[LOGO] STANDISH FUNDS(R)
Standish Small Capitalization
Financial Report Equity Fund
--------------------------------------------------------------------------------
Six Months Ended
March 31, 2000
(Unaudited)
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Note 1A) (identified cost,
$148,543,690) $203,657,448
Cash 153,425
Receivable for investments sold 7,813,382
Receivable for Fund shares sold 222,699
Interest and dividends receivable 4,957
Receivable for variation margin on open financial
futures contracts (Note 6) 47,120
Prepaid expenses 185
------------
Total assets 211,899,216
LIABILITIES
Payable for investments purchased $ 890,681
Payable for Fund shares redeemed 1,000,000
Accrued accounting, custody and transfer agent fees 35,314
Accrued trustees' fees and expenses (Note 2) 6,030
Accrued expenses and other liabilities 20,420
-----------
Total liabilities 1,952,445
------------
NET ASSETS $209,946,771
============
NET ASSETS CONSIST OF:
Paid-in capital $ 67,487,362
Accumulated net realized gain 87,995,269
Net investment loss (646,394)
Net unrealized appreciation 55,110,534
------------
TOTAL NET ASSETS $209,946,771
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,380,491
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 88.19
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income allocated from Portfolio (a) $ 52,037
Dividend income allocated from Portfolio (a) 1,395
Expenses allocated from Portfolio (a)(b) (416,976)
------------
Net investment income allocated from Portfolio (363,544)
Interest income 35,465
Dividend income 2,996
------------
Total investment income (325,083)
EXPENSES
Investment advisory fee (Note 2) $ 251,829
Accounting, custody and transfer agent fees 44,220
Legal and audit services 13,909
Registration fees 7,136
Trustees' fees and expenses (Note 2) 4,983
Insurance expense 2,261
Miscellaneous 7,290
----------
Total expenses 331,628
Deduct:
Waiver of investment advisory fee (Note 2) (10,317)
----------
Total expense deductions (10,317)
----------
Net expenses 321,311
------------
Net investment loss (646,394)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain allocated from Portfolio (a)
Investment security transactions 33,391,481
Financial futures contracts 186,170
----------
Net realized gain allocated from Portfolio 33,577,651
Net realized gain
Investment security transactions 55,302,385
Financial futures contracts 346,187
----------
Net realized gain 89,226,223
Change in unrealized appreciation (depreciation)
Investment securities 38,184,563
Financial futures contracts (3,224)
----------
Net change in unrealized appreciation
(depreciation) 38,181,339
------------
Net realized and unrealized gain 127,407,562
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $126,761,168
============
</TABLE>
(a) On January 28, 2000, the Fund withdrew its investment in Standish Small
Capitalization Equity Portfolio and began investing directly in securities.
(b) Includes $18,855 of amortization of organization costs of the portfolio
expense and net of reimbursement resulting from conversion of the Fund from
a master-feeder structure.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (646,394) $ (940,595)
Net realized gain 89,226,223 28,751,722
Change in unrealized appreciation (depreciation) 38,181,339 32,959,364
------------ ------------
Net increase in net assets from investment operations 126,761,168 60,770,491
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net realized gains on investments (28,497,714) (15,623,361)
------------ ------------
Total distributions to shareholders (28,497,714) (15,623,361)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 6,301,984 22,657,287
Value of shares issued to shareholders in payment of
distributions declared 26,646,611 14,776,461
Cost of shares redeemed (68,597,172) (82,249,148)
------------ ------------
Net decrease in net assets from Fund share
