STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1999
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
January 27, 2000
Dear Standish, Ayer & 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 1999 MARKETS
The past year has been as tumultuous as 1998, although in different ways. World
stock markets have been euphoric. The S&P 500 advanced about 21% but the
technology-driven Nasdaq composite soared 86%. For the second year in a row,
larger capitalization growth stocks have performed brilliantly, and small or
middle capitalization value stocks have been left far behind. In striking
contrast to some of the equity markets, the bond market suffered one of its
worst years in history, with prices of ten-year Treasuries dropping 13%. Yield
spreads, which had widened sharply during the crisis in the fall of 1998,
narrowed during the early months of 1999 but then widened again as the year
progressed, with distressingly poor liquidity in the secondary bond market.
Securities that suffered even a slight short-term tarnishing in their attributes
often dropped dramatically in price - investors displayed very little appetite
for any bond or stock that had evidenced any degree of adversity.
STANDISH INVESTMENT DISCIPLINES
Many of Standish's investment disciplines are directed to applying fundamental
research to uncover relatively cheap securities where the fundamentals are
improving. This methodology has generally been quite successful over long
periods of time in the past. However, the investment environment of the last two
years has produced significant headwinds for some of our disciplines. While
there has been enormous pressure on Standish and other value investors to
capitulate and to become momentum investors, we have not wavered in our focus on
fundamentals and value. Of course, we and other investors make misjudgments
along the way, and we are doing our best to learn the correct lessons from the
inevitable mistakes. We have applied new investment tools and made modest
alterations to the investment process. We have added investment talent and
quantitative resources. We believe that our approach is correct, that our
portfolios are attractively priced relative to the benchmarks, and that it is
our obligation to adhere to the philosophy we have consistently represented to
you.
MAJOR DEVELOPMENTS AT STANDISH DURING 1999
We are pleased that Standish is able to report continued stability of both our
clients and our professional team. Assets under management for our clients are
approximately $45 billion, a slight decline during 1999 but up from $39 billion
at the beginning of 1998. These statistics include $3.3 billion of assets
managed through Standish International Management Company, LLC, or SIMCO. The
Standish Funds returned to 1997's level of $5.8 billion of assets from $6.5
billion in 1998. While we had some client turnover, a substantial portion of the
assets lost related to corporate events or restructuring as opposed to
terminations because of investment performance. We have also added a substantial
number of distinguished new clients.
We continue to build our professional resources both by adding new people and
through our long-term commitment to education and professional training. The
Standish team has grown to 292 members from 232 at the beginning of 1998. Our
109 investment officers average experience of 16 years. Sixty-seven of those
officers have advanced degrees (typically an MBA) and 72 have some advanced
professional accreditation.
1
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At the end of the year, the Standish board of directors elected two new
directors: Lavinia Chase and Cathy Powers. During the last year, we were sorry
to lose the services of Mark Flaherty, Director, who accepted a position of
great responsibility at a very large investment management organization. In
addition, we anticipate the retirement of both Arthur Parker and Barr Clayson
from their positions as stockholders and directors of Standish in June 2000. In
line with other professional service firms, Standish is attempting to maintain
the best balance between retaining the wisdom of senior investment managers and
assuring generational change.
STANDISH'S STRATEGIES FOR THE FUTURE
Standish's top priorities include:
o meeting the needs of our clients and working closely with them to
assure that their investment expectations are realistic;
o developing new investment products that add value in today's
environment; and
o investigating strategic business alliances to augment our research
and penetrate foreign markets as well as expand our domestic
distribution channels.
We believe that all investors and investment management firms are facing very
challenging times. However, the characteristics that have served Standish and
our clients well for sixty-seven years are still intact. We remain dedicated to
fulfilling your needs.
Sincerely,
/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 INTERNATIONAL FIXED INCOME FUND
MANAGEMENT DISCUSSION AND ANALYSIS
1999 was a difficult year for foreign bonds. The J.P. Morgan Non-U.S. Hedged
Government Bond Index returned 2.16% in 1999 while the Standish International
Fixed Income Fund returned 1.03% in 1999. The Fund's negative performance
relative to the Index was primarily due to the underweight position in Japan.
Japanese bonds far and away outperformed other markets, with a currency-hedged
total return of 10.59%, and were the only market to outperform the Index.
Bond yields followed a one way trend higher in 1999. The year began with the
10-year U.S. Treasury yield at 4.65% but finished at a yield of 6.43%. The view
at the start of the year was that developing Asia was facing years of sluggish
growth or a "U" shaped recovery and the Japanese economy was confronting another
year of recession. Europe was challenged with the prospect of outright deflation
as consumer prices increased only 0.5% and it seemed like the U.S. economy would
be dragged down with the rest of the world.
The dramatic turnaround in yields was a direct result of concerted central bank
interest rate cuts of 1998 that were directed at avoiding the risk of a global
recession. The power of monetary policy cannot be denied now that there is talk
of a "long boom" for the world economy.
