STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH FIXED INCOME FUND II
Financial Statements for the Year Ended
December 31, 1998
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
February 25, 1999
Dear Standish, Ayer and Wood Investment Trust Shareholder:
We are writing to provide you with a review of developments at Standish, Ayer &
Wood, as they relate to the activities of the Investment Trust.
The financial markets had a wild year in 1998. Following the disarray in Asia
and, more directly, the de facto Russian default in mid-August, a large part of
the world's financial markets simply shut down. Many sectors of the U.S. markets
were paralyzed. Spurred by a second easing of monetary policy by the Federal
Reserve in mid-October, the markets reopened and staged a dramatic recovery.
Performance within subsets of the major asset classes varied greatly. Bonds
generally produced positive returns, but less liquid issues with any degree of
perceived credit risk underperformed. Emerging market securities were
eviscerated during the third quarter spasm and recovered only partially in the
fourth. By far the best returns in the U.S. equity markets were registered by a
relatively narrow group of higher price/earnings ratio, larger capitalization
stocks. The disparity in return between the larger cap stocks and smaller cap
stocks, as measured by the Standard & Poor's 500 and the Russell 2000 indexes
was an astounding 31%!
While some funds managed by Standish did well relative to their benchmarks and
most funds produced good absolute returns, too many underperformed their
benchmarks in 1998. In bonds, our holdings of corporate credits and mortgages
underperformed U.S. Treasury securities, the latter representing a significant
portion of the major indexes. In equities, our preference for lower
price/earnings ratios led to an overweighting in mid cap stocks that suffered
relative to larger cap stocks with significantly higher valuations.
We have expended considerable time and effort trying to learn the correct
lessons from 1998. We have determined that much of the underperformance was
generic to our style and that 1998 was an aberrant year, with valuation on
holiday in many sectors. We are deeply committed to the view that valuation is
extremely important in making investment judgments. We are dedicated to our
philosophy and unalterably convinced that our strategy of buying securities that
are inexpensive relative to their fundamentals is an excellent path to
sustainable excess returns over the long term.
Notwithstanding the chaotic markets, we are pleased that Standish has benefited
from extraordinary stability of both our clients and our professional team. At
the end of 1998, total assets under management for our clients were $46.2
billion, compared with $39.3 billion at the end of 1997. We have experienced
growth in virtually all asset categories, especially equities. The Standish
Funds increased assets from $5.7 billion to $6.5 billion during the year, with
about 75% of the growth representing additions from existing clients.
The Standish team has also grown significantly, from 232 members at the
beginning of 1998 to 276 members at the end of the year. Our 97 investment
officers have average investment experience of 15 years. Fifty-six officers have
advanced degrees (typically an MBA) and 65 have some advanced professional
accreditation (virtually all Chartered Financial Analysts). There have been no
changes in the 24 individuals (all with CFAs) who own Standish, Ayer & Wood.
1
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At the end of 1998, the Standish Board of Directors elected four new associate
directors: Susan Coan, one of the key managers in our taxable client group;
David Horsfall, head of our large bond trading operation; Phil Leonardi, a major
contributor to expanding our equity assets; and Jennifer Pline, who holds major
responsibilities for serving large, fixed income clients. We have elected 13 new
vice presidents and 17 new assistant vice presidents of Standish, Ayer & Wood.
In this environment, there are no shortages of challenges and opportunities. Our
first priority remains to produce superior long-term investment performance for
our clients. We believe we have the investment disciplines and the professional
team to achieve that goal. In those asset classes in which our returns were
subpar in 1998, we have a special impetus to produce superior results in the
future. With our portfolios attractively priced compared to the relevant
benchmarks, we see potential for significant excess return when the markets
become more focused on investment value.
We believe that we are in partnership with our clients. We would like to assure
you of our dedication to fulfilling your needs while expressing our great
appreciation for your confidence in Standish.
Sincerely yours,
/s/ Ted Ladd /s/ George Noyes
Edward H. Ladd, Chairman George W. Noyes, President
2
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH FIXED INCOME FUND II
Management Discussion and Analysis
The year just ended has been one of the most volatile periods in recent history.
While the market environment was difficult during the first half of the year,
the global crisis hit the markets in full force in August, when Russia defaulted
on its debt. This led to a complete crisis of confidence in the markets, with a
severe liquidity crunch and a flight to quality that affected virtually every
sector of the market. Confidence was gradually restored only when the Federal
Reserve stepped in to lower interest rates in two increments based on concerns
about market psychology. In this environment, the best performing sector of the
bond market was the safest and most liquid--U.S. Treasuries. These securities
make up substantial portions of the index against which we measure ourselves and
resulted in quite strong returns for the year--the Lehman Aggregate Index
returned 8.81%. This return is attractive on a stand-alone basis, but is even
more impressive against the backdrop of an economy in which we have had
inflation of less than 2% for the year. The Fund's performance versus the index
was disappointing, returning 4.91% for 1998.
