Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at value (Note 1A) (identified cost,
$79,679,964) $ 76,964,228
Receivable for investments sold 2,165,715
Interest receivable 787,471
Tax reclaim receivable 286
Deferred organization costs (Note 1E) 2,506
Prepaid expenses 5,199
------------
Total assets 79,925,405
Liabilities
Payable for Fund shares redeemed $ 3,597
Payable for variation margin on open financial
futures contracts (Note 6) 46,937
Distributions payable 230,026
Payable for delayed delivery transactions (Note 7) 4,402,387
Options written, at value (Note 6) (premiums
received, $310,315) 335,966
Accrued accounting, custody and transfer agent fees 10,149
Accrued trustees' fees and expenses (Note 2) 2,354
Accrued expenses and other liabilities 14,706
----------
Total liabilities 5,046,122
------------
Net Assets $ 74,879,283
============
Net Assets consist of:
Paid-in capital $ 79,363,959
Accumulated net realized loss (1,673,350)
Distributions in excess of net investment income (25,889)
Net unrealized depreciation (2,785,437)
------------
Total Net Assets $ 74,879,283
============
Shares of beneficial interest outstanding 4,202,923
============
Net Asset Value, offering price and redemption price
per share (Net Assets/Shares outstanding) $ 17.82
============
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Statement Of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income
Interest income $ 2,490,208
Dividend income 17,062
-----------
Total investment income 2,507,270
Expenses
Investment advisory fee (Note 2) $ 144,534
Accounting, custody and transfer agent fees 57,077
Legal and audit services 15,516
Trustees' fees and expenses (Note 2) 4,559
Registration fees 3,680
Insurance expense 3,571
Amortization of organization expenses (Note 1E) 1,229
Miscellaneous 3,292
-----------
Total expenses 233,458
Deduct:
Waiver of investment advisory fee (Note 2) (88,933)
-----------
Net expenses 144,525
-----------
Net investment income 2,362,745
-----------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss)
Investment security transactions (1,865,190)
Financial futures contracts 182,238
Written options transactions 21,156
-----------
Net realized loss (1,661,796)
Change in unrealized appreciation (depreciation)
Investment securities (1,108,588)
Financial futures contracts (49,894)
Written options (65,434)
-----------
Net change in unrealized depreciation (1,223,916)
-----------
Net realized and unrealized loss (2,885,712)
-----------
Net Decrease in Net Assets from Operations $ (522,967)
-----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Investment Operations
Net investment income $ 2,362,745 $ 4,856,783
Net realized gain (loss) (1,661,796) 1,314,163
Change in unrealized depreciation (1,223,916) (2,613,653)
------------ ------------
Net increase (decrease) in net assets from investment
operations (522,967) 3,557,293
------------ ------------
Distributions to Shareholders (Note 1F)
From net investment income (2,388,634) (4,892,262)
From net realized gains on investments (301,075) (1,061,939)
------------ ------------
Total distributions to shareholders (2,689,709) (5,954,201)
------------ ------------
Fund Share (Principal) Transactions (Note 4)
Net proceeds from sale of shares 9,479,632 17,951,155
Value of shares issued to shareholders in payment of
distributions declared 2,229,658 4,428,536
Cost of shares redeemed (11,525,999) (16,654,350)
------------ ------------
Net increase in net assets from Fund share
transactions 183,291 5,725,341
------------ ------------
Total Increase (Decrease) in Net Assets (3,029,385) 3,328,433
Net Assets
At beginning of period 77,908,668 74,580,235
------------ ------------
At end of period (including distributions in excess
of net investment income of $25,889 and $0,
respectively) $ 74,879,283 $ 77,908,668
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
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 $ 18.60 $ 19.17 $ 18.73 $ 20.52 $ 20.00
------- --------- --------- --------- --------
Investment Operations:
Net investment income* 0.59 1.23 1.11 1.16 0.53
Net realized and unrealized gain
(loss) on investments (0.70) (0.30) 0.46 (0.52) 0.64
------- --------- --------- --------- --------
Total from investment operations (0.11) 0.93 1.57 0.64 1.17
------- --------- --------- --------- --------
Less Distributions to Shareholders:
From net investment income (0.60) (1.24) (1.11) (1.15) (0.53)
In excess of net investment income -- -- -- -- (0.12)
From net realized gain on investments (0.07) (0.26) (0.02) (1.28) --
------- --------- --------- --------- --------
Total distributions to shareholders (0.67) (1.50) (1.13) (2.43) (0.65)
------- --------- --------- --------- --------
Net Asset Value, End of Period $ 17.82 $ 18.60 $ 19.17 $ 18.73 $ 20.52
======= ========= ========= ========= ========
Total Return (0.57)% 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% 0.40%++
Net Investment Income (to average
daily net assets)* 6.54%++ 6.36% 6.58% 6.57% 6.64%++
Portfolio Turnover 103% 162% 103% 124% 389%
Net Assets, End of Period (000's
omitted) $74,879 $ 77,909 $ 74,580 $ 35,485 $ 8,046
</TABLE>
- ----------
* For the periods indicated, the investment adviser did not impose 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income per share $ 0.57 $ 1.19 $ 1.06 $ 1.04 $ 0.29
Ratios (to average daily net assets):
Expenses 0.65%++ 0.62% 0.74% 1.06% 1.29%++
Net investment income 6.29%++ 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.