The swing in sentiment from doom to boom helped produce poor returns for all
bond markets in the Index, except Japan. The surge in Japanese yields in
December 1998 from less than 1% to over 2.2% had the potential to crush any hope
for a recovery just as fiscal policy was starting to bear fruit. The Japanese
"administrators" reacted in early 1999 and fought the rise in yields by
effectively cutting overnight interest rates to 0%, flooding the money market
with excess liquidity and announcing that the Trust Fund Bureau would resume its
outright purchases of bonds for the rest of 1999. Ten-year bond yields dropped
and stayed in a 1.6% to 1.9% range throughout the year.
The bear market phenomenon of Japanese outperformance took over when Japanese
Government Bonds ("JGB") yields stayed in a tight 30 basis point range during
the year while most other markets saw yields rise by over 150 basis points. JGB
outperformance was also helped by collecting 600 basis points in carry when
hedged to U.S. dollars.
The Fund was overweight in the next best performing markets in Scandinavia and
Europe. However, the Fund's position in the U.S. was a drag on performance
because the U.S. market produced the worst relative returns of (2.87%). During
the year the Fund reduced duration, prudent in a rising interest rate
environment.
Currency markets were dominated in 1999 by Japanese yen strength and euro
weakness with the U.S. dollar in the middle. The yen was strong as the economy
surprised to the upside by mid-1999 and capital flowed into Japan to chase
undervalued equities. Japanese banks also repatriated billions of dollars in
foreign capital to comply with new bank regulations. The euro dropped steadily
throughout the year as European capital flowed into U.S. equities and
high-yielding corporate bonds. The Fund had a modest short yen position on at
the start of the year; the position was reversed by mid-year because the yen was
poised to strengthen. By the end of 1999, the Fund had no major currency
positions.
U.S. credit spreads started 1999 at historically cheap levels, rallied into the
summer, but then widened as a result of substantial corporate bond issuance
ahead of Y2K. For the year, credit spreads basically collected the yield premium
over Treasuries. European credit spreads performed better but became relatively
rich by the end of 1999. The Fund is now neutral on Euroland credit because of
valuations and increased supply.
The Fund is well positioned to outperform in 2000. The U.S. credit spread market
and European bonds should outperform because they offer high yields on an
absolute and currency-hedged basis. Bond yields are relatively cheap, especially
compared to early 1999. Global growth should moderate and inflation, stay low
because central banks are now hiking interest rates. In addition, corporate
credit spreads offer a higher yield advantage over government bonds, giving the
portfolio a distinct yield advantage. We believe that the yield advantage and
potential for spread contraction will add to relative value in the next few
years. We appreciate your support during the year and we look forward to working
on your behalf towards superior, risk-adjusted returns in 2000.
/s/ William C. Cook II /s/ Richard S. Wood
W. Charles Cook Richard S. Wood
3
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH INTERNATIONAL FIXED INCOME FUND, THE LEHMAN AGGREGATE INDEX,
AND THE LEHMAN MORTGAGE INDEX
[The following table was depicted as a line graph in the printed materials.]
Standish
International J.P. Morgan
Fixed Lehman Hedged
Income Aggregate Non-U.S.Gov't
Fund Index Bond Index
100000 100000 100000
102350 101240 101900
102900 102101 103459
97100 102805 103625
97604 103915 104381
97654 104518 105185
95387 104466 104406
97352 105918 105002
99569 108206 106587
104910 110402 108143
106019 111628 108998
107430 112655 109096
1 Year 115083 116001 110896
112787 114423 111938
113622 115167 112308
112293 114522 111499
114469 115346 111978
118130 117526 113009
122906 119148 112850
124687 121579 112489
129920 122807 112512
128194 124268 114064
125659 122615 116380
124336 122640 116205
2 Year 124391 124590 117518
126034 126982 118588
128909 129204 120734
132077 129747 120807
134223 130655 120819
135892 130825 121495
139230 133193 123974
143102 133952 125362
148366 136296 127970
146551 136664 128520
149560 137170 130230
149498 136004 131141
3 Year 153972 136738 133856
155498 138584 133187
149268 136173 130190
145072 132810 129005
143587 131747 128089
140940 131734 126667
138551 131444 125375
140234 134060 126203
138357 134221 124991
137257 132248 125104
138551 132129 125592
140039 131838 127363
4 Year 139781 132748 127070
141093 135376 128455
142078 138598 130112
143390 139443 132766
146503 141396 134872
151868 146868 139295
150146 147940 138836
152685 147614 140585
154556 149396 141808
156159 150845 144049
158653 152806 145662
162899 155098 148852
5 Year 165123 157269 150236
168040 158307 152054
165408 155553 150260
166333 154464 151507
169275 153599 153325
169849 153291 154368
172142 155346 155649
172874 155765 156816
175732 155500 158902
181375 158206 162287
185069 161718 164964
190241 164483 168264
6 Year 190348 162954 168499
193213 163459 170606
194769 163868 171697
193133 162049 170787
195533 164479 172632
197436 166042 173530
200360 168018 176480
203728 172554 179286
203391 171088 179501
207938 173620 182678
208533 176137 183847
210234 176947 185171
7 Year 212929 178735 187578
215543 181022 190073
215916 180878 191764
218349 181493 193471
219010 182440 194458
221558 184164 197122
222153 185729 197970
224264 186119 199811
224648 189149 203747
228794 193576 208576
225787 192550 208263
231315 193647 210512
8 Year 231521 194228 210259
235609 195607 212867
233615 192184 211440
YTD 236314 193241 213957
239034 193859 216674
237221 192153 215786
234502 191538 212441
231445 190734 211888
230833 190639 212270
231139 192850 213077
231345 193564 213588
233612 193544 214827
233353 192615 215471
----------------------------------------------------------
Average Annual Total Return
(for periods ended 12/31/1999)
Since
Inception
1 Year 3 Year 5 Year 01/02/1991
------- -------- -------- ------------
0.79% 7.03% 10.79% 9.87%
----------------------------------------------------------
Past performance is not predictive of future performance.