On a relative return basis, the Fund performed fairly well during the first half
of the year, but as the flight to quality unfolded, particularly during the
August-October period, our performance lagged substantially. We cut back our
corporate bond exposure during the first half of the year based on our opinion
that yield spreads were relatively narrow on a historical basis. In hindsight,
this was the right move, but we did not cut enough. We also reduced our mortgage
exposure generally throughout the year, and these securities underperformed as
interest rates fell substantially and fears of increased prepayments proved to
be true. On the positive side, we maintained a duration longer than the index
for much of the year, and lengthened the Fund's duration at the height of the
crisis, which served us well in a falling interest rate environment. We also
continued to use option strategies throughout the year to improve the
portfolio's characteristics and this also had a positive effect on our
performance.
In late 1998, we began to add to corporate bonds, mortgages and commercial
mortgage backed securities. Our belief at that time was that these sectors
offered attractive values on a historical basis and if we were able to simply
earn the yield spread above Treasuries, it would be positive for the Fund. We
entered 1999 with a substantial yield spread advantage versus the Lehman
Aggregate Index, one of the highest levels in recent history. We expect that
1999 is likely to be a year in which maintaining income will be important--we do
not expect to see significant spread tightening in most sectors.
Although this was a difficult and disappointing year, we are confident that the
Fund is well positioned to take advantage of the market environment in 1999. We
want to assure you that we are working diligently to meet your expectations for
the year and thank you for your continued confidence as a shareholder.
Sincerely yours,
/s/ Caleb F. Aldrich /s/ David C. Stuehr
Caleb F. Aldrich David C. Stuehr
3
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH FIXED INCOME FUND II
Comparison of Change in Value of $100,000 Investment in
Standish Fixed Income Fund II, Lehman Gov't/Corp Index,
and Lehman Aggregate Index
[The following table was originally a line chart in the printed materials.]
Standish Fixed Lehman Gov't/Corp. Lehman Aggregate
Income Fund II Index Index
-------------- ----- -----
Inception 7/3/1995 100000 100000 100000
Jul-1995 99550 99780 99615
Aug-1995 100500 100984 100889
Sep-1995 101350 101964 101914
Oct-1995 102757 103289 103412
Nov-1995 104315 104838 105118
Dec-1995 105785 106306 106663
Jan-1996 106611 107008 107325
Feb-1996 104701 105146 105050
Mar-1996 103773 104410 104168
Apr-1996 103039 103825 103449
May-1996 102777 103618 103273
Jun-1996 104176 105006 104657
Jul-1996 104631 105289 104898
Aug-1996 104460 105111 104646
Sep-1996 106449 106939 106509
Oct-1996 108818 109313 108990
Nov-1996 110839 111183 110999
Dec-1996 109771 110149 109767
Jan-1997 110122 110490 109899
Feb-1997 110591 110766 110129
Mar-1997 109232 109537 108819
Apr-1997 110598 111180 110408
May-1997 111727 112236 111434
Jun-1997 113217 113572 112772
Jul-1997 116350 116638 116222
Aug-1997 115206 115647 114921
Sep-1997 116951 117358 116725
Oct-1997 117867 119060 118593
Nov-1997 118233 119608 119221
Dec-1997 119196 120816 120473
Jan-1998 120377 122362 122172
Feb-1998 120253 122264 121927
Mar-1998 121249 122680 122305
Apr-1998 121753 123320 122921
May-1998 122824 124486 124241
Jun-1998 123461 125544 125508
Aug-1998 124100 128063 127856
Sep-1998 125764 131725 130848
Oct-1998 123241 130790 130154
Nov-1998 124600 131575 130896
Dec-1998 125046 131891 131289
4
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Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets
Investments at value (Note 1A) (identified cost, $79,377,410) $ 77,770,262
Cash 11,715
Receivable for investments sold 4,364,075
Interest and dividends receivable 819,785
Receivable for variation margin on open financial futures contracts (Note 6) 859
Deferred organization costs (Note 1E) 3,735
Prepaid expenses 2,001
Miscellaneous receivable 286
-------------
Total assets 82,972,718
Liabilities
