984,090
----------
Collateralized Mortgage Obligations -- 1.4%
Bear Stearns Mtg 1998-2 B 6.750% 04/30/2030 1,694,088 1,682,706
Prudential Home Mortgage 1993-B 1B1
144A Non-ERISA 7.834% 04/28/2023 1,241,930 1,228,668
Residential Funding 1998-S4 A4 NAS 6.500% 02/25/2013 1,279,189 1,287,983
Residential Funding 1998-S9 A1 6.500% 04/25/2013 1,116,872 1,149,768
----------
Total Collateralized Mortgage Obligations (Cost $5,360,625) 5,349,125
----------
Corporate -- 11.3%
Bank Bonds -- 1.8%
Bank United Corp. Notes+ 8.875% 05/01/2007 775,000 849,478
Centura Capital Trust 144A NC '07 8.845% 06/01/2027 725,000 808,680
City National Bank+ 6.375% 01/15/2008 900,000 895,599
Dime Bancorp Capital Trust+ 9.330% 05/06/2027 225,000 263,534
First Nationwide Senior Sub Notes+ 9.125% 01/15/2003 500,000 531,250
First Nationwide Senior Sub Notes+ 10.625% 10/01/2003 1,350,000 1,525,500
Imperial Credit Capital Trust+ 9.980% 12/31/2026 375,000 444,244
Providian Corp. Cap 144A Notes 9.525% 02/01/2027 825,000 952,256
Sovereign Bancorp. 9.000% 04/01/2027 600,000 675,894
----------
6,946,435
----------
Financial -- 4.6%
Aames Financial Corp. Notes+ 9.125% 11/01/2003 250,000 250,000
Advanta Capital Trust I+ 8.990% 12/17/2026 750,000 585,000
Amresco Inc. Corp. Senior Sub Notes+ 9.875% 03/15/2005 600,000 606,000
Conseco Finance Trust 6.800% 06/15/2005 900,000 901,503
Conseco Finance Trust Cap. Notes 8.700% 11/15/2026 2,225,000 2,513,538
Conseco Finance Trust Cap. Notes+ 8.796% 04/01/2027 250,000 285,325
Crescent Real Estate 144A 7.125% 09/15/2007 900,000 889,668
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial (continued)
Criimi Mae Corp. Notes+ 9.125% 12/01/2002 1,075,000 $1,064,250
ERP REIT 144A 8.500% 05/15/1999 500,000 509,430
Health Care REIT Inc. 7.625% 03/15/2008 500,000 506,910
Kaufman & Broad Home Corp.+ 7.750% 10/15/2004 500,000 496,250
Liberty Mutual Insurance Co. 144A Notes 7.697% 10/15/2097 850,000 928,192
MMI Capital Trust Notes 7.625% 12/15/2027 1,300,000 1,337,960
Orion Capital Trust Notes 7.701% 04/15/2028 1,200,000 1,245,960
Pindo Deli Financial 10.250% 10/01/2002 200,000 140,000
Simon Debartolo Group LP+ 6.750% 07/15/2004 925,000 923,918
Simon Debartolo Group LP Notes+ 6.875% 10/27/2005 425,000 424,142
Taubman Realty Group REIT+ 8.000% 06/15/1999 1,000,000 1,016,380
TIG Holdings Capital 144A 8.597% 01/15/2027 250,000 270,228
UCFC Sub Notes+ 8.375% 07/01/2005 425,000 426,879
United Companies Financial Corp.+ 9.350% 11/01/1999 1,000,000 1,022,640
Wellsford REIT+ 9.375% 02/01/2002 1,000,000 1,092,010
Wharf Capital Notes+ 7.625% 03/13/2007 825,000 651,998
----------
18,088,181
----------
Industrial Bonds -- 4.9%
American Standard Corp. Notes 7.375% 04/15/2005 1,000,000 992,500
Choice Hotels 144A 7.125% 05/01/2008 750,000 762,000
Cominco Ltd. Notes+ 6.875% 02/15/2006 525,000 518,091
Conmed Corp. 9.000% 03/15/2008 700,000 694,750
Enterprise Corp. 7.000% 06/15/2000 500,000 510,180
Enterprise Corp. 144A 6.375% 05/15/2003 950,000 952,033
Flag Limited 144A Senior Notes 8.250% 01/30/2008 925,000 931,938
Horseshoe Gaming L.L.C. 9.375% 06/15/2007 450,000 476,438
IMC Global Inc.+ 6.550% 01/15/2005 1,000,000 997,840
Lilly Industries Inc. Notes 144A 7.750% 12/01/2007 300,000 309,447
Loewen Group International 144A 7.600% 06/01/2008 750,000 748,875