4
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Note 1A) (identified cost,
$1,059,220,785) $1,035,623,308
Receivable for investments sold 56,858,449
Receivable for Fund shares sold 164,137
Interest receivable 21,383,979
Unrealized appreciation on forward foreign currency
exchange contracts (Note 7) 50,705,106
Prepaid expenses 7,155
--------------
Total assets 1,164,742,134
LIABILITIES
Payable for investments purchased $56,577,534
Unrealized depreciation on forward foreign currency
exchange contracts (Note 7) 33,454,741
Payable for Fund shares redeemed 160,666
Options written, at value (premiums received,
$11,484,903) (Note 7) 22,939,690
Accrued accounting, custody and transfer agent fees 87,865
Accrued trustees' fees and expenses (Note 2) 15,393
Accrued expenses and other liabilities 63,679
----------
Total liabilities 113,299,568
--------------
NET ASSETS $1,051,442,566
==============
NET ASSETS CONSIST OF:
Paid-in capital $1,112,650,209
Accumulated net realized loss (46,309,309)
Undistributed net investment income 3,089,432
Net unrealized depreciation (17,987,766)
--------------
TOTAL NET ASSETS $1,051,442,566
==============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 49,319,334
==============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 21.32
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income $ 84,624,261
------------
Total investment income 84,624,261
EXPENSES
Investment advisory fee (Note 2) $ 5,348,212
Accounting, custody and transfer agent fees 1,302,945
Legal and audit services 106,885
Trustees' fees and expenses (Note 2) 53,670
Registration fees 36,079
Insurance expense 22,225
Miscellaneous 34,204
-------------
Total expenses 6,904,220
------------
Net investment income 77,720,041
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
Investment security transactions (107,783,016)
Financial futures contracts 72,454
Written options transactions 3,560,957
Foreign currency transactions and forward foreign
currency exchange contracts 57,355,537
-------------
Net realized loss (46,794,068)
Change in unrealized appreciation (depreciation)
Investment securities (72,591,584)
Written options (1,031,423)
Foreign currency and forward foreign currency
exchange contracts 48,183,852
-------------
Net change in unrealized appreciation
(depreciation) (25,439,155)
------------
Net realized and unrealized loss (72,233,223)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,486,818
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 77,720,041 $ 79,311,563
Net realized gain (loss) (46,794,068) 38,368,751
Change in unrealized appreciation (depreciation) (25,439,155) (6,782,554)
-------------- --------------
Net increase in net assets from investment operations 5,486,818 110,897,760
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (107,801,609) (69,004,032)
From net realized gains on investments (633,288) (19,243,045)
-------------- --------------
Total distributions to shareholders (108,434,897) (88,247,077)
-------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5)
Net proceeds from sale of shares 289,944,558 465,332,134
Value of shares issued to shareholders in payment of
distributions declared 84,762,409 70,989,234
Cost of shares redeemed (572,699,748) (379,283,686)
-------------- --------------
Net increase (decrease) in net assets from Fund share
transactions (197,992,781) 157,037,682
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (300,940,860) 179,688,365
NET ASSETS
At beginning of year 1,352,383,426 1,172,695,061
-------------- --------------
At end of year (including undistributed net
investment income of $3,089,432 and $35,089,632,
respectively) $1,051,442,566 $1,352,383,426
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1999(1) 1998(1) 1997(1) 1996(1) 1995
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 23.22 $ 22.81 $ 23.25 $ 23.21 $ 21.30
---------- ---------- ---------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment income 1.34 1.38 1.54 1.72 1.96
Net realized and unrealized gain
(loss) on investments (1.15) 0.58 1.16 1.73 1.84
---------- ---------- ---------- -------- --------
Total from investment operations 0.19 1.96 2.70 3.45 3.80
---------- ---------- ---------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2.08) (1.21) (2.86) (2.64) (1.89)