Payable for delayed delivery transactions (Note 7) $ 4,280,797
Distribution payable 602,654
Options written, at value (premiums received, $188,664) (Note 6) 148,881
Accrued accounting, custody and transfer agent fees 10,514
Accrued trustees' fees and expenses (Note 2) 2,037
Accrued expenses and other liabilities 19,167
------------
Total liabilities 5,064,050
-------------
Net Assets $ 77,908,668
=============
Net Assets consist of:
Paid-in capital $ 79,180,668
Accumulated net realized gain 289,521
Net unrealized depreciation (1,561,521)
-------------
Total Net Assets $ 77,908,668
=============
Shares of beneficial interest outstanding 4,189,732
=============
Net Asset Value, offering price and redemption price per share
(Net Assets/Shares outstanding) $ 18.60
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Statement of Operations
Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Interest income $ 5,132,502
Dividend income 29,620
------------
Total investment income 5,162,122
Expenses
Investment advisory fee (Note 2) $ 305,342
Accounting, custody and transfer agent fees 107,182
Legal and audit services 29,417
Trustees' fees and expenses (Note 2) 8,154
Insurance expense 5,924
Registration fees 5,899
Amortization of organization costs (Note 1E) 2,478
Miscellaneous 6,400
-----------
Total expenses 470,796
Deduct --
Waiver of investment advisory fee (Note 2) (165,457)
-----------
Net expenses 305,339
------------
Net investment income 4,856,783
------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss)
Investment security transactions 1,247,629
Financial futures contracts (81,482)
Written option transactions 148,016
-----------
Net realized gain 1,314,163
Change in unrealized appreciation (depreciation)
Investment securities (2,614,992)
Financial futures contracts (9,734)
Written options 11,073
-----------
Net change in unrealized appreciation (depreciation) (2,613,653)
------------
Net realized and unrealized loss (1,299,490)
------------
Net Increase in Net Assets from Operations $ 3,557,293
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Increase (decrease) in Net Assets
From Investment Operations
Net investment income $ 4,856,783 $ 3,304,308
Net realized gain 1,314,163 76,622
Change in unrealized appreciation (depreciation) (2,613,653) 1,060,405
------------- ------------
Net increase in Net Assets from Investment Operations 3,557,293 4,441,335
------------- ------------
Distributions to Shareholders (Note 1F)
From net investment income (4,892,262) (3,318,681)
From net realized gains on investments (1,061,939) (57,788)
------------- ------------
Total distributions to shareholders (5,954,201) (3,376,469)
------------- ------------
Fund Share (principal) Transactions (Note 4)
Net proceeds from sale of shares 17,951,155 38,654,192
Value of shares issued to shareholders in
payment of distributions declared 4,428,536 2,705,708
Cost of shares redeemed (16,654,350) (3,329,835)
------------- ------------
Net increase in Net Assets from Fund share transactions 5,725,341 38,030,065
------------- ------------
Total Increase in Net Assets 3,328,433 39,094,931
Net Assets
At beginning of year 74,580,235 35,485,304
------------- ------------
At end of year (including undistributed net investment income of $0 and
$4,599, respectively) $ 77,908,668 $74,580,235
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
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Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1998(1) 1997 1996 1995+
-------- --------- --------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 19.17 $ 18.73 $ 20.52 $20.00
-------- --------- --------- -------
Investment Operations
Net investment income * 1.23 1.11 1.16 0.53
Net realized and unrealized gain
(loss) on investments (0.30) 0.46 (0.52) 0.64
-------- --------- --------- -------
Total from investment operations 0.93 1.57 0.64 1.17
-------- --------- --------- -------
Less distributions to shareholders
From net investment income (1.24) (1.11) (1.15) (0.53)
In excess of net investment income -- -- -- (0.12)
From net realized gains on
investments (0.26) (0.02) (1.28) --
-------- --------- --------- -------
Total distributions to shareholders (1.50) (1.13) (2.43) (0.65)
