STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investment in Standish World High Yield Portfolio
("Portfolio"), at value (Note 1A) $31,586,595
Deferred organization costs (Note 1D) 6,956
Prepaid expenses 7,115
-----------
Total assets 31,600,666
LIABILITIES
Distributions payable $453,114
Accrued accounting, custody and transfer agent fees 2,083
Accrued trustees' fees and expenses (Note 2) 989
Accrued expenses and other liabilities 7,673
--------
Total liabilities 463,859
-----------
NET ASSETS $31,136,807
===========
NET ASSETS CONSIST OF:
Paid-in capital $39,010,498
Accumulated net realized loss (4,304,079)
Undistributed net investment income 289,091
Net unrealized depreciation (3,858,703)
-----------
TOTAL NET ASSETS $31,136,807
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,839,109
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (Net Assets/Shares outstanding) $ 16.93
===========
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $ 1,541,725
Dividend income allocated from Portfolio (net of
foreign withholding taxes of $35) 31,465
Expenses allocated from Portfolio (38,843)
-----------
Net investment income allocated from Portfolio 1,534,347
EXPENSES
Accounting, custody, and transfer agent fees $ 12,689
Registration fees 6,937
Legal and audit services 5,940
Trustees' fees and expenses (Note 2) 1,989
Amortization of organization expenses (Note 1D) 1,795
Insurance expense 278
Miscellaneous 3,602
-----------
Total expenses 33,230
Deduct:
Reimbursement of Fund operating expenses (Note 2) (33,000)
-----------
Total expense deductions (33,000)
-----------
Net expenses 230
-----------
Net investment income 1,534,117
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions (229,485)
Written options transactions (124,396)
Foreign currency transactions and forward foreign
currency exchange contracts 171,483
-----------
Net realized loss (182,398)
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities (1,281,723)
Written options 279,443
Foreign currency and forward foreign currency
exchange contracts (86,652)
-----------
Change in net unrealized appreciation
(depreciation) (1,088,932)
-----------
Net realized and unrealized loss on investments (1,271,330)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 262,787
===========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,534,117 $ 3,347,065
Net realized loss (182,398) (1,916,911)
Change in net unrealized appreciation (depreciation) (1,088,932) (751,086)
----------- -----------
Net increase in net assets from investment operations 262,787 679,068
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (1,086,601) (3,347,065)
In excess of net investment income -- (227,812)
Return of capital -- (44,546)
----------- -----------
Total distributions to shareholders (1,086,601) (3,619,423)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 669,797 261,396
Value of shares issued to shareholders in payment of
distributions declared 180,512 527,973
Cost of shares redeemed (27,679) (7,168,363)
----------- -----------
Net increase (decrease) in net assets from Fund
share transactions 822,630 (6,378,994)
----------- -----------
TOTAL DECREASE IN NET ASSETS (1,184) (9,319,349)
NET ASSETS
At beginning of period 31,137,991 40,457,340
----------- -----------
At end of period (including undistributed net
investment income of $299,400 and distributions in
excess of net investment income of $158,425,
respectively) $31,136,807 $31,137,991
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS YEAR ENDED JUNE 2, 1997
ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2000 ---------------------- OPERATIONS) TO
(UNAUDITED)(1) 1999(1) 1998(1) DECEMBER 31, 1997(1)
-------------- ---------- ---------- --------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.39 $ 19.02 $ 20.51 $ 20.00
------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.85 1.84 1.70 0.98
Net realized and unrealized gain (loss) on
investments (0.71) (1.45) (1.52) 0.26
------- ------- ------- -------
Total from investment operations 0.14 0.39 0.18 1.24
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.60) (1.87) (1.67) (0.63)
In excess of net investment income -- (0.13) -- --
From net realized gain on investments -- -- -- (0.10)
From tax return of capital -- (0.02) -- --
------- ------- ------- -------
Total distributions to shareholders (0.60) (2.02) (1.67) (0.73)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 16.93 $ 17.39 $ 19.02 $ 20.51
======= ======= ======= =======
TOTAL RETURN++ 0.79%+++ 2.20% 0.86% 6.20%+++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)*(2) 0.25%+ 0.00% 0.00% 0.00%+
Net Investment Income (to average daily net
assets)* 9.94%+ 9.87% 8.40% 8.07%+
Net Assets, End of Period (000's omitted) $31,137 $31,138 $40,457 $27,398
</TABLE>
-----------------
* For the period indicated, the investment adviser voluntarily agreed not to
impose any of its investment advisory fee and/or reimbursed the Fund for a
portion of its operating expenses. If this voluntary action had not been
taken, the investment income per share and ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income per share $ 0.78 $ 1.64 $ 1.51 $ 0.74
Ratios (to average daily net assets):
Expenses (2) 1.12%+ 1.08% 0.91% 1.96%+
Net investment income 9.07%+ 8.79% 7.49% 6.11%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of Standish World High Yield Portfolio's
allocated expenses.