From net realized gain on investments (0.01) (0.34) (0.28) (0.77) --
---------- ---------- ---------- -------- --------
Total distributions to shareholders (2.09) (1.55) (3.14) (3.41) (1.89)
---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF YEAR $ 21.32 $ 23.22 $ 22.81 $ 23.25 $ 23.21
========== ========== ========== ======== ========
TOTAL RETURN 0.79% 8.73% 11.86% 15.28% 18.13%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets) 0.52% 0.52% 0.53% 0.53% 0.51%
Net Investment Income (to average
daily net assets) 5.82% 5.92% 6.37% 7.17% 8.09%
Portfolio Turnover 162% 156% 173% 226% 165%
Net Assets, End of Year (000's
omitted) $1,051,443 $1,352,383 $1,172,695 $840,133 $803,537
</TABLE>
- -----------------
(1) Calculated based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE# (NOTE 1A)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 93.6%
CORPORATE -- 3.1%
BANK BONDS -- 1.2%
Firstar Bank+ 7.125% 12/01/2009 $ 10,500,000 $ 10,163,581
GS Escrow Corp. 144A Notes+ 7.125% 08/01/2005 2,700,000 2,412,379
--------------
12,575,960
--------------
INDUSTRIAL BONDS -- 1.9%
Aramark Services Notes+ 6.750% 08/01/2004 10,000,000 9,397,000
Cox Communications Inc.+ 7.750% 08/15/2006 10,075,000 10,172,929
--------------
19,569,929
--------------
Total Corporate (Cost $33,115,273) 32,145,889
--------------
GOVERNMENT/OTHER -- 88.7%
AUSTRALIA -- 1.0%
St. Georges Bank+ 5.750% 10/15/2002 16,600,000 10,486,653
--------------
DENMARK -- 9.8%
Danske Kredit+ 5.000% 10/01/2029 32,619,000 3,833,113
Denmark Bullet+ 7.000% 11/15/2007 300,000,000 44,351,181
Denmark Nykredit+ 5.000% 10/01/2029 10,877,000 1,278,175
Denmark Nykredit+ 7.000% 10/01/2026 59,827,000 8,076,827
Denmark Realkredit+ 5.000% 10/01/2029 14,787,000 1,737,645
Denmark Realkredit+ 7.000% 10/01/2026 9,032,000 1,219,348
Denmark Realkredit+ 8.000% 10/01/2026 2,000 282
Denmark Realkredit Notes NCL+ 6.000% 10/01/2029 333,300,000 41,941,698
--------------
102,438,269
--------------
EURODOLLAR -- 11.4%
American Standard Global+ 7.125% 06/01/2006 5,475,000 5,518,252
Enron Corp.+ 4.375% 04/08/2005 11,020,000 10,392,653
Ford Motor Credit Co.+ 3.750% 07/12/2004 14,323,000 13,540,107
Fort James Corp. Notes+ 4.750% 06/29/2004 12,470,000 12,007,890
Italian Government BTPS Notes NCL+ 3.250% 02/01/2004 52,580,000 49,561,281
Lafarge Corp.+ 5.125% 06/26/2006 2,150,000 2,110,680
Lehman Brothers Holdings PLC Medium Term
Notes+ 4.750% 07/12/2004 7,250,000 6,990,563
Mexico Global Bonds NCL+ 9.750% 04/06/2005 5,092,000 5,267,063
Remy Cointreau 144A+ 10.000% 07/30/2005 1,100,000 1,214,016
Republic of Brazil (a) 6.500% 01/01/2001 5,774,850 5,709,883
UPM-Kymmene Corp. Notes+ 6.350% 10/01/2009 8,000,000 7,973,165
--------------
120,285,553
--------------
GERMANY -- 21.7%
Colt Telecom Group PLC 144A Notes+ 7.625% 07/31/2008 24,075,000 12,406,596
Depfa Pfandbriefbank Notes NCL+ 5.500% 01/15/2010 12,375,000 12,287,103
Deutschland Republic+ 4.750% 07/04/2008 4,499,000 4,354,521
Deutschland Republic+ 5.625% 01/04/2028 15,200,000 14,566,332
Deutschland Republic+ 6.000% 01/05/2006 1,327,545 1,400,653
Deutschland Republic+ 6.000% 01/04/2007 9,900,000 10,435,212
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE# (NOTE 1A)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschland Republic+ 6.250% 01/04/2024 $ 6,100,000 $ 6,363,377
Deutschland Republic+ 6.500% 10/14/2005 20,600,000 22,241,047
Deutschland Republic+ 6.500% 07/04/2027 19,280,000 20,726,504
Deutschland Republic+ 6.750% 04/22/2003 31,375,000 33,292,550
Deutschland Republic+ 7.375% 01/03/2005 10,800,000 12,011,951
Exide Holding Corp.+ 9.125% 04/15/2004 10,000,000 4,998,712
Exide Holding Europe 144A Notes+ 9.125% 04/15/2004 2,625,000 1,312,162
Fresenius Med Global+ 7.375% 02/01/2008 4,800,000 2,485,957
Haus Limited (a) 4.030% 05/01/2035 7,659,067 3,868,016
RSL Communications PLC Reg+, (b) 0.000% 03/15/2008 10,525,000 3,417,032
Texon International PLC 144A Senior Notes+ 10.000% 02/01/2008 3,140,000 1,407,781
Treuhandanstalt+ 6.000% 11/12/2003 53,300,000 55,869,913
Uruguay Notes NCL+ 8.000% 09/08/2000 10,000,000 5,172,285
--------------
228,617,704
--------------
IRELAND -- 0.1%
Esat Telecom Group PLC+ 11.875% 11/01/2009 1,075,000 1,256,851
--------------
ITALY -- 0.2%