-------- --------- --------- -------
Net Asset Value, End of Year $ 18.60 $ 19.17 $ 18.73 $20.52
======== ========= ========= =======
Total Return 4.91% 8.59% 3.77% 5.79%
Ratios/Supplemental Data
Expenses (to average daily net
assets)* 0.40% 0.40% 0.40% 0.40%++
Net investment income (to average
daily net assets)* 6.36% 6.58% 6.57% 6.64%++
Portfolio Turnover 162% 103% 124% 389%
Net Assets, End of Year (000's
omitted) $77,909 $ 74,580 $ 35,485 $8,046
</TABLE>
- ----------------------------------------
* The investment adviser voluntarily agreed not to impose a portion of its
investment advisory fee and reimbursed the Fund for a portion of its
operating expenses. In the absence of this agreement, the net investment
income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income per share $ 1.19 $ 1.06 $ 1.04 $ 0.29
Ratios (to average daily net
assets):
Expenses 0.62% 0.74% 1.06% 1.29%++
Net investment income 6.14% 6.24% 5.91% 5.75%++
</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.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 97.3%
Asset Backed -- 11.3%
Advanta Mortgage Loan Trust 1997-3 A7 ERISA 6.920% 10/25/2028 $ 550,000 $ 560,227
Amresco 1997-1 B1A Non-ERISA FRN(a) 6.456% 03/25/2027 1,095,052 1,035,679
Chase Credit Card Master Trust
1997-3 A Non-ERISA 6.777% 05/15/2007 550,000 555,221
Continental Mortgage Home Equity 1996-4 A9 6.880% 01/15/2028 600,000 612,188
Discover Card Master Trust 1998-7 A 5.600% 05/15/2006 750,000 752,930
Green Tree Financial Corp. 1997-6 B2 Non-ERISA 7.750% 01/15/2029 250,000 220,508
Greentree Acceptance Corp. 1997-5 M1 6.950% 05/15/2029 500,000 501,250
Greentree Acceptance Corp. 1998 2 B1 7.360% 10/01/2020 600,000 565,875
IMC Home Equity Loan 1998-1 M1 Non-ERISA 7.030% 06/20/2029 675,000 671,836
JC Penney Credit Card 1998-E 5.500% 11/15/2007 575,000 575,000
Oakwood Mortgage Investments 1997-D B1 Non-ERISA 7.325% 02/15/2028 550,000 513,906
Preferred Credit Corp. 1997-1 A6 Non-ERISA 7.590% 07/25/2026 300,000 309,422
Residential Funding 1997-HS5 M1 7.010% 05/25/2027 550,000 552,320
TMS Home Equity 1996-DA9 ERISA 7.000% 04/15/2028 625,000 638,281
Vanderbilt Mtg 1998-A 1B2 Non-ERISA 7.690% 04/07/2028 825,000 778,594
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Total Asset Backed (Cost $9,012,902) 8,843,237
-------------
Collateralized Mortgage Obligations -- 4.6%
GE Capital Mortgage 1997-13 A-3 NAS 6.750% 12/25/2012 527,607 532,388
Housing Securities, Inc. 1994-2 A1 6.500% 07/25/2009 293,007 296,672
Norwest Asset Sec. Corp. 1998-3 A5 6.750% 02/25/2013 722,833 729,384
Prudential Home Mortgage 1992-25 B1 NAS 144A 8.000% 08/25/2022 597,846 603,825
Residential Funding 1998-S4 A4 NAS 6.500% 02/25/2013 1,398,009 1,398,008
-------------
Total Collateralized Mortgage Obligations
(Cost $3,570,592) 3,560,277
-------------
Corporate -- 33.1%
Bank Bonds -- 5.1%
Banco Latinoamericano 144A Notes 6.500% 04/02/2001 450,000 444,150
Bank Sub. Midlantic Cap. Notes 9.875% 12/01/1999 193,000 199,354
Bank United Corp. Notes+ 8.875% 05/01/2007 525,000 539,606
Branch Bank & Trust Notes 6.375% 06/30/2005 600,000 613,170
First Security Bank Sub. Notes 5.875% 11/01/2003 200,000 199,858
First Union Bank Sub. Notes NCL 5.800% 12/01/2008 650,000 653,361
Hubco Capital Trust NC '07 8.980% 02/01/2027 500,000 540,774
Key Corp. Sub. Notes NC '08 6.500% 04/15/2008 550,000 569,278
Union Planters Corp. Sub. Notes 6.250% 11/01/2003 240,000 242,554
-------------
4,002,105
-------------
Financial -- 14.1%
American Annuity Group Senior Notes+ 6.875% 06/01/2008 300,000 297,420
American Health Properties REIT Notes+ 7.500% 01/15/2007 175,000 165,932
Carramerica REIT Notes 6.875% 03/01/2008 450,000 425,871
Colonial Realty Medium Term Notes 7.160% 01/17/2003 150,000 144,786
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial (continued)
Colonial Realty Medium Term Notes 6.960% 07/26/2004 $ 500,000 $ 470,870
Conseco Finance Trust Cap. Notes 8.796% 04/01/2027 550,000 503,111
Conseco Finance Trust II+ 8.700% 11/15/2026 800,000 724,656
Contifinancial Corp. Senior Notes 7.500% 03/15/2002 750,000 562,500
Equity Office Properties Trust+ 6.625% 02/15/2005 250,000 245,058
Florida Windstorm 144A Notes 6.500% 08/25/2002 500,000 504,930