+ Computed on an annualized basis.
++ Total return would have been lower in the absence of expense waivers.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD 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 World High Yield Fund (formerly, Standish Diversified
Income Fund) (the "Fund") is a separate diversified investment series of
the Trust.
The Fund invests all of its investable assets in an interest of the
Standish World High Yield Portfolio (formerly, Standish Diversified Income
Portfolio) (the "Portfolio"), a subtrust of Standish, Ayer & Wood Master
Portfolio (the "Portfolio Trust"), which is organized as a New York trust,
and has the same investment objective as the Fund. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (approximately 100% at June 30, 2000). The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements.
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
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. 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
capital loss carryovers which will reduce the Fund's taxable income
arising from future net realizable gain on investments, if any, to the
extent permitted by the Internal Revenue Code and thus will reduce the
amount of distributions to shareholders which would otherwise be necessary
to relieve the Fund of any liability for federal income tax. Such capital
loss carryovers are $1,365,591 and $1,721,238 which expire on
December 31, 2006 and 2007, respectively. The Fund elected to defer to its
fiscal year ending December 31, 2000 losses of $959,194 recognized during
the period from November 1, 1999 to December 31, 1999.
D. DEFERRED ORGANIZATION EXPENSE
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized on a straight-line basis through May
2002.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
E. OTHER
All net investment income and realized and unrealized gains and losses of
the Portfolio are allocated pro rata among the investors in the Portfolio.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's dividends from short-term and long-term capital gains, if any,
after reduction of capital losses will be declared and distributed at
least annually, as will dividends from net investment income. In
determining the amounts of its dividends, the Fund will take into account
its share of the income, gains or losses, expenses, and any other tax
items of the Portfolio. Dividends from net investment income and capital
gains distributions, if any, are reinvested in additional shares of the
Fund unless a shareholder elects to receive them in cash. 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 Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish International Management Company, LLC ("SIMCO") for
investment advisory services. See Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report.
Commencing March 31, 2000, SIMCO voluntarily agreed to limit the total
operating expenses of the Fund and its pro rata share of expenses
allocated from the Portfolio (excluding brokerage commissions, taxes and
extraordinary expenses) to 0.50% of the Fund's average daily net assets.
Prior to March 31, 2000, SIMCO voluntarily agreed to limit total operating
expenses of the Fund and its pro rata share of expenses allocated from the
Portfolio to 0.00% of the Fund's average daily net assets. Pursuant to
these agreements, for the six months ended June 30, 2000, SIMCO
voluntarily reimbursed the Fund for $33,000 of its operating expenses. The
Trust pays no compensation directly to its trustees who are affiliated
with the investment adviser 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., the parent company of SIMCO.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 2000 aggregated $669,796 and $489,884,
respectively.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH WORLD HIGH YIELD 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 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, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
Shares sold 40,056 13,893
Shares issued to shareholders in payment of
distributions declared 10,531 29,761
Shares redeemed (1,575) (380,241)
----------- -------------
Net increase (decrease) 49,012 (336,587)
=========== =============
</TABLE>
At June 30, 2000, two shareholders held of record approximately 55% and
19%, of the total outstanding shares of the Fund, respectively. Investment
activity of these shareholders could have a material impact on the Fund.