transactions (35,648,577) (44,815,400)
------------ ------------
TOTAL INCREASE IN NET ASSETS 62,614,877 331,730
NET ASSETS
At beginning of period 147,331,894 147,000,164
------------ ------------
At end of period (including net investment loss of
$646,394 and $0, respectively) $209,946,771 $147,331,894
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED NINE MONTHS
ENDED SEPTEMBER 30, ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 2000 ---------------------- SEPTEMBER 30, -----------------------------------
(UNAUDITED)(1) 1999(1) 1998(1) 1997(1) 1996 1995 1994
-------------- --------- --------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 54.46 $ 41.74 $ 66.50 $ 52.96 $ 53.46 $ 42.15 $ 48.97
-------- -------- -------- -------- -------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment loss* (0.01) (0.28) (0.31) (0.23) -- -- --
Net realized and unrealized
gain (loss) on
investments 44.84 17.77 (16.57) 14.80 9.29 12.57 (1.84)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations 44.83 17.49 (16.88) 14.57 9.29 12.57 (1.84)
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net realized gain on
investments (11.10) (4.77) (7.88) (1.03) (9.79) (1.26) (4.98)
-------- -------- -------- -------- -------- -------- --------
Total distributions to
shareholders (11.10) (4.77) (7.88) (1.03) (9.79) (1.26) (4.98)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 88.19 $ 54.46 $ 41.74 $ 66.50 $ 52.96 $ 53.46 $ 42.15
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN 92.49%++ 44.02% (27.20)% 27.92%++ 17.36% 29.83% (3.66)%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily
net assets)*(2) 0.74%+ 0.74% 0.74% 0.74%+ 0.75% 0.75% 0.79%
Net Investment Loss (to
average daily net
assets)* (0.65)%+ (0.56)% (0.57)% (0.57)%+ (0.44)% (0.30)% (0.27)%
Portfolio Turnover 90%(5) 173%(3) 107%(3) 70%(3) 28%(4) 103%(4) 95%(4)
Net Assets, End of Period
(000's omitted) $209,947 $147,332 $147,000 $274,368 $244,131 $180,470 $107,591
</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> <C> <C>
Net investment income per share $ (0.01) $ (0.30) $ (0.34) $ (0.23) $ (0.01) -- --
Ratios (to average daily net
assets):
Expenses(2) 0.78%+ 0.80% 0.78% 0.74%+ 0.76% -- --
Net investment loss (0.69)%+ (0.62)% (0.61)% (0.57)%+ (0.45)% -- --
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
(1) Calculated using average shares outstanding.
(2) Includes the Fund's share of the Standish Small Capitalization Equity
Portfolio's allocated expenses for periods from May 3, 1996 to January 27,
2000.
(3) Represents activity of the Standish Small Capitalization Equity Portfolio
while the Fund was invested in the Standish Small Capitalization Equity
Portfolio.
(4) Represents portfolio turnover when the fund was investing directly in
securities.
(5) Portfolio turnover while the Fund was invested in the Standish Small
Capitalization Equity Portfolio was 58%. For the period from January 28,
2000 to March 31, 2000, when the Fund began investing in securities, the
portfolio turnover was 32%
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES -- 96.2%
CAPITAL GOODS -- 1.7%
EGL, Inc.* 109,500 $ 2,559,562
Waste Connections, Inc.* 87,500 1,060,937
------------
3,620,499
------------
EARLY CYCLICAL -- 5.0%
Atlantic Coast Airlines, Inc.* 115,600 2,991,150
Forward Air Corp.* 94,150 2,230,178
Ryanair Holdings PLC ADR* 52,300 2,399,262
Skywest, Inc. 74,900 2,930,462
------------
10,551,052
------------
ENERGY -- 2.4%
Cal Dive International, Inc.* 36,900 1,872,675
Core Laboratories, Inc.* 105,500 3,066,094
------------
4,938,769
------------
FINANCIAL -- 1.8%
Costar Group, Inc.* 101,200 3,731,750
------------
GROWTH CYCLICAL -- 1.7%
Cinar Corp.* 72,600 508,200
Tweeter Home Entertainment Group, Inc.* 71,500 3,163,875
------------
3,672,075
------------
HEALTH CARE -- 9.9%
Alexion Pharmaceuticals, Inc.* 35,800 2,497,050