Florida Windstorm 144A Notes+ 6.700% 08/25/2004 225,000 229,298
Homeside Inc. Senior Notes 11.250% 05/15/2003 650,000 748,157
IRT Prop. Senior Notes, REIT 7.250% 08/15/2007 325,000 292,276
Lehman Brothers Inc. 7.625% 06/01/2006 225,000 236,970
Meditrust REIT Notes 7.375% 07/15/2000 275,000 263,016
MMI Capital Trust Notes 7.625% 12/15/2027 725,000 627,442
Phoenix Re-Insurance Corp. NC '07+ 8.850% 02/01/2027 550,000 482,499
Realty Income Corp. Notes 7.750% 05/06/2007 375,000 355,180
Reliance Group Holdings Corp. 9.000% 11/15/2000 175,000 181,589
Reliastar Financial Corp. Notes 6.500% 11/15/2008 375,000 381,788
Security Capital Notes 7.625% 07/01/2017 500,000 464,818
Simon Debartolo Group LP Notes NCL+ 6.875% 10/27/2005 350,000 342,493
Simon Debartolo Notes NCL 6.750% 06/15/2005 250,000 244,015
Spieker Properties REIT 6.650% 12/15/2000 100,000 100,482
Summit Properties Notes REIT+ 7.200% 08/15/2007 250,000 241,450
Sun Communities, Ltd. Senior Notes 7.375% 05/01/2001 175,000 177,737
Susa Partnership - Storage USA Inc. REIT Notes 7.125% 11/01/2003 200,000 195,490
TIG Holdings Capital 144A 8.597% 01/15/2027 300,000 275,489
Trinet Corp. Realty Trust Notes NCL 7.300% 05/15/2001 400,000 397,568
UCFC Home Equity Loan 1996 7.700% 01/15/2004 150,000 102,000
Unum Corp. Notes NCL 6.750% 12/15/2028 275,000 276,042
Wharf Capital Notes 7.625% 03/13/2007 375,000 307,200
-------------
10,968,133
-------------
Industrial Bonds -- 13.9%
Aramark Services Notes 6.750% 08/01/2004 300,000 302,880
Blount, Inc. Notes+ 7.000% 06/15/2005 600,000 594,773
Coastal Corp. Notes 7.420% 02/15/2037 200,000 203,572
Cominco Ltd. Notes 6.875% 02/15/2006 449,000 391,108
CSX Notes 6.250% 10/15/2008 375,000 380,456
Georgia Pacific Senior Notes NCL 9.950% 06/15/2002 350,000 387,359
Guandong Enterprises 144A Senior Notes NCL 8.875% 05/22/2007 300,000 144,000
Idex Corp. Senior Notes NCL 6.875% 02/15/2008 650,000 627,608
IMC Global Notes 7.625% 11/01/2005 375,000 381,015
La Quinta Inns, Inc. Medium Term Notes 7.110% 10/17/2001 300,000 281,971
Merck & Co. Notes 5.950% 12/01/2028 750,000 748,688
News America Holdings 7.750% 12/01/2045 175,000 185,885
News America Holdings 8.150% 10/17/2036 275,000 309,515
News America Inc. Deb Notes NCL 7.125% 04/08/2028 600,000 603,222
Quantum Health Sub. Deb. Notes CVT+ 4.750% 10/01/2000 725,000 703,150
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Bonds (continued)
Ryder Systems Notes NCL 6.600% 11/15/2005 $ 375,000 $ 379,275
Texaco Capital Corp. Notes 9.750% 03/15/2020 525,000 725,083
Time Warner Inc. Notes 6.625% 05/15/2029 750,000 763,095
Toro Co. Deb. Notes 7.800% 06/15/2027 500,000 430,645
U.S. Filter Corp. NC '03 6.500% 05/15/2003 725,000 707,797
USA Waste Services Inc. Senior Notes 6.500% 12/15/2002 700,000 712,336
Wisconsin Central Transportation Notes 6.625% 04/15/2008 800,000 817,952
-------------
10,781,385
-------------
Total Corporate (Cost $26,790,402) 25,751,623
-------------
General Obligations -- 0.5%
Georgia NCL 5.250% 10/01/2015 375,000 400,313
-------------
Total General Obligations (Cost $412,476) 400,313
-------------
Government/Other -- 10.4%
Yankee Bonds -- 10.4%
Abbey National PLC 6.700% 06/29/2049 550,000 549,973
Abitibi Consolidated Deb Notes 7.500% 04/01/2028 700,000 635,684
Amvescap Senior Notes 6.600% 05/15/2005 575,000 572,878
Edperbrascan Ltd. Notes+ 7.375% 10/01/2002 1,100,000 1,101,055
Gruma SA Notes 7.625% 10/15/2007 525,000 459,795
Lite-On Tech 144A 0.000% 12/15/2002 700,000 715,750
Merita Bank Perpetual Step Up 144A 7.500% 12/29/2049 200,000 199,386
National Westminster Bank Perpetual 10 Yr. Step Up 7.750% 04/29/2049 900,000 958,742
Royal Caribbean Cruise Senior Notes 7.500% 10/15/2027 550,000 544,783
Se Banken Perpetual 10 Yr. Step Up 144A 8.125% 09/06/2049 375,000 382,950
Societe Generale Step Up 144A NC '07 7.850% 04/29/2049 750,000 754,403
St. Georges Bank 144A 7.150% 10/15/2005 675,000 702,387
Tyco International Group 144A Notes 6.125% 11/01/2008 550,000 551,755
-------------
8,129,541
-------------
Total Government/Other (Cost $8,130,085) 8,129,541
-------------
Insured Bond -- 0.5%
Austin, Texas Utility Systems MBIA NCL 5.250% 05/15/2020 400,000 415,500
-------------
Total Insured Bond (Cost $432,281) 415,500