7
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 96.8%
ASSET BACKED -- 1.1%
Green Tree Financial Corp. 1997-6 B2
Non-ERISA 7.750% 01/15/2029 $ 873,415 $ 349,366
----------
Total Asset Backed (Cost $819,679) 349,366
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.6%
GE Capital Mortgage Services Inc. 1994-1 B3
144A Non-ERISA 6.500% 01/25/2024 234,198 186,618
----------
Total Collateralized Mortgage Obligations (Cost $200,825) 186,618
----------
CONVERTIBLE CORPORATE BONDS -- 1.9%
Exide Corp. 144A+ 2.900% 12/15/2005 460,000 234,600
Integrated Health# 5.750% 01/01/2001 500,000 1,250
Tenet Healthcare Corp.+ 6.000% 12/01/2005 450,000 374,445
----------
Total Convertible Corporate Bonds (Cost $1,177,376) 610,295
----------
CORPORATE -- 53.4%
BANK BONDS -- 3.1%
Bank United Corp. Notes+ 8.875% 05/01/2007 200,000 182,000
First Palm Beach Notes 10.350% 06/30/2002 100,000 92,000
GS Escrow Corp. 144A Notes 7.125% 08/01/2005 400,000 354,392
Matrix Capital Corp. Notes+ 11.500% 09/30/2004 300,000 249,000
Webster Financial Capital 144A Notes+ 9.360% 01/29/2027 100,000 85,645
----------
963,037
----------
FINANCIAL -- 4.5%
Amresco Inc. Corp. Senior Sub Notes+ 9.875% 03/15/2005 175,000 80,500
Cabot Industrial Property LP+ 7.125% 05/01/2004 300,000 286,985
Conseco Finance Trust Capital Notes+ 8.796% 04/01/2027 700,000 308,000
Conseco Finance Trust II+ 8.700% 11/15/2026 75,000 33,000
Fresenius Medical Capital Trust Notes 7.875% 02/01/2008 300,000 273,000
Meditrust, REIT 7.820% 09/10/2026 200,000 152,000
Phoenix Re-Insurance Corp. Capital Notes+ 8.850% 02/01/2027 175,000 114,092
Tanger REIT Senior Notes+ 7.875% 10/24/2004 200,000 184,398
----------
1,431,975
----------
INDUSTRIAL BONDS -- 45.8%
Adelphia Communications+ 8.125% 07/15/2003 175,000 165,812
Adelphia Communications Senior Notes+ 9.250% 10/01/2002 150,000 147,374
Allied Waste Industries 144A Notes+ 7.375% 01/01/2004 125,000 110,625
Allied Waste Industries 144A Notes+ 7.625% 01/01/2006 150,000 130,500
Argosy Gaming Co.+ 10.750% 06/01/2009 175,000 181,125
Beckman Instruments+ 7.450% 03/04/2008 475,000 436,578
CSC Holdings Inc.+ 8.125% 08/15/2009 300,000 292,425
Charter Communications Holdings Inc. 0.000% 01/15/2010 200,000 113,500
Charter Communications Holdings LLC+ 8.250% 04/01/2007 475,000 420,375
Cleveland Electric Co.+ 7.430% 11/01/2009 300,000 282,480
Conmed Corp. Notes 9.000% 03/15/2008 175,000 160,125
D.R. Horton Inc. 10.500% 04/01/2005 400,000 401,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL BONDS (CONTINUED)
Exide Corp. 10.000% 04/15/2005 $ 150,000 $ 134,250
Extendicare Health Services Senior Notes+ 9.350% 12/15/2007 484,000 203,280
Fox Sports Networks LLC(a) 0.000% 08/15/2007 275,000 214,500
Fox/Liberty Network+ 8.875% 08/15/2007 275,000 272,250
GT Group Telecom 0.000% 02/01/2010 575,000 313,375
Global Crossing Holding Ltd. Notes+ 9.625% 05/15/2008 400,000 389,000
Grove Worldwide Senior Notes(a) 0.000% 05/01/2009 175,000 12,250
Grove Worldwide Senior Sub Notes+ 9.250% 05/01/2008 125,000 47,500
Harras Operating Co. Inc. 7.500% 01/15/2009 100,000 92,274
Horseshoe Gaming Holdings+ 8.625% 05/15/2009 400,000 372,000
Horseshoe Gaming LLC Notes 9.375% 06/15/2007 250,000 247,500
Huntsman ICI Chemicals LLC 0.000% 12/31/2009 400,000 128,000
Huntsman ICI Chemicals LLC 144A 10.125% 07/01/2009 600,000 604,500
Isle of Capri Casinos+ 8.750% 04/15/2009 435,000 400,200
Lamar Media Corp. 8.625% 09/15/2007 225,000 214,875
Lear Corp. 8.110% 05/15/2009 300,000 273,223
Level 3 Communications Inc. Step Up Notes 0.000% 03/15/2010 200,000 110,500
Lilly Industries Inc. Notes+ 7.750% 12/01/2007 180,000 167,959
McLeod USA Senior Notes 8.375% 03/15/2008 550,000 503,250
Mohegan Tribal Gaming 8.125% 01/01/2006 250,000 235,000
Mohegan Tribal Gaming 8.750% 01/01/2009 50,000 47,500
