Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at value (Note 1A) (identified cost,
$21,798,596) $ 21,552,285
Receivable for investments sold 116
Interest receivable 240,913
Deferred organization costs (Note 1E) 2,374
Prepaid expenses 3,326
------------
Total assets 21,799,014
Liabilities
Payable for Fund shares redeemed $3,316,421
Distributions payable 60,239
Options written, at value (Note 6) (premiums
received, $1,777) 354
Accrued accounting, custody and transfer agent fees 6,317
Accrued trustees' fees and expenses (Note 2) 1,676
Accrued expenses and other liabilities 7,839
----------
Total liabilities 3,392,846
------------
Net Assets $ 18,406,168
============
Net Assets consist of:
Paid-in capital $ 18,846,737
Accumulated net realized loss (243,471)
Undistributed net investment income 47,790
Net unrealized depreciation (244,888)
------------
Total Net Assets $ 18,406,168
============
Shares of beneficial interest outstanding 936,646
============
Net Asset Value, offering price and redemption price
per share (Net Assets/Shares outstanding) $ 19.65
============
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Statement of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income
Interest income $ 727,500
---------
Total investment income 727,500
Expenses
Investment advisory fee (Note 2) $ 33,000
Accounting, custody and transfer agent fees 36,113
Legal and audit services 10,989
Registration fees 7,112
Trustees' fees and expenses (Note 2) 3,189
Insurance expense 2,257
Amortization of organization expenses (Note 1E) 1,159
Miscellaneous 3,110
---------
Total expenses 96,929
Deduct:
Reimbursement of Fund operating expenses (Note 2) (30,928)
Waiver of investment advisory fee (Note 2) (33,000)
---------
Total expense deductions (63,928)
---------
Net expenses 33,001
---------
Net investment income 694,499
---------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss)
Investment security transactions (135,065)
Financial futures contracts 2,023
---------
Net realized loss (133,042)
Change in unrealized appreciation (depreciation)
Investment securities (132,220)
Written options 1,423
---------
Net change in unrealized depreciation (130,797)
---------
Net realized and unrealized loss (263,839)
---------
Net Increase in Net Assets from Operations $ 430,660
=========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
----------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Investment Operations
Net investment income $ 694,499 $ 1,545,299
Net realized loss (133,042) (1,724)
Change in unrealized depreciation (130,797) (127,618)
------------ ------------
Net increase in net assets from investment operations 430,660 1,415,957
------------ ------------
Distributions to Shareholders (Note 1F)
From net investment income (645,073) (1,561,525)
------------ ------------
Total distributions to shareholders (645,073) (1,561,525)
------------ ------------
Fund Share (Principal) Transactions (Note 4)
Net proceeds from sale of shares 2,525,543 27,446,026
Value of shares issued to shareholders in payment of
distributions declared 523,314 1,249,284
Cost of shares redeemed (11,007,493) (15,886,520)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions (7,958,636) 12,808,790
------------ ------------
Total Increase (Decrease) in Net Assets (8,173,049) 12,663,222
Net Assets
At beginning of period 26,579,217 13,915,995
------------ ------------
At end of period (including undistributed net
investment income and distributions in excess of
net investment income of $47,790 and $1,636
respectively) $ 18,406,168 $ 26,579,217
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1999 ------------------------------------
(Unaudited) 1998(1) 1997 1996 1995+
-------------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.87 $ 19.95 $ 19.99 $ 20.24 $20.00
------- ------- ------- ------- ------
Investment Operations:
Net investment income* 0.65 1.25 1.34 1.27 0.57
Net realized and unrealized gain
(loss) on investments (0.27) (0.16) (0.04) (0.27) 0.24
------- ------- ------- ------- ------
Total from investment operations 0.38 1.09 1.30 1.00 0.81
------- ------- ------- ------- ------
Less Distributions to Shareholders:
From net investment income (0.60) (1.17) (1.34) (1.24) (0.57)
From net realized gain on investments -- -- -- (0.01) --
------- ------- ------- ------- ------
Total distributions to shareholders (0.60) (1.17) (1.34) (1.25) (0.57)
------- ------- ------- ------- ------
Net Asset Value, End Of Period $ 19.65 $ 19.87 $ 19.95 $ 19.99 $20.24
======= ======= ======= ======= ======
Total Return 1.93% 5.58% 6.66% 5.13% 4.20%
Ratios/Supplemental Data:
Expenses (to average daily net
assets)* 0.30%++ 0.30% 0.37% 0.40% 0.40%++
Net Investment Income (to average
daily net assets)* 6.32%++ 6.19% 6.60% 6.60% 6.29%++
Portfolio Turnover 42% 145% %94 107% 127%
Net Assets, End of Period (000's
omitted) $18,406 $26,579 $13,916 $12,525 $8,868
</TABLE>
- ----------
* For the periods indicated, the investment adviser did not impose all or a
portion of its advisory fee and/or reimbursed a portion of the Fund's
operating expenses. If this voluntary reduction had not been taken, the
investment income per share and the ratios would have been: reimbursed a
portion of the Fund's operating expenses. If this voluntary reduction had
not been taken, the investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income per share $ 0.58 $ 1.15 $ 1.18 $ 1.11 $ 0.38
Ratios (to average daily net assets):
Expenses 0.88%++ 0.81% 1.28% 1.25% 2.51%++
Net investment income 5.74%++ 5.68% 5.69% 5.75% 4.18%++
</TABLE>
(1) Calculated based on average shares outstanding.