-------------
Non-Agency -- 5.4%
Pass Thru Securities -- 5.4%
BankBoston 1997-C1 B Non-ERISA 144A 7.218% 04/25/2000 139,732 139,077
Chase Commercial Mortgage 1996-1E Non-ERISA 7.600% 06/18/2006 725,000 694,188
Franchise Mortgage Acceptance Corp. 1997-1A 7.350% 04/15/2019 447,094 463,161
Merrill Lynch Mortgage Investments
1996-C2 E Non-ERISA 6.960% 11/21/2028 400,000 351,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrill Lynch Mortgage Investment
1997-C1 D Non-ERISA 7.120% 06/18/2029 $ 500,000 $ 496,094
Morgan Stanley Capital 1997-WF1 E 7.490% 05/15/2009 500,000 468,906
Morgan Stanley Dean Witter 1998-HF1 A2 6.520% 01/15/2008 350,000 362,797
Mortgage Capital Funding 1996 MC1A-C Non-ERISA 7.800% 04/15/2006 100,000 107,688
Resolution Trust Corp. 1993-C3 E Non-ERISA 7.100% 12/25/2024 355,203 354,481
Resolution Trust Corp. 1994-C1 C Non-ERISA 8.000% 06/25/2026 525,000 526,313
Resolution Trust Corp. 1994-C2 C Non-ERISA 8.000% 04/25/2025 75,000 75,293
Resolution Trust Corp. 1995-2 CA1 7.450% 05/25/2029 139,312 141,445
-------------
4,180,943
-------------
Total Non-Agency (Cost $4,253,522) 4,180,943
-------------
U.S. Government Agency -- 29.8%
Pass Thru Securities -- 29.8%
FHLMC Gold+ 7.500% 05/01/2028 - 11/01/2028 2,819,780 2,895,545
FHLMC Gold 8.500% 07/01/2028 314,588 329,235
FNMA+ 6.000% 05/15/2008 - 01/01/2012 350,000 369,467
FNMA# 7.000% 01/01/2029 4,200,000 4,283,998
FNMA 8.000% 12/01/2012 539,611 556,813
FNMA 8.500% 12/01/2026 907,914 950,749
GNMA+ 7.000% 10/15/2025 - 01/15/2026 2,571,376 2,630,858
GNMA 7.500% 11/15/2025 - 10/15/2026 722,913 745,273
GNMA+ 8.000% 04/15/2023 - 12/15/2027 5,775,168 6,002,859
GNMA+ 9.000% 12/15/2017 1,247,260 1,337,686
GNMA 8.000% 09/15/2017 702,972 737,460
GNMA 8.000% 11/15/2025 393,758 409,261
GNMA 8.000% 10/15/2027 449,880 467,592
GNMA 8.000% 12/15/2026 285,147 296,373
GNMA 8.000% 07/15/2027 116,305 120,884
GNMA 8.000% 10/15/2027 666,444 692,682
Tenneesee Valley Authority Notes 5.375% 11/13/2008 350,000 352,504
-------------
Total U.S. Government Agency (Cost $23,137,670) 23,179,239
-------------
U.S. Treasury Obligations -- 1.7%
Treasury Notes -- 1.7%
U.S. Treasury Inflation Index Tip 3.625% 07/15/2002 691,153 687,049
U.S. Treasury Note+ 6.625% 04/30/2002 275,000 291,027
U.S. Treasury Note+ 6.250% 10/31/2001 275,000 286,514
U.S. Treasury Note+ 5.875% 11/15/1999 75,000 75,773
-------------
1,340,363
-------------
Total U.S. Treasury Obligations (Cost $1,343,656) 1,340,363
-------------
TOTAL BONDS AND NOTES(COST $77,083,586) 75,801,036
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS -- 1.7%
Equity Office Properties Trust 144A CVT 13,000 $ 495,625
Societe Generale Preferred Step Up NC '07, 7.640% 555,000 509,213
Merita Bank Preferred Step Up 144A Notes 7.15% 325,000 314,451
TOTAL PREFERRED STOCKS (COST $1,531,574) 1,319,289
-------------
WARRANTS -- 0.0%
Financial -- 0.0%
Equity Office Properties Warrants 5,000 1,000
-------------
TOTAL WARRANTS (COST $4,000) 1,000
-------------
<CAPTION>
Contract
Size
---------------
<S> <C> <C>
PURCHASED OPTIONS -- 0.1%
UST 6.125% Call, Strike Price 110.43, 1/22/99 8,000 $ 14,500
UST 5.500% Call, Strike Price 104.391, 2/25/99 16,000 32,625
UST 5.625% Call, Strike Price 108.125, 4/23/99 23,750 25,234
UST 5.625% Call, Strike Price 110.25, 4/9/99 24,000 10,500
UST 5.625% Call, Strike Price 110.00, 4/9/99 16,000 7,750
UST 6.125% Call, Strike Price 113.438, 5/31/99 8,000 21,750
-------------
TOTAL PURCHASED OPTIONS (COST $221,672) 112,359
-------------
SHORT-TERM INVESTMENTS -- 0.7%
Repurchase Agreements -- 0.7%
Prudential-Bache Repurchase Agreement, dated 12/31/98, due 1/4/99, with a
maturity value of $536,814 and an effective yield of 3.95%, collateralized by a
U.S. Government Agency Obligation with a rate of 6.152%, a maturity date of
2/1/31 and a market value of $547,565. 536,578
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $536,578) 536,578
-------------
TOTAL INVESTMENTS-- 99.8% (COST $79,377,410) $ 77,770,262
Other Assets, Less Liabilities-- 0.2% 138,406
-------------
NET ASSETS-- 100% $ 77,908,668
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Fixed Income Fund II
Schedule of Investments - December 31, 1998
