STANDISH, AYER & WOOD INVESTMENT TRUST
N-30D Table of Contents
International Equity Fund
International Small Cap Fund
Select Value Fund
Select Value Asset Fund
Small Capitalization Equity Fund
Small Cap Growth Fund - Institutional and Service Classes
Small Cap Value Fund
The Series Book:
Massachusetts Intermediate Tax Exempt Bond Fund
Intermediate Tax Exempt Bond Fund
Small Cap Tax-Sensitive Equity Fund
Tax-Sensitive Equity Fund
<PAGE>
[LOGO] STANDISH FUNDS(R)
Standish International
Financial Report Equity Fund
-----------------------------------------------------
Year Ended
September 30, 2000
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted H. Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
The Standish International Equity Fund achieved a return of 7.07% in the
twelve-month period ended September 30, 2000, outperforming the benchmark return
of 3.20% for the MSCI EAFE index. Importantly, for the three years ending
September 30, 2000, a period fully reflecting the change in strategy of the fund
from emphasizing country weighting to emphasizing stock selection, the fund has
outperformed its benchmark, achieving a return of 8.02% per year versus 7.39%
per year for the index.
The first six months of the fiscal year continued the trend in place for more
than two years of strong market gains driven by soaring prices for technology,
media, and telecom (TMT) stocks, driving price multiples for these stocks to
unsustainably high levels. In March of this year the trend reversed
dramatically, with markets falling, led lower by plunging prices for the new
economy TMT sector stocks. We trailed the market during the period of TMT
outperformance, but outperformed the index by a considerable margin (7.34%) from
March to September as our more defensive positioning paid off.
On balance, it is remarkable that we were able to outperform the benchmark
during the year, as the return of technology stocks was 39.1%, even with the
reversal over the last six months. We were underweight in technology stocks, and
we were also underweight in the two most successful markets, technology-heavy
Finland (index up 51.0% for the year) and Sweden (30.8% return). Indeed, other
factors show that the year favored the big TMT stocks on balance. Large
capitalization stocks (those with at least $50 billion in market
capitalization), which account for more than 40% of the benchmark, outperformed
the index by more than 10%, meaning the rest of the market significantly
underperformed the index. The cheapest 10% of stocks according to our
multifactor evaluation underperformed the index by more than 10%. We were able
to achieve our 3.87% margin over the benchmark in spite of the fact that we were
underweight in technology, underweight in the two strongest markets, underweight
in large capitalization stocks, and overweight in cheap stocks.
The keys to our outperformance in the fiscal year just ended were dramatic
outperformance in Japan and excellent selection of health care stocks. In Japan,
the fund's holdings returned 20.0% versus -2.3% for the Japanese index for the
year. Our Health Care portfolio return was 72.4% versus 11.3% for the Health
Care portion of the index. Our analysts did an excellent job of identifying
companies that delivered positive earnings surprise, as almost 80% of the Fund's
holdings that reported annual earnings in 2000 exceeded analysts' expectations,
with the median margin of positive surprise being almost 6%.
The overall positioning of the portfolio continues to reflect a bias for cheaper
companies, which can more often be found among issues that are not enormous in
capitalization. The correction among the large TMT companies with dangerously
high price multiples is continuing, and may continue for several more months, as
the largest stocks still command price multiples almost twice those of small
stocks based on earnings. Our analysts will continue their focus on identifying
companies with reasonable valuation and improving business momentum.
Sincerely,
/s/ Remi J. Browne
Remi J. Browne
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH INTERNATIONAL EQUITY FUND AND THE EAFE INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish
International
Equity EAFE
Fund Index
------------- ------
100000 100000
100350 100600
101450 102411
99900 102923
99600 100864
103400 101772
100300 96276
100750 94640
110384 106564
110485 101769
112818 106450
106835 102192
110942 107302
1 Year 119206 111272
118948 107155
117194 99654
119103 89290
116420 88576
123438 98674
126018 97785
132212 99154
117358 89536
102925 77091
110640 89117
109065 83859
2 Year 107963 85201
110801 87927
120173 97380
115139 91537
116639 92434
118352 93358
111658 86543
116950 90792
115384 88976
119217 93995
121269 95320
115654 90840
3 Year 120621 95527
120567 93493
119643 90146
114482 84196
115786 84592
120241 90251
115188 85973
112137 83772
111483 89025
109194 87244
107342 82672
107941 83450
4 Year 108595 83884
108595 83884
111559 86417
116446 93952
119410 102868
120948 105039
120069 103400
123818 107019
132418 112798
130213 110204
139309 113598
135064 103715
5 Year 150169 111204
159323 120611
152359 120274
141352 115090
145789 119970
146856 119286
141268 120968
146131 122141
150766 125036
145273 121097
147104 125130
142012 119111
6 Year 139645 119861
132457 115259
129860 114936
132578 122097
137893 126687
138135 125180
135974 122989
142943 130646
138095 125662
139246 128116
134884 124672
138034 128141
7 Year 142640 133304
145972 133851
145124 134303
146033 137150
153789 141138
152153 138541
153168 139321
147904 135249
146964 135545
151413 139146
148092 137722
155362 143202
8 Year 153255 141360
149696 136412
152398 138643
150619 139143
150355 139881
160968 148987
168472 157196
170851 159743
157693 147810
164972 156087
156573 144084
151463 142614
9 Year 149469 143855
158452 150429
173265 160087
181617 165018
186344 166321
188866 165506
188017 166764
189684 168448
165944 147578
160148 143047
174202 157952
180395 166040
10 Year 186131 172582
185079 172064
180064 167969
182248 174973
192279 182059
182491 172685
188395 179418
193458 184747
193131 185430
194193 187303
198358 194327
201951 201070
11 Year 219356 219126
202435 205212
205519 210732
217417 218908
207546 207394
206841 202126
218304 209807
198,358 194,327
201,951 201,070
219,356 219,126
202,435 205,212
205,519 210,732
12 Year 217,417 218,908
207,546 207,394
206,841 202,126
218,304 209,807
209,791 201,016
212,895 202,765
207,929 192,890
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 5 Year 10 Year 12/08/1988
------ ------ ------ ------- ----------
7.07% 8.02% 8.35% 7.29% 6.38%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A)
(identified cost, $37,241,004) $39,137,569
Cash 12,673
Foreign currency, at value (cost $26,811) 26,781
Receivable for investments sold 672,501
Interest and dividends receivable 79,101
Receivable for variation margin on open financial
futures contracts (Note 6) 6,827
Unrealized appreciation on forward foreign currency
exchange contracts (Note 6) 22,206
Tax reclaim receivable 60,499
Prepaid expenses 5,243
-----------
Total assets 40,023,400
LIABILITIES
Payable for investments purchased $715,550
Unrealized depreciation on forward foreign currency
exchange contracts (Note 6) 6,536
Accrued accounting, custody and transfer agent fees 27,162
Accrued trustees' fees and expenses (Note 2) 1,344
Payable to investment adviser (Note 2) 8,736
Accrued expenses and other liabilities 34,238
--------
Total liabilities 793,566
-----------
NET ASSETS $39,229,834
===========
NET ASSETS CONSIST OF:
Paid-in capital $35,041,028
Accumulated net realized gain 2,144,119
Undistributed net investment income 168,602
Net unrealized appreciation 1,876,085
-----------
TOTAL NET ASSETS $39,229,834
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,673,059
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 23.45
===========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income (net of foreign withholding taxes of
$94,337) $ 728,028
Interest income 91,663
----------
Total investment income 819,691
EXPENSES
Investment advisory fee (Note 2) $ 330,416
Accounting, custody, and transfer agent fees 171,526
Legal and audit services 37,971
Registration fees 6,502
Insurance expense 5,836
Trustees' fees and expenses (Note 2) 5,023
Miscellaneous 5,797
---------
Total expenses 563,071
Deduct:
Waiver of investment advisory fee (Note 2) (149,939)
---------
Total expense deductions (149,939)
---------
Net expenses 413,132
----------
Net investment income 406,559
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 2,274,377
Financial futures contracts 370,602
Foreign currency transactions and forward foreign
currency exchange contracts (42,962)
---------
Net realized gain 2,602,017
Change in unrealized appreciation (depreciation)
Investment securities (184,374)
Financial futures contracts 9,120
Foreign currency and forward foreign currency
exchange contracts 30,822
---------
Net change in unrealized appreciation
(depreciation) (144,432)
----------
Net realized and unrealized gain 2,457,585
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,864,144
==========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 406,559 $ 475,507
Net realized gain 2,602,017 2,575,469
Net change in unrealized appreciation (depreciation) (144,432) 4,604,532
----------- -----------
Net increase in net assets from investment operations 2,864,144 7,655,508
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G)
From net investment income (723,326) (563,638)
From net realized gains on investments (2,551,831) (567,620)
----------- -----------
Total distributions to shareholders (3,275,157) (1,131,258)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 3,622,701 3,622,377
Value of shares issued to shareholders in payment of
distributions declared 2,870,889 827,848
Cost of shares redeemed (5,871,177) (8,772,044)
----------- -----------
Net increase (decrease) in net assets from Fund share
transactions 622,413 (4,321,819)
----------- -----------
TOTAL INCREASE IN NET ASSETS 211,400 2,202,431
NET ASSETS
At beginning of year 39,018,434 36,816,003
----------- -----------
At end of year (including undistributed net
investment income of $168,602
and $400,152, respectively) $39,229,834 $39,018,434
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------------------- SEPTEMBER 30, ----------------------
2000 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 23.77 $ 20.17 $ 23.57 $ 23.25 $ 23.54 $ 23.12
------- ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.24(1) 0.27(1) 0.32 0.39 0.47 0.04
Net realized and unrealized gain
(loss) on investments 1.42 3.98 (1.17) 1.44 1.28 0.45
------- ------- ------- ------- ------- -------
Total from investment operations 1.66 4.25 (0.85) 1.83 1.75 0.49
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.43) (0.33) (0.31) (0.30) (0.51) --
From net realized gain on investments (1.55) (0.32) (2.24) (1.21) (1.53) (0.07)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (1.98) (0.65) (2.55) (1.51) (2.04) (0.07)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 23.45 $ 23.77 $ 20.17 $ 23.57 $ 23.25 $ 23.54
======= ======= ======= ======= ======= =======
TOTAL RETURN+++ 7.07% 21.26% (2.92)% 7.65%++ 7.44% 2.14%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)* 1.00% 1.00% 1.00% 0.84%+ 0.50% 1.22%
Net Investment Income (to average
daily net assets)* 0.98% 1.20% 1.30% 1.78%+ 1.80% 1.76%
Portfolio Turnover 112% 195% 206% 155%++ 163% 108%
Net Assets, End of Year (000's
omitted) $39,230 $39,018 $36,816 $49,497 $47,739 $59,473
<FN>
----------
* For the periods indicated, the investment adviser voluntary agreed not
impose a portion of its investment advisory fee and/or reimbursed the Fund
for a portion of its operating expenses. If this voluntary reduction had
not been taken, the investment income per share and the ratios would have
been:
</FN>
Net investment income per share $ 0.15(1) $ 0.18(1) 0.22 $ 0.29 $ 0.27 N/A
Ratios (to average daily net assets):
Expenses 1.36% 1.41% 1.42% 1.42%+ 1.29% N/A
Net investment income 0.62% 0.79% 0.88% 1.20%+ 1.01% N/A
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
(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 EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-----------------------------------------------------------------------------
EQUITIES -- 97.6%
AUSTRALIA -- 1.7%
Broken Hill Proprietary 13,700 $ 142,564
David Jones Ltd. 167,000 116,157
National Australia Bank Ltd. 19,300 267,508
Santos Ltd. 46,000 157,477
-----------
683,706
-----------
AUSTRIA -- 0.9%
Boehler-Uddeholm AG 5,300 168,307
Flughafen Wien AG 5,300 191,789
-----------
360,096
-----------
BELGIUM -- 2.0%
Arbed 2,300 168,488
Fortis B 13,600 418,317
Solvay Et Cie A NPV 3,200 189,936
-----------
776,741
-----------
DENMARK -- 1.2%
Novo Nordisk A/S-B 1,300 288,175
Tele Danmark Ordinary Shares 3,500 192,412
-----------
480,587
-----------
FINLAND -- 0.9%
Amer-Yhthymae Oy, Class A 3,700 84,090
Elisa Communications Oyj 4,972 177,682
Enso Oy-A Shares* 11,400 95,082
-----------
356,854
-----------
FRANCE -- 10.4%
Alcatel 4,600 294,347
Banque National De Paris 5,900 520,213
Compagnie De Saint Gobain French 2,100 264,118
Peugeot SA FF35 2,100 373,101
Remy Cointreau 10,200 311,487
ST Microelectronics NV 8,810 431,940
Sanofi-Synthelabo SA 3,800 204,251
Societe Air France 14,900 262,883
Societe Generale, Class A Frf 30 10,200 570,310
Suez Lyonnaise des Eaux SA 1,500 232,609
Total SA Series B 4,215 616,802
-----------
4,082,061
-----------
GERMANY -- 7.2%
Bankgesellschaft Berlin AG 7,300 101,799
Bayerische Motoren Werke AG 13,200 450,867
Bewag Aktiengesellschaft 30,100 318,795
Buderus AG 7,200 120,485
DBV - Winterhur Holding 7,200 245,928
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-----------------------------------------------------------------------------
GERMANY (CONTINUED)
Deutsche Bank AG Registered Shares 3,800 $ 316,439
Epcos* 2,600 210,659
GEHE AG 7,400 263,209
M.A.N. AG Dm50 5,600 147,288
Schering AG 6,300 409,800
Siemans AG Registered Shares 1,750 225,195
-----------
2,810,464
-----------
HONG KONG -- 3.1%
ASM Pacific Technology Ltd. 98,000 223,099
Cathay Pacific Airways Ltd. 168,000 308,118
China Telecom* 71,000 471,239
Hysan Development Company 172,000 223,907
Regal Hotel International* 800 25
Sunevision Holdings Ltd.* 1,085 772
-----------
1,227,160
-----------
IRELAND -- 0.5%
Jurys Doyle Hotel Group PLC 24,400 187,358
-----------
ITALY -- 3.7%
Banca Popolare di Bergamo 7,200 126,777
Credito Italiano Ordinary Shares 25,000 129,301
ENI Spa 64,900 344,830
Edison Spa 12,000 118,939
Parmalat Finanziaria Spa 219,300 321,300
Safilo 19,400 166,995
Tecnost Spa* 38,500 117,571
Telecom Italia Spa 11,900 126,455
-----------
1,452,168
-----------
JAPAN -- 24.5%
Citizen Watch Co. Ltd. Ordinary Shares 15,000 160,848
Daiichi Pharmaceutical 21,000 532,419
Daimaru, Inc. 51,000 149,792
Daito Trust Construction Ordinary Shares 29,000 468,468
Fast Retailing Co. Ltd. 400 81,278
Fast Retailing Co. Ltd. (New)* 400 80,539