+ For the period from July 3, 1995 (start of business) to December 31, 1995.
++ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 99.6%
Asset Backed -- 27.2%
Advanta Mortgage Loan Trust 1997-4 A4 6.660% 03/25/2022 $ 50,000 $ 49,717
Amresco Residential Securities 1998-2 B1A(a) 6.243% 06/25/2028 750,000 704,297
BankBoston Home Equity Loan 1998-1 A2 6.220% 02/25/2013 450,000 448,453
Delta Funding Home Equity Loan 1998-1 2A(a) 5.133% 05/25/2030 112,035 111,790
Equicredit Home Equity 1995-4 A2 6.350% 10/15/2009 2,424 2,424
Equicredit Home Equity 1997-1 A4 ERISA 7.160% 03/15/2013 325,000 328,847
First USA 1998-1 C 144A 6.500% 05/18/2003 450,000 441,703
Gulf States Auto Grantor Trust 1996-B A 6.600% 05/25/2003 127,453 127,533
Independent National Mortgage Corp. 1998-2 A2 6.170% 12/25/2011 350,000 348,687
Premier Auto Trust 1997-1B ERISA 6.550% 09/06/2003 350,000 350,630
Standard Credit Card 1998-1 A6(a) 6.737% 03/23/2003 500,000 493,750
TMS Home Equity Trust 1998-1 AV1(a) 5.163% 06/15/2029 129,216 129,054
Toyota Auto Lease 1997-A B 6.750% 09/25/2001 500,000 499,200
UCFC Home Equity Loan Trust 1993-B A1 6.075% 07/25/2014 322,910 316,956
UCFC Home Equity Loan Trust 1996 A1 A5 6.500% 03/15/2016 312,880 312,684
World Omni Auto Lease 1997-A B Non-ERISA 144A 7.300% 06/25/2003 346,534 349,756
------------
Total Asset Backed (Cost $5,086,933) 5,015,481
------------
Collateralized Mortgage Obligations -- 0.0%
Collateralized Mortgage Obligation Trust
13-A(a) 5.500% 01/20/2003 4,307 4,286
------------
Total Collateralized Mortgage Obligations
(Cost $4,275) 4,286
------------
Corporate -- 41.8%
Bank Bonds -- 4.3%
Ahmanson H.F. & Co. Sub. Notes 9.875% 11/15/1999 350,000 355,131
MBNA Corp. Sr Medium Term Notes 6.500% 09/15/2000 225,000 225,578
Sovereign Bancorp 6.750% 07/01/2000 200,000 200,892
------------
781,601
------------
Financial -- 22.5%
AT& T Capital Corp. 6.250% 05/15/2001 300,000 296,595
Avalon Bay Comm Notes 6.500% 07/15/2003 500,000 488,125
Bear Stearns Co. 0.065% 08/01/2002 300,000 298,470
Carramerica Realty Corp. 6.625% 10/01/2000 160,000 158,861
Chartwell Real Estate Holdings Senior Notes 10.250% 03/01/2004 650,000 675,429
Chelsea GCA Realty 7.750% 01/26/2001 450,000 452,137
Conseco Inc. 6.400% 02/10/2003 600,000 569,052
Lehman Brothers Holding Inc. 6.000% 02/26/2001 350,000 346,759
Reliance Group Holdings Corp. 9.000% 11/15/2000 400,000 407,668
Salomon Brothers, Inc. Senior Notes 7.750% 05/15/2000 75,000 76,128
Spieker Properties REIT 6.650% 12/15/2000 75,000 75,112
Wellsford Residential Property REIT(a) 5.369% 11/24/1999 250,000 250,000
Wellsford Residential Property REIT 7.250% 08/15/2000 50,000 49,945
------------
4,144,281
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Bonds -- 15.0%
COMDISCO Inc. Notes NCL 6.000% 01/30/2002 $ 500,000 $ 492,965
DeepTech International 12.000% 12/15/2000 400,000 421,774