McLeod USA 144A 8.375% 03/15/2008 675,000 676,688
Methanex Corp.+ 7.400% 08/15/2002 250,000 259,883
Panavision Inc. 144A 0.000% 02/01/2006 1,000,000 720,000
Paxson Communications+ 11.625% 10/01/2002 750,000 804,375
Revlon Worldwide Senior Notes+ 0.000% 03/15/2001 1,700,000 1,321,750
Sinclair Broadcast 8.750% 12/15/2007 750,000 768,750
Southland Corp. Senior Sub Notes+ 5.000% 12/15/2003 500,000 433,750
Stage Stores Inc.+ 8.500% 07/15/2005 400,000 410,000
Sun Healthcare Group Inc. 144A 9.500% 07/01/2007 500,000 506,250
Tenet Healthcare Corp.+ 8.625% 12/01/2003 525,000 551,250
Tenet Healthcare Corp.+ 8.000% 01/15/2005 250,000 256,875
Tenet Healthcare Corp. 8.125% 12/01/2008 1,450,000 1,453,625
Tricon Global Restaurant Inc. Senior Notes 7.450% 05/15/2005 775,000 774,124
USA Waste Services, Inc. Senior Notes 6.500% 12/15/2002 1,200,000 1,204,848
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Bonds (continued)
Westinghouse Credit Corp.+ 8.875% 06/14/2014 975,000 $1,112,134
----------
19,148,394
----------
Total Corporate (Cost $43,494,401) 44,183,010
----------
Government/Other -- 57.9%
Argentina -- 0.3%
City of Buenos Aires 10.500% 05/28/2004 700,000 $ 581,875
Cointel 10.375% 08/01/2004 1,000,000 817,500
----------
1,399,375
----------
Australia -- 0.5%
Australian Government 9.000% 09/15/2004 2,400,000 1,757,801
----------
Denmark -- 2.8%
Denmark Nykredit 7.000% 10/01/2026 5,933,000 881,561
Denmark Realkredit 8.000% 10/01/2026 10,532,000 1,565,673
Denmark Realkredit 7.000% 10/01/2026 2,274,000 337,885
Kingdom of Denmark 6.000% 12/10/1999 14,600,000 2,171,053
Kingdom of Denmark 8.000% 11/15/2001 37,500,000 6,031,678
----------
10,987,850
----------
EuroDollar -- 0.1%
Bonos DEL Tesoro Notes 8.750% 05/09/2002 400,000 378,993
----------
Finland -- 0.4%
Government of Finland 10.000% 09/15/2001 7,000,000 1,485,090
----------
France -- 1.0%
France Oat ECU 5.250% 04/25/2008 23,000,000 3,910,448
----------
Germany -- 14.9%
Baden Wurttemburg+ 6.200% 11/22/2013 2,000,000 1,183,731
Deutschland Republic 7.250% 10/21/2002 11,700,000 7,190,841
Deutschland Republic 6.750% 04/22/2003 6,000,000 3,648,119
Deutschland Republic 6.000% 01/04/2007 18,175,000 10,900,979
Deutschland Republic 6.000% 07/04/2007 16,010,000 9,636,107
Die Bundrep Deutschland Dm1000+ 8.250% 09/20/2001 13,770,000 8,516,379
Exide Holding Europe 144A 9.125% 04/15/2004 1,700,000 944,967
Federal Republic of Germany 8.000% 07/22/2002 2,350,000 1,473,689
Federal Republic of Germany 6.875% 05/12/2005 5,600,000 3,496,283
Fresenius Med Global 7.375% 02/01/2008 3,970,000 2,228,733
German Unity Fund 8.500% 02/20/2001 7,450,000 4,558,592
German Unity Fund 8.000% 01/21/2002 3,000,000 1,858,075
Texon International PLC 10.000% 02/01/2008 4,950,000 2,744,676
----------
58,381,171
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japan -- 10.3%
Austria Republic 4.500% 09/28/2005 190,000,000 $1,655,277
Austria Republic+ 6.250% 10/16/2003 370,000,000 3,354,364
European Investment Bank 4.625% 02/26/2003 363,000,000 3,035,702
European Investment Bank 6.625% 03/15/2000 300,000,000 2,384,859
Government of Italy 5.125% 07/29/2003 975,000,000 8,389,787
IBRD-Global Bond 4.750% 12/20/2004 525,000,000 4,585,126
Italy Euroyen Notes+ 3.750% 06/08/2005 181,000,000 1,501,176
Kingdom of Spain+ 5.750% 03/23/2002 428,000,000 3,632,901