Argentina ITL Notes NCL+ 13.250% 03/06/2001 4,000,000,000 2,175,971
--------------
JAPAN -- 12.8%
Austria Republic+ 4.500% 09/28/2005 1,070,000,000 12,456,798
General Motors+ 1.250% 12/20/2004 1,445,000,000 14,176,117
Italy Euroyen Notes+ 5.000% 12/15/2004 725,000,000 8,492,274
Italy Euroyen Notes+ 5.125% 07/29/2003 1,300,000,000 14,762,607
Italy Euroyen Notes NCL+ 3.750% 06/08/2005 3,418,000,000 38,192,433
Mexican Notes NCL+ 3.100% 04/24/2002 1,125,000,000 11,128,327
South Africa+ 3.350% 06/17/2004 625,600,000 6,205,680
South Africa Transnet+ 3.000% 06/27/2001 500,000,000 4,930,430
Spanish Government+ 4.750% 03/14/2005 1,730,000,000 20,154,138
Uruguay Notes+ 2.500% 04/24/2002 500,000,000 4,819,642
--------------
135,318,446
--------------
MEXICO -- 1.3%
Mexico Global 144A Notes+ 6.542% 04/07/2004 13,595,000 13,976,449
--------------
NETHERLANDS -- 1.2%
KPN-Qwest B.V. 144A Private Placement+ 7.125% 06/01/2009 8,225,000 8,082,728
Netherlands Government Notes+ 5.750% 09/15/2002 3,795,000 3,937,052
--------------
12,019,780
--------------
NEW ZEALAND -- 3.8%
Fernz Capital+ 9.800% 04/15/2002 19,000,000 10,171,555
Fletcher Challenge+ 11.250% 12/15/2002 13,000,000 7,404,735
Fletcher Challenge+ 14.500% 09/30/2000 8,500,000 4,725,996
Fletcher Challenge CVT+ 10.000% 04/30/2005 5,725,000 3,054,373
New Zealand Government+ 8.000% 04/15/2004 27,000,000 14,598,322
--------------
39,954,981
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE# (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORWAY -- 0.3%
Vital Forsikring+ 7.850% 09/22/2003 $ 25,600,000 $ 3,215,984
--------------
SINGAPORE -- 1.9%
Singapore Government+ 3.500% 02/01/2004 19,300,000 11,496,641
Singapore Government+ 5.125% 11/15/2004 12,900,000 8,140,852
--------------
19,637,493
--------------
SWEDEN -- 7.0%
Sweden Government Bond #1030+ 13.000% 06/15/2001 36,500,000 4,778,420
Sweden Government Bond #1033+ 10.250% 05/05/2003 10,000,000 1,350,406
Sweden Government Bond #1039+ 5.500% 04/12/2002 122,000,000 14,483,498
Sweden Government Bond #1042+ 5.000% 01/15/2004 136,300,000 15,821,997
Sweden Government Bond #1044 NCL+ 3.500% 04/20/2006 350,000,000 36,709,839
--------------
73,144,160
--------------
UNITED KINGDOM -- 13.8%
Abbey National Treasury+ 7.750% 12/31/2003 3,746,000 6,192,875
Alliance and Leicester Building Society+ 8.750% 12/07/2006 7,300,000 12,721,561
Austria Government+ 6.250% 04/14/2004 7,935,000 12,659,940
British Sky Broadcasting+ 7.750% 07/09/2009 9,400,000 14,430,414
European Investment Bank+ 7.625% 12/07/2006 6,935,000 11,916,378
FHLB+ 6.875% 06/07/2002 570,000 920,053
FNMA Global Bond+ 6.875% 06/07/2002 2,700,000 4,361,181
IPC Magazine Group PLC+ 9.625% 03/15/2008 4,600,000 4,383,653
IPC Magazines 144A+ (b) 0.000% 03/15/2008 1,993,000 1,030,110
Inco Ltd.+ 15.750% 07/15/2006 796,000 1,758,368
Lehman Brothers Holdings PLC+ 6.950% 06/22/2004 3,300,000 5,091,766
Merrill Lynch Notes+ 7.375% 12/17/2007 8,245,000 13,602,284
National Westminister Bank+ 5.125% 06/30/2011 11,539,000 10,402,035
Republic of Argentina+ 11.500% 08/14/2001 1,435,000 2,300,363
Stagecoach Holdings PLC+ 7.625% 10/31/2007 8,490,000 13,521,480
UK Treasury Gilt+ 9.000% 10/13/2008 5,260,000 10,344,671
UK Treasury Gilt+ 10.000% 09/08/2003 1,000,000 1,804,663
UK Treasury Gilt Stock+ 6.000% 12/07/2028 8,600,000 16,991,129
--------------
144,432,924
--------------
YANKEE BONDS -- 2.4%
Asia Pulp and Paper Global Financial Notes+ 11.750% 10/01/2005 2,900,000 2,436,000
Fuji JGB Inv. L.L.C. Pfd 144A FLIRB 9.870% 12/31/2049 3,200,000 3,176,000
Republic of Panama Notes+ 8.875% 09/30/2027 17,115,000 14,333,813
TPSA Finance 144A Senior Notes+ 7.750% 12/10/2008 6,175,000 5,705,700
--------------
25,651,513
--------------
Total Government/Other (Cost $952,577,827) 932,612,731
--------------
U.S. TREASURY OBLIGATIONS -- 1.8%
TREASURY NOTES -- 1.8%
U.S. Treasury Note+ 4.625% 11/30/2000 19,050,000 18,799,874
--------------
Total U.S. Treasury Obligations (Cost $18,826,607) 18,799,874
--------------
TOTAL BONDS AND NOTES (COST $1,004,519,707) 983,558,494
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT VALUE
SECURITY SIZE (NOTE 1A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED OPTIONS -- 1.3%
AUD Put/USD Call, Strike Price 0.64, 07/20/2000 22,000,000 $ 245,542