Fuji Television Network, Inc. 11 142,237
Hitachi Credit Corp. 10,300 280,641
Kaken Pharmaceutical Co. Ltd. 33,000 210,308
Katokichi Co. Ltd. 10,000 251,224
Kyocera Corp. 2,000 304,794
Mitsubishi Electric 45,000 371,987
Mizuho Holdings Inc.* 35 287,707
Murata Manufacturing Co. Ltd. 1,000 138,265
NTT Mobile Communcations 14 400,850
Nippon Meat Packers, Inc. 15,000 205,320
Nippon Shinpan Co. Ordinary Shares 125,000 252,840
Nippon Telegraph and Telephone Corp. 17 166,436
Nissan Motor Co. Ltd.* 118,000 675,718
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-----------------------------------------------------------------------------
JAPAN (CONTINUED)
Nissin Food Products Co. Ltd. 8,700 $ 214,547
Pioneer Electric Corp. 4,000 162,557
Ricoh Corp. Ltd. 24,000 435,578
Sakura Bank Ltd. 35,000 260,552
Sanyo Electric Co. Ltd. 93,000 816,016
Shikoku Electric Power 13,000 192,112
Shimachu Co. Ltd. 9,700 152,484
Sumitomo Realty & Development Co. Ltd. 74,000 386,164
Takefuji Corp. 2,400 263,785
The Sanwa Bank Ltd. 31,000 275,441
Toshiba Corp. 52,000 418,325
Toyo Seikan Kaisha 20,000 350,790
Yokogawa Electric 56,000 512,570
-----------
9,602,592
-----------
NETHERLANDS -- 6.4%
ABN Amro Holdings 7,700 179,415
ASM Lithography Holding NV* 5,100 169,247
ING Groep 5,376 358,142
Koninklijke Boskalis Westminster NV 16,900 452,699
Koninklijke Philips Electronics NV 17,351 746,863
OCE NV 13,000 206,528
Royal Dutch Petroleum Co. 6,765 408,939
-----------
2,521,833
-----------
NORWAY -- 1.6%
Den Norske Bank ASA 36,100 156,853
Norske Hydro SA 10,900 455,615
-----------
612,468
-----------
PORTUGAL -- 1.2%
Banco Espirito Santo 12,800 203,351
Portugal Telecom SA 25,400 261,170
-----------
464,521
-----------
SINGAPORE -- 1.7%
Creative Technology Ltd. 6,650 140,660
Fraser & Neave Ltd. Ordinary Shares 52,000 179,331
Sembcorp Industries Ltd. Ordinary Shares 153 142
Singapore Telecom Ltd. 218,000 340,821
-----------
660,954
-----------
SPAIN -- 2.8%
Endesa SA 5,428 102,043
Grupo Empresarial Ence SA 8,000 134,155
Repsol SA 12,100 222,667
Telefonica SA* 32,300 640,004
-----------
1,098,869
-----------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-----------------------------------------------------------------------------
SWEDEN -- 2.8%
Electrolux 8,000 $ 100,405
Ericsson AB B Free 13,500 205,140
Foreningsparbanken AB - A Shares 24,900 353,833
SKF AB - A Shares 5,500 71,310
Svenska Handelbanken, Class A 22,700 364,952
-----------
1,095,640
-----------
SWITZERLAND -- 6.9%
Ascom Holding AG Bearer Shares 50 167,796
Credit Suisse Group Registered Shares 2,950 551,801
Grands Magasins Jelmoli SA 220 295,576
Helvetia Patria Holding Registered Shares 410 356,150
Hilti AG-PC 140 116,748
Logitech International* 480 151,216
Nestle Registered Shares 165 343,989
Novartis AG 190 291,580
Schweizersche Rueckversicherungs Registered Shares 175 334,434
Sika Finanz AG 370 107,777
-----------
2,717,067
-----------
UNITED KINGDOM -- 18.1%
Alliance Unichem PLC 26,800 203,552
Anglian Water PLC* 24,600 210,062
BAA PLC 33,000 260,376
BP Amoco PLC 82,200 729,796
BPB Industries PLC 64,700 229,007
Barratt Developments PLC Ordinary Shares 56,600 217,866
Berisford International PLC 39,400 113,018
Cadbury Schweppes PLC 22,500 132,732
Debenhams PLC 70,800 195,780
Enterprise Oil PLC Ordinary Shares 28,400 231,830
Glaxo Wellcome PLC 10,500 317,141
HSBC Holdings PLC 43,800 621,416
Kelda Group PLC 53,600 296,435
London & Scotland Marine Oil (Lasmo PLC) 152,500 292,379
Nan E D & F Group PLC 39,400 298,525
Pilkington PLC 210,000 251,638
Rexam PLC 67,000 227,267
Royal Bank of Scotland Group PLC 34,908 735,167
Signet Group PLC 416,300 334,608
Tesco PLC Ordinary Shares 100,000 366,488
Vodafone Group PLC 152,900 569,380
Wimpey (George) PLC 139,000 272,646
-----------
7,107,109
-----------
TOTAL EQUITIES (COST $36,401,548) 38,298,248
-----------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.2%
U.S. GOVERNMENT AGENCY -- 0.3%
FNMA Discount Note#+ 7.116% 12/14/2000 $100,000 $ 98,540
-----------
REPURCHASE AGREEMENTS -- 1.9%
Tri-party repurchase agreement dated 09/29/00
with Bank of New York and Investors Bank and
Trust Company, due 10/02/00, with a maturity
value of $741,127 and an effective yield of
5.60%, collateralized by a U.S. Government
Obligation with a rate of 6.50%, a maturity
date of 07/01/29 and an aggregate market
value of $756,158. 740,781
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $839,456) 839,321
-----------
TOTAL INVESTMENTS -- 99.8% (COST $37,241,004) $39,137,569
OTHER ASSETS, LESS LIABILITIES -- 0.2% 92,265
-----------
NET ASSETS -- 100.0% $39,229,834
===========
NOTES TO SCHEDULE OF INVESTMENTS:
FNMA - Federal National Mortgage Association
* Non-income producing security.
# Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY 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 Equity Fund (the "Fund") is a separate,
diversified investment series of the Trust.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Securities
(including illiquid securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. 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. Dividend income is recorded on
the ex-dividend date. 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. Net
realized gains and losses on foreign currency transactions represent gains
and losses on disposition of foreign currencies and forward foreign
currency exchange contracts, currency gains and losses realized between
the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
usually received or paid.
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.
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
G. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and capital gains distributions, if
any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. 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
and passive foreign investment companies (PFIC).
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital,
undistributed net investment income and accumulated net realized gain.
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.
H. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
(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 0.80% of the Fund's average daily net assets. SIMCO
voluntarily agreed to limit total Fund operating expenses (excluding
litigation, indemnification and other extraordinary expenses) to 1.00% of
the Fund's average daily net assets for the year ended September 30, 2000.
Pursuant to this agreement, for the year ended September 30, 2000, SIMCO
voluntarily waived a portion of its investment advisory fee in the amount
of $149,939. This agreement is voluntary and temporary and may be
discontinued or revised by SIMCO at any time. No director, officer or
employee of SIMCO or its affiliates receives any compensation from the
Trust or the Fund for serving as an officer or Trustee of the Trust. The
Trust pays
15
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
each Trustee who is not a director, officer or employee of SIMCO or its
affiliates an annual fee and a per meeting fee as well as reimbursement
for travel and out of pocket expenses. In addition, the Trust pays the
legal fees for the independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the year ended September 30, 2000 were $43,913,549 and
$44,636,047, respectively. For the year ended September 30, 2000, the Fund
did not purchase or sell any U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Shares sold 153,076 158,473
Shares issued to shareholders in payment of
distributions declared 123,830 36,030
Shares redeemed (245,571) (378,286)
------------- -------------
Net increase (decrease) 31,335 (183,783)
============= =============
</TABLE>
At September 30, 2000, two shareholders held of record approximately 15%
and 13% of the total outstanding shares of the Fund, respectively.
Investment activity of these shareholders could have a material impact on
the Fund.
A significant portion of the Fund's shares represent investments by
fiduciary accounts over which SA&W and its affiliates have either sole or
joint investment discretion.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at December 31, 2000, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $37,258,846
===========
Gross unrealized appreciation 4,338,010
Gross unrealized depreciation (2,459,287)
-----------
Net unrealized appreciation $ 1,878,723
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these instruments are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to
16
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and
written by the Fund, are reflected in the accompanying Statement of Assets
and Liabilities at market value. The underlying face amount at value of
any open purchased options is shown in the Schedule of Investments. This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
The Fund entered into no such transactions for the year ended
September 30, 2000.
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 September 30, 2000, the Fund held the following forward foreign
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>
Euro 1,369,690 12/15/2000 $ 1,212,678 $ 1,190,488 $ 22,190
Japanese Yen 48,400,000 10/16/2000 448,514 455,050 (6,536)
----------- ----------- --------
TOTAL $ 1,661,192 $ 1,645,538 $ 15,654
=========== =========== ========
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Swiss Franc 58,454 10/03/2000 $ 33,851 $ 33,867 $ 16
</TABLE>
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to 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
17
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 September 30, 2000, the Fund held the following open financial futures
contracts:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE
CONTRACT POSITION DATE AMOUNT AT VALUE UNREALIZED LOSS
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Topix Futures (2 contracts) Long 12/11/2000 $271,543 $ (2,772)
MSCI (23 contracts) Long 12/18/2000 558,245 (28,766)
--------
$(31,538)
========
</TABLE>
At September 30, 2000, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
(7) LINE OF CREDIT:
The Fund, other funds in the Trust and subtrusts in the Standish, Ayer &
Wood Master Portfolio (the "Portfolio Trust") are parties to a committed
line of credit facility, which enables each portfolio/fund to borrow, in
the aggregate, up to $35 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 year ended
September 30, 2000 the expense related to this commitment fee was $764 for
the Fund.
During the year ended September 30, 2000, the Fund had no borrowings under
the credit facility.
--------------------------------------------------------------------------------
TAX INFORMATION -- UNAUDITED
Pursuant to section 852 of the Internal Revenue Code, the Fund designated
$1,331,200 as capital gain dividends for the year ended September 30,
2000. The Fund paid foreign taxes of $94,337 and recognized $822,365 of
foreign source income for the year ended September 30, 2000.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish International Equity 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 Equity Fund (the "Fund") at September 30, 2000,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. 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 of America, 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 include confirmation
of securities at September 30, 2000, by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
19
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO] STANDISHFUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.729.0066
00-364
<PAGE>
[LOGO] STANDISH FUNDS(R)
Standish International
Financial Report Small Cap Fund
------------------------------------------------------------
Period Ended
September 30, 2000
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
FINANCIAL STATEMENTS FOR THE PERIOD ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
MANAGEMENT DISCUSSION AND ANALYSIS
The International Small Cap Fund achieved a return of 8.20% (which includes its
operations prior to converting from a limited partnership on February 1, 2000)
for the fiscal year ended September 30, 2000, outperforming its benchmark, the
Salomon Smith Barney Extend Market Index (World ex US) return of 3.69%. Fiscal
year performance includes one month's performance as a limited partnership. The
valued added over the benchmark was predominately a function of stock selection
rather than country or sector allocation.
During this past fiscal year the equity markets could be characterized as having
a split personality, the initial euphoria was followed by dysphoria,
particularly in the technology and services sectors. International small caps in
general and technology-related stocks in particular, rose precipitously during
the first half of the fiscal year, only to retreat sharply in the second half of
the fiscal year. The fiscal year ended with a sharp divergence between the best
and worst performing sectors. The technology and health care sectors maintained
the leadership position, rising 41.1% and 40.8%, respectively. In contrast, the
basic industry and consumer staple sectors fell 12.6% and 13.9%, respectively.
The Fund outperformed the Index in all but 3 of the 10 economic sectors, with
the Fund's technology holdings providing the greatest contribution with a return
of 72.4% during the period.
The return of most international small cap markets was not far from the overall
Index return, with the exception of the smaller markets of Denmark and Greece
that returned 40.6% and (59.7)%, respectively. Greece has been a volatile market
over the past two years as it approaches acceptance into the European Monetary
Union. At the country level, the Fund outperformed the benchmark in the
important core European countries and Japan. On the negative side,
underperformance in the United Kingdom was the greatest drag on performance. The
impact of currency on the Fund's return was dominated by the weak euro, which
fell 17% relative to the US dollar, dampening the Fund's unhedged return.
Our quantitative analysis suggests that the past fiscal year was a challenging
environment for our investment approach. Companies exhibiting business momentum
were rewarded, but once coupled with reasonable valuations, the reward was
lacking. The extreme influence of "growth at any price" during the first half of
the fiscal year was powerful enough to dominate the entire fiscal year, and
therefore, our preference for attractive valuation levels was not rewarded. We
are pleased that our stock selection was able to overcome this challenging
environment.
We have an optimistic outlook on international small caps and we expect our
approach will be rewarded now that company fundamentals are once again an
important determinant to performance. We have been successful at identifying
companies capable of delivering earnings reports at or above expectations, as
nearly 80% of our holdings have reported positive surprises.
Thank you for your continued support of the Standish International Small Cap
Fund.