Nextel Communications Inc. 9.375% 11/15/2009 325,000 312,000
Nextlink Communications(a) 0.000% 06/01/2009 225,000 139,500
Nextlink Communications 144A Notes 10.750% 11/15/2008 500,000 493,750
Ocean Energy Inc. 7.625% 07/01/2005 325,000 310,375
Owens Illinois Inc. Deb Notes NCL 7.500% 05/15/2010 150,000 130,809
Owens-Illinois Inc. 7.150% 05/15/2005 175,000 159,392
Panavision Inc. Step Up Sub Notes 0.000% 02/01/2006 450,000 90,000
Park Place Entertainment 7.950% 08/01/2003 350,000 344,156
Park Place Entertainment 9.375% 02/15/2007 125,000 125,312
Premier Parks Inc. 9.750% 06/15/2007 325,000 313,625
Premier Parks Inc. Senior Notes+ 9.250% 04/01/2006 50,000 47,375
Premier Parks Inc. Step Up Senior Notes(a) 0.000% 04/01/2008 150,000 102,375
Psinet Inc. 10.500% 12/01/2006 50,000 46,500
Psinet Inc. 11.500% 11/01/2008 75,000 71,250
RSL Communications PLC Notes(a) 0.000% 03/01/2008 225,000 83,250
RSL Communications PLC Notes 9.875% 11/15/2009 150,000 93,000
RSL Communications PLC Notes 12.000% 11/01/2008 75,000 54,750
Republic Service 7.125% 05/15/2009 625,000 566,044
Revlon Consumer Prods+ 8.625% 02/01/2008 300,000 151,500
Rose Hills Co. Senior Sub Notes 9.500% 11/15/2004 125,000 81,875
Salem Communications Corp. Senior Sub Notes 9.500% 10/01/2007 175,000 164,500
Scotts Company 8.625% 01/15/2009 475,000 451,250
Sequa Corp. 144A 9.000% 08/01/2009 300,000 288,000
Speedway Motorsports 8.500% 08/15/2007 350,000 325,500
Station Casinos Inc. 9.875% 07/01/2010 450,000 448,227
Tricon Global Restaurant Inc. Senior Notes 7.450% 05/15/2005 325,000 300,924
Waste Management Inc. 6.875% 05/15/2009 650,000 573,767
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL BONDS (CONTINUED)
Williams Communications Group Notes 10.700% 10/01/2007 $ 225,000 $ 222,750
Williams Communications Group Notes 10.875% 10/01/2009 150,000 146,250
-----------
14,463,111
-----------
Total Corporate (Cost $19,031,565) 16,858,123
-----------
GOVERNMENT/OTHER -- 37.7%
EURODOLLAR -- 8.6%
Bulgaria FLIRB Series A(b) 2.750% 07/28/2012 375,000 274,687
Exodus Communications 11.375% 07/15/2008 700,000 665,018
Flextronics International 9.750% 07/01/2010 225,000 220,201
Level 3 Communications Inc. 10.750% 03/15/2008 220,000 197,453
Level 3 Communications Inc. 11.250% 03/15/2010 80,000 71,801
Metromedia Fiber Network 10.000% 12/15/2009 550,000 504,134
Psinet Inc. 11.000% 08/01/2009 175,000 155,394
Remy Cointreau 144A 10.000% 07/30/2005 150,000 156,826
Republic of Argentina 11.750% 06/15/2015 260,000 235,300
Russia Ministry of Finance 10.000% 06/26/2007 245,000 187,884
Winstar Communications 144A 12.750% 04/15/2010 45,000 40,818
-----------
2,709,516
-----------
GERMANY -- 1.3%
Colt Telecom Group PLC 144A Notes 7.625% 07/31/2008 725,000 322,078
Exide Holding Europe 144A Notes 9.125% 04/15/2004 200,000 91,778
-----------
413,856
-----------
IRELAND -- 0.6%
Esat Telecom Group PLC 11.875% 11/01/2009 150,000 179,025
-----------
LUXEMBOURG -- 0.9%
PTC International Finance II SA 11.250% 12/01/2009 300,000 297,181
-----------
NETHERLANDS -- 0.7%
Koninklijke Ahold NV 4.000% 05/19/2005 100,000 104,073
Versatel Telecom 4.000% 03/30/2005 95,000 85,037
Versatel Telecom 4.000% 12/17/2004 40,000 44,303
-----------
233,413
-----------
NEW ZEALAND -- 0.1%
Fletcher Challenge CVT 10.000% 04/30/2005 50,000 24,141
-----------
SLOVAKIA -- 0.3%
Slovak Wireless 11.250% 03/30/2007 100,000 98,344
-----------
TURKEY -- 0.7%
Turkish Treasury Bill 0.000% 08/22/2001 181,000,000,000 208,277
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM -- 0.9%
Colt Telecom 2.000% 04/03/2007 $125,000 $ 96,673
IPC Magazines 144A+(a) 0.000% 03/15/2008 200,000 179,006
-----------
275,679
-----------
YANKEE BONDS -- 23.6%
Asia Pulp and Paper Global Financial 144A
CVT+ 2.000% 07/25/2000 125,000 152,500