BTPS 6.75% Put, Strike Price 105.29, 01/01/2007 7,095,000,000 7,095
BTPS 6.75% Put, Strike Price 105.29, 07/01/2007 7,095,000,000 7,095
BTPS 6.75% Put, Strike Price 105.29, 07/01/2007 7,095,000,000 7,095
BTPS 6.75% Put, Strike Price 105.49, 02/03/2000 7,095,000,000 7,095
BTPS 6.75% Put, Strike Price 105.49, 02/03/2000 7,095,000,000 7,095
BTPS 6.75% Put, Strike Price 107.69, 02/07/2000 8,735,000,000 52,410
BTPS 6.75% Put, Strike Price 107.69, 02/07/2000 8,735,000,000 52,410
BTPS 6.75% Put, Strike Price 107.69, 02/07/2000 8,735,000,000 52,410
BTPS 6.75% Put, Strike Price 107.69, 02/07/2000 8,735,000,000 52,410
BTPS 6.75% Put, Strike Price 107.69, 02/07/2000 8,735,000,000 52,410
BTPS Put, Strike Price 105.49, 02/03/2000 7,095,000,000 7,095
DBR 4.75% Call, Strike Price 106.99, 02/08/2000 12,525,000 0
DBR 4.75% Call, Strike Price 95.78, 03/13/2000 12,600,000 1,273
DBR 5.25% Call, Strike Price 112.07, 01/25/2000 18,100,000 0
DBR 5.25% Call, Strike Price 112.08, 01/26/2000 24,000,000 0
DEM 3.75% Call, Strike Price 90.20, 09/13/2000 23,100,000 216,516
DEM 3.75% Call, Strike Price 91.05, 09/29/2000 12,000,000 97,728
DEM 3.75% Call, Strike Price 92.49, 07/17/2000 950,000 3,256
DEM 3.75% Call, Strike Price 99.15, 04/17/2000 13,625,000 0
DEM 4% Call, Strike Price 93.99, 07/07/2000 25,000,000 86,175
DEM 4% Call, Strike Price 95.43, 07/21/2000 27,100,000 40,975
DEM 4% Call, Strike Price 96.26, 06/23/2000 14,175,000 13,580
DEM 4% Call, Strike Price 99.01, 08/03/2000 13,280,000 25,298
DEM 4.5% Call, Strike Price 101.20, 08/14/2000 13,515,000 12,393
DEM 4.5% Call, Strike Price 94.76, 10/06/2000 10,400,000 119,496
DEM 4.5% Call, Strike Price 95.42, 11/02/2000 10,200,000 91,494
DEM 4.5% Call, Strike Price 95.54, 10/13/2000 10,225,000 94,816
DEM 4.75% Call, Strike Price 105.38, 03/29/2000 28,000,000 0
DEM 4.75% Call, Strike Price 106.33, 03/29/2000 7,000,000 0
DEM 4.75% Call, Strike Price 85.93, 09/11/2000 11,224,500 179,884
DEM 4.75% Call, Strike Price 95.85, 05/11/2000 14,500,000 10,237
DEM 4.75% Call, Strike Price 99.39, 04/27/2000 20,000,000 2,020
DEM 5.25% Call, Strike Price 111.26, 01/10/2000 21,200,000 0
EUR Put/JPY Call, Strike Price 146.70, 04/13/2000 25,206,690 10,924,504
EUR Put/USD Call, Strike Price 0.89, 07/10/2001 25,225,000 189,188
EUR Put/USD Call, Strike Price 0.95, 08/16/2000 13,600,000 129,200
JPY 1.8% Call, Strike Price 104.67, 05/08/2000 3,125,000,000 90,625
JPY 3% Call, Strike Price 110.43, 06/30/2000 3,500,000,000 154,000
JPY Put, Strike Price 121.50, 04/06/2000 14,500,000 1,450
JPY Put, Strike Price 150.00, 02/08/2001 13,450,000 1,345
JPY Put/EUR Call, Strike Price 110.25, 12/06/2001 9,800,000 271,627
JPY Put/EUR Call, Strike Price 125.00, 08/29/2000 22,950,000 57,834
JPY Put/USD Call, Strike Price 115.00, 09/01/2000 11,850,000 49,770
JPY Put/USD Call, Strike Price 115.80, 08/14/2000 13,500,000 49,950
JPY Put/USD Call, Strike Price 120.00, 11/07/2001 10,850,000 112,818
JPY Put/USD Call, Strike Price 122.00, 03/08/2000 13,100,000 1,310
JPY Put/USD Call, Strike Price 125.00, 02/09/2000 13,500,000 0
USD Put/CAD Call, Strike Price 1.42, 10/19/2000 11,150,000 130,455
UST 5.25% Call, Strike Price 94.38, 02/29/2000 133,000 862
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT VALUE
SECURITY SIZE (NOTE 1A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
UST 6.00% Call, Strike Price 100.75, 09/29/2000 119,900 $ 73,532
UST 6.00% Call, Strike Price 99.88, 10/27/2000 215,000 187,285
--------------
TOTAL PURCHASED OPTIONS (COST $16,607,322) 13,971,058
--------------
SHORT-TERM INVESTMENTS -- 3.6%
REPURCHASE AGREEMENTS -- 3.6%
Prudential-Bache Repurchase Agreement, dated 12/31/99, due 01/03/00,
with a maturity value of $38,100,105 and an effective yield of
2.00%, collateralized by a U.S. Government Agency Obligation with a
rates ranging from 6.00% to 6.50%, maturity dates ranging from
05/01/13 - 07/01/29 and an aggregate market value of $38,856,270. 38,093,756
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $38,093,756) 38,093,756
--------------
TOTAL INVESTMENTS -- 98.5% (COST $1,059,220,785) $1,035,623,308
OTHER ASSETS, LESS LIABILITIES -- 1.5% 15,819,258
--------------
NET ASSETS -- 100.0% $1,051,442,566
==============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration.