5
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
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 -- 98.4%
Asset Backed -- 3.9%
ARG Funding 1999-1A A3 6.020% 05/20/2005 $ 700,000 $ 678,180
Advanta Mortgage Loan Trust 1997-3 A7 ERISA 6.920% 10/25/2028 550,000 548,432
Green Tree Financial Corp. 1997-6 B2
Non-ERISA 7.750% 01/15/2029 250,000 197,803
IMC Home Equity Loan 1998-1 M1 Non-ERISA 7.030% 06/20/2029 675,000 656,437
Preferred Credit Corp. 1997-1 A6 Non-ERISA 7.590% 07/25/2026 300,000 305,344
Residential Funding 1997-HS5 M1 7.010% 05/25/2027 550,000 550,687
-------------
Total Asset Backed (Cost $3,036,769) 2,936,883
-------------
Collateralized Mortgage Obligations -- 1.0%
Housing Securities, Inc. 1994-2 A1 6.500% 07/25/2009 252,251 249,098
Prudential Home Mortgage 1992-25 B1 NAS 144A 8.000% 08/25/2022 535,083 536,254
-------------
Total Collateralized Mortgage Obligations
(Cost $796,568) 785,352
-------------
Corporate -- 27.3%
Bank Bonds -- 3.3%
Bank United Corp. Notes+ 8.875% 05/01/2007 525,000 522,349
Branch Bank & Trust Notes(a) 6.375% 06/30/2005 600,000 584,748
First Security Bank Sub. Notes+ 5.875% 11/01/2003 200,000 192,242
First Union Bank Sub. Notes NCL 5.800% 12/01/2008 650,000 593,398
Mellon Financial Co. 5.750% 11/15/2003 350,000 338,264
Union Planters Corp. Sub. Notes 6.250% 11/01/2003 240,000 234,473
-------------
2,465,474
-------------
Financial -- 15.2%
American Annuity Group Senior Notes+ 6.875% 06/01/2008 300,000 272,880
American Health Properties REIT Notes+ 7.500% 01/15/2007 175,000 161,679
Bear Stearns Notes NCL 6.150% 03/02/2004 700,000 674,345
Colonial Realty Medium Term Notes 6.960% 07/26/2004 500,000 478,360
Colonial Realty Medium Term Notes 7.160% 01/17/2003 150,000 146,146
Conseco Finance Trust Cap. Notes 8.796% 04/01/2027 550,000 502,958
Conseco Finance Trust II+ 8.700% 11/15/2026 800,000 720,976
Equity Office Properties Trust+ 6.625% 02/15/2005 250,000 241,145
Florida Windstorm 144A Notes 6.500% 08/25/2002 500,000 500,745
Florida Windstorm 144A Notes+ 6.700% 08/25/2004 225,000 219,370
Florida Windstorm 144A Notes 7.125% 02/25/2019 200,000 195,772
Goldman Sachs Notes NCL 6.340% 03/01/2006 1,050,000 1,008,976
IRT Prop. Senior Notes, REIT 7.250% 08/15/2007 325,000 293,923
Lehman Bros Holding Inc. 6.625% 04/01/2004 500,000 487,070
Lehman Brothers Inc. 7.625% 06/01/2006 225,000 231,185
MMI Capital Trust Notes 7.625% 12/15/2027 725,000 556,436
Marsh & McLennan Cos. 6.625% 06/15/2004 725,000 727,682