Asia Pulp and Paper Global Financial III 10.761% 04/17/2002 600,000 423,000
Brazil DCB-Bearer 7.438% 04/15/2012 950,000 695,875
Cho Hung Bank+ 11.500% 04/01/2010 395,625 386,000
Colt Telecom Group PLC Senior Step Up
Notes(a) 0.000% 12/15/2006 350,000 308,000
Guangdong Enterprises 144A Senior Notes
NCL# 8.875% 05/22/2007 825,000 338,250
IBJ Preferred Capital Co. LLC 144A 8.790% 12/29/2049 175,000 159,600
Innova S De R.L 12.875% 04/01/2007 680,000 627,300
KPN-Qwest B.V 8.125% 06/01/2009 150,000 141,000
Lite-On Tech 144A CVT 0.000% 12/15/2002 250,000 285,000
Mexico Global Bond 11.375% 09/15/2016 565,000 638,450
Republic of Argentina 7.375% 03/31/2005 433,600 395,226
Republic of Brazil(b) 8.000% 04/15/2014 535,663 393,380
Republic of Brazil 14.500% 10/15/2009 775,000 827,313
Republic of Panama Notes 8.875% 09/30/2027 500,000 420,000
Republic of Peru 144A FLIRB(b) 3.750% 03/07/2017 400,000 241,500
Republic of Philippines 10.625% 03/16/2025 195,000 166,725
Republic of Venezuela 9.250% 09/15/2027 250,000 164,225
Russia Ministry of Finance 12.750% 06/24/2028 225,000 193,922
Russian IAN(b) 7.938% 12/15/2015 685,000 208,497
UPM-Kymmene Corp. 144A Notes 7.450% 11/26/2027 350,000 299,798
-----------
7,465,561
-----------
Total Government/Other (Cost $12,543,165) 11,904,993
-----------
U.S. TREASURY OBLIGATIONS -- 2.1%
TREASURY BONDS -- 2.1%
U.S. Treasury Bond+ 8.125% 05/15/2021 350,000 427,056
U.S. Treasury Bond+ 9.250% 02/15/2016 175,000 227,091
-----------
Total U.S. Treasury Obligations (Cost $646,270) 654,147
-----------
TOTAL BONDS AND NOTES (COST $34,418,880) 30,563,542
-----------
<CAPTION>
SHARES
--------
<S> <C> <C>
PREFERRED STOCKS -- 3.8%
Adelphia Communications 1,300 131,300
Equity Office Properties Trust 144A CVT 8,000 332,000
Global Crossing PIK Pfd 144A 4,000 384,000
Paxson Communications 12.5% PIK Pfd 367 367,000
-----------
TOTAL PREFERRED STOCKS (COST $1,235,410) 1,214,300
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT VALUE
SECURITY SIZE (NOTE 1A)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED OPTIONS -- 0.1%
USD Put/MXP Call, Strike Price 10.00, 4/12/2001 330,000 $ 6,758
USD Put/MXP Call, Strike Price 8.25, 04/12/2001 660,000 84
UST 6.50% Call, Strike Price 99.31, 08/11/2000 5,000 20,190
-------------
TOTAL PURCHASED OPTIONS (COST $20,604) 27,032
-------------
SHORT-TERM INVESTMENTS -- 1.0%
REPURCHASE AGREEMENTS -- 1.0%
Investors Bank & Trust Repurchase Agreement, dated 06/30/00, due
07/03/00, with a maturity value of $329,318 and an effective yield
of 5.75%, collateralized by a U.S. Government Agency Obligation
with a rate of 7.50%, maturity date of 04/01/28 and market value
of $336,196. 329,160
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $329,160) 329,160
-------------
TOTAL INVESTMENTS -- 101.7% (COST $36,004,054) $ 32,134,034
OTHER ASSETS, LESS LIABILITIES -- (1.7%) (547,330)
-------------
NET ASSETS -- 100.0% $ 31,586,704
=============
</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.
CVT - Convertible
DEB - Debenture
FLIRB - Front Loaded Interest Reduction Bond
NCL - Non-callable
PIK - Payment-in-kind
REIT - Real Estate Investment Trust
UST - United States Treasury
MXP - Mexican Peso
USD - United States Dollar
* 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.
# Defaulted security.
(a) 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.
(b) Variable Rate Security; rate indicated is as of 6/30/00.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A)
(identified cost, $36,004,054) $32,134,034
Receivable for investments sold 752,190
Receivable from investment adviser (Note 2) 625
Interest receivable 647,019
Unrealized appreciation on forward foreign currency
exchange contracts (Note 5) 52,329
Deferred organization costs (Note 1E) 2,272
Prepaid expenses 3,092
-----------
Total assets 33,591,561
LIABILITIES