AUD - Australian Dollar
CAD - Canadian Dollar
CVT - Convertible
DBR - Deutsche Bundes Republik
DEM - German Deutsche Mark
EUR - Euro
FHLB - Federal Home Loan Bank
FLIRB - Front Loaded Interest Reduction Bond
FNMA - Federal National Mortgage Association
JPY - Japanese Yen
NCL - Non-callable
USD - United States Dollar
UST - United States Treasury
# Denominated in United States dollars except for foreign country specific
bonds which are denominated in their respective local currency.
+ Denotes all or part of security pledged as collateral (Note 7).
(a) Variable Rate Security; rate indicated is as of 12/31/99.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
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 International Fixed Income Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The Fund currently offers two different classes of shares: Institutional
Class and Service Class. The Service Class of shares are subject to an
account service fee of 0.25% of the average daily net assets of that class
of shares. At December 31, 1999, there were no Service Class of shares
outstanding.
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 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 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 trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount on long-term debt securities when
required for federal income tax purposes. Realized gains and losses from
securities sold are recorded on the identified cost basis. The Fund does
not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or
loss from investments.
D. FEDERAL TAXES
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal year.
At December 31, 1999, the Fund, for federal income tax purposes, had a
capital loss carryover which will reduce the Fund's taxable income arising
from net realized gain on investments, if any, to the extent permitted by
the Internal
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Revenue Code and thus will reduce the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income tax. Such capital loss carryover is
$42,835,858 which expires on December 31, 2007. The Fund elected to defer
to its fiscal year ending December 31, 2000 $3,104,760 of losses
recognized during the period November 1, 1999 to December 31, 1999.
E. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on ex-dividend date.
Distributions in excess of net realized gain on investments, written
options, and foreign currency arise because of certain timing differences.
Dividends from net investment income and distributions from capital gains,
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, 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 International Management
Company, L.L.C. ("SIMCO") 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. The Trust
pays no compensation directly to its trustees who are affiliated with
SIMCO or to its officers, all of whom receive remuneration for their
services to the Trust from SIMCO. Certain of the trustees and officers of
the Trust are directors or officers of Standish Ayer & Wood, Inc. which is
the parent company of SIMCO.
(3) ADMINISTRATION SERVICE FEE:
Pursuant to a service plan, the Service Class pays the service fee at an
aggregate annual rate of up to 0.25% of the class' average daily net
assets. The service fee is payable for the benefit of participants in the
omnibus accounts that are shareholders in the Service Class and is
intended to be compensation to account administrators for providing
personal services and/or account maintenance services to participants in
omnibus accounts that are the beneficial owners of Service Class shares.
15
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(4) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
U.S. Government Securities $ 194,326,048 $ 128,266,452
============== ==============
Investments (non-U.S.Government Securities) $1,875,098,151 $2,104,271,564
============== ==============
</TABLE>
Included in the proceeds from sales amount is approximately $29,400,000 of
in kind redemptions which included interest receivable of approximately
$700,000. The securities were contributed to the Standish International
Fixed Income Fund II. Realized losses arising from the in kind redemptions
were approximately $1,304,400.
(5) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Shares sold 12,454,256 19,937,369
Shares issued to shareholders in payment of
distributions declared 3,856,026 3,059,774
Shares redeemed (25,229,550) (16,178,171)
-------------- --------------
Net increase (decrease) (8,919,268) 6,818,972
============== ==============
</TABLE>
At December 31, 1999, one shareholder was record owner of approximately
21% of the total outstanding shares of the Fund.