Sincerely,
/s/ Daniel B. LeVan /s/ Edward R. Walter
Daniel B. LeVan Edward R. Walter
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH INTERNATIONAL SMALL CAP FUND AND THE SALOMON EMI (EX US) INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish Salomon
International EMI
Small Cap (EX US)
Fund Index
------------- -------
100,000 100,000
102,862 101,781
106,613 103,364
109,123 105,739
114,061 111,301
116,694 110,395
117,983 110,406
114,691 106,230
117,131 107,305
118,543 107,906
120,079 107,483
125,367 109,241
1 Year 125,933 107,231
125,851 104,915
129,957 106,678
129,050 105,259
128,966 103,691
138,811 110,332
144,933 112,826
146,473 111,122
142,099 106,382
147,408 108,276
140,758 103,997
131,645 99,354
2 Year 127,767 97,156
134,649 101,207
146,020 108,758
155,480 113,869
162,031 114,732
164,992 116,872
158,609 113,463
155,519 112,680
134,010 98,865
125,511 96,295
133,595 103,093
138,090 106,392
3 Year 140,652 108,962
142,767 108,624
144,763 106,517
153,742 110,515
164,443 116,499
161,466 113,449
175,694 117,317
186,701 121,704
191,557 123,578
193,860 123,285
189,776 122,052
191,930 126,226
4 Year 198,510 134,608
195,691 131,278
199,996 136,778
209,396 137,339
201,764 128,961
202,351 126,730
216,065 134,942
210,550 130,314
217,247 134,328
209,762 127,840
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year* 3 Year* 1/02/1996*
------ ------ ----------
8.20% 12.48% 16.88%
--------------------------------------------------------------------------------
* Combined limited partnership and mutual fund performance.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$15,573,896) $16,969,092
Cash 14,407
Foreign currency, at value (cost $34,223) 34,173
Receivable for investments sold 321,255
Receivable from investment adviser (Note 2) 230
Interest and dividends receivable 39,241
Unrealized appreciation on forward foreign currency
exchange contracts (Note 6) 153
Tax reclaim receivable 20,038
Prepaid expenses 6,016
-----------
Total assets 17,404,605
LIABILITIES
Payable for investments purchased $266,576
Unrealized depreciation on forward foreign currency
exchange contracts (Note 6) 40
Accrued accounting, custody and transfer agent fees 24,388
Accrued trustees' fees and expenses (Note 2) 982
Accrued expenses and other liabilities 20,875
--------
Total liabilities 312,861
-----------
NET ASSETS $17,091,744
===========
NET ASSETS CONSIST OF:
Paid-in capital $15,193,326
Accumulated net realized gain 480,372
Undistributed net investment income 24,312
Net unrealized appreciation 1,393,734
-----------
TOTAL NET ASSETS $17,091,744
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,604,874
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 10.65
===========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 1, 2000 (COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income (net of foreign withholding taxes of
$33,811) $240,568
Interest income 14,411
--------
Total investment income 254,979
EXPENSES
Investment advisory fee (Note 2) $103,453
Accounting, custody, and transfer agent fees 92,417
Legal and audit services 22,304
Registration fees 13,150
Trustees' fees and expenses (Note 2) 2,250
Insurance expense 1,906
Miscellaneous 2,110
--------
Total expenses 237,590
Deduct:
Waiver of investment advisory fee (Note 2) (103,453)
Reimbursement of Fund operating expenses (Note 2) (4,821)
--------
Total expense deductions (108,274)
--------
Net expenses 129,316
--------
Net investment income 125,663
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 480,371
Foreign currency transactions and forward foreign
currency exchange contracts 8,330
--------
Net realized gain 488,701
Change in unrealized appreciation (depreciation)
Investment securities 288,376
Foreign currency and forward foreign currency
exchange contracts 750
--------
Net change in unrealized appreciation
(depreciation) 289,126
--------
Net realized and unrealized gain 777,827
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS $903,490
========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 1, 2000
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 2000
------------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 125,663
Net realized gain 488,701
Net change in unrealized appreciation (depreciation) 289,126
-----------
Net increase in net assets from investment operations 903,490
-----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1G)
From net investment income (109,744)
-----------
Total distributions to shareholders (109,744)
-----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Proceeds from shares issued in reorganization of SIMCO
International Small Cap Fund, L.P. 10,796,305
Net proceeds from sale of shares 5,746,065
Value of shares issued to shareholders in payment of
distributions declared 91,724
Cost of shares redeemed (336,096)
-----------
Net increase in net assets from Fund share transactions 16,297,998
-----------
TOTAL INCREASE IN NET ASSETS 17,091,744
NET ASSETS
At beginning of period --
-----------
At end of period (including undistributed net investment
income of $24,312) $17,091,744
===========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 1, 2000
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 2000
------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.09(1)
Net realized and unrealized gain on investments 0.63
----------
Total from investment operations 0.72
----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.07)
----------
Total distributions to shareholders (0.07)
----------
NET ASSET VALUE, END OF PERIOD $ 10.65
==========
TOTAL RETURN+++ 7.19%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.25%+
Net Investment Income (to average daily net assets)* 1.21%+
Portfolio Turnover 70%++
Net Assets, End of Period (000's omitted) $ 17,092
----------
* For the period indicated, the investment adviser voluntarily agreed not to
impose any of its investment advisory fee and 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:
Net investment income per share $ 0.01(1)
Ratios (to average daily net assets):
Expenses 2.29%+
Net investment income 0.17%+
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
EQUITIES -- 99.3%
AUSTRALIA -- 2.1%
CSR Ltd. 20,500 $ 45,194
David Jones Ltd. 54,800 38,116
Goldfields Ltd. 67,000 54,612
PMP Communications Ltd. 103,000 105,784
Santos Ltd. 17,400 59,567
Suncorp-Metway Ltd. 12,300 59,874
-----------
363,147
-----------
BELGIUM -- 0.7%
Creyf's NV* 2,900 77,554
Icos Vision Systems NV 1,500 45,469
-----------
123,023
-----------
CANADA -- 5.6%
AEterna Laboratories, Inc. 2,850 22,757
AGF Management Ltd., Class B 7,200 116,183
Baytex Energy Ltd. 13,500 130,706
CAE Industries, Inc. 6,700 85,377
Dofasco, Inc. 3,800 58,158
Fletcher Challenge Canada, Class A 9,400 104,771
GTC Transcontinental Group, Class A 6,600 81,248
Genesis Microchip, Inc. 5,000 91,249
Gildan Activewear, Inc. 2,100 69,171
Pivotal Corp. 2,000 105,000
Teknion Corp. 8,280 99,175
-----------
963,795
-----------
DENMARK -- 0.9%
Danske Traelast 860 91,405
Jyske Bank A/S 3,500 61,655
-----------
153,060
-----------
FINLAND -- 2.9%
Amer-Yhthymae Oy, Class A 2,700 61,363
Elcoteq Network Corp. 2,100 63,018
Elisa Communications Oyj 1,400 50,031
Kone Corp., Class B* 1,400 85,259
Partedk Oyj ABP 6,400 74,562
Perlos Oyj 2,200 58,057
Teleste Oyj 3,100 95,762
-----------
488,052
-----------
FRANCE -- 8.4%
Beneteau 1,260 120,104
Bongrain SA 2,080 67,925
CNP Assurances 3,050 90,422
Chargeurs SA 900 54,412
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
FRANCE (CONTINUED)
Credit Lyonnais SA 2,200 $ 80,193
Entrelec 1,200 57,616
GFI Informatique 2,300 87,309
Global Graphics* 2,050 64,684
Hermes International 400 57,192
Manitou Bf SA 680 56,416
Penauille Polyservices 1,300 72,859
Peugeot SA FF35 490 87,057
Publicis Groupe SA 2,300 70,237
Radiall SA 147 23,613
Remy Cointreau 3,550 108,410
Soc Generale D'Enterprises 1,800 91,746
Sodexho Alliance 600 95,374
Usinor Sacilor 7,600 69,023
Vallourec SA 2,000 84,200
-----------
1,438,792
-----------
GERMANY -- 7.0%
Altana AG 700 79,699
Beiersdorf 1,200 115,444
Celanese AG 5,300 90,749
DBV - Winterhur Holding 2,470 84,367
Gold-Zack AG 4,750 98,059
Hannover Rueckversicherungs AG 1,000 86,495
Heidelberger Druckmaschinen Ordinary Shares 1,460 81,697
Heidelberger Zement AG 1,250 61,892
Heyde AG Beratung Software* 2,850 82,002
Hugo Boss AG 590 125,497
Kloeckner Werke AG Ordinary Shares 2,700 56,239
M.A.N. AG Dm50 1,800 47,343
Rhoen-Klinikum AG - Vorzugsakt Preferred
Stock 1,560 73,662
Singulus Technologies AG 2,600 122,311
-----------
1,205,456
-----------
GREECE -- 0.4%
Petzetakis SA* 8,200 67,133
-----------
HONG KONG -- 1.6%
Kingboard Chemicals Holdings 186,000 81,108
Oriental Press Group Ltd.* 744,000 84,925
Wing Hang Bank Ltd. 31,000 99,795
-----------
265,828
-----------
IRELAND -- 1.0%
Golden Vale PLC 35,000 32,436
Heiton Holdings PLC 17,700 49,209
Jurys Doyle Hotel Group PLC 11,000 84,465
-----------
166,110
-----------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
ITALY -- 3.2%
Banca Popolare di Bergamo 8,100 $ 142,624
Banca Popolare di Milano 15,300 95,337
Buzzi Unicem Spa 11,900 94,358
Gruppo Editoriale L'Espresso 3,300 40,019
Industria Macchine Automatic 9,700 67,086
Parmalat Finanziaria Spa 74,700 109,444
-----------
548,868
-----------
JAPAN -- 22.8%
Amano Corp. 13,000 133,278
Arrk Corp. 2,000 94,209
Asahi Denka Kogyo KK 22,000 154,632
Asian Industry Co. 12,000 87,559
Credit Saison 7,000 151,935
Daisyo Corp. 8,500 77,879
Fast Retailing Co. Ltd. 500 101,598
Fast Retailing Co. Ltd. (New)* 500 100,674
Fujitsu Devices, Inc. 3,000 67,193
Geomatec Co. Ltd. 4,500 96,010
Glory Ltd. 6,000 104,239
Hisamitsu Pharmaceutical Co., Inc. 6,000 90,053
Hogy Medical Co. 1,400 87,023
Hokuetsu Paper Mills Ltd. 13,000 94,855
Katokichi Co. Ltd. 3,700 92,953
Koa Corp. 3,000 76,060
Kojima Co. Ltd. 2,800 69,179
Max Co. Ltd. 11,000 113,790
Meitec Corp. 2,500 115,452
Meiwa Estate Co. Ltd. 3,600 84,456
Ministop Co. Ltd. 3,800 70,195
Mycal Card Inc. 2,400 50,984
Net One Systems Co. Ltd. 5 141,775
Nifco 8,000 91,697
Nippon Thompson Co. Ltd. 6,000 79,080
Nishin Flour Milling 8,000 73,224
Okumura 32,000 104,923
Q.P. Corp. 12,000 100,305
San-in Godo Bank Ltd. 19,000 93,008
Shimachu Co. Ltd. 5,100 80,172
Shin-Etsu Polymer Co. Ltd. 15,000 102,937
Showa Corp. 18,000 100,582
Sumitomo Bakelite Co. Ltd. 9,000 100,997
Sumitomo Metal Industries 23,000 126,822
Takasago Electric Industries 2,470 114,067
The Higo Bank Ltd. 18,000 71,654
Tokyo Denpa Co. Ltd. 2,200 105,459
Torii Pharmaceutical Co. Ltd. 2,700 69,825
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
JAPAN (CONTINUED)
Toyo Corp. 4,800 $ 135,661
Xebio Co. Ltd. 4,000 86,635
-----------
3,893,029
-----------
NETHERLANDS -- 5.3%
ASM International NV* 2,500 44,461
DSM NV 2,100 60,719
Geveke NV 1,890 76,733
Grontmij 2,000 57,545
Heijmans Cva 3,400 51,014
Koninklijke Boskalis Westminster NV 3,700 99,112
Koninklijke Wessanen NV 8,700 100,206
Ordina Beheer NV* 1,500 43,424
Unique International NV 3,900 79,169
Unit 4* 1,400 57,457
VNU NV 1,300 65,401
Van Der Moolen Holdings 2,360 172,780
-----------
908,021
-----------
NEW ZEALAND -- 0.3%
Sky City Ltd. 15,700 45,182
-----------
NORWAY -- 0.9%
Norske Skogindustrier ASA 1,300 40,898
Sparebanken Nor Cap Ctf 4,850 117,636
-----------
158,534
-----------
PORTUGAL -- 0.3%
Portucel Industrial Empresa 7,700 45,601
-----------
SINGAPORE -- 0.5%
Keppel Corp. Ltd. Ordinary Shares 57,000 81,906
-----------
SPAIN -- 2.3%
Acerinox SA 1,700 45,013
Aguas De Barcelona 4,800 59,438
Aumar Ordinary Shares 2,700 41,226
Grupo Empresarial Ence SA 2,700 45,277
NH Hoteles SA 8,900 104,081
Red Electrica de Espana 11,300 106,715
-----------
401,750
-----------
SWEDEN -- 1.8%
Proffice AB, Class B 3,000 111,710
Rottneros AB 118,300 103,072
SKF AB - A Shares 6,700 86,869
-----------
301,651
-----------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
SWITZERLAND -- 7.2%
Bank Sarasin & Cie-Registered B 42 $ 141,435
Forbo Holdings AG Registered Shares 130 55,710
Galenica Holding AG Regular Shares "B" 120 104,864
Grands Magasins Jelmoli SA 83 111,513
Gurit-Heberlein AG 125 93,019
Helvetia Patria Holding Registered Shares 160 138,985
Hilti AG-PC 140 116,748
Kaba Holdings AG-Registered B 75 103,370
Mikron Holding 202 167,280
Straumann Holding AG Registered Shares 90 200,660
-----------
1,233,584
-----------
UNITED KINGDOM -- 24.1%
ARM Holdings PLC* 10,450 115,896
Abacus Polar PLC 37,000 285,661
Aggreko PLC 20,700 131,654
Alliance Unichem PLC 13,000 98,738
Amvesco PLC 5,200 112,274
BPB Industries PLC 16,000 56,632
Bryant Holdings PLC Ordinary Shares 56,500 109,991
Cairn Energy PLC* 46,100 129,178
Cobham PLC 9,500 148,793
Cookson Group PLC 29,500 82,445
Countryside Properties PLC 43,200 66,897
Crest Nicholson PLC 31,600 53,594
D.F.S. Furniture Co. PLC 16,900 80,879
Debenhams PLC 31,600 87,382
Enterprise Inns PLC 10,900 53,611
Enterprise Oil PLC Ordinary Shares 13,300 108,568
Eurocamp PLC 15,900 70,817
First Technology PLC 5,800 49,612
Gallaher Group PLC 17,100 102,137
Iceland Group PLC 22,900 109,762
Johnson Matthey PLC 9,700 135,188
Johnston Press PLC 28,800 129,971
Lavendon Group PLC 14,700 103,195
Lonmin PLC 4,900 61,787
McCarthy & Stone PLC 18,800 65,157
Morse Holdings PLC 20,100 166,596
Nan E D & F Group PLC 13,900 105,317
Northern Rock PLC 18,500 107,771
PSD Group PLC 4,000 69,611
Pilkington PLC 52,000 62,310
Powell Duffryn PLC 15,100 110,011
Safeway PLC 32,000 135,446
Shanks Group PLC 22,700 77,780
Signet Group PLC 106,300 85,440
Singer & Friedlander PLC 30,000 126,538
Spirent PLC 14,100 139,324
Travis Perkins PLC 7,900 65,245
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
Vardy (Reg) PLC 14,800 $ 67,227
Viridian Group PLC 12,000 124,768
WSP Group PLC 23,900 123,367
-----------
4,116,570
-----------
TOTAL EQUITIES (COST $15,573,896) 16,969,092
-----------
TOTAL INVESTMENTS -- 99.3% (COST $15,573,896) $16,969,092
OTHER ASSETS, LESS LIABILITIES -- 0.7% 122,652
-----------
NET ASSETS -- 100.0% $17,091,744
===========
NOTES TO SCHEDULE OF INVESTMENTS:
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP 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 Small Cap Fund (the "Fund") is a separate
diversified investment series of the Trust. The Fund commenced operations
on February 1, 2000.
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 accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Securities
(including illiquid securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreements underlying investments to ensure the
existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for amortization
of premium or accretion of discount on long-term debt securities when
required for federal income tax purposes. Dividend income is recorded on
the ex-dividend date. 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. Net
realized gains and losses on foreign currency transactions represent gains
and losses on disposition of foreign currencies and forward foreign
currency exchange contracts, currency gains and losses realized between
the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
usually received or paid.
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.
15
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
G. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
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. 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.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital,
undistributed net investment income and accumulated net realized gain.
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.
H. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
(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 1.00% of the Fund's average daily net assets. SIMCO
voluntarily agreed to limit total Fund operating expenses (excluding
litigation, indemnification and other extraordinary expenses) to 1.25% of
the Fund's average daily net assets for the period ended September 30,
2000. Pursuant to this agreement, for the period ended September 30, 2000,
SIMCO voluntarily did not impose $103,453 of its investment advisory fee
and reimbursed the Fund for $4,821 of its operating expenses. This
agreement is voluntary and temporary and may be discontinued or revised by
SIMCO at any time. No director, officer or employee of SIMCO or its
affiliates receives any compensation from the Trust or the Fund for
16
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
serving as an officer or Trustee of the Trust. The Trust pays each Trustee
who is not a director, officer or employee of SIMCO or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended September 30, 2000 were $16,530,363 and
$10,936,041, respectively. For the period ended September 30, 2000, the
Fund did not purchase or sell any U.S. Government securities.
(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>
FOR THE PERIOD
FEBRUARY 1, 2000
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 2000
------------------
<S> <C>
Shares issued in reorganization of SIMCO International Small
Cap Fund, L.P. 1,079,631
Shares sold 548,080
Shares issued to shareholders in payment of distributions
declared 8,454
Shares redeemed (31,291)
---------
Net increase 1,604,874
=========
</TABLE>
The Fund commenced operations with an initial tax-free contribution of
assets and liabilities, including securities-in-kind from SIMCO
International Small Cap Fund L.P. (the "Partnership"). On the date of
contribution, the Partnership had net assets of $10,796,305 including
unrealized appreciation of $1,104,608.
At September 30, 2000, one shareholder held of record approximately 21% of
the total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000 as computed on a federal
income tax basis, were as follows:
Aggregate Cost $15,573,896
===========
Gross unrealized appreciation 2,479,840
Gross unrealized depreciation (1,084,644)
-----------
Net unrealized appreciation $ 1,395,196
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these instruments are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
17
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Fund's exposure to the underlying instrument. Buying puts
and writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and
written by the Fund, are reflected in the accompanying Statement of Assets
and Liabilities at market value. The underlying face amount at value of
any open purchased options is shown in the Schedule of Investments. This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
The Fund entered into no such transactions for the period ended September
30, 2000.
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 September 30, 2000, the Fund held the following forward foreign
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 LOSS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro 49,297 10/03/2000 $43,509 $43,549 $(40)
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 7,776,527 10/03/2000 $71,825 $71,978 $153
</TABLE>
18
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL SMALL CAP 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 September 30, 2000, the Fund held no open financial futures contracts.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish International Small Cap 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 Small Cap Fund (the "Fund") at September 30, 2000,
and the results of its operations, the changes in its net assets and the
financial highlights for the period from February 1, 2000 (commencement of
operations) to September 30, 2000, in conformity with accounting principles
generally accepted in the United States of America. 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 audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, 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 audit, which include confirmation of securities at September
30, 2000 by correspondence with the custodian and brokers, provides a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
20
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.221.4795
00-357
<PAGE>
[LOGO] STANDISH FUNDS(R)
Financial Report Standish Select Value Fund
------------------------------------------------------------
Year Ended
September 30, 2000
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
MANAGEMENT DISCUSSION AND ANALYSIS
During the Fund's fiscal year, the Trustees approved a name change and a change
in primary benchmark for the former Standish Equity Fund. The new name is the
Standish Select Value Fund, and the new benchmark is the Russell 1000 Value
Index (formerly the S&P 500). As we communicated with shareholders at the time,
the rationale for the changes is that the Fund has always had a predominantly
value oriented approach to stock selection. This orientation made comparing the
Fund to the S&P 500 inappropriate under certain market conditions. The Russell
1000 Value Index is the most widely recognized proxy for large value investing,
and by adopting this benchmark, the Fund's investment style will be more clearly
communicated to shareholders and prospective shareholders. Similarly, our
objective in changing the name to Standish Select Value Fund is to more clearly
convey the Fund's investment style. The Fund has continued to be managed using
the investment philosophy that has been in use since inception.
The Select Value Fund had a 16.52% total return for the fiscal year ended
September 30, 2000. This strong absolute return easily surpassed the Fund's
benchmark, the Russell 1000 Value Index which returned only 8.91% over the same
period. In addition, the S&P 500 index's return of 13.29% also trailed the fund
during this period.
From a macro point of view, the strong performance of the Fund can be attributed
to a reversal in those forces that caused the disappointing results of the past
two years. Specifically, the very narrow market has broadened significantly -
investors have been willing to look beyond the new "nifty fifty", the large cap
dominated market became a smaller and mid cap market, and a market focused only
on growth-at-any-price shifted to a focus on valuation and visible earnings
(i.e. the next four quarters). All of these shifts worked to the advantage of
the Fund, and we believe that the excesses of 1998 and 1999 have only been
partially unwound. We expect that the reversal will continue until it is
completed.
This shift in market sentiment is perhaps best illustrated from the perspective
of sector returns. Technology and Internet related stocks dominated the market
last year, while this year more traditionally defensive sectors have been the
best performers: utilities, health care, food and beverage, and financials.
From a micro point of view, our superior stock selection has been driven by
stronger returns from our estimate trend and earnings surprise measurements.
Despite the strong reversal of many trends, our valuation measurements have not
added value this year. Value has returned as an important factor between sectors
(e.g. between Tech and Finance) but not yet on an intra-sector basis. We expect
that as the reversal continues, intra-sector valuation will again become a key
source of our ability to outperform.
The qualitative work done by our analysts has been, and continues to be, a very
important part of the process. The analysts use the quantitative modeling to
help focus their attention on the most promising of companies. It is the
analyst's post-model work that identifies those companies in the best position
to maintain their superior business momentum.
Looking ahead, we expect the economy to stay on its current more sustainable
growth path, and that the Fed will remain on hold for at least the next few
quarters. However, higher energy prices, the cumulative effects of previous rate
hikes, and the potential for a negative wealth effect from a stock market
correction could combine to push the economy into recession. With the Fed on
hold, investors will be focused on corporate earnings. The latter half of 1999
was a very strong period for earnings, so the year-over-year comparison will be
very difficult for some companies. We anticipate that any disappointments will
continue to lead to significant price reactions.
We expect that stocks will continue to produce volatile returns, and total
returns will not match the 20% returns of the last five years. We believe large
cap value stocks should continue to outperform growth stocks as investors
realize that the earnings growth implied by very high price/earnings ratios is
highly unlikely. The Fund is well positioned in companies with a history of
strong earnings growth, above average expectations for future growth, and below
average valuations. We remain confident that our focused pursuit of these
characteristics, while not guaranteed, should lead to superior performance.
Sincerely,
/s/ Ralph S. Tate /s/ David C. Cameron
Ralph S. Tate David C. Cameron
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SELECT VALUE FUND, THE RUSSELL 1000 VALUE INDEX
AND THE S&P 500 Index
[The following information was represented by a line chart in the printed
materials.]
Standish Russell
Select 1000
Value Value
Fund Index S&P 500
------- ------- -------
100,000 100,000 100,000
105,200 104,503 104,360
112,000 111,451 111,822
116,300 113,100 114,528
115,748 113,937 114,803
119,964 118,187 119,751
113,088 113,211 114,266
118,475 117,949 119,591
120,439 120,097 122,425
120,036 119,214 120,381
123,528 121,189 121,994
119,985 114,970 117,077
1 Year 133,349 124,605 130,471
131,582 124,802 128,044
133,713 127,858 129,709
129,660 126,004 127,180
129,974 131,429 130,919
129,031 132,085 131,560
126,256 131,262 129,600
132,182 136,332 134,901
128,425 132,161 132,135
131,336 133,990 133,694
134,788 134,115 134,162
141,851 138,515 138,724
2 Year 146,046 141,815 140,430
151,326 145,933 141,610
152,104 151,073 143,536
157,328 155,525 146,564
151,810 153,533 143,017
157,718 156,619 146,850
161,675 160,072 147,276
159,998 161,862 146,687
167,599 167,706 152,246
172,405 167,973 151,074
174,758 167,857 154,201
172,461 164,393 152,736
3 Year 176,446 167,516 154,585
182,557 173,855 159,840
181,758 167,909 155,509
172,390 161,663 148,729
172,734 164,764 150,632
172,046 166,662 153,103
166,978 162,670 149,352
170,853 167,731 154,250
178,198 172,550 160,575
172,357 166,823 156,641
175,142 169,148 160,165
165,683 162,315 154,335
4 Year 169,774 164,184 156,619
169,655 169,238 160,676
178,304 175,930 166,937
184,642 179,790 171,862
191,011 185,471 176,932
197,797 193,277 184,004
205,154 195,896 188,272
216,634 202,716 194,523
217,112 205,580 195,011
224,766 213,014 203,241
222,845 210,898 202,515
234,311 221,580 211,406
5 Year 233,529 227,149 215,477
240,371 234,227 222,812
247,416 235,997 224,878
249,495 240,009 227,043
255,894 240,931 230,390
259,262 243,943 236,332
256,195 244,143 237,232
245,225 234,917 226,751
253,418 241,635 231,533
268,901 251,240 244,564
277,543 260,953 251,309
298,105 279,875 270,306
6 Year 296,213 276,304 264,951
310,417 289,699 281,505
311,180 293,955 283,712
299,689 283,384 272,054
310,647 295,289 288,269
334,555 311,784 305,824
352,494 325,159 319,525
385,105 349,621 344,959
375,928 337,164 325,642
400,265 357,542 343,487
389,192 347,552 332,014
400,183 362,918 347,383
7 Year 403,649 373,511 353,349
401,916 368,226 357,257
430,411 393,015 383,024
454,671 417,052 402,638
451,488 419,842 406,689
436,824 413,616 399,699
446,191 418,918 415,934
426,468 411,524 411,506
346,511 350,281 352,010
362,931 370,387 374,560
385,402 399,078 405,012
405,936 417,671 429,556
8 Year 432,738 431,888 454,298
429,942 435,339 473,288
413,919 429,196 458,569
402,520 438,076 476,911
423,598 478,993 495,368
421,554 473,729 483,687
434,808 487,481 510,532
428,232 473,208 494,608
417,774 455,647 492,135
407,532 439,722 478,646
416,911 465,032 508,934
419,175 461,396 519,281
9 Year 431,982 463,624 549,867
408,702 448,501 522,241
408,929 415,177 512,371
455,375 465,833 562,496
451,628 460,411 545,571
446,745 465,264 534,376
447,871 444,001 547,548
444,114 449,551 538,990
472,121 474,546 572,467
YTD 474,853 478,912 542,246
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 5 Year 01/03/1991
------ ------ ------ ----------
16.52% 5.86% 16.14% 17.33%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investment in Standish Select Value Portfolio
("Portfolio"), at value (Note 1A) $93,337,256
Receivable for Fund shares sold 8,898
Receivable from investment adviser (Note 2) 529
Prepaid expenses 3,444
-----------
Total assets 93,350,127
LIABILITIES
Payable for Fund shares redeemed $ 7,022
Accrued accounting, custody and transfer agent fees 5,379
Accrued trustees' fees and expenses (Note 2) 1,000
Accrued expenses and other liabilities 21,960
-------
Total liabilities 35,361
-----------
NET ASSETS $93,314,766
===========
NET ASSETS CONSIST OF:
Paid-in capital $73,602,590
Accumulated net realized gain 10,788,022
Undistributed net investment income 37,976
Net unrealized appreciation 8,886,178
-----------
TOTAL NET ASSETS $93,314,766
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,237,044
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 41.71
===========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income allocated from Portfolio (net of
foreign withholding taxes of $5) $ 1,234,158
Interest income allocated from Portfolio 314,572
Expenses allocated from Portfolio (671,341)
-----------
Net investment income allocated from Portfolio 877,389
EXPENSES
Accounting, custody, and transfer agent fees $ 32,651
Registration fees 24,975
Legal and audit services 21,880
Trustees' fees and expenses (Note 2) 4,000
Insurance expense 1,080
Miscellaneous 14,924
----------
Total expenses 99,510
Deduct:
Reimbursement of Fund operating expenses (Note 2) (19,897)
----------
Total expense deductions (19,897)
----------
Net expenses 79,613
-----------
Net investment income 797,776
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain allocated from Portfolio on:
Investment security transactions 14,483,139
Financial futures contracts 526,626
----------
Net realized gain 15,009,765
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities 231,773
Financial futures contracts (280,035)
----------
Net change in unrealized appreciation
(depreciation) (48,262)
-----------
Net realized and unrealized gain 14,961,503
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $15,759,279
===========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 797,776 $ 1,459,975
Net realized gain 15,009,765 6,409,910
Change in net unrealized appreciation (depreciation) (48,262) 19,682,441
------------ -------------
Net increase in net assets from investment operations 15,759,279 27,552,326
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income (661,235) (1,120,754)
From net realized gains on investments (5,643,568) (21,379,747)
------------ -------------
Total distributions to shareholders (6,304,803) (22,500,501)
------------ -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 9,715,714 42,766,447
Value of shares issued to shareholders in payment of
distributions declared 6,112,494 21,902,549
Cost of shares redeemed (62,524,095) (137,486,416)
------------ -------------
Net decrease in net assets from Fund share
transactions (46,695,887) (72,817,420)
------------ -------------
TOTAL DECREASE IN NET ASSETS (37,241,411) (67,765,595)
NET ASSETS
At beginning of year 130,556,177 198,321,772
------------ -------------
At end of year (including undistributed net
investment income of $37,976 and $275,671,
respectively) $ 93,314,766 $ 130,556,177
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
----------------------------------- SEPTEMBER 30, ---------------------
2000 1999 1998 1997 1996 1995
--------- --------- --------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 37.79 $ 37.47 $ 48.81 $ 38.79 $ 34.81 $ 28.66
------- -------- -------- -------- -------- -------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.29(1) 0.29(1) 0.30 0.39 0.60 0.76
Net realized and unrealized gain
(loss) on investments 5.73 4.49 (4.30) 12.79 8.52 9.94
------- -------- -------- -------- -------- -------
Total from investment operations 6.02 4.78 (4.00) 13.18 9.12 10.70
------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.23) (0.23) (0.29) (0.43) (0.56) (0.78)
In excess of net investment income -- -- (0.01) -- -- --
From net realized gain on investments (1.87) (4.23) (7.04) (2.73) (4.58) (3.77)
------- -------- -------- -------- -------- -------
Total distributions to shareholders (2.10) (4.46) (7.34) (3.16) (5.14) (4.55)
------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF YEAR $ 41.71 $ 37.79 $ 37.47 $ 48.81 $ 38.79 $ 34.81
======= ======== ======== ======== ======== =======
TOTAL RETURN+++ 16.52% 12.29% (9.33)% 35.13%++ 26.84% 37.55%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)*(2) 0.71% 0.66% 0.71% 0.71%+ 0.71% 0.69%
Net Investment Income (to average
daily net assets)* 0.76% 0.74% 0.69% 0.95%+ 1.53% 2.05%
Portfolio Turnover(3) N/A N/A N/A N/A 41% 128%
Net Assets, End of Year (000's
omitted) $93,315 $130,556 $198,322 $170,170 $105,855 $88,532
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed to
reimburse 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:
</FN>
Net investment income per share $ 0.28(1) N/A N/A $ 0.38 $ 0.59 N/A
Ratios (to average daily net assets):
Expenses(2) 0.73% N/A N/A 0.72%+ 0.72% N/A
Net investment income 0.74% N/A N/A 0.93%+ 1.52% N/A
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of Standish Select Value Portfolio's (formerly,
Standish Equity Portfolio) allocated expenses for periods since May 3,
1996.