Payable for investments purchased $1,907,536
Unrealized depreciation on forward foreign currency
exchange contracts (Note 5) 37,808
Options written, at value (Note 5)
(premiums received, $38,194) 36,427
Accrued accounting and custody fees 5,959
Accrued trustees' fees and expenses (Note 2) 1,501
Accrued expenses and other liabilities 15,626
----------
Total liabilities 2,004,857
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS) $31,586,704
===========
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income $ 1,541,732
Dividend income (net of foreign withholding taxes
of $35) 31,465
-----------
Total income 1,573,197
EXPENSES
Investment advisory fee (Note 2) $ 77,177
Accounting and custody fees 36,583
Legal and audit services 20,332
Insurance expense 2,486
Trustees' fees and expenses (Note 2) 1,545
Amortization of organization expenses (Note 1E) 594
Miscellaneous 344
-----------
Total expenses 139,061
Deduct:
Waiver of investment advisory fee (Note 2) (77,177)
Reimbursement of Fund operating expenses (Note 2) (23,041)
-----------
Total expense deductions (100,218)
-----------
Net expenses 38,843
-----------
Net investment income 1,534,354
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions (229,487)
Written options transactions (124,397)
Foreign currency transactions and forward foreign
currency exchange contracts 171,487
-----------
Net realized loss (182,397)
Change in unrealized appreciation (depreciation)
Investment securities (1,281,728)
Written options 279,443
Foreign currency and forward foreign currency
exchange contracts (86,653)
-----------
Change in net unrealized
appreciation (depreciation) (1,088,938)
-----------
Net realized and unrealized loss (1,271,335)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 263,019
===========
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,534,354 $ 3,347,072
Net realized loss (182,397) (1,916,917)
Change in net unrealized appreciation (depreciation) (1,088,938) (751,087)
----------- ------------
Net increase in net assets from investment operations 263,019 679,068
----------- ------------
CAPITAL TRANSACTIONS
Contributions 669,796 260,000
Withdrawals (489,884) (11,435,882)
----------- ------------
Net increase (decrease) in net assets from
capital transactions 179,912 (11,175,882)
----------- ------------
Total Increase (Decrease) in Net Assets 442,931 (10,496,814)
NET ASSETS
At beginning of period 31,143,773 41,640,587
----------- ------------
At end of period $31,586,704 $ 31,143,773
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED JUNE 2, 1997
SIX MONTHS ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2000 ------------------------ OPERATIONS) TO
(UNAUDITED) 1999 1998 DECEMBER 31, 1997
---------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
RATIOS:
Expenses (to average daily net assets)* 0.25%+ 0.00% 0.00% 0.00%+
Net Investment Income (to average daily net
assets)* 9.94%+ 9.83% 8.40% 8.07%+
Portfolio Turnover 85%++ 137% 145% 25%++
Net Assets, End of Period (000's omitted) $31,587 $31,144 $41,641 $27,784
</TABLE>
-----------------
* For the period indicated, the investment adviser voluntarily agreed not to
impose any of its investment advisory fee and/or reimbursed the Portfolio
for a portion of its operating expenses. If this voluntary action had not
been taken, the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Ratios (to average daily net assets):
Expenses 0.90%+ 0.86% 0.75% 1.50%+
Net investment income 9.29%+ 8.97% 7.65% 6.57%+
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
World High Yield Portfolio (formerly, Standish Diversified Income
Portfolio) (the "Portfolio") is a separate diversified investment series
of the Portfolio Trust.
At June 30, 2000, there was one fund, Standish World High Yield Fund