Enterprise Corp. 144A Notes 7.000% 06/15/2000 250,000 252,048
Ford Motor Credit 8.200% 02/15/2002 350,000 365,082
IMC Global 7.400% 11/01/2002 475,000 479,931
News America Holdings 7.450% 06/01/2000 175,000 177,133
TRW Inc. 144A 6.500% 06/01/2002 250,000 246,563
Tele-Commun Inc. 8.250% 01/15/2003 300,000 317,838
------------
2,753,334
------------
Total Corporate (Cost $7,779,734) 7,679,216
------------
Government/Other -- 5.8%
Yankee Bonds -- 5.8%
Banco Latinoamericano 144A Notes 6.500% 04/02/2001 300,000 299,805
Edperbrascan Ltd. Notes 7.375% 10/01/2002 325,000 324,789
Tyco International 6.125% 06/15/2001 450,000 447,620
------------
Total Government/Other (Cost $1,082,398) 1,072,214
------------
Non-Agency -- 2.7%
Pass Thru Securities -- 2.7%
MLMI Mortgage Inv. 1995-C2 D Non-ERISA 7.495% 06/15/2021 296,814 295,894
Resolution Trust Corp. 1995-1 A2C ERISA 7.500% 10/25/2028 202,730 202,350
------------
Total Non-Agency (Cost $506,725) 498,244
------------
U.S. Government Agency -- 3.5%
Pass Thru Securities -- 3.5%
FHLMC Gold 5 Yr 7.000% 08/01/1999 7,950 8,002
FNMA 6.000% 05/01/2029 325,032 305,325
GNMA 9.000% 12/15/2017 309,130 329,220
------------
Total U.S. Government Agency (Cost $651,586) 642,547
------------
U.S. Treasury Obligations -- 18.6%
Treasury Notes -- 18.6%
U.S. Treasury Note 5.625% 11/30/2000 2,670,000 2,677,102
U.S. Treasury Note 6.250% 10/31/2001 500,000 507,110
U.S. Treasury Note 6.625% 04/30/2002 225,000 230,976
------------
Total U.S. Treasury Obligations
(Cost $3,460,233) 3,415,188
------------
TOTAL BONDS AND NOTES (COST $18,571,884) 18,327,176
------------
<CAPTION>
Contract
Size
----------
<S> <C> <C>
PURCHASED OPTIONS -- 0.0%
UST 5.5% Call, Strike Price 100.4609, 8/9/99 1,900 207
------------
TOTAL PURCHASED OPTIONS (COST $1,810) 207
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 17.5%
Commercial Paper -- 16.9%
Anheuser Busch 5.180% 07/01/1999 $ 220,000 $ 220,000
BP America 5.700% 07/01/1999 1,000,000 1,000,000
Bemis CP 5.750% 07/01/1999 1,000,000 1,000,000
Union Carbide Corp. 6.050% 07/01/1999 900,000 900,000
------------
3,120,000
------------
Repurchase Agreements -- 0.6%
Prudential-Bache Repurchase Agreement, dated
6/30/99, due 7/1/99, with a maturity value of
$104,913 and an effective yield of 4.10%,
collateralized by a U.S. Government Agency
Obligation with a rate of 5.00%, a maturity
date of 11/15/00 and a market value of
$110,559. 104,902
------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,224,902) 3,224,902
------------
TOTAL INVESTMENTS -- 117.1% (COST $21,798,596) $ 21,552,285
Other Assets, Less Liabilities -- (17.1%) (3,146,117)
------------
NET ASSETS -- 100.0% $ 18,406,168
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration.
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
MLMI - Merrill Lynch Mortgage Investors, Inc.