- --------------------------------------------------------------------------------
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.
CVT - Convertible
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
REIT - Real Estate Investment Trust
UCFC - United Companies Financial Corporation
UST - United States Treasury
(a) Variable Rate Security; rate indicated is as of 12/31/98.
+ Denotes all or part of security pledged as a margin deposit (Note 6) or
collateral for delayed delivery transactions (Note 7).
# Delayed delivery contract (Note 7).
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
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 Fixed Income Fund II (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 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
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 basis.
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 Board of 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 and 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.
E. Deferred organization cost
Costs incurred by the Fund in connection with its organization and
initial registration are being amortized, on a straight-line basis,
through June, 2000.
15
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Notes to Financial Statements
- --------------------------------------------------------------------------------
F. 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 treatments
for financial futures contracts and option transactions. Permanent book
and tax basis differences relating to shareholder distributions will
result in reclassifications between paid-in-capital, distributions in
excess of net investment income and accumulated net realized gains
(losses).
(2) Investment Advisory Fee:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. (SA&W)
for overall investment advisory and administrative services, and
general office facilities, is paid monthly at the annual rate of 0.40%
of the Fund's average daily net assets. SA&W voluntarily agreed to
limit the Fund's total operating expense to 0.40% of the Fund's average
daily net assets for the Fund's fiscal year ended December 31, 1998.
Pursuant to this agreement, SA&W voluntarily waived $165,457 of its
investment advisory fee. The Trust pays no compensation directly to its
trustees who are affiliated with SA&W or to its 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 year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
U.S. Government Securities................................. $96,521,270 $93,769,587
============ ============
Investments (non-U.S. Government Securities)............... $38,500,247 $21,130,019
============ ============
</TABLE>
(4) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest having a
par value of one cent per share. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
-------------------- -------------------
<S> <C> <C>
Shares sold........................................ 926,615 2,028,481
Shares issued to shareholders in payment of
distributions declared.......................... 234,244 142,698
Shares redeemed.................................... (861,503) (175,022)
-------------------- -------------------
Net increase....................................... 299,356 1,996,157
==================== ===================
</TABLE>
At December 31, 1998, the Fund had two shareholders of record owning
approximately 50% and 11%, of the outstanding shares of the Fund,
respectively.
16
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
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 December 31, 1998, as computed on a
federal income tax basis, were as follows:
Aggregate Cost........................................... $79,383,111
============
Gross unrealized appreciation............................ 624,304
Gross unrealized depreciation............................ (2,237,153)
------------
Net unrealized depreciation.............................. $(1,612,849)
============
(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 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 security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Fund's
exposure to the underlying instrument, or hedge other Fund investments.