(formerly, Standish Diversified Income Fund) (the "Fund"), invested in the
Portfolio. The value of the Fund's investment in the Portfolio reflects
the Fund's proportionate interest in the net assets of the Portfolio. The
Fund's proportionate interest at June 30, 2000 was approximately 100%.
The following is a summary of significant accounting policies followed by
the Portfolio 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 normally 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 Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio 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 Portfolio 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
Portfolio 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. Dividend income is
recorded on the ex-dividend date. Realized gains and losses from
securities sold are recorded on the identified cost basis.
D. INCOME TAXES
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors
17
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
to satisfy them. The Portfolio allocates at least annually among its
investors each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of
income, gain, loss deduction or credit.
E. DEFERRED ORGANIZATIONAL EXPENSES
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized on a straight-line basis through
May 2002.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Investment Management
Company, LLC ("SIMCO") for overall investment advisory and administrative
services is paid monthly at the annual rate of 0.50% of the Portfolio's
average daily net assets. Commencing March 31, 2000, SIMCO voluntarily
agreed to limit the total operating expenses of the Portfolio (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.50% of the
Portfolio's average daily net assets. Prior to March 31, 2000, SIMCO
voluntarily agreed to limit the total operating expenses of the Portfolio
to 0.00% of the Portfolio's average daily net assets. Pursuant to these
agreements, for the six months ended June 30, 2000, SIMCO voluntarily did
not impose $77,177 of its investment advisory fee and reimbursed the
Portfolio for $23,041 of its operating expenses. The Portfolio 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 Portfolio Trust from SIMCO. Certain of the trustees and officers of
the Portfolio Trust are directors or officers of Standish, Ayer & Wood,
Inc., the parent company of SIMCO.
(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, 2000 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $ 2,682,237 $ 2,580,955
=========== ===========
Investments (non-U.S. Government Securities) $25,444,261 $22,636,535
=========== ===========
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2000 as computed on a federal
income tax basis, were as follows:
Aggregate Cost $36,004,054
===========
Gross unrealized appreciation 309,062
Gross unrealized depreciation (4,179,082)
-----------
Net unrealized depreciation $(3,870,020)
===========
(5) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek 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 Parts A and B of the Portfolio Trust's registration statement.
18
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
The Portfolio trades the following financial instruments with off-balance
sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Portfolio may use options to seek to hedge against risks
of market exposure and changes in security prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Portfolio's exposure to the underlying instrument. Buying
puts and writing calls tend to decrease the Portfolio's exposure to the
underlying instrument, or hedge other Portfolio investments. Options, both
held and written by the Portfolio, 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 Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option.