Alkermes, Inc.* 19,400 1,794,500
Angiotech Pharmaceuticals, Inc.* 40,300 1,601,925
Antigenics, Inc.* 44,000 896,500
COR Therapeutics, Inc.* 32,700 2,155,646
Cephalon, Inc.* 49,400 1,852,500
Coulter Pharmaceutical, Inc.* 72,300 2,205,150
Diversa Corp.* 24,100 1,132,700
Inhale Therapeutic Systems, Inc.* 38,700 2,883,150
Progenics Pharmeceuticals* 30,500 2,135,000
Vical, Inc.* 45,100 1,510,850
eBenX, Inc.* 3,100 91,450
------------
20,756,421
------------
SERVICES -- 32.6%
C-Bridge Internet Solutions* 27,900 1,590,300
Citadel Communication Corp.* 74,500 3,142,969
Corporate Executive Board Co.* 61,800 3,136,350
Cysive, Inc.* 18,800 1,287,800
Data Return Corp.* 60,600 2,230,837
Digex, Inc.* 22,300 2,473,906
Digital River, Inc.* 90,800 1,952,200
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (CONTINUED)
Dycom Industries, Inc.* 39,200 $ 1,911,000
Emmis Broadcasting Corp., Class A* 129,500 6,021,750
Fairmarket, Inc.* 58,200 1,324,050
Getty Images, Inc.* 40,200 1,444,687
Globix Corp.* 50,200 1,913,875
Insight Communications, Inc.* 132,800 2,739,000
Interliant, Inc.* 58,700 1,658,275
Internet Commerce Corp., Class A* 27,000 1,275,750
Media Metrix, Inc.* 89,100 3,742,200
NCO Group, Inc.* 131,300 4,193,394
Pinnacle Holdings, Inc.* 70,800 3,911,700
Quanta Services, Inc.* 39,200 2,378,950
Regent Communications, Inc.* 102,700 1,270,913
SBS Broadcasting SA* 77,400 4,760,100
SmartForce PLC ADR* 87,200 4,000,300
Sportsline USA, Inc.* 74,600 2,196,038
Stamps.com, Inc.* 80,000 1,545,000
Westwood One, Inc.* 146,100 5,296,125
eMerge Interactive, Inc., Class A* 32,500 979,062
------------
68,376,531
------------
TECHNOLOGY -- 41.1%
ATMI, Inc.* 90,500 4,321,375
Adaptive Broadband Corp.* 28,600 1,530,100
ArrowPoint Communications, Inc.* 500 59,242
Aspen Technologies, Inc.* 49,300 1,990,488
Bottomline Technologies, Inc.* 57,500 2,095,156
Burr - Brown Corp.* 86,050 4,678,969
Clarus Corp.* 19,000 1,341,876
Credence Systems Corp.* 34,100 4,266,763
Cree Research, Inc.* 23,200 2,618,700
Cybex Corp.* 45,150 1,698,769
Datastream Systems, Inc.* 34,000 986,000
Emulex Corp.* 13,700 1,495,013
Exar Corp.* 61,250 4,383,203
Gadzoox Networks, Inc.* 76,900 3,686,394
Globespan, Inc.* 32,200 3,282,388
HNC Software, Inc.* 20,500 1,477,281
Level 8 Systems, Inc.* 78,800 3,683,900
Manugistics Group, Inc.* 33,300 1,673,325
Mercury Interactive Corp.* 31,200 2,472,600
Micrel, Inc.* 49,600 4,761,600
NetScout Systems, Inc.* 126,800 2,123,900
Pericom Semiconductor Corp.* 75,100 2,680,131
Photronics, Inc.* 75,400 2,662,563
Qlogic Corp.* 21,800 2,953,900
Quicklogic Corp.* 99,200 3,360,400
Semtech Corp.* 86,100 5,515,781
SmartDisk Corp.* 25,300 670,450
TSI International Software Ltd.* 35,300 2,932,106
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Varian Semiconductor Equipment Associates, Inc.* 72,300 $ 4,600,088
Veeco Instruments, Inc.* 46,400 3,433,600
Visual Networks, Inc.* 50,400 2,860,200
------------
86,296,261
------------
TOTAL EQUITIES (COST $146,829,169) 201,943,358
------------
<CAPTION>
PAR
RATE MATURITY VALUE
------ ---------- -------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 0.8%
U.S. GOVERNMENT AGENCY -- 0.2%
FNMA Discount Note=/=+ 6.698% 06/08/2000 $350,000 345,635
-------------
REPURCHASE AGREEMENTS -- 0.6%
Morgan Stanley Repurchase Agreement, dated 03/31/00,
due 04/03/00, with a maturity value of $1,369,059 and
an effective yield of 5.30%, collateralized by a U.S.
Government Agency Obligation with a rate of 7.00%, a
maturity date of 04/01/30 and an aggregate market value
of $1,369,486. 1,368,455
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,714,521) 1,714,090
-------------
TOTAL INVESTMENTS -- 97.0% (COST $148,543,690) $ 203,657,448
OTHER ASSETS, LESS LIABILITIES -- 3.0% 6,289,323
-------------
NET ASSETS -- 100.0% $ 209,946,771
=============
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
</TABLE>
* Non-income producing security.