(3) Portfolio turnover represents activity while the Fund was investing
directly in securities. The portfolio turnover for the period since the
Fund transferred substantially all of its investable assets to the
Portfolio is shown in the Portfolio's financial statements which are
included elsewhere in this report.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE 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 Select Value Fund (formerly, Standish Equity 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 Select Value Portfolio (formerly, Standish Equity 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 64% at September 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 accounting principles generally
accepted in the United States of America 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.
Prior to the Fund's investment in the Portfolio, the Fund held its
investments directly. For investments held directly, interest income was
determined on the basis of interest accrued, dividend income was recorded
on the ex-dividend date and realized gains and losses from securities sold
were recorded on the identified cost basis.
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.
D. 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.
E. DISTRIBUTIONS TO SHAREHOLDERS
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. 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. Distributions to shareholders are
recorded on ex-dividend date. Dividends from net investment income and
distributions from capital gains, 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
non-taxable dividends, capital loss carryforwards, losses deferred due to
wash sales and the tax practice known as equalization.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated undistributed
net realized gain (loss) on investments 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.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
(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, Ayer & Wood, Inc. ("SA&W") for such services. See
Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. SA&W voluntarily agreed to limit the total
operating expenses of the Fund and its pro rata share of the Portfolio
expenses (excluding commissions, taxes and extraordinary expenses) to
0.71% of the Fund's average daily net assets for the year ended
September 30, 2000. Pursuant to this agreement, for the year ended
September 30, 2000, SA&W voluntarily reimbursed the Fund for $19,897 of
its operating expenses. This agreement is temporary and voluntary and may
be discontinued or revised by SA&W at any time. No director, officer or
employee of SA&W or its affiliates receives any compensation from the
Trust or the Fund for serving as an officer or Trustee of the Trust. The
Trust pays each Trustee who is not a director, officer or employee of SA&W
or its affiliates an annual fee and a per meeting fee as well as
reimbursement for travel and out of pocket expenses. In addition, the
Trust pays the legal fees for the independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended September 30, 2000 aggregated $9,708,186 and $62,920,132,
respectively.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Shares sold 253,177 1,077,765
Shares issued to shareholders in payment of
distributions declared 162,125 554,118
Shares redeemed (1,633,485) (3,470,039)
----------- -----------
Net decrease (1,218,183) (1,838,156)
=========== ===========
</TABLE>
At September 30, 2000, one shareholder held of record approximately 10% of
the total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
--------------------------------------------------------------------------------
TAX INFORMATION -- UNAUDITED:
Pursuant to section 852 of the Internal Revenue Code, the designated
$4,437,790 as a capital gain dividend for the year ended September 30,
2000.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and Shareholders of
Standish Select Value Fund (formerly, Standish Equity Fund):
In our opinion, the accompanying statement of assets and liabilities 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 Select Value Fund (formerly,
Standish Equity Fund) (the "Fund"), at September 30, 2000, and the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. 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 of America, 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 with the custodian,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
11
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
EQUITIES -- 97.0%
BASIC INDUSTRY -- 4.0%
Alcoa, Inc. 43,100 $ 1,090,969
Dow Chemical 52,700 1,314,206
LaFarge Corp. 21,200 461,100
Praxair, Inc. 39,700 1,483,787
Westvaco Corp. 56,200 1,499,837
------------
5,849,899
------------
CAPITAL GOODS -- 9.9%
Boeing Co. 39,900 2,513,700
Danaher Corp. 15,100 751,225
General Dynamics 27,300 1,714,781
Ingersoll Rand Co. 40,500 1,371,937
Parker-Hannifin Corp. 16,300 550,125
Tyco International Ltd. 68,000 3,527,500
United Technologies Corp. 59,700 4,134,225
------------
14,563,493
------------
CONSUMER STABLE -- 10.6%
Adolph Coors Co. 20,600 1,301,662
CVS Corp. 33,100 1,532,944
Flowers Industries, Inc. 102,700 2,002,650
Heinz H J Co. 29,000 1,074,812
Kimberly-Clark Corp. 20,300 1,132,994
McCormick & Co., Inc. 35,500 1,056,125
Procter & Gamble Co. 27,100 1,815,700
Quaker Oats Co. 44,200 3,497,325
Safeway, Inc.* 29,800 1,391,287
Supervalu, Inc. 45,500 685,344
------------
15,490,843
------------
EARLY CYCLICAL -- 2.4%
Black & Decker Corp. 46,500 1,589,719
Kaufman And Broad Home 71,000 1,912,562
------------
3,502,281
------------
ENERGY -- 10.7%
BP Amoco PLC ADR 24,590 1,303,270
Chevron Corp. 39,100 3,333,275
Coastal Corp. 44,200 3,276,325
El Paso Energy Corp. 28,000 1,725,500
Exxon Mobil Corp. 67,402 6,007,203
------------
15,645,573
------------
FINANCIAL -- 24.1%
AMBAC Inc. 32,100 2,351,325
American General Corp. 38,600 3,010,800
Chase Manhattan Corp. 31,350 1,447,978
Citigroup, Inc. 73,366 3,966,349
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Cullen/Frost Bankers, Inc. 28,300 $ 919,750
Federal Home Loan Mortgage Corp. 31,600 1,708,375
First Union Corp. 46,600 1,499,937
Firstar Corp. 48,800 1,091,900
Fleet Financial Group, Inc. 74,400 2,901,600
Golden West Financial Corp. 59,200 3,174,600
Lehman Brothers Holding, Inc. 4,800 709,200
MBNA Corp. 29,100 1,120,350
Morgan Stanley Dean Witter 22,900 2,093,919
PNC Bank Corp. 51,600 3,354,000
The PMI Group, Inc. 34,800 2,357,700
Washington Mutual, Inc. 87,500 3,483,594
------------
35,191,377
------------
GROWTH CYCLICAL -- 6.2%
Brinker International, Inc.* 63,900 1,924,988
Jones Apparel Group, Inc.* 37,600 996,400
Saks, Inc.* 65,000 641,875
Sears, Roebuck and Co. 62,100 2,013,282
Station Casinos, Inc.* 79,550 1,133,588
TJX Cos, Inc. 102,800 2,313,000
------------
9,023,133
------------
HEALTH CARE -- 7.1%
Abbott Laboratories 32,800 1,560,050
Baxter International, Inc. 16,400 1,308,925
Biomet, Inc. 40,700 1,424,500
Bristol-Myers Squibb, Inc. 25,000 1,428,125
Cardinal Health, Inc. 17,500 1,543,281
Merck & Co., Inc. 21,100 1,570,631
Sybron International Corp.* 65,300 1,567,200
------------
10,402,712
------------
REAL ESTATE -- 1.2%
General Growth Properties, REIT 9,600 309,000
Liberty Property Trust, REIT 23,300 640,750
Prentiss Properties Trust, REIT 29,800 778,525
------------
1,728,275
------------
SERVICES -- 11.2%
AT&T Corp. 35,100 1,031,063
Bellsouth Corp. 61,776 2,486,484
General Motors Corp., Class H* 65,600 2,439,008
Knight Ridder, Inc. 45,400 2,306,888
McGraw-Hill Companies, Inc. 18,200 1,156,838
New York Times Co. Class A 33,100 1,301,244
Omnicom Group 27,300 1,991,194
Verizon Communications 76,300 3,695,781
------------
16,408,500
------------
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
TECHNOLOGY -- 3.1%
Apple Computer, Inc.* 26,100 $ 672,075
Intel Corp. 20,700 861,638
International Business Machine 10,600 1,192,500
Motorola, Inc. 36,700 1,036,775
Tellabs, Inc.* 15,200 725,800
------------
4,488,788
------------
UTILITIES -- 6.5%
AES Corp.* 20,300 1,390,550
Dominion Resources, Inc. 19,100 1,108,994
Duke Energy Corp. 30,000 2,572,500
Dynegy, Inc. 46,200 2,633,400
NRG Energy, Inc.* 27,600 1,007,400
Southern Energy, Inc.* 25,300 793,788
------------
9,506,632
------------
TOTAL EQUITIES (COST $127,682,273) 141,801,506
------------
PAR
RATE MATURITY VALUE
------ ---------- --------
SHORT-TERM INVESTMENTS -- 2.9%
U.S. GOVERNMENT AGENCY -- 0.4%
FNMA Discount Note#+ 7.116% 12/14/2000 $500,000 492,700
------------
REPURCHASE AGREEMENTS -- 2.5%
Tri-party repurchase agreement dated 09/29/00 with
Bank of New York and Investors Bank and Trust Company,
due 10/02/00, with a maturity value of $3,689,155 and
an effective yield of 5.60%, collateralized by a U.S.
Government Obligation with a rate of 6.50%, a maturity
date of 07/01/29 and an aggregate market value of
$3,761,997. 3,687,434
------------
TOTAL SHORT-TERM INVESTMENTS (COST $4,180,809) 4,180,134
------------
TOTAL INVESTMENTS -- 99.9% (COST $131,863,082) $145,981,640
OTHER ASSETS, LESS LIABILITIES -- 0.1% 122,941
------------
NET ASSETS -- 100.0% $146,104,581
============
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
FNMA - Federal National Mortgage Association
REIT - Real Estate Investment Trust
* Non-income producing security.
# Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$131,863,082) $145,981,640
Cash 3,616
Receivable for investments sold 739,718
Interest and dividends receivable 196,008
Deferred organization costs (Note 1E) 8,789
Prepaid expenses 4,983
------------
Total assets 146,934,754
LIABILITIES
Payable for investments purchased $681,269
Payable for variation margin on open financial
futures contracts (Note 5) 40,350
Accrued accounting and custody fees 20,700
Accrued trustees' fees and expenses (Note 2) 6,084
Accrued expenses and other liabilities 81,770
--------
Total liabilities 830,173
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS) $146,104,581
============
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income $ 1,937,712
Interest income 495,964
-----------
Total income 2,433,676
EXPENSES
Investment advisory fee (Note 2) $ 828,980
Accounting and custody fees 128,065
Legal and audit services 36,139
Trustees' fees and expenses (Note 2) 19,100
Amortization of organizational expenses (Note 1E) 14,936
Insurance expense 8,572
Interest expense (Note 6) 1,344
Miscellaneous 15,266
----------
Total expenses 1,052,402
-----------
Net investment income 1,381,274
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 21,538,557
Financial futures contracts 771,248
----------
Net realized gain 22,309,805
Change in unrealized appreciation (depreciation)
Investment securities 1,191,503
Financial futures contracts 129
----------
Net change in unrealized appreciation
(depreciation) 1,191,632
-----------
Net realized and unrealized gain 23,501,437
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $24,882,711
===========
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,381,274 $ 2,191,260
Net realized gain 22,309,805 14,598,308
Change in net unrealized appreciation (depreciation) 1,191,632 25,069,765
------------ -------------
Net increase in net assets from investment operations 24,882,711 41,859,333
------------ -------------
CAPITAL TRANSACTIONS
Contributions 21,023,212 130,904,313
Withdrawals (90,658,528) (189,518,283)
------------ -------------
Net decrease in net assets from capital transactions (69,635,316) (58,613,970)
------------ -------------
TOTAL DECREASE IN NET ASSETS (44,752,605) (16,754,637)
NET ASSETS
At beginning of year 190,857,186 207,611,823
------------ -------------
At end of year $146,104,581 $ 190,857,186
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS FOR THE PERIOD
YEAR ENDED SEPTEMBER 30, ENDED MAY 3, 1996
---------------------------- SEPTEMBER 30, (COMMENCEMENT OF OPERATIONS)
2000 1999 1998 1997 TO DECEMBER 31, 1996
-------- -------- -------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
RATIOS:
Expenses (to average daily net assets) 0.64% 0.60% 0.65% 0.66%+ 0.69%+
Net Investment Income (to average
daily net assets) 0.83% 0.81% 0.75% 0.99%+ 1.58%+
Portfolio Turnover 92% 90% 144% 75%++ 78%++
Net Assets, End of Year
(000's omitted) $146,105 $190,857 $207,612 $170,142 $106,278
</TABLE>
----------
+ Computed on an annualized basis.
++ Not annualized.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(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
Select Value Portfolio (formerly, Standish Equity Portfolio) (the
"Portfolio") is a separate diversified investment series of the Portfolio
Trust.
At September 30, 2000, the Standish Select Value Fund (formerly, Standish
Equity Fund) and the Standish Select Value Asset Fund (formerly, Standish
Equity Asset Fund) held approximately 64% and 36% interests in the
Standish Select Value Portfolio, respectively.
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 accounting
principles generally accepted in the United States of America 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 of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. 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 TRANSACTION 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
19
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 April 2001.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services is paid
monthly at the annual rate of 0.50% of the Portfolio's average daily net
assets. The Portfolio Trust pays no compensation directly to its trustees
who are affiliated with SA&W or to its officers, all of whom receive
remuneration for their services to the Portfolio Trust from SA&W. Certain
of the trustees and officers of the Portfolio Trust are directors or
officers of SA&W.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than purchased
option transactions and short-term obligations, were $143,371,954 and
$200,457,601, respectively. For the year ended September 30, 2000, the
Fund did not purchase or sell any U.S. Government securities.
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000, as computed on a
federal income tax basis, were as follows:
Aggregate Cost $132,232,451
============
Gross unrealized appreciation 19,427,898
Gross unrealized depreciation (5,678,709)
------------
Net unrealized appreciation $ 13,749,189
============
(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.
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
20
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
The Portfolio entered into no such transactions during the year ended
September 30, 2000.
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.
The Portfolio had the following open financial futures contracts at
September 30, 2000:
<TABLE>
<CAPTION>
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED LOSS
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 (18 contracts) Long 12/15/2000 $4,086,150 $(32,280)
</TABLE>
At September 30, 2000, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open financial futures
contracts.
(6) 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 $35 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 year ended September 30, 2000, the expense related to this
commitment fee was $3,306 for the Portfolio.
21
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
During the year ended September 30, 2000, the Portfolio had the following
borrowings:
Interest Expense $ 1,344
Average Balance Outstanding $6,910,100
Average Interest Rate 7.00%
At September 30, 2000, there was no outstanding balance on the line of
credit.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Master Portfolio and Investors of
Standish Select Value Portfolio (formerly, Standish Equity Portfolio):
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 supplemental data present fairly, in all material
respects, the financial position of Standish Select Value Portfolio (formerly,
Standish Equity Portfolio) (the "Portfolio"), at September 30, 2000, and the
results of its operations, the changes in its net assets and the supplemental
data for the periods indicated in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and supplemental data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio'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 of America, 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
September 30, 2000, by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricwaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
23
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.221.4795
00-362
<PAGE>
[LOGO] STANDISH FUNDS(R)
Financial Report Standish Select Value Asset Fund
--------------------------------------------------------------
Year Ended
September 30, 2000
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
MANAGEMENT DISCUSSION AND ANALYSIS
During the Fund's fiscal year, the Trustees approved a name change and a change
in primary benchmark for the former Standish Equity Asset Fund. The new name is
the Standish Select Value Asset Fund, and the new benchmark is the Russell 1000
Value Index (formerly the S&P 500). As we communicated with shareholders at the
time, the rationale for the changes is that the Fund has always had a
predominantly value-oriented approach to stock selection. This orientation made
comparing the fund to the S&P 500 inappropriate under certain market conditions.