A summary of such transactions for the six months ended June 30, 2000 is
as follows:
<TABLE>
<CAPTION>
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------------------------------------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ---------
<S> <C> <C>
Outstanding, beginning of period 3 $ 18,742
Options written 1 5,156
Options expired (1) (4,992)
Options closed (3) (18,906)
-- ---------
Outstanding, end of period 0 $ --
== =========
<CAPTION>
WRITTEN CALL OPTION TRANSACTIONS
----------------------------------------------------------------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ---------
<S> <C> <C>
Outstanding, beginning of period 1 $ 2,672
Options written 1 2,578
Options expired (1) (2,672)
-- ---------
Outstanding, end of period 1 $ 2,578
== =========
<CAPTION>
WRITTEN CROSS CURRENCY OPTION TRANSACTIONS
----------------------------------------------------------------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ---------
<S> <C> <C>
Outstanding, beginning of period 2 $ 129,540
Options written 4 20,175
Options expired (3) (114,099)
Options closed 0 --
-- ---------
Outstanding, end of period 3 $ 35,616
== =========
</TABLE>
19
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
FUTURES CONTRACTS
The Portfolio 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
Portfolio 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 Portfolio 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 Portfolio. 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 Portfolio's exposure to the
underlying instrument, while selling futures tends to decrease the
Portfolio's exposure to the underlying instrument or hedge other
investments. In addition, there is the risk that the Portfolio 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 counterparty does not perform under the contract's terms. The
Portfolio enters into financial futures transactions primarily to seek to
manage its exposure to certain markets and to changes in securities prices
and foreign currencies. Gains and losses are realized upon the expiration
or closing of the futures contracts.
There were no outstanding future contracts at June 30, 2000.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio 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 Portfolio primarily to protect the value of the Portfolio'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 June 30, 2000, the Portfolio 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 1,333,959 09/07/2000-04/17/2002 $ 1,304,969 $ 1,281,833 $ 23,136
Japanese Yen 64,000,000 07/31-09/27/2000 609,962 616,366 (6,404)
Slovakia Koruna 11,118,524 09/11/2000 247,580 256,093 (8,513)
--------------- -------------- -------------
TOTAL $ 2,162,511 $ 2,154,292 $ 8,219
=============== ============== =============
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 1,388,294 07/10/2000-04/17/2002 $ 1,308,677 $ 1,294,138 $ (14,539)
Euro 3,594,949 08/24/2000-08/22/2001 3,451,636 3,473,579 21,943
Hong Kong Dollar 5,232,979 08/13/2001 671,403 663,051 (8,352)
Japanese Yen 32,000,000 09/27/2000 306,546 310,680 4,134
New Zealand Dollar 55,000 09/20/2000 25,785 26,323 538
--------------- -------------- -------------
TOTAL $ 5,764,047 $ 5,767,771 $ 3,724
=============== ============== =============
</TABLE>
20
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH WORLD HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
MARKET MARKET CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE IN EXCHANGE FOR VALUE VALUE DATE GAIN
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro $ 757,562 Hungarian Forint $ 760,140 08/08/2000 $ 2,578
------------- ------------- -----------
TOTAL $ 757,562 $ 760,140 $ 2,578
============= ============= ===========
</TABLE>
(6) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase securities on a when-issued, delayed delivery
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 Portfolio
instructs its custodian to segregate securities having a value at least
equal to the amount of the purchase commitment.
At June 30, 2000, the Portfolio did not have any delayed delivery
transactions.
(7) CONCENTRATION OF RISK:
The Portfolio invests in low rated (non-investment grade) and comparable
quality unrated high yield securities. Investments in high yield
securities are accompanied by a greater degree of credit risk and the risk
tends to be more sensitive to economic conditions than higher rated
securities. The risk of loss due to default of an issuer may be
significantly greater for holders of high yield securities, because such
securities are generally unsecured and are often subordinated to other
creditors of the issuer.
There are certain additional considerations and risks associated with
investing in foreign securities and currency transactions that are not
inherent with investments of domestic origin. The Portfolio's investment
in emerging market countries may involve greater risks than investments in
more developed markets and the price of such investments may be volatile.
These risks of investing in foreign and emerging markets may include
foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
(8) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Standish, Ayer & Wood Investment Trust (the "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
June 30, 2000, the expense related to the commitment fee was $263 for the
Portfolio.
During the six months ended June 30, 2000, the Portfolio had no borrowings
under the credit facility.
21