Meditrust REIT Notes 7.375% 07/15/2000 275,000 266,010
Paine Webber Notes 6.375% 05/15/2004 225,000 219,379
Phoenix Re-Insurance Corp. NC '07+ 8.850% 02/01/2027 550,000 460,861
Prologis Trust 6.700% 04/15/2004 500,000 486,550
Realty Income Corp. Notes 7.750% 05/06/2007 375,000 355,980
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial (continued)
Reliance Group Holdings Corp. 9.000% 11/15/2000 $ 175,000 $ 178,355
Simon Debartolo Group LP Notes NCL+ 6.875% 10/27/2005 350,000 336,122
Simon Debartolo Notes NCL 6.750% 06/15/2005 250,000 238,760
Spieker Properties REIT 6.650% 12/15/2000 100,000 100,150
Summit Properties Notes REIT+ 7.200% 08/15/2007 250,000 233,252
Sun Communities, Ltd. Senior Notes 7.375% 05/01/2001 175,000 175,982
Susa Partnership - Storage USA Inc. REIT
Notes 7.125% 11/01/2003 200,000 196,042
Trinet Corp. Realty Trust Notes NCL 7.300% 05/15/2001 400,000 396,596
U.S. Bancorp Notes NCL 6.000% 05/15/2004 350,000 338,956
-------------
11,402,643
-------------
Industrial Bonds -- 8.8%
Aramark Services Notes+ 6.750% 08/01/2004 300,000 288,936
Blount, Inc. Notes+ 7.000% 06/15/2005 600,000 516,174
Coastal Corp. Notes NCL 6.200% 05/15/2004 725,000 708,579
Cox Enterprises 144A Notes 6.625% 06/14/2002 725,000 725,217
Enron Corp. 6.450% 11/15/2001 175,000 174,762
Georgia Pacific Senior Notes NCL 9.950% 06/15/2002 350,000 380,943
IMC Global Notes 7.625% 11/01/2005 375,000 380,126
Idex Corp. Senior Notes NCL 6.875% 02/15/2008 650,000 602,921
La Quinta Inns, Inc. Medium Term Notes 7.110% 10/17/2001 300,000 276,663
TRW Inc. 144A 7.125% 06/01/2009 725,000 704,120
USA Waste Services Inc. Senior Notes 6.500% 12/15/2002 700,000 699,349
WMX Technologies 144A 6.875% 05/15/2009 375,000 362,625
Wisconsin Central Transportation Notes+ 6.625% 04/15/2008 800,000 760,408
-------------
6,580,823
-------------
Total Corporate (Cost $21,568,270) 20,448,940
-------------
Government/Other -- 9.8%
Yankee Bonds -- 9.8%
Abbey National PLC(a) 6.700% 06/29/2049 550,000 522,379
Abitibi Consolidated Deb Notes 7.500% 04/01/2028 700,000 632,744
Amvescap Senior Notes 6.600% 05/15/2005 575,000 559,533
Cominco Ltd. Notes 6.875% 02/15/2006 449,000 384,182
Edperbrascan Ltd. Notes+ 7.375% 10/01/2002 1,100,000 1,099,285
Lite-On Tech 144A 0.000% 12/15/2002 700,000 717,500
Merita Bank Perpetual Step Up 144A 7.500% 12/29/2049 200,000 192,984
Merita Bank Pfd Step Up 144A Notes 7.15% 7.150% 325,000 322,901
National Westminster Bank Perpetual 10 Yr.