The Russell 1000 Value Index is the most widely recognized proxy for large value
investing, and by adopting this benchmark, the Fund's investment style will be
more clearly communicated to shareholders and prospective shareholders.
Similarly, our objective in changing the name to Standish Select Value Asset
Fund is to more clearly convey the Fund's investment style. The Fund has
continued to be managed using the investment philosophy that has been in use
since inception.
The Select Value Asset Fund had a 16.28% total return for the fiscal year ended
September 30, 2000. This strong absolute return easily surpassed the Fund's
benchmark, the Russell 1000 Value Index which returned only 8.91% over the same
period. In addition, the S&P 500 index's return of 13.29% also trailed the fund
during this period.
From a macro point of view, the strong performance of the Fund can be attributed
to a reversal in those forces that caused the disappointing results of the past
two years. Specifically, the very narrow market has broadened significantly -
investors have been willing to look beyond the new "nifty fifty", the large cap
dominated market became a smaller and mid cap market, and a market focused only
on growth-at-any-price shifted to a focus on valuation and visible earnings
(i.e. the next four quarters). All of these shifts worked to the advantage of
the Fund, and we believe that the excesses of 1998 and 1999 have only been
partially unwound. We expect that the reversal will continue until it is
completed.
This shift in market sentiment is perhaps best illustrated from the perspective
of sector returns. Technology and Internet related stocks dominated the market
last year, while this year more traditionally defensive sectors have been the
best performers: utilities, health care, food and beverage, and financials.
From a micro point of view, our superior stock selection has been driven by
stronger returns from our estimate trend and earnings surprise measurements.
Despite the strong reversal of many trends, our valuation measurements have not
added value this year. Value has returned as an important factor between sectors
(e.g. between Tech and Finance) but not yet on an intra-sector basis. We expect
that as the reversal continues, intra-sector valuation will again become a key
source of our ability to outperform.
The qualitative work done by our analysts has been, and continues to be, a very
important part of the process. The analysts use the quantitative modeling to
help focus their attention on the most promising of companies. It is the
analyst's post model work that identifies those companies in the best position
to maintain their superior business momentum.
Looking ahead, we expect the economy to stay on its current more sustainable
growth path, and that the Fed will remain on hold for at least the next few
quarters. However, higher energy prices, the cumulative effects of previous rate
hikes, and the potential for a negative wealth effect from a stock market
correction could combine to push the economy into recession. With the Fed on
hold, investors will be focused on corporate earnings. The latter half of 1999
was a very strong period for earnings, so the year-over-year comparison will be
very difficult for some companies. We anticipate that any disappointments will
continue to lead to significant price reactions.
We expect that stocks will continue to produce volatile returns, and total
returns will not match the 20% returns of the last five years. We believe large
cap value stocks should continue to outperform growth stocks as investors
realize that the earnings growth implied by very high price/earnings ratios is
highly unlikely. The Fund is well positioned in companies with a history of
strong earnings growth, above average expectations for future growth, and below
average valuations. We remain confident that our focused pursuit of these
characteristics, while not guaranteed, should lead to superior performance.
Sincerely,
/s/ Ralph S. Tate /s/ David C. Cameron
Ralph S. Tate David C. Cameron
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SELECT VALUE ASSET FUND, THE RUSSELL 1000 VALUE INDEX
AND THE S&P 500 Index
[The following information was represented by a line chart in the printed
materials.]
Standish
Select Russell
Value 1000
Asset Value
Fund Index S&P 500
------- ------- -------
100,000 100,000 100,000
94,750 97,206 96,660
97,450 101,503 101,134
98,311 104,466 102,871
97,960 102,988 104,009
104,889 109,921 111,511
110,814 116,644 117,221
110,109 117,424 118,400
106,585 115,683 116,365
108,700 117,166 121,092
103,913 115,098 119,802
84,360 97,969 102,482
1 Year 88,338 103,593 109,047
93,838 111,617 117,912
98,832 116,817 125,057
105,279 120,794 132,261
104,608 121,759 137,789
100,684 120,041 133,504
97,896 122,524 138,844
103,007 133,968 144,217
102,491 132,496 140,817
105,697 136,342 148,632
104,094 132,350 143,996
101,507 127,439 143,276
2 Year 98,972 122,985 139,349
101,248 130,064 148,167
101,765 129,047 151,179
104,849 129,670 160,084
99,180 125,440 152,041
99,239 116,120 149,168
110,460 130,288 163,761
109,525 128,771 158,833
108,356 130,128 155,574
108,588 124,181 159,409
107,652 125,734 156,917
114,384 132,724 166,663
3 Year 115,086 133,946 157,865
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 10/08/1997
------ ----------
16.28% 4.80%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investment in Standish Select Value Portfolio
("Portfolio"), at value (Note 1A) $52,767,135
Receivable for Fund shares sold 47,531
Receivable from investment adviser (Note 2) 36
Deferred organization costs (Note 1E) 2,239
Prepaid expenses 7,866
-----------
Total assets 52,824,807
LIABILITIES
Accrued accounting, custody and transfer agent fees $4,224
Accrued trustees' fees and expenses (Note 2) 1,000
Accrued expenses and other liabilities 44,631
------
Total liabilities 49,855
-----------
NET ASSETS $52,774,952
===========
NET ASSETS CONSIST OF:
Paid-in capital $42,503,468
Accumulated net realized gain 5,626,447
Undistributed net investment income 111,810
Net unrealized appreciation 4,533,227
-----------
TOTAL NET ASSETS $52,774,952
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,684,932
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 19.66
===========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income allocated from Portfolio $ 610,150
Interest income allocated from Portfolio 155,083
Expenses allocated from Portfolio (329,410)
----------
Net investment income allocated from Portfolio 435,823
EXPENSES
Administration service fee (Note 3) $ 129,675
Accounting, custody, and transfer agent fees 26,370
Registration fees 15,700
Legal and audit services 15,567
Trustees' fees and expenses (Note 2) 4,000
Amortization of organizational expenses (Note 1E) 1,124
Insurance expense 1,083
Miscellaneous 18,406
---------
Total expenses 211,925
Deduct:
Reimbursement of Fund operating expenses (Note 2) (44,051)
---------
Total expense deductions (44,051)
---------
Net expenses 167,874
----------
Net investment income 267,949
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain allocated from Portfolio on:
Investment security transactions 6,586,079
Financial futures contracts 228,696
---------
Net realized gain 6,814,775
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities 191,376
Financial futures contracts 285,476
---------
Net change in unrealized appreciation
(depreciation) 476,852
----------
Net realized and unrealized gain 7,291,627
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $7,559,576
==========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 267,949 $ 379,152
Net realized gain 6,814,775 8,222,287
Change in net unrealized appreciation (depreciation) 476,852 5,483,473
------------ ------------
Net increase in net assets from investment operations 7,559,576 14,084,912
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (175,319) (355,195)
From net realized gains on investments (6,435,217) (1,736,620)
------------ ------------
Total distributions to shareholders (6,610,536) (2,091,815)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5)
Net proceeds from sale of shares 2,962,554 84,938,827
Value of shares issued to shareholders in payment of
distributions declared 6,610,536 2,091,815
Cost of shares redeemed (14,961,955) (50,607,920)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions (5,388,865) 36,422,722
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,439,825) 48,415,819
NET ASSETS
At beginning of year 57,214,777 8,798,958
------------ ------------
At end of year (including undistributed net
investment income of $111,810 and $24,276,
respectively) $ 52,774,952 $ 57,214,777
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
2000 1999 1998(2)
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 19.12 $ 17.51 $ 20.00
---------- ---------- ----------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.10(1) 0.10(1) 0.05(1)
Net realized and unrealized gain (loss) on
investments 2.77 2.02 (2.42)
---------- ---------- ----------
Total from investment operations 2.87 2.12 (2.37)
---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.06) (0.10) (0.12)
From net realized gain on investments (2.27) (0.41) --
---------- ---------- ----------
Total distributions to shareholders (2.33) (0.51) (0.12)
---------- ---------- ----------
NET ASSET VALUE, END OF YEAR $ 19.66 $ 19.12 $ 17.51
========== ========== ==========
TOTAL RETURN+++ 16.28% 12.04% (11.66)%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)*((3)) 0.96% 0.91% 0.83%+
Net Investment Income (to average daily net
assets)* 0.52% 0.52% 0.46%+
Net Assets, End of Year (000's omitted) $ 52,775 $ 57,215 $ 8,799
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed to
reimburse the Fund for a portion of its operating expenses.
If this voluntary action had not been taken, the investment income (loss)
per share would have been:
</FN>
Net investment income (loss) per share $ 0.08(1) $ 0.10(1) $ (0.14)(1)
Ratios (to average daily net assets):
Expenses((3)) 1.05% 0.94% 2.49%+
Net investment income (loss) 0.43% 0.49% (1.20)%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) For the period October 8, 1997 (commencement of operations) to September
30, 1998.
(3) Includes the Fund's share of Standish Select Value Portfolio's (formerly,
Standish Equity Portfolio) allocated expenses for the periods since October
8, 1997.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET 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 Select Value Asset Fund (formerly, Standish Equity Asset
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 Select Value Portfolio (formerly, Standish Equity 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 36% at September 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.
Shares of the Fund may be purchased by entities ("Account Administrators")
that provide omnibus accounting services for groups of individuals who
beneficially own Fund shares ("Omnibus Accounts"). Omnibus Accounts
include pension and retirement plans (such as 401(k) plans, 457 plans and
403(b) plans), and programs through which personal and or account
maintenance services are provided to groups of individuals whether or not
such individuals invest on a tax-deferred basis. Individual investors may
only purchase Fund shares through their Omnibus Account Administrators.
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 accounting principles generally
accepted in the United States of America 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.
D. 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.
E. DEFERRED ORGANIZATIONAL EXPENSES
Costs associated with the Fund's organization and initial registration are
being amortized, on a straight-line basis, through September 2002.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
F. DISTRIBUTIONS TO SHAREHOLDERS:
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. Distributions to shareholders are recorded on the
ex-dividend date. Dividends from net investment income and distributions
from capital gains, 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
non-taxable dividends, capital loss carryforwards and losses deferred due
to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated undistributed
net realized gain (loss) on investments 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.
G. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
(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, Ayer & Wood, Inc. ("SA&W") for such services. See
Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. SA&W voluntarily agreed to limit the total
operating expenses of the Fund and its pro rata share of the Portfolio
expenses (excluding commissions, taxes, and extraordinary expenses) for
the year ended September 30, 2000, so that the Fund's annual operating
expenses do not exceed the total operating expenses of the Standish Select
Value Fund (net of any expense limitation) for the comparable period plus
0.25% (the Fund's maximum Administration Service Fee). Pursuant to this
agreement, for the year ended September 30, 2000, SA&W voluntarily
reimbursed the Fund for $44,051 of its operating expenses. This agreement
is voluntary and temporary and may be discontinued or revised by SA&W at
any time. No director, officer or employee of SA&W or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of SA&W or its affiliates an annual fee and
a per meeting fee as well as reimbursement for travel and out of pocket
expenses. In addition, the Trust pays the legal fees for the independent
counsel of the Trustees.
(3) SERVICE FEE:
Pursuant to a service plan, the Fund pays service fees at an aggregate
annual rate of up to 0.25% of the Fund's average daily net assets. The
service fee is payable for the benefit of the participants in the Omnibus
Accounts that are shareholders in the Fund 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 Fund shares.
(4) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended September 30, 2000 aggregated $2,915,023 and $15,169,174
respectively.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SELECT VALUE ASSET FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(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
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Shares sold 157,556 5,004,819
Shares issued to shareholders in payment of
distributions declared 372,194 104,416
Shares redeemed (836,442) (2,620,073)
-------- ----------
Net increase (decrease) (306,692) 2,489,162
======== ==========
</TABLE>
At September 30, 2000, one profit sharing plan on behalf of its plan
participants was a shareholder of the Fund. Prudential Trust for the
benefit of MTA profit sharing plan held of record approximately 99% of the
Fund's outstanding voting shares. Investment activity of this shareholder
could have a material impact on the Fund.