=/= Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral to cover margin
requirements on open financial futures contracts (Note 6).
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY 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 Small Capitalization Equity Fund (the "Fund") is a
separate diversified investment series of the Trust.
Prior to January 28, 2000, the Fund sought to achieve its investment
objective by investing substantially all of its assets in the Standish
Small Capitalization Equity Portfolio (the "Portfolio") a subtrust of
Standish Ayer & Wood Master Portfolio (the "Portfolio Trust") which had
the same investment objective as that of Standish Small Capitalization
Equity Fund. Effective January 28, 2000, the Fund withdrew its investment
in the Portfolio and began investing directly in securities.
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 illiquid 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, which approximates
market value. 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 value based upon the value on such date unless the trustees
determine during such sixty-day period that amortized value 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 and accrued interest 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. Interest income
is determined on the basis of interest accrued, adjusted for amortization
of premium or accretion of discount on debt securities. Dividend income is
recorded on the ex-dividend date. Realized gains and losses from
securities sold are recorded on the identified cost basis.
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.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains
distributions, if any, are reinvested in additional shares of the Fund
unless the shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC),
litigation proceeds, market discount, non-taxable dividends, capital loss
carryforwards, losses deferred due to wash sales and excise tax
regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services is paid
monthly at the annual rate of 0.60% of the Fund's average daily net
assets. For the six months ended March 31, 2000, SA&W has voluntarily
agreed to limit the Fund's total annual operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.74% of the
Fund's average daily net assets. Pursuant to this agreement, for the six
months ended March 31, 2000, SA&W voluntarily did not impose $40,386 of
its investment advisory fee. While the Fund was invested in the Portfolio,
the Portfolio incurred $347,779 in advisory fees. Of these fees, the
advisor waived $30,069. The Fund was allocated its ratable share of the
net fee of $317,710. Since January 28, 2000 the Fund incurred advisory
fees of $251,829. Of these fees, the advisor waived $10,317. This
agreement is voluntary and temporary and may be discontinued or revised by
SA&W at any time. 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
investments for the six months ended March 31, 2000, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Securities $ -- $ --
============ ============
Investments (non-U.S.Government Securities) $168,007,718 $240,693,474
============ ============
</TABLE>
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
Shares sold 77,869 469,529
Shares issued to shareholders in payment of
distributions declared 451,179 322,771
Shares redeemed (853,884) (1,608,974)
-------- ----------
Net decrease (324,836) (816,674)
======== ==========
</TABLE>
At March 31, 2000, one shareholder held of record approximately 18% of the
total outstanding shares of the Fund.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2000, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost $ 148,543,690
=============
Gross unrealized appreciation 67,922,858
Gross unrealized depreciation (12,809,100)
-------------
Net unrealized appreciation $ 55,113,758
=============
</TABLE>
(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 contract, or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
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.
The Fund entered into no such transactions during the six months ended
March 31, 2000.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in 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.
The Fund had the following open financial futures contracts at March 31,
2000.
<TABLE>
<CAPTION>
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P Mid Cap 400 (2 contracts) Long 6/16/2000 $505,350 $ 9,330
Nasdaq 100 (2 contracts) Long 6/16/2000 891,470 (12,554)
--------
$ (3,224)
========
</TABLE>
At March 31, 2000 the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open financial futures
contracts.
(7) LINE OF CREDIT:
The Fund, and other funds in the Trust and subtrusts in the Standish
Ayer & Wood Portfolio Trust (the "Portfolio Trust") are parties to a
committed line of credit facility, which enables each portfolio/fund to
borrow, in the aggregate, up to $25 million. Interest is charged to each
participating portfolio/fund based on its borrowings at a rate equal to
the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment
fee, computed at an annual rate of .065 of 1% on the daily unused portion
of the facility, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended
March 31, 2000, the expense related to the commitment fee was $1,587 for
the Fund.
During the six months ended March 31, 2000, the Fund had no borrowings
under the credit facility.
11
<PAGE>
[LOGO] Standish Funds(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.729.0066
00-170