South Africa 3.350% 06/17/2004 175,000,000 1,285,650
Spanish Government 4.750% 03/14/2005 600,000,000 5,245,473
World Bank 5.250% 03/20/2002 600,000,000 5,012,534
----------
40,082,849
----------
Netherlands -- 2.5%
Netherlands Government 8.750% 08/01/2000 6,500,000 3,519,358
Netherlands Government 9.000% 10/16/2000 11,300,000 6,118,269
----------
9,637,627
----------
New Zealand -- 1.1%
Fernz Capital+ 9.800% 04/15/2002 4,100,000 2,220,182
Fletcher Challenge 14.500% 09/30/2000 500,000 289,169
Fletcher Challenge 10.000% 04/30/2005 1,000,000 563,707
Fletcher Challenge+ 11.250% 12/15/2002 1,900,000 1,083,375
----------
4,156,433
----------
Norway -- 1.1%
Norway Government 7.000% 05/31/2001 26,200,000 3,584,165
Vital Forsikring+ 7.850% 09/22/2003 6,000,000 842,086
----------
4,426,251
----------
South Africa -- 0.3%
Euro Bank Recon & Development 0.000% 12/31/2015 55,000,000 820,896
IBRD-Global Bond 0.000% 12/31/2025 105,000,000 391,791
----------
1,212,687
----------
Sweden -- 3.8%
Kingdom of Sweden 13.000% 06/15/2001 47,700,000 7,357,356
Kingdom of Sweden 10.250% 05/05/2003 10,000,000 1,551,145
Sweden Government Bond 6.500% 10/25/2006 23,000,000 3,182,497
Swedish Government 5.000% 01/15/2004 23,400,000 2,971,487
----------
15,062,485
----------
United Kingdom -- 13.8%
Alliance and Leicester Building Society+ 8.750% 12/07/2006 1,200,000 2,229,143
Bank of Greece 10.750% 09/06/2010 350,000 749,776
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United Kingdom (continued)
Bank of Greece 10.750% 09/06/2010 699,700 $1,498,909
Birmingham Midshires Building Society+ 9.125% 01/05/2006 750,000 1,405,435
Capital Shopping Euro Notes 6.875% 03/05/2013 1,550,000 2,533,900
CSW Investments+ 8.875% 09/27/2006 2,500,000 4,595,174
Deutsche Bank 0.000% 02/28/2001 410,000 571,019
FNMA Global Bond+ 6.875% 06/07/2002 160,000 267,513
GTD Export Finance Corp. 0.000% 09/29/2000 940,000 1,336,551
Inco Ltd.+ 15.750% 07/15/2006 200,000 496,952
IPC Magazines 0.000% 03/15/2008 3,120,000 2,969,039
Northern Rock Building Society+ 9.375% 10/17/2021 1,950,000 4,240,321
P & O Steam Navigation 11.500% 07/03/2014 900,000 2,152,298
Republic of Argentina 11.500% 08/14/2001 1,010,000 1,728,350
Slough Estates 7.125% 02/17/2010 1,050,000 1,781,899
Stagecoach Holdings PLC 7.625% 10/31/2007 1,725,000 2,923,213
UK Treasury 7.750% 09/08/2006 8,260,000 15,332,834
UK Treasury 9.000% 02/26/2001 2,750,000 4,932,590
United Mexican States 8.750% 05/30/2002 1,480,000 2,384,380
----------
54,129,296
----------
Yankee Bonds -- 5.0%
Asia Pulp and Paper Global Financial+ 11.750% 10/01/2005 425,000 374,000
Edperbrascan Ltd. Notes+ 7.375% 10/01/2002 500,000 514,140
Gruma SA 144A Notes 7.625% 10/15/2007 525,000 499,013
ING Barings NV 0.000% 02/12/1999 2,000,000 2,065,000
Jamaica Government 144A Notes 9.625% 07/02/2002 1,000,000 970,000
Lithuania Government 144A Notes 7.125% 07/22/2002 900,000 870,750
Merita Bank 7.500% 12/29/2049 250,000 259,235
Merita Bank Ltd Corp. Bond 7.150% 12/29/2049 650,000 661,135
Republic of Argentina(a) 9.150% 11/30/2002 7,050,000 7,067,625
Republic of Lithuania Regs Notes 7.125% 07/22/2002 350,000 338,625
Republic of Panama 7.875% 02/13/2002 3,295,000 3,224,158
Se Banken Perpetral 10 Yr. Step Up 144A 8.125% 09/06/2049 1,500,000 1,608,210