NCL - Non-callable
REIT - Real Estate Investment Trust
UCFC - United Companies Financial Corporation
UST - United States Treasury
* 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 6/30/99.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity 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 Controlled Maturity Fund (the "Fund") is a separate
diversified investment series of the Trust.
The following is a summary of significant accounting policies 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. Repurchase agreements
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor on a daily basis, the market value of the repurchase agreement's
underlying investments to ensure the existence of a proper level of
collateral.
C. Securities transactions and income
Securities transactions are recorded as of the trade date. Realized gains
and losses from securities sold are recorded on the identified cost basis.
Interest income is determined on the basis of interest accrued, adjusted
for accretion of discount or amortization of premium on debt securities
when required for federal income tax purposes.
D. Federal taxes
As a regulated investment company qualified 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.
At December 31, 1998, the Fund, for federal income tax purposes, had a
capital loss carryover which will reduce the Fund's taxable income arising
from net realized gain on investments, if any, to the extent permitted by
the Internal Revenue Code and thus will reduce the amount of distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal income tax. Such capital loss carryovers were
$5,003 and $88,743 which will expire on December 31, 2004 and 2005,
respectively. The Fund elected to defer to its fiscal year ending December
31, 1999, $15,434 of losses recognized during the period November 1, 1998
to December 31, 1998.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. 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 June,
2000.
F. Distributions to shareholders
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. The differences are primarily
due to differing treatment of asset and mortgage backed securities.
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, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory administrative services, and general
office facilities, is paid monthly at the annual rate of 0.30% of the
Fund's average daily net assets. SA&W voluntarily agreed to waive its
investment advisory fee and to limit the Fund's total operating expenses
to 0.30% of the Fund's average daily net assets for the six months ending
June 30, 1999. Pursuant to this agreement, SA&W voluntarily waived $33,000
of its investment advisory fee and reimbursed the Fund for $30,928 of
operating expenses. The Trust pays no compensation directly to its
trustees who are affiliated with SA&W or to is officers, all of whom,
receive remuneration for their services to the Trust from SA&W. Certain of
the trustees and officers of the Trust are directors or officers of SA&W.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 1999 were as follows:
Purchases Sales
---------- -----------
U.S. Government Securities $3,023,005 $ 5,425,394
---------- -----------
Investments (non-U.S.Government Securities) $5,969,740 $10,972,897
========== ===========
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
---------------- -----------------
<S> <C> <C>
Shares sold 126,769 1,364,193
Shares issued to shareholders in payment of
distributions declared 26,567 62,459
Shares redeemed (554,641) (786,222)
-------- ---------
Net increase (decrease) (401,305) 640,430
======== =========
</TABLE>
At June 30, 1999, three shareholders were record owners of approximately
20%, 21%, and 39% of the total outstanding shares of the Fund,
respectively.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Federal Income Tax Basis of Investment Securities:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 1999, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $21,798,596
===========
Gross unrealized appreciation 12,026
Gross unrealized depreciation (258,337)
-----------
Net unrealized depreciation $ (246,311)
===========
(6) 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 instruments are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
Options
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Fund may use options to seek to hedge against risks of
market exposure and changes in 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 Assets
and Liabilities at market value. The underlying face amount at value of
any open purchased options 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.
A summary of such transactions for the six months ended June 30, 1999.
Written Call Option Transactions
--------------------------------------------------------------------------
Number of Contracts Premiums
------------------- --------
Outstanding, beginning of period 0 $ 0
Options written 1 1,777
--- ------
Outstanding, end of period 1 $1,777
=== ======
Futures contracts
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Fund
deposits either in cash or
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Controlled Maturity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
securities an amount equal to a certain percentage of the contract amount.
Subsequent payments are made or received by the Fund each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for financial statement purposes as unrealized gains or losses by
the Fund. There are several risks in connection with the use of futures
contracts as a hedging device. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments or
indices, which may not correlate with changes in the value of hedged
investments. Buying futures tends to increase the Fund's exposure to the
underlying instrument, while selling futures tends to decrease the Fund's
exposure to the underlying instrument or hedge other Fund investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparties do
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to manage its exposure to certain markets
and to changes in securities prices and foreign currencies. Gains and
losses are realized upon the expiration or closing of the futures
contracts.
There were no outstanding futures contracts at June 30, 1999.
12
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