(6) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at December 31, 1999 as computed on a federal
income tax basis, were as follows:
Aggregate Cost $1,061,321,594
=============
Gross unrealized appreciation 30,529,868
Gross unrealized depreciation (56,228,154)
-------------
Net unrealized depreciation $ (25,698,286)
=============
(7) 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
16
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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
contracts 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 contracts terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
A summary of written option transactions for the year ended December 31,
1999 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS PREMIUMS
------------------- ------------------
<S> <C> <C>
Outstanding, beginning of period 14 $ 3,797,061
Options written 16 5,018,077
Options expired (3) (877,399)
Options closed (20) (6,265,897)
---- -----------
Outstanding, end of period 7 $ 1,671,842
==== ===========
</TABLE>
WRITTEN CALL OPTION TRANSACTIONS
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS PREMIUMS
------------------- ------------------
<S> <C> <C>
Outstanding, beginning of period 10 $ 3,006,614
Options written 19 4,601,410
Options exercised (1) (492,734)
Options expired (6) (1,088,668)
Options closed (14) (5,118,458)
---- -----------
Outstanding, end of period 8 $ 908,164
==== ===========
</TABLE>
WRITTEN CROSS CURRENCY OPTION TRANSACTIONS
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS PREMIUMS
------------------- -------------------
<S> <C> <C>
Outstanding, beginning of period 15 $ 12,684,008
Options written 29 22,301,801
Options exercised (2) (7,531,862)
Options expired (6) (1,753,562)
Options closed (26) (16,795,488)
----- ------------
Outstanding, end of period 10 $ 8,904,897
===== ============
</TABLE>
17
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
At December 31, 1999, the Fund held the following forward foreign currency
and cross currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 13,539,747 01/19/2000-03/09/2000 $ 13,484,026 $13,439,844 $ 44,182
British Pound Sterling 59,732,871 01/18/2000-01/24/2000 96,446,023 98,244,785 (1,798,762)
Canadian Dollar 14,750,000 03/16/2000 10,231,758 9,995,934 235,824
Euro 186,929,765 01/14/2000-01/19/2000 188,575,905 197,071,996 (8,496,091)
Hong Kong Dollar 53,003,950 01/14/2000 6,817,696 6,792,940 24,756
Japanese Yen 17,249,681,810 01/18/2000-05/17/2001 177,558,864 173,917,863 3,641,001
New Zealand Dollar 65,138,254 01/14/2000-01/18/2000 34,042,034 33,114,513 927,521
Polish Zloty 13,768,165 07/24/2000 3,139,892 3,350,000 (210,108)
Swedish Krona 248,600,000 01/18/2000 29,292,961 29,149,323 143,638
Thai Baht 227,880,000 09/11/2000 6,055,270 6,000,000 55,270
------------ ------------ -----------
TOTAL $565,644,429 $571,077,198 $(5,432,769)
============ ============ ===========
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australian Dollar 16,300,000 03/15/2000 $ 10,694,511 $ 10,413,468 $ (281,043)
British Pound Sterling 142,228,799 01/18/2000-03/15/2000 229,618,065 233,478,330 3,860,265
Danish Krone 781,966,365 01/13/2000-02/07/2000 106,015,867 111,766,534 5,750,667
Euro 556,830,647 01/14/2000-03/15/2000 561,855,826 593,190,634 31,334,808
Hong Kong Dollar 224,356,420 01/14/2000-08/13/2001 28,678,318 28,271,988 (406,330)
Japanese Yen 24,073,645,921 01/18/2000-08/17/2001 255,003,550 233,988,514 (21,015,036)
New Zealand Dollar 155,983,814 01/14/2000-01/18/2000 81,518,619 81,312,899 (205,720)
Norwegian Krone 31,100,000 01/18/2000 3,883,616 4,053,279 169,663
Polish Zloty 13,768,165 07/24/2000 3,139,892 3,267,244 127,352
Singapore Dollar 33,761,608 01/14/2000 20,264,261 20,162,203 (102,058)
Swedish Krona 923,556,260 01/18/2000-02/28/2000 108,854,886 113,245,045 4,390,159
Thai Baht 486,960,000 09/11/2000 12,939,593 12,000,000 (939,593)
-------------- -------------- -----------
TOTAL $1,422,467,004 $1,445,150,138 $22,683,134
============== ============== ===========
</TABLE>
18
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
At December 31, 1999, the Fund held no open futures contracts.
INTEREST RATE SWAP CONTRACTS
Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Credit and market risk exist with respect to
these instruments. If forecasts of interest rates and other market factors
are incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction
may not perform. The Fund expects to enter into these transactions
primarily for hedging purposes including, but not limited to, preserving a
return or spread on a particular investment or portion of its portfolio,
protecting against currency fluctuations, as a duration management
technique or protecting against an increase in the price of securities the
Fund anticipates purchasing at a later date. Gains and losses are realized
upon the expiration or closing of the swap contracts.
At December 31, 1999 the Fund held no open interest rate swap contracts.
19
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish International Fixed Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the 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 International Fixed Income Fund (the "Fund") at December 31,
1999, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated therein, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter 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 auditing
standards generally accepted in the United States, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2000
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[LOGO] Standish Funds(R)
One Financial Center
Boston, MA 02111-2662
(800) 729-0066
www.standishfunds.com