Svenska Handelsbanken Step Up 144A NC'07 7.125% 03/29/2049 500,000 512,075
Trizec Finance+ 10.875% 10/15/2005 335,000 376,875
----------
19,340,841
----------
Total Government/Other (Cost $230,633,485) 226,349,197
--------------
Non-Agency -- 1.3%
Pass Thru Securities -- 1.3%
Chase Commercial Mortage Sec 6.6
1997-2D Non-ERISA 6.600% 12/25/2007 500,000 491,328
GMAC Mortgage Corp. 1996-C1 7.860% 11/15/2006 1,000,000 965,313
GMAC Mortgage Corp. 1997-C1 E Non-ERISA 7.085% 11/15/2010 900,000 912,234
Mortgage Capital Funding 1997-MC2 D Non-ERISA 7.117% 11/20/2007 725,000 734,969
Resolution Trust Corp. 1993-C3 E Non-ERISA 7.100% 12/25/2024 1,550,112 1,550,596
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pass Thru Securities (continued)
Resolution Trust Corp. 1995 C1 C 6.900% 02/25/2027 500,000 $ 500,469
----------
Total Non-Agency (Cost $5,034,620) 5,154,909
----------
U.S. Government Agency -- 2.7%
Pass Thru Securities -- 2.7%
FHLMC 6.500% 04/01/2028 469,769 468,444
FHLMC Gold 15Yr+ 6.000% 04/01/2012 362,145 359,541
FHLMC Gold 30Yr 6.500% 04/01/2028 889,814 887,304
FNMA 6.500% 05/01/2028 4,223,115 4,205,927
FNMA 8.000% 12/01/2012 2,022,860 2,095,258
GNMA 8.000% 03/15/2017 -
11/15/2017 2,477,045 2,594,126
----------
Total U.S. Government Agency (Cost $10,593,054) 10,610,600
----------
U.S. Treasury Obligations -- 13.9%
Treasury Bonds -- 4.7%
U.S. Treasury Bond+ 8.125% 08/15/2019 9,060,000 11,693,017
U.S. Treasury Bond+ 6.625% 02/15/2027 5,875,000 6,634,168
----------
18,327,185
----------
Treasury Notes -- 9.2%
U.S. Treasury Inflation Index Note(a) 3.375% 01/15/2007 3,400,000 3,381,306
U.S. Treasury Note+ 6.625% 04/30/2002 4,650,000 4,820,748
U.S. Treasury Note++ 6.250% 06/30/2002 11,000,000 11,276,760
U.S. Treasury Note+ 6.500% 05/15/2005 550,000 580,509
U.S. Treasury Note+ 6.500% 08/15/2005 850,000 897,014
U.S. Treasury Note+ 6.625% 06/30/2001 13,435,000 13,827,571
U.S. Treasury Note+ 5.875% 11/15/1999 1,075,000 1,079,870
----------
35,863,778
----------
Total U.S. Treasury Obligations (Cost $53,764,645) 54,190,963
----------
TOTAL BONDS AND NOTES (COST $360,727,967) 357,821,894
---------------
<CAPTION>
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS -- 1.1%
Equity Office Properties Trust 144A CVT 6,000 265,500
Equity Residential Properties 3,000 77,063
Fuji JGB Inv. L.L.C. Pfd(a) 1,025,000 892,047
Pinto Totta Intl 144A 550 565,411
Sumitomo Bank Step Up 144A 1,325,000 1,321,688
Societe Generale Step Up 750,000 740,550
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Texaco Capital LLC 14,000 $ 303,625
--------------
TOTAL PREFERRED STOCKS (COST $4,269,219) 4,165,884
--------------
<CAPTION>
Contract Value
Security Size (1) (Note 1A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED OPTIONS -- 0.5%
JPY Put/NZD Call, Strike Price 73.50, 4/6/99 12,700,000 156,807
JPY Put/USD Call, Strike Price 145.00, 5/19/99 10,700,000 228,980
JPY Put, Strike Price 145.00, 11/16/98 7,750,000 119,350
USD Put/DEM Call, Strike Price 1.70, 5/21/99 7,275,000 55,290
USD Put/DEM Call, Strike Price 1.78, 8/4/98 7,155,000 25,758
UST 5.625% Call, Strike Price 101.39, 7/9/98 25,000 781
UST 6.125% Call, Strike Price 105.0156, 7/9/98 75,000 2,930
UST 6.125% Call, Strike Price 109.516, 11/9/98 71,500 97,195
DEM 6.00% Call, Strike Price 106.78, 5/12/99 12,640,000 105,847