Options, both held and written by the Fund, are reflected in the
accompanying Statement of Assets and Liabilities at market value. The
underlying face amount at value of any open purchased option is shown
in the Schedule of Investments. This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise
from changes in the value of the underlying instrument, 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 purchased 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 year ended December 31, 1998 is as follows:
17
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Written Put Option Transactions
-----------------------------------------------------------------------------------------
Number of
Contracts Premiums
------------ -----------
<S> <C> <C>
Outstanding, beginning of period...................... 4 $ 56,015
Options written....................................... 9 204,352
Options expired....................................... (5) (86,882)
Options closed........................................ (6) (92,040)
--------- -----------
Outstanding, end of period............................ 2 $ 81,445
========= ===========
<CAPTION>
Written Call Option Transactions
-----------------------------------------------------------------------------------------
Number of
Contracts Premiums
------------ -----------
<S> <C> <C>
Outstanding, beginning of period.......................... 3 $ 12,711
Options written........................................... 11 162,727
Options expired........................................... (2) (22,078)
Options closed............................................ (7) (46,141)
-------- -----------
Outstanding, end of period................................ 5 $ 107,219
======== ===========
</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 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 security
prices and foreign currencies. Gains and losses are realized upon the
expiration or closing of the futures contracts. At December 31, 1998,
the Fund held the following futures contracts:
<TABLE>
<CAPTION>
Underlying
Face/amount Unrealized
Contract Position Expiration Date at value Gain/(Loss)
--------------------------------------------- --------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
U.S. Bond (CBT) (3 contracts)............ Short 3/31/99 $ 383,344 $ (217)
U.S. 5 Yr. Note (21 contracts)........... Short 3/31/99 2,380,219 3,072
U.S. 10 Yr. Bond (5 contracts)........... Short 3/31/99 595,782 2,989
----------------
$ 5,844
================
</TABLE>
At December 31, 1998, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
18
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Notes to Financial Statements
- --------------------------------------------------------------------------------
(7) Delayed Delivery Transactions:
The Fund may purchase securities on a when-issued or forward commitment
basis. Payment and delivery may take place a month or more after the
date of the transactions. The price of the underlying securities and
the date when the securities will be delivered and paid for are fixed
at the time the transaction is negotiated. The fund segregates
securities having a value at least equal to the amount of the purchase
commitment.
At December 31, 1998, the Fund had entered into the following delayed
delivery transactions outstanding:
When Issued
<TABLE>
<CAPTION>
Type Security Settlement Date Payable Amount
------------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C>
Buy FNMA 1/21/99 $ 3,082,664
Buy FNMA 1/21/99 1,198,133
------------------------
$ 4,280,797
========================
</TABLE>
- --------------------------------------------------------------------------------
Supplemental Tax Information -- (Unaudited):
-----------------------------------------------------------------------
Pursuant to section 852 of the Internal Revenue Code, the Fund
designates $25,036 as capital gain dividends for the year ended
December 31, 1998. This represents a 20% tax rate gain distribution.
- --------------------------------------------------------------------------------
19
<PAGE>
Report of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Fixed Income II 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 Fixed Income II Fund (the "Fund"), at December 31, 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 December 31, 1998, by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
20
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
(800) 729-0066
www.standishfunds.com
<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 December 31, 1998
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> Standish Fixed Income Fund Series II Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 79,377,410
<INVESTMENTS-AT-VALUE> 77,770,262
<RECEIVABLES> 5,185,005
<ASSETS-OTHER> 17,451
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82,972,718
<PAYABLE-FOR-SECURITIES> 4,280,797
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 783,253
<TOTAL-LIABILITIES> 5,064,050
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79,180,668
<SHARES-COMMON-STOCK> 4,189,732
<SHARES-COMMON-PRIOR> 3,890,376
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 289,521
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,561,521)
<NET-ASSETS> 77,908,668
<DIVIDEND-INCOME> 29,620
<INTEREST-INCOME> 5,132,502
<OTHER-INCOME> 0
<EXPENSES-NET> 305,339
<NET-INVESTMENT-INCOME> 4,856,783
<REALIZED-GAINS-CURRENT> 1,314,163
<APPREC-INCREASE-CURRENT> (2,613,653)
<NET-CHANGE-FROM-OPS> 3,557,293
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,892,262
<DISTRIBUTIONS-OF-GAINS> 1,061,939
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 926,615
<NUMBER-OF-SHARES-REDEEMED> (861,503)
<SHARES-REINVESTED> 234,244
<NET-CHANGE-IN-ASSETS> 3,328,433
<ACCUMULATED-NII-PRIOR> 4,599
<ACCUMULATED-GAINS-PRIOR> 68,177
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 305,342
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,796
<AVERAGE-NET-ASSETS> 76,342,152
<PER-SHARE-NAV-BEGIN> 19.17
<PER-SHARE-NII> 1.23
<PER-SHARE-GAIN-APPREC> (0.30)
<PER-SHARE-DIVIDEND> (1.24)
<PER-SHARE-DISTRIBUTIONS> (0.26)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.60
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