--------------------------------------------------------------------------------
TAX INFORMATION -- UNAUDITED:
Pursuant to section 852 of the Internal Revenue Code, the Fund designated
$6,173,499 as a capital gain dividend for the year ended September 30,
2000.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Select Value Asset Fund (formerly, Standish Equity Asset Fund):
In our opinion, the accompanying statement of assets and liabilities and related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Standish, Ayer & Wood Investment Trust: Standish Select Value Asset Fund
(formerly, Standish Equity Asset Fund) (the "Fund"), at September 30, 2000, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. 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 of America, 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 with the custodian,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
12
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
EQUITIES -- 97.0%
BASIC INDUSTRY -- 4.0%
Alcoa, Inc. 43,100 $ 1,090,969
Dow Chemical 52,700 1,314,206
LaFarge Corp. 21,200 461,100
Praxair, Inc. 39,700 1,483,787
Westvaco Corp. 56,200 1,499,837
------------
5,849,899
------------
CAPITAL GOODS -- 9.9%
Boeing Co. 39,900 2,513,700
Danaher Corp. 15,100 751,225
General Dynamics 27,300 1,714,781
Ingersoll Rand Co. 40,500 1,371,937
Parker-Hannifin Corp. 16,300 550,125
Tyco International Ltd. 68,000 3,527,500
United Technologies Corp. 59,700 4,134,225
------------
14,563,493
------------
CONSUMER STABLE -- 10.6%
Adolph Coors Co. 20,600 1,301,662
CVS Corp. 33,100 1,532,944
Flowers Industries, Inc. 102,700 2,002,650
Heinz H J Co. 29,000 1,074,812
Kimberly-Clark Corp. 20,300 1,132,994
McCormick & Co., Inc. 35,500 1,056,125
Procter & Gamble Co. 27,100 1,815,700
Quaker Oats Co. 44,200 3,497,325
Safeway, Inc.* 29,800 1,391,287
Supervalu, Inc. 45,500 685,344
------------
15,490,843
------------
EARLY CYCLICAL -- 2.4%
Black & Decker Corp. 46,500 1,589,719
Kaufman And Broad Home 71,000 1,912,562
------------
3,502,281
------------
ENERGY -- 10.7%
BP Amoco PLC ADR 24,590 1,303,270
Chevron Corp. 39,100 3,333,275
Coastal Corp. 44,200 3,276,325
El Paso Energy Corp. 28,000 1,725,500
Exxon Mobil Corp. 67,402 6,007,203
------------
15,645,573
------------
FINANCIAL -- 24.1%
AMBAC Inc. 32,100 2,351,325
American General Corp. 38,600 3,010,800
Chase Manhattan Corp. 31,350 1,447,978
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Citigroup, Inc. 73,366 $ 3,966,349
Cullen/Frost Bankers, Inc. 28,300 919,750
Federal Home Loan Mortgage Corp. 31,600 1,708,375
First Union Corp. 46,600 1,499,937
Firstar Corp. 48,800 1,091,900
Fleet Financial Group, Inc. 74,400 2,901,600
Golden West Financial Corp. 59,200 3,174,600
Lehman Brothers Holding, Inc. 4,800 709,200
MBNA Corp. 29,100 1,120,350
Morgan Stanley Dean Witter 22,900 2,093,919
PNC Bank Corp. 51,600 3,354,000
The PMI Group, Inc. 34,800 2,357,700
Washington Mutual, Inc. 87,500 3,483,594
------------
35,191,377
------------
GROWTH CYCLICAL -- 6.2%
Brinker International, Inc.* 63,900 1,924,988
Jones Apparel Group, Inc.* 37,600 996,400
Saks, Inc.* 65,000 641,875
Sears, Roebuck and Co. 62,100 2,013,282
Station Casinos, Inc.* 79,550 1,133,588
TJX Cos, Inc. 102,800 2,313,000
------------
9,023,133
------------
HEALTH CARE -- 7.1%
Abbott Laboratories 32,800 1,560,050
Baxter International, Inc. 16,400 1,308,925
Biomet, Inc. 40,700 1,424,500
Bristol-Myers Squibb, Inc. 25,000 1,428,125
Cardinal Health, Inc. 17,500 1,543,281
Merck & Co., Inc. 21,100 1,570,631
Sybron International Corp.* 65,300 1,567,200
------------
10,402,712
------------
REAL ESTATE -- 1.2%
General Growth Properties, REIT 9,600 309,000
Liberty Property Trust, REIT 23,300 640,750
Prentiss Properties Trust, REIT 29,800 778,525
------------
1,728,275
------------
SERVICES -- 11.2%
AT&T Corp. 35,100 1,031,063
Bellsouth Corp. 61,776 2,486,484
General Motors Corp., Class H* 65,600 2,439,008
Knight Ridder, Inc. 45,400 2,306,888
McGraw-Hill Companies, Inc. 18,200 1,156,838
New York Times Co. Class A 33,100 1,301,244
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
SERVICES (CONTINUED)
Omnicom Group 27,300 $ 1,991,194
Verizon Communications 76,300 3,695,781
------------
16,408,500
------------
TECHNOLOGY -- 3.1%
Apple Computer, Inc.* 26,100 672,075
Intel Corp. 20,700 861,638
International Business Machine 10,600 1,192,500
Motorola, Inc. 36,700 1,036,775
Tellabs, Inc.* 15,200 725,800
------------
4,488,788
------------
UTILITIES -- 6.5%
AES Corp.* 20,300 1,390,550
Dominion Resources, Inc. 19,100 1,108,994
Duke Energy Corp. 30,000 2,572,500
Dynegy, Inc. 46,200 2,633,400
NRG Energy, Inc.* 27,600 1,007,400
Southern Energy, Inc.* 25,300 793,788
------------
9,506,632
------------
TOTAL EQUITIES (COST $127,682,273) 141,801,506
------------
PAR
RATE MATURITY VALUE
------ ---------- --------
SHORT-TERM INVESTMENTS -- 2.9%
U.S. GOVERNMENT AGENCY -- 0.4%
FNMA Discount Note#+ 7.116% 12/14/2000 $500,000 492,700
------------
REPURCHASE AGREEMENTS -- 2.5%
Tri-party repurchase agreement dated 09/29/00 with
Bank of New York and Investors Bank and Trust
Company, due 10/02/00, with a maturity value of
$3,689,155 and an effective yield of 5.60%,
collateralized by a U.S. Government Obligation with a
rate of 6.50%, a maturity date of 07/01/29 and an
aggregate market value of $3,761,997. 3,687,434
------------
TOTAL SHORT-TERM INVESTMENTS (COST $4,180,809) 4,180,134
------------
TOTAL INVESTMENTS -- 99.9% (COST $131,863,082) $145,981,640
OTHER ASSETS, LESS LIABILITIES -- 0.1% 122,941
------------
NET ASSETS -- 100.0% $146,104,581
============
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
FNMA - Federal National Mortgage Association
REIT - Real Estate Investment Trust
* Non-income producing security.
# Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$131,863,082) $145,981,640
Cash 3,616
Receivable for investments sold 739,718
Interest and dividends receivable 196,008
Deferred organization costs (Note 1E) 8,789
Prepaid expenses 4,983
------------
Total assets 146,934,754
LIABILITIES
Payable for investments purchased $681,269
Payable for variation margin on open financial
futures contracts (Note 5) 40,350
Accrued accounting and custody fees 20,700
Accrued trustees' fees and expenses (Note 2) 6,084
Accrued expenses and other liabilities 81,770
-------
Total liabilities 830,173
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS) $146,104,581
============
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income $ 1,937,712
Interest income 495,964
-----------
Total income 2,433,676
EXPENSES
Investment advisory fee (Note 2) $ 828,980
Accounting and custody fees 128,065
Legal and audit services 36,139
Trustees' fees and expenses (Note 2) 19,100
Amortization of organizational expenses (Note 1E) 14,936
Insurance expense 8,572
Interest expense (Note 6) 1,344
Miscellaneous 15,266
----------
Total expenses 1,052,402
-----------
Net investment income 1,381,274
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 21,538,557
Financial futures contracts 771,248
----------
Net realized gain 22,309,805
Change in unrealized appreciation (depreciation)
Investment securities 1,191,503
Financial futures contracts 129
----------
Net change in unrealized appreciation
(depreciation) 1,191,632
-----------
Net realized and unrealized gain 23,501,437
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $24,882,711
===========
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,381,274 $ 2,191,260
Net realized gain 22,309,805 14,598,308
Change in net unrealized appreciation (depreciation) 1,191,632 25,069,765
------------ -------------
Net increase in net assets from investment operations 24,882,711 41,859,333
------------ -------------
CAPITAL TRANSACTIONS
Contributions 21,023,212 130,904,313
Withdrawals (90,658,528) (189,518,283)
------------ -------------
Net decrease in net assets from capital transactions (69,635,316) (58,613,970)
------------ -------------
TOTAL DECREASE IN NET ASSETS (44,752,605) (16,754,637)
NET ASSETS
At beginning of year 190,857,186 207,611,823
------------ -------------
At end of year $146,104,581 $ 190,857,186
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS FOR THE PERIOD
YEAR ENDED SEPTEMBER 30, ENDED MAY 3, 1996
---------------------------- SEPTEMBER 30, (COMMENCEMENT OF OPERATIONS)
2000 1999 1998 1997 TO DECEMBER 31, 1996
-------- -------- -------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
RATIOS:
Expenses (to average daily net assets) 0.64% 0.60% 0.65% 0.66%+ 0.69%+
Net Investment Income (to average
daily net assets) 0.83% 0.81% 0.75% 0.99%+ 1.58%+
Portfolio Turnover 92% 90% 144% 75%++ 78%++
Net Assets, End of Year
(000's omitted) $146,105 $190,857 $207,612 $170,142 $106,278
</TABLE>
----------
+ Computed on an annualized basis.
++ Not annualized.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(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
Select Value Portfolio (formerly, Standish Equity Portfolio) (the
"Portfolio") is a separate diversified investment series of the Portfolio
Trust.
At September 30, 2000, the Standish Select Value Fund (formerly, Standish
Equity Fund) and the Standish Select Value Asset Fund (formerly, Standish
Equity Asset Fund) held approximately 64% and 36% interests in the
Standish Select Value Portfolio, respectively.
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 accounting
principles generally accepted in the United States of America 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 of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. 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 TRANSACTION 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
20
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 April 2001.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services is paid
monthly at the annual rate of 0.50% of the Portfolio's average daily net
assets. The Portfolio Trust pays no compensation directly to its trustees
who are affiliated with SA&W or to its officers, all of whom receive
remuneration for their services to the Portfolio Trust from SA&W. Certain
of the trustees and officers of the Portfolio Trust are directors or
officers of SA&W.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than purchased
option transactions and short-term obligations, were $143,371,954 and
$200,457,601, respectively. For the year ended September 30, 2000, the
Fund did not purchase or sell any U.S. Government securities.
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000, as computed on a
federal income tax basis, were as follows:
Aggregate Cost $132,232,451
============
Gross unrealized appreciation 19,427,898
Gross unrealized depreciation (5,678,709)
------------
Net unrealized appreciation $ 13,749,189
============
(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.
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
21
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
The Portfolio entered into no such transactions during the year ended
September 30, 2000.
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.
The Portfolio had the following open financial futures contracts at
September 30, 2000:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE
CONTRACT POSITION DATE AMOUNT AT VALUE UNREALIZED LOSS
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 (18 contracts) Long 12/15/2000 $4,086,150 $(32,280)
</TABLE>
At September 30, 2000, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open financial futures
contracts.
(6) 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 $35 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 year ended September 30, 2000, the expense related to this
commitment fee was $3,306 for the Portfolio.
22
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SELECT VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
During the year ended September 30, 2000, the Portfolio had the following
borrowings:
Interest Expense $ 1,344
Average Balance Outstanding $6,910,100
Average Interest Rate 7.00%
At September 30, 2000, there was no outstanding balance on the line of
credit.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Master Portfolio and Investors of
Standish Select Value Portfolio (formerly, Standish Equity Portfolio):
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 supplemental data present fairly, in all material
respects, the financial position of Standish Select Value Portfolio (formerly,
Standish Equity Portfolio) (the "Portfolio"), at September 30, 2000, and the
results of its operations, the changes in its net assets and the supplemental
data for the periods indicated in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and supplemental data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio'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 of America, 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
September 30, 2000, by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricwaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
24
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.221.4795
00-363
<PAGE>
[LOGO] STANDISH FUNDS(R)
Standish Small
Financial Report Capitalization Equity Fund
------------------------------------------------------------
Year Ended
September 30, 2000
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
The Standish Small Cap Equity Fund return for the fiscal year was 67.64% versus
29.66% for the benchmark Russell 2000 Growth Index. This mark's the second
consecutive year of exceptionally strong returns on both an absolute and
relative basis.
The net returns for the year have obviously been quite rewarding, but the path
to that end result has not been smooth. Our superior relative performance has
generally come from above market returns in the up markets and essentially
in-line performance when the market is in a downdraft. The fiscal year began
with a tremendous surge of investor enthusiasm for small cap growth
companies--especially in the technology, biotechnology and business service
areas on which the Fund has historically focused. Our focus on these fastest
growing segments and excellent stock selection within those segments has allowed
the fund to again outperform the benchmark. The wave of enthusiasm crested in
early March of 2000, and the market for small cap growth companies has been very
turbulent since that crest. March, April and May were very difficult months for
the market, and the Fund was not immune from the difficulty. However, the Fund
bounced back along with the market in June. Since June performance has
fluctuated greatly from month to month.
Throughout these turbulent times, we have maintained our focus on investing in
the highest growth areas of the economy--technology, health care and services.
We have continued to invest in companies with excellent business positions,
solid management teams, strong balance sheets, and the potential to grow 20% or
more on an annualized basis. The environment for these companies is extremely
competitive and the landscape changes dramatically in a short period of time.
Therefore, we are continually on the alert to re-position the Fund in the best
areas for growth. This strategy has proven to be very successful over the long
term, but can be highly volatile. The Fund experienced both the success and the
volatility of this strategy during the fiscal year.
Looking ahead, we expect positive returns for the Fund, albeit with continued
substantial volatility. Not surprisingly, we do not anticipate the same type of
extraordinary absolute returns that we witnessed in the last two fiscal years.
The small cap growth market has produced outstanding performance over the past
few years, and it is probable, if not inevitable, that the market will cool off
at some point in the future. We will continue to invest in the high growth
sectors of the economy, and in companies within those sectors that we believe
will provide the best performance for the Fund.