DBR 6.00% Call, Strike Price 108.10, 8/27/98 6,000,000 26,550
BTP 6.75% Put, Strike Price 105.29, 1/31/00 4,545,000,000 13,635
BTP 6.75% Put, Strike Price 105.49, 2/3/00 4,545,000,000 13,635
BTP 6.75% Put, Strike Price 107.69, 2/7/00 9,085,000,000 54,510
DBR 5.625% Call, Strike Price 103.30, 11/27/98 6,000,000 63,384
JGB 2.00% Put, Strike Price 99.00, 1/25/99 642,400,000 25,696
Fujibank 9.87% Call, Strike Price 6.37, 2/26/99 19,000 58,900
JPY Put/USD Call, Strike Price 155.00, 6/15/99 8,000,000 131,200
JPY Put/USD Call, Strike Price 150.00, 6/9/99 3,800,000 58,520
JPY Put/USD Call, Strike Price 145.00, 12/7/98 11,000,000 158,400
UST 5.625% Call, Strike Price 103.906, 11/20/98 37,500 14,063
UST 5.625% Call, Strike Price 104.859, 12/18/98 38,000 9,500
DBR 6.00% Call, Strike Price 108.445, 12/10/98 7,200,000 25,934
DBR 6.00% Call, Strike Price 109.81, 12/14/98 8,875,000 15,363
DBR 5.625% Call, Strike Price 104.35, 12/1/98 6,675,000 52,793
JGB 2.60% Call, Strike Price 108.516, 11/27/98 1,050,000,000 68,250
JGB 2.60% Call, Strike Price 109.811, 12/3/98 368,500,000 19,162
JGB 3.00% Put, Strike Price 110.00, 6/2/99 1,550,000,000 274,350
JGB 3.00% Put, Strike Price 111.40, 12/2/98 1,549,000,000 219,958
--------------
TOTAL PURCHASED OPTIONS (COST $2,612,394) 2,096,741
--------------
<CAPTION>
Par Value
Rate Maturity Value (1) (Note 1A)
---- -------- --------- ---------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 2.9%
COMMERCIAL PAPER -- 1.0%
General Electric Credit Corp. 5.530% 07/29/98 750,000 743,175
Motorola 5.490% 07/14/98 3,000,000 2,974,380
----------
3,717,555
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Global Fixed Income Portfolio
Schedule of Investments - June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (1) (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -- 1.0%
FHLMC Discount Note 5.470% 07/09/98 3,500,000 $3,495,695
FNMA Discount Note+ 5.600% 07/27/98 500,000 497,994
----------
3,993,689
----------
REPURCHASE AGREEMENTS -- 0.9%
Prudential Bache Repurchase Agreement, dated 6/30/98, due 7/01/98, with a
maturity value of $3,675,497 and an effective yield of 5.32%, collateralized by
a U.S. Government Agency Obligation with a rate of 7.925%, with a maturity date
of 2/01/19 and with an aggregate market value of $3,748,930. 3,674,954
----------
TOTAL SHORT-TERM INVESTMENTS (COST $11,409,627) 11,386,198
-------------
TOTAL INVESTMENTS-- 96.1% (COST $379,019,207) $ 375,470,717
Other Assets, Less Liabilities-- 3.9% 15,262,879
=============
NET ASSETS-- 100% $ 390,733,596
=============
</TABLE>
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.
FNMA, FNCI - Federal National Mortgage Association
FHLMC - Federal Home Loan Mortgage Corporation
GNMA, GNSF - Government National Mortgage Association
IBRD - International Bank for Reconstruction and Development
REIT - Real Estate Investment Trust
BTP British Pound Sterling
DBR Deutsche Bundes Republik
DEM German Mark
JGB Japanese Government Bond
JPY Japanese Yen
NZD New Zealand Dollar
USD United States Dollar
UST United States Treasury
(1) Denominated in United States currency except for foreign country specific
bonds which are denominated in their respective local currency.
(a) Variable Rate Security; rate indicated is as of 6/30/98.