Step Up(a) 7.750% 04/29/2049 900,000 893,961
Nova Chemical Ltd. Notes 6.500% 09/22/2000 200,000 198,730
Royal Caribbean Cruise Senior Notes 7.500% 10/15/2027 550,000 515,774
Se Banken Perpetual 10 Yr. Step Up 144A 8.125% 09/06/2049 375,000 370,838
Societe Generale Step Up 144A NC '07 7.850% 04/29/2049 250,000 243,238
St. Georges Bank 144A 7.150% 10/15/2005 675,000 665,354
-------------
Total Government/Other (Cost $7,526,215) 7,319,403
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Security Rate Maturity Value* (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-Agency -- 4.3%
Pass Thru Securities -- 4.3%
Chase Commercial Mortgage 1996-1E Non-ERISA 7.600% 06/18/2006 $ 725,000 $ 686,343
Franchise Mortgage Acceptance Corp. 1997-1A 7.350% 04/15/2019 432,605 433,010
Merrill Lynch Mortgage Investments 1996-C2 E
Non-ERISA 6.960% 11/21/2028 400,000 349,240
Merrill Lynch Mortgage Investments 1997-C1 D
Non-ERISA 7.120% 06/18/2029 500,000 482,000
Morgan Stanley Capital 1997-WF1 E 7.490% 05/15/2009 500,000 473,984
Mortgage Capital Funding 1996 MC1A-C
Non-ERISA 7.800% 04/15/2006 100,000 102,875
Resolution Trust Corp. 1994-C1 C Non-ERISA 8.000% 06/25/2026 525,000 522,539
Resolution Trust Corp. 1994-C2 C Non-ERISA 8.000% 04/25/2025 46,522 46,391
Resolution Trust Corp. 1995-2 CA1 7.450% 05/25/2029 129,082 127,993
-------------
Total Non-Agency (Cost $3,352,643) 3,224,375
-------------
U.S. Government Agency -- 39.6%
Pass Thru Securities -- 39.6%
FHLB 5.375% 03/02/2001 675,000 671,200
FNMA 6.000% 08/01/2011 - 06/01/2029 5,150,434 4,846,202
FNMA 6.400% 05/14/2009 1,425,000 1,380,697
FNMA++ 6.500% 05/01/2014 - 07/01/2029 6,926,580 6,730,657
FNMA+ 9.000% 11/01/2025 623,315 657,791
FNMA 6.000% 06/01/2029 1,000,100 939,464
GNMA 6.500% 04/15/2029 - 06/15/2029 1,357,499 1,305,317
GNMA+ 7.000% 11/15/2027 - 05/15/2029 8,977,588 8,856,930
GNMA++ 8.000% 04/15/2023 - 07/15/2029 3,066,354 3,154,051
GNMA+ 9.000% 12/15/2017 1,021,702 1,094,499
-------------
Total U.S. Government Agency (Cost $30,130,638) 29,636,808
-------------
U.S. Treasury Obligations -- 12.5%
Treasury Bonds -- 6.1%
U.S. Treasury Bond+ 6.625% 02/15/2027 800,000 844,872
U.S. Treasury Bond+ 8.125% 05/15/2021 3,025,000 3,683,875
-------------
4,528,747
-------------
Treasury Notes -- 6.4%
U.S. Treasury Inflation Index Note(a) 3.625% 07/15/2002 700,313 693,528
U.S. Treasury Note 4.625% 11/30/2000 1,775,000 1,755,866
U.S. Treasury Note 4.750% 11/15/2008 900,000 826,452
U.S. Treasury Note+ 6.250% 10/31/2001 275,000 278,911
U.S. Treasury Note+ 6.625% 04/30/2002 540,000 554,342
U.S. Treasury Note 6.625% 05/15/2007 650,000 676,917
-------------
4,786,016
-------------
Total U.S. Treasury Obligations (Cost $9,733,705) 9,314,763
-------------
TOTAL BONDS AND NOTES (COST $76,144,808) 73,666,524
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PREFERRED STOCKS -- 0.7%
Equity Office Properties Trust 144A CVT 13,000 $ 554,125
-------------
TOTAL PREFERRED STOCKS (COST $650,000) 554,125
-------------
<CAPTION>
Contract
Size
-----------
PURCHASED OPTIONS -- 0.2%
UST 4.75% Call, Strike Price 95.0625, 9/3/99 17,000 4,607
UST 4.75% Call, Strike Price 96.6093,
10/18/99 23,750 6,436
UST 5.25% Call, Strike Price 101.8281,
7/20/99 16,000 125
UST 5.25% Put, Strike Price 90.1562, 12/1/99 7,000 22,155
UST 5.25% Put, Strike Price 90.5781, 12/1/99 7,000 25,020
UST 5.25% Put, Strike Price 90.6562, 12/1/99 7,000 24,227
UST 5.5% Call, Strike Price 100.1093, 11/8/99 15,000 9,660
UST 5.5% Call, Strike Price 100.4062, 8/9/99 8,800 3,080
UST 5.5% Call, Strike Price 96.7265, 9/22/99 10,000 11,719
UST 5.5% Call, Strike Price 97.1875, 9/2/99 8,700 9,648
UST 5.5% Call, Strike Price 98.1328, 9/2/99 7,425 6,504
UST 5.5% Call, Strike Price 99.3671, 8/9/99 13,050 4,792
-------------
TOTAL PURCHASED OPTIONS (COST $265,591) 127,973
-------------
<CAPTION>
Shares
-----------
WARRANTS -- 0.0%
Financial -- 0.0%
Equity Office Properties Warrants 5,000 250
-------------
TOTAL WARRANTS (COST $4,000) 250
-------------
<CAPTION>
Par
Rate Maturity Value
-------- ------------------------ -----------
SHORT-TERM INVESTMENTS -- 3.5%
U.S. Government Agency -- 2.4%
FHLMC Discount Note 0.000% 08/12/1999 $ 775,000 770,427
FHLMC Discount Note+ 0.000% 09/17/1999 100,000 98,895
FNMA Discount Note 4.790% 07/08/1999 950,000 949,115
-------------
1,818,437
-------------
Repurchase Agreements -- 1.1%
Prudential-Bache Repurchase Agreement, dated 6/30/99, due 7/1/99, with a maturity
value of $797,009 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 $814,414. 796,919
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $2,615,565) 2,615,356
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Schedule of Investments - June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Value
(Note 1A)
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 102.8% (COST $79,679,964) $ 76,964,228
Other Assets, Less Liabilities -- (2.8%) (2,084,945)
-------------
NET ASSETS -- 100.0% $ 74,879,283
=============
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.