+ Denotes all or part of security pledged as a margin deposit (Note 5).
++ Denotes all or part of security pledged as collateral to cover margin
requirements on open financial futures contracts (Note 5).
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments, at value (Note 1A) (identified cost, $379,019,207) $ 375,470,717
Cash 3,934
Interest and dividends receivable 8,597,945
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 9,992,428
Receivable for investments sold 3,339,219
Deferred organization costs (Note 1F) 42,424
Receivable for variation margin on open financial futures contracts (Note 5) 19,875
Miscellaneous receivable 4,188
Prepaid expenses 14,451
-------------
Total assets 397,485,181
-------------
Liabilities
Payable for investments purchased 3,032,649
Due to custodian 50,108
Options written, at value (premiums received $994,169) (Note 5) 723,962
Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 2,861,139
Accrued trustees' fees and expenses (Note 2) 4,202
Accrued accounting and custody fees 61,959
Accrued expenses and other liabilities 17,566
-----------
Total liabilities 6,751,585
-------------
Net Assets (applicable to investors' beneficial interests) $ 390,733,596
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Statement of Operations
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1C)
Interest income $ 10,809,200
Dividend income (net of foreign withholding taxes of $5,994) 51,126
Miscellaneous income 58,836
------------
Total income 10,919,162
Expenses
Investment advisory fee (Note 2) $ 638,875
Accounting and custody fees 146,520
Professional service fees 15,590
Trustees' fees and expenses (Note 2) 8,608
Amortization of organization expense (Note 1F) 7,407
Insurance expense 5,042
Registration fees 4,004
Miscellaneous 8,183
-----------
Total expenses 834,229
------------
Net investment income 10,084,933
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Investment securities transactions (904,106)
Financial futures contracts 311,162
Written options transactions 11,115
Foreign currency transactions and forward foreign currency exchange
contracts 4,197,466
-----------
Net realized gain 3,615,637
Change in unrealized appreciation (depreciation)
Investment securities (2,114,001)
Financial futures contracts (74,197)
Written options 178,468
Foreign currency and forward foreign currency exchange contracts 843,585
-----------
Change in net unrealized appreciation (depreciation) (1,166,145)
------------
Net realized and unrealized gain 2,449,492
------------
Net Increase in Net Assets from Operations $ 12,534,425
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
---------------- -----------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 10,084,933 $ 12,971,199
Net realized gain 3,615,637 10,546,998
Change in net unrealized appreciation
(depreciation) (1,166,145) (1,136,692)
------------ ------------
Net increase in Net Assets from Investment
Operations 12,534,425 22,381,505
------------ ------------
Capital Transactions
Contributions 127,415,202 112,195,968
Withdrawals (11,769,188) (31,838,814)
------------ ------------
Increase in net assets resulting from
capital transactions 115,646,014 80,357,154
------------ ------------
Total Increase in Net Assets 128,180,439 102,738,659
Net Assets
At beginning of period 262,553,157 159,814,498
------------ ------------
At end of period $390,733,596 $262,553,157
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 -----------------------------
(Unaudited) 1997 1996 (1)
------------- -----------------------------
<S> <C> <C> <C>
Ratios:
Expenses (to average daily net assets) 0.52%+ 0.61% 0.62%+
Net investment income (to average daily net
assets) 6.30%+ 6.47% 7.17%+
Portfolio Turnover 77% 176% 111%
Net assets, end of period (000s omitted) $390,734 $ 262,553 $ 159,814
</TABLE>
- -------------------------------------------------------
(1) For the period May 3, 1996 (commencement of operations) through December
31, 1996.
+ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Global Fixed Income Portfolio (the "Portfolio") is a separate
non-diversified investment series of the Portfolio Trust.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Securities
(including restricted securities) for which quotations are not readily
available are valued 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 Portfolio are valued at amortized cost. If the
Portfolio 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 Portfolio 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
Portfolio to monitor on a daily basis, the market value of the repurchase
agreements' 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 Portfolio 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. Income taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all
or substantially all of their assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net investment income,
net realized capital gains, and any other items of income, gain, loss
deduction or credit.
20
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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.
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. Deferred organization expense
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized on a straight-line basis through
April, 2001.
(2) Investment Advisory Fee:
The investment advisory fee paid to Standish International Management
Company, L.P. ("SIMCO") for overall investment advisory services is paid
monthly at the annual rate of 0.40% of the Portfolio's average daily net
assets. The advisory agreement provides that if the total annual operating
expenses of the Portfolio (excluding brokerage commissions, taxes and
extraordinary expenses) in any fiscal year exceed 0.65% of the Portfolio's
average daily net assets, the compensation due the adviser shall be
reduced by the amount of the excess. The Portfolio 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
Portfolio Trust from SIMCO. Certain of the trustees and officers of the
Portfolio Trust are limited partners 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:
Purchases Sales
------------ ------------
U.S. Government Securities.................... $139,595,565 $102,181,888
============ ============
Investments (non-U.S. Government Securities).. $257,957,213 $125,328,869
============ ============
(4) 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:
Aggregate Cost......................................... $ 379,019,207
=============
Gross unrealized appreciation.......................... $ 5,875,623
Gross unrealized depreciation.......................... (9,424,113)
=============
Net unrealized depreciation............................ $ (3,548,490)
=============
21
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Financial Instruments:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these investments are set forth more fully in
Parts A and B of the Portfolio Trust's registration statement.
The Portfolio 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 Portfolio 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 put and buying calls tend
to increase the Portfolio's exposure to the underlying instrument. Buying
puts and writing calls tend to decrease the Portfolio's exposure to the
underlying instrument, or hedge the Portfolio's investments. Options, both
held and written by the Portfolio, are reflected in the accompanying
Statement of Assets and Liabilities at market value. The underlying 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 are included in realized gains and losses on foreign currency
transactions. If a put option written by the Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a 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:
Written Put Option Transactions
--------------------------------------------------------------------------
Number of
Contracts Premiums
--------- ---------
Outstanding, beginning of period................. 2 $ 96,770
Options written.................................. 7 369,250
Options expired.................................. (2) (96,770)
Options closed................................... (1) (59,872)
--------- --------
Outstanding, end of period....................... 6 $309,378
========= ========
22
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Written Call Option Transactions
--------------------------------------------------------------------------
Number of
Contracts Premiums
--------- ---------
Outstanding, beginning of period............. 3 $ 99,629
Options written.............................. 2 48,241
Options expired.............................. (3) (99,629)
--------- --------
Outstanding, end of period................... 2 $ 48,241
========= ========
Written Cross Currency Option Transactions
--------------------------------------------------------------------------
Number of
Contracts Premiums
--------- ------------
Outstanding, beginning of period............ 14 $ 1,166,297
Options written............................. 11 824,950
Options expired............................. (5) (183,335)
Options closed.............................. (13) (1,171,362)
--------- -----------
Outstanding, end of period.................. 7 $ 636,550
========= ===========
Forward currency exchange contracts
The Portfolio 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 Portfolio primarily to protect the value of the Portfolio'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.
23
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1998, the Portfolio held the following forward foreign
currency and cross currency exchange contracts:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Local U.S.$ U.S.$
Principal Contract U.S.$ Market Aggregate Unrealized
Contracts to Deliver Amount Value Date Value Face Amount Gain/(Loss)
------------------------------- -------------- ---------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Argentinean Peso 16,436,625 10/06/98-4/06/99 16,244,236 15,725,000 (519,236)
Australian Dollar 31,758,777 7/31-10/21/98 19,646,363 20,589,019 942,656
British Pound Sterling 32,578,501 7/07-12/10/98 54,226,950 53,621,100 (605,850)
Danish Krone 109,507,703 7/14-9/16/98 15,929,593 15,850,875 (78,718)
Finnish Markka 8,972,880 8/26/98 1,638,697 1,674,045 35,348
French Franc 23,448,500 8/11/98 3,876,477 3,974,322 97,845
German Deutsche Mark 112,260,601 7/15-9/29/98 62,274,156 63,089,401 815,245