CVT - Convertible
FHLB - Federal Home Loan Bank
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
NCL - Non-callable
REIT - Real Estate Investment Trust
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.
+ Denotes all or part of security pledged as a margin deposit (Note 6) or
collateral for delayed delivery transactions (Note 7).
++ Denotes all or part of a delayed delivery contract (Note 7).
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
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 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 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.
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.
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
11
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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 six months ended June 30, 1999. Pursuant to this agreement,
SA&W voluntarily waived $88,933 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 six months ended June 30, 1999 were as follows:
Purchases Sales
----------- -----------
U.S. Government Securities $66,464,446 $49,264,136
=========== ===========
Investments (non-U.S.Government Securities) $10,396,133 $26,831,603
=========== ===========
(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 30, 1998
---------------- -----------------
<S> <C> <C>
Shares sold 513,041 926,615
Shares issued to shareholders in payment of
distributions declared 124,266 234,244
Shares redeemed (624,116) (861,503)
-------- --------
Net increase 13,191 299,356
======== ========
</TABLE>
At June 30, 1999, one shareholder was record owner of approximately 51% of
the total outstanding shares of the Fund.
12
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
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 $79,679,964
===========
Gross unrealized appreciation 114,697
Gross unrealized depreciation (2,830,433)
-----------
Net unrealized depreciation $(2,715,736)
===========
(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.
13
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
A summary of written option transactions for the six months ended June 30,
1999 is as follows:
Written Put Option Transactions
--------------------------------------------------------------------------
Number of Contracts Premiums
------------------- --------
Outstanding, beginning of period 6 $ 81,445
Options written 8 186,859
Options expired (2) (10,500)
Options closed (4) (70,945)
--- --------
Outstanding, end of period 8 $186,859
=== ========
Written Call Option Transactions
--------------------------------------------------------------------------
Number of Contracts Premiums
------------------- --------
Outstanding, beginning of period 5 $107,219
Options written 13 152,544
Options exercised (1) (29,750)
Options expired (3) (44,588)
Options closed (4) (61,969)
--- --------
Outstanding, end of period 10 $123,456
=== ========
Futures contracts
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Fund
deposits either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts.
At June 30, 1999, the Fund held the following futures contracts:
<TABLE>
<CAPTION>
Underlying
Face Amount
Contract Position Expiration Date at Value Unrealized Loss
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond (17 contracts) Short 9/30/99 $1,970,406 $ (2,966)
U.S. 5 Yr. Note (21 contracts) Short 9/30/99 2,289,000 (20,061)
U.S. 10 Yr. Note (18 contracts) Short 9/30/99 2,001,375 (21,023)
--------
$(44,050)
========
</TABLE>
At June 30, 1999, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
14
<PAGE>
Standish, Ayer & Wood Investment Trust
Standish Fixed Income Fund II
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(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 June 30, 1999, the Fund had the following delayed delivery transactions
outstanding:
Type Security Settlement Date Payable Amount
--------------------------------------------------------------------------
Buy FNMA 7/16/99 $1,439,649
Buy FNMA 7/20/99 2,062,992
Buy GNMA 7/29/99 899,746
----------
$4,402,387
==========
15