Hong Kong Dollar 70,878,392 10/14-12/30/98 8,757,949 8,755,000 (2,949)
Japanese Yen 5,622,800,779 07/28-11/27/98 41,067,809 43,891,803 2,823,994
Republic of Korea Won 4,200,800,000 8/03/98 2,968,763 4,450,000 1,481,237
Netherlands Guilder 20,621,000 9/25/98 10,171,893 10,213,472 41,579
Norwegian Krone 34,178,703 7/16/98 4,492,496 4,521,387 28,891
New Zealand Dollar 15,952,324 8/10-12/17/98 8,218,370 8,754,853 536,483
Polish Zloty 16,073,860 9/18/98 4,453,045 4,000,000 (453,045)
South African Commercial Rand 31,476,199 10/20-10/23/98 4,992,225 6,017,730 1,025,505
Swedish Krona 107,134,399 07/17-8/31/98 13,428,995 13,661,477 232,482
============ ============ ==========
$272,388,017 $278,789,484 $6,401,467
============ ============ ==========
<CAPTION>
Local U.S.$ U.S.$
Principal Contract U.S.$ Market Aggregate Unrealized
Contracts to Deliver Amount Value Date Value Face Amount Gain/(Loss)
------------------------------- -------------- ---------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Argentinean Peso 1,272,000 11/09/98 1,256,793 1,200,000 56,793
Australian Dollar 27,693,083 7/31-10/21/98 17,131,769 16,893,342 238,427
Danish Krone 27,386,625 7/14/98 3,980,074 4,075,391 (95,317)
German Deutsche Mark 13,500,165 7/15-9/18/98 7,488,774 7,750,256 (261,482)
Hong Kong Dollar 55,511,152 10/14-12/30/98 6,906,719 6,961,716 (54,997)
Irish Punt 57,985 7/20/98 80,719 85,143 (4,424)
Republic of Korea Won 4,200,800,000 8/03/98 2,968,767 2,360,000 608,767
New Zealand Dollar 6,036,465 8/13/98-3/11/99 3,117,306 3,271,064 (153,758)
South African Commercial Rand 10,475,000 10/20/98 1,661,614 1,895,928 (234,314)
=========== =========== ========
$44,592,535 $44,492,840 $ 99,695
=========== =========== ========
</TABLE>
24
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Forward Foreign Cross Currency Exchange Contracts
<TABLE>
<CAPTION>
U.S. $
U.S.$ Market U.S. $ Contract Unrealized
Contracts to Deliver Value In Exchange For Market Value Value Date Gain/(Loss)
------------------------ ------------ ------------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
German Deutsche Mark $843,015 Greek Drachma 871,944 4/22/99 28,929
Irish Punt 891,921 Belgian Franc 925,777 7/20/98 33,856
Irish Punt 984,647 Belgian Franc 1,019,696 7/20/98 35,049
German Deutsche Mark 1,840,583 Greek Drachma 1,900,157 4/22/99 59,574
German Deutsche Mark 1,840,583 Greek Drachma 1,894,008 4/22/99 53,425
Irish Punt 1,878,603 Belgian Franc 1,945,473 7/20/98 66,870
Irish Punt 1,939,659 French Franc 2,022,453 7/20/98 82,794
Belgian Franc 1,945,473 Irish Punt 1,850,143 7/20/98 (95,330)
Belgian Franc 1,945,473 Irish Punt 1,848,449 7/20/98 (97,024)
French Franc 2,022,453 Irish Punt 1,915,518 7/20/98 (106,935)
Greek Drachma 2,339,047 German Deutsche Mark 2,304,241 4/22/99 (34,806)
New Zealand Dollar 2,625,204 Australian Dollar 2,629,930 3/11/99 4,726
Australian Dollar 2,629,930 New Zealand Dollar 2,566,976 3/11/99 (62,954)
German Deutsche Mark 2,838,151 Greek Drachma 2,930,013 4/22/99 91,862
German Deutsche Mark 3,855,400 Polish Zloty 4,425,491 9/18/98 570,091
=========== =========== ========
$30,420,142 $31,050,269 $630,127
=========== =========== ========
</TABLE>
Futures contracts
The Portfolio 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
Portfolio 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 Portfolio 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 Portfolio. 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 Portfolio's exposure to the
underlying instrument, while selling futures tends to decrease the
Portfolio's exposure to the underlying instrument or hedge other Portfolio
investments. In addition, there is the risk that the Portfolio 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
Portfolio enters into financial futures transactions primarily to seek 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 Portfolio held
the following futures contracts:
<TABLE>
<CAPTION>
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Appreciation
---------------------------------- ---------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
U.S. 10 Year Note (106 Contracts) Long 9/30/98 $ 12,067,437 $ 65,194
===========
</TABLE>
At June 30, 1998 the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
25
<PAGE>
Standish, Ayer & Wood Master Portfolio
Standish Global Fixed Income Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Interest rate swap contracts
Interest rate swaps involve the exchange by the Portfolio 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 be diminished 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 Portfolio 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,
managing duration or protecting against an increase in the price of
securities the Portfolio 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 Portfolio held no interest rate swap contracts.
26
<PAGE>
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Standish, Ayer & Wood Investment Trust
One Financial Center
Boston, MA 02111-2662
(800) 221-4795
1022-98