Sincerely,
/s/ Steven L. Gold
Steven L. Gold
Note: The Fund experienced a change in portfolio managers in August, as Steven
L. Gold assumed responsibility for the portfolio. Steve is a veteran research
analyst with experience in a broad range of industries. He is an associate
director of Standish having joined the firm in 1994 after spending 14 years with
Aetna. Steve received his MBA from Temple University and is a Chartered
Financial Analyst.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SMALL CAPITALIZATION EQUITY FUND AND THE RUSSELL 2000 GROWTH INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish Russell
Small Cap 2000
Equity Growth
Fund Index
--------- -------
100,000 100,000
98,409 101,952
105,495 111,444
112,134 117,413
113,989 120,248
112,441 116,285
124,003 124,865
121,136 122,542
120,638 118,086
125,625 121,430
126,996 119,411
122,050 114,760
1 Year 127,612 120,372
132,082 125,509
131,737 125,814
136,898 129,307
144,273 135,753
149,614 142,255
147,838 137,675
158,540 144,127
162,174 148,271
163,655 149,975
153,593 141,768
154,890 143,025
2 Year 158,351 144,647
144,914 129,717
148,167 134,634
151,795 140,805
149,246 136,627
159,297 148,807
157,529 149,690
153,642 142,892
131,200 122,204
120,245 110,628
113,545 104,425
126,995 114,025
3 Year 137,914 119,464
149,619 130,683
169,279 145,697
177,082 155,961
178,383 154,105
190,689 161,547
182,160 150,552
196,322 157,375
201,877 164,322
205,080 166,800
221,394 173,902
204,779 164,830
4 Year 227,096 180,614
243,395 194,801
242,827 196,879
234,252 185,557
220,907 174,783
218,010 174,392
205,801 163,271
212,956 168,396
211,593 161,913
220,679 166,433
229,482 173,277
246,404 189,449
5 Year 249,187 194,647
251,877 197,061
241,179 186,359
250,751 191,159
244,182 185,094
256,632 196,190
259,385 196,657
264,327 198,620
281,720 208,132
296,860 215,006
301,552 221,224
299,613 212,276
6 Year 319,513 220,652
332,758 226,526
331,322 225,529
308,355 211,675
314,554 211,999
310,574 207,248
294,869 198,392
294,802 201,219
312,183 215,985
312,250 216,890
314,263 219,200
296,748 210,331
7 Year 307,845 215,286
307,772 210,901
316,609 220,647
326,396 227,092
325,958 230,507
323,182 233,527
334,673 249,619
367,980 269,074
380,835 272,395
388,796 278,003
370,901 264,328
386,459 275,996
8 Year 399,683 282,112
397,366 279,776
408,580 292,534
426,075 298,317
474,970 321,219
507,866 337,691
469,815 315,748
406,480 277,201
441,495 297,723
455,809 313,055
432,030 299,550
439,186 307,881
9 Year 469,083 313,884
486,355 321,725
447,383 302,296
411,245 280,963
402,034 277,704
465,541 319,443
497,071 330,272
524,420 347,182
540,216 357,597
600,060 386,134
557,907 362,942
556,012 354,290
10 Year 540,175 354,488
533,999 349,759
588,844 380,640
612,289 396,607
623,383 399,039
576,598 370,049
569,376 373,830
534,523 342,616
409,553 263,540
436,871 290,263
459,583 305,415
505,740 329,115
11 Year 549,431 358,900
586,876 375,050
536,140 340,733
586,761 352,863
618,774 384,021
600,167 384,628
642,929 404,898
631,949 392,386
612,533 377,711
629,176 385,001
665,928 394,857
771,214 436,593
12 Year 984,055 513,565
1,004,098 508,788
1,366,941 627,183
1,211,123 561,267
1,086,057 504,579
926,807 460,378
1,099,923 519,858
1,020,023 475,306
1,129,164 525,309
1,054,756 499,201
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 5 Year 10 Year 01/01/1988*
------ ------ ------ ------- ----------
67.64% 20.68% 22.09% 24.25% 20.29%
--------------------------------------------------------------------------------
* Combined limited partnership and mutual fund performance.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$117,987,348) $146,195,704
Cash 9,371,368
Receivable for investments sold 214,984
Receivable for Fund shares sold 31,589
Receivable from investment adviser (Note 2) 18
Interest and dividends receivable 5,786
Prepaid expenses 6,166
------------
Total assets 155,825,615
LIABILITIES
Payable for investments purchased $2,073,711
Payable for Fund shares redeemed 2,344,212
Payable for variation margin on open financial
futures contracts (Note 6) 271,000
Accrued accounting, custody and transfer agent fees 39,013
Accrued trustees' fees and expenses (Note 2) 4,589
Accrued expenses and other liabilities 30,147
----------
Total liabilities 4,762,672
------------
NET ASSETS $151,062,943
============
NET ASSETS CONSIST OF:
Paid-in capital $ 59,638,127
Accumulated net realized gain 63,920,460
Net unrealized appreciation 27,504,356
------------
TOTAL NET ASSETS $151,062,943
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,966,309
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 76.83
============
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 311,108
Dividend income 8,239
-----------
Total investment income 319,347
EXPENSES
Investment advisory fee (Note 2) $1,117,757
Accounting, custody, and transfer agent fees 185,785
Legal and audit services 51,975
Amortization of organizational expenses 23,724
Trustees' fees and expenses (Note 2) 18,699
Registration fees 9,652
Insurance expense 9,701
Miscellaneous 17,677
----------
Total expenses 1,434,970
Deduct:
Waiver of investment advisory fee (Note 2) (57,844)
----------
Total expense deductions (57,844)
----------
Net expenses 1,377,126
-----------
Net investment loss (1,057,779)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 89,033,639
Financial futures contracts 1,432,447
----------
Net realized gain 90,466,086
Change in unrealized appreciation (depreciation)
Investment securities 11,279,161
Financial futures contracts (704,000)
----------
Net change in unrealized appreciation
(depreciation) 10,575,161
-----------
Net realized and unrealized gain 101,041,247
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $99,983,468
===========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (1,057,779) $ (940,595)
Net realized gain 90,466,086 28,751,722
Net change in unrealized appreciation (depreciation) 10,575,161 32,959,364
------------- ------------
Net increase in net assets from investment operations 99,983,468 60,770,491
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net realized gains on investments (28,497,713) (15,623,361)
------------- ------------
Total distributions to shareholders (28,497,713) (15,623,361)
------------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 13,599,648 22,657,287
Value of shares issued to shareholders in payment of
distributions declared 26,646,611 14,776,461
Cost of shares redeemed (108,000,965) (82,249,148)
------------- ------------
Net decrease in net assets from Fund share
transactions (67,754,706) (44,815,400)
------------- ------------
TOTAL INCREASE IN NET ASSETS 3,731,049 331,730
NET ASSETS
At beginning of year 147,331,894 147,000,164
------------- ------------
At end of year $ 151,062,943 $147,331,894
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------------------- SEPTEMBER 30, ------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 54.46 $ 41.74 $ 66.50 $ 52.96 $ 53.46 $ 42.15
-------- -------- -------- -------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment loss* (0.43)(1) (0.28)(1) (0.31)(1) (0.23)(1) -- --
Net realized and unrealized gain
(loss) on investments 33.90 17.77 (16.57) 14.80 9.29 12.57
-------- -------- -------- -------- -------- --------
Total from investment operations 33.47 17.49 (16.88) 14.57 9.29 12.57
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gain on investments (11.10) (4.77) (7.88) (1.03) (9.79) (1.26)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (11.10) (4.77) (7.88) (1.03) (9.79) (1.26)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 76.83 $ 54.46 $ 41.74 $ 66.50 $ 52.96 $ 53.46
======== ======== ======== ======== ======== ========
TOTAL RETURN+++ 67.64% 44.02% (27.20)% 27.92%++ 17.36% 29.83%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)*(2) 0.74% 0.74% 0.74% 0.74%+ 0.75% 0.75%
Net Investment Loss (to average daily
net assets)* (0.57)% (0.56)% (0.57)% (0.57)%+ (0.44)% (0.30)%
Portfolio Turnover 153% 173%(3) 107%(3) 70%++(3) 28%(4) 103%(4)
Net Assets, End of Year (000's
omitted) $151,063 $147,332 $147,000 $274,368 $244,131 $180,470
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the Fund
for a portion of its operating expenses. If this voluntary reduction had
not been taken, the investment loss per share and the ratios would have
been:
</FN>
Net investment loss per share $ (0.45)(1) $ (0.30)(1) $ (0.34)(1) $ (0.23)(1) $ (0.01) N/A
Ratios (to average daily net assets):
Expenses(2) 0.77% 0.80% 0.78% 0.74%+ 0.76% N/A
Net investment loss (0.60)% (0.62)% (0.61)% (0.57)%+ (0.45)% N/A
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absense of expense waivers.
(1) Calculated using average shares outstanding.
(2) Includes the Fund's share of the Standish Small Capitalization Equity
Portfolio's allocated expenses for periods from May 3, 1996 to January 27,
2000.
(3) Represents activity of the Standish Small Capitalization Equity Portfolio
while the Fund was invested in the Standish Small Capitalization Equity
Portfolio.
(4) Represents portfolio turnover when the fund was investing directly in
securities.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
EQUITIES -- 90.8%
CAPITAL GOODS -- 6.7%
Dycom Industries, Inc.* 51,100 $ 2,127,037
EGL, Inc.* 129,900 3,929,475
Forward Air Corp.* 28,850 1,015,159
Hanover Compressor Co.* 67,100 2,210,106
SatCon Technology Corp.* 22,000 786,500
------------
10,068,277
------------
EARLY CYCLICAL -- 4.4%
Atlantic Coast Airlines, Inc.* 78,600 2,529,937
Ryanair Holdings PLC ADR* 47,200 1,817,200
Skywest, Inc. 45,000 2,306,250
------------
6,653,387
------------
ENERGY -- 5.7%
Cal Dive International, Inc.* 44,500 2,544,844
Core Laboratories, Inc.* 72,700 1,785,694
Global Industries Ltd.* 97,800 1,222,500
National-Oilwell, Inc.* 41,400 1,293,750
Stone Energy Corp.* 30,800 1,694,000
------------
8,540,788
------------
FINANCIAL -- 1.7%
Boston Private Financial Holdings, Inc. 22,400 369,600
Costar Group, Inc.* 60,900 2,253,300
------------
2,622,900
------------
GROWTH CYCLICAL -- 2.2%
Cost Plus, Inc.* 45,600 1,373,700
Tweeter Home Entertainment Group, Inc.* 51,800 1,880,987
------------
3,254,687
------------
HEALTH CARE -- 13.9%
Alexion Pharmaceuticals, Inc.* 30,300 3,454,200
Alkermes, Inc.* 55,100 2,128,237
Angiotech Pharmaceuticals, Inc.* 47,600 1,880,200
Arena Pharmaceuticals, Inc.* 33,300 1,431,900
COR Therapeutics, Inc.* 28,100 1,750,981
Cubist Pharmaceuticals, Inc.* 19,100 994,394
Cyberonics, Inc.* 23,500 503,781
Enzon, Inc.* 24,500 1,617,000
ImClone Systems, Inc.* 16,700 1,954,944
Inhale Therapeutic Systems, Inc.* 45,300 2,553,787
Large Scale Biology Corp.* 4,300 140,825
Tripath Technology, Inc.* 102,400 2,604,800
------------
21,015,049
------------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
OTHER -- 0.1%
Technology Select Sector SPDR Fund 5,000 $ 231,875
------------
SERVICES -- 12.9%
Caminus Corp.* 45,600 1,812,600
Corporate Executive Board Co.* 102,600 4,129,650
Data Return Corp.* 47,100 953,775
Jupiter Media Metrix, Inc.* 71,800 1,144,312
Pinnacle Holdings, Inc.* 18,300 487,237
Quanta Services, Inc.* 45,200 1,243,000
Radio One, Inc., Class D * 77,100 544,519
SBA Communications Corp.* 43,700 1,832,669
SBS Broadcasting SA* 71,900 2,862,519
SmartForce PLC ADR* 55,300 2,619,837
Westwood One, Inc.* 89,500 1,918,656
------------
19,548,774
------------
TECHNOLOGY -- 43.2%
ATMI, Inc.* 96,300 2,251,013
Airspan Networks, Inc.* 44,300 509,450
Alteon Websystems, Inc.* 17,100 1,853,479
Aspen Technologies, Inc.* 35,100 1,583,887
AvantGo, Inc.* 10,900 218,000
Avocent Corp.* 59,550 3,282,694
Computer Network Technology Corp.* 21,800 749,375
Credence Systems Corp.* 17,900 537,000
Daleen Technologies, Inc.* 27,100 401,419
Dupont Photomasks, Inc.* 34,600 2,032,750
Elantec Semiconductor, Inc.* 20,200 2,012,425
Elastic Networks, Inc.* 16,800 234,150
Emulex Corp.* 32,800 4,018,000
Exar Corp.* 34,150 4,132,149
Gasonics International Corp.* 78,000 955,500
International Rectifier Corp.* 57,800 2,922,513
Kopin Corp.* 45,000 810,000
Level 8 Systems, Inc.* 74,600 1,370,775
Lexent, Inc.* 21,100 627,725
MatrixOne, Inc.* 36,600 1,464,000
Micrel, Inc.* 56,000 3,752,000
NetScout Systems, Inc.* 108,000 2,565,000
O2Micro International Ltd.* 31,500 541,898
Pericom Semiconductor Corp.* 99,600 3,685,200
Photronics, Inc.* 35,100 765,619
Pixelworks, Inc.* 66,000 3,147,375
Qlogic Corp.* 47,600 4,188,800
Quicklogic Corp.* 118,600 1,956,900
Semtech Corp.* 82,400 3,553,500
SignalSoft Corp.* 22,800 926,250
Silicon Image, Inc.* 65,900 1,635,144
Spectra-Physics Lasers, Inc.* 20,700 1,108,744
Stanford Microdevices, Inc.* 18,300 979,050
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
SynQuest, Inc.* 22,100 $ 290,063
Vastera, Inc.* 28,900 635,800
Veeco Instruments, Inc.* 19,400 2,061,553
Watchguard Technologies, Inc.* 25,100 1,506,000
------------
65,265,200
------------
UTILITIES -- 0.0%
H Power Corp.* 200 6,688
------------
TOTAL EQUITIES (COST $108,997,515) 137,207,625
------------
PAR
RATE MATURITY VALUE
------ ---------- ---------
SHORT-TERM INVESTMENTS -- 6.0%
U.S. GOVERNMENT AGENCY -- 0.9%
FNMA Discount Note#+ 7.116% 12/14/2000 $1,300,000 1,281,020
------------
REPURCHASE AGREEMENTS -- 5.1%
Tri-party repurchase agreement dated 09/29/00 with
Bank of New York and Investors Bank and Trust
Company, due 10/02/00, with a maturity value of
$7,710,655 and an effective yield of 5.60%,
collateralized by a U.S. Government Obligation with
a rate of 6.50%, a maturity date of 06/01/29 and an
aggregate market value of $7,861,260. 7,707,059
------------
TOTAL SHORT-TERM INVESTMENTS (COST $8,989,833) 8,988,079
------------
TOTAL INVESTMENTS -- 96.8% (COST $117,987,348) $146,195,704
OTHER ASSETS, LESS LIABILITIES -- 3.2% 4,867,239
------------
NET ASSETS -- 100.0% $151,062,943
============
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
FNMA - Federal National Mortgage Association
SPDR - Standard and Poor's Depositary Receipt
* Non-income producing security.
# Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY 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 Small Capitalization Equity Fund (the "Fund") is a
separate diversified investment series of the Trust.
For the period from May 3, 1996 through January 27, 2000, the Fund had
invested substantially all of its investable assets in the Standish Small
Capitalization Equity Portfolio (the "Portfolio"), a subtrust of the
Standish, Ayer & Wood Master Portfolio. The Portfolio had investment
objectives, policies and limitations substantially identical to those of
the Fund. For the period from October 1, 1999 through January 27, 2000,
the Fund owned approximately 100% of the Portfolio. Effective January 28,
2000, the Fund began investing directly in the securities in which the
Portfolio had invested. Therefore, the financial statements of the Fund
and Portfolio have been presented on a consolidated basis, and represent
all the activities of both the Fund and the Portfolio.
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 accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Securities
(including illiquid securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for amortization
of premium or accretion of discount on long-term debt securities. Dividend
income is recorded on the ex-dividend date. Realized gains and losses from
securities sold are recorded on the identified cost basis.
D. FEDERAL TAXES
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal year.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and capital gains distributions, if
any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. 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 net operating losses, losses
deferred due to wash sales and the tax practice known as equalization.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital,
undistributed net investment income and accumulated net realized gain.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services, and general
office facilities, is paid monthly at the annual rate of 0.60% of the
Fund's average daily net assets. SA&W voluntarily agreed to limit total
Fund operating expenses (excluding brokerage commissions, taxes and
extraordinary expenses) to 0.74% of the Fund's average daily net assets
for the year ended September 30, 2000. Pursuant to this agreement, for the
year ended September 30, 2000, SA&W voluntarily did not impose $57,844 of
its investment advisory fee. This agreement is voluntary and temporary and
may be discontinued or revised by SA&W at any time. No director, officer
or employee of SA&W or its affiliates receives any compensation from the
Trust or the Fund for serving as an officer or Trustee of the Trust. The
Trust pays each Trustee who is not a director, officer or employee of SA&W
or its affiliates an annual fee and a per meeting fee as well as
reimbursement for travel and out of pocket expenses. In addition, the
Trust pays the legal fees for the independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations for the year ended September 30, 2000, were $267,276,017 and
$378,133,430, respectively. For the year ended September 30, 2000, the
Fund did not purchase or sell any U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Shares sold 176,261 469,529
Shares issued to shareholders in payment of
distributions declared 451,179 322,771
Shares redeemed (1,366,458) (1,608,974)
----------- -----------
Net decrease (739,018) (816,674)
=========== ===========
</TABLE>
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
At September 30, 2000, three shareholders held of record approximately
21%, 12%, and 11% of the total outstanding shares of the Fund. Investment
activity of these shareholders could have a material impact on the Fund.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000 as computed on a federal
income tax basis, were as follows:
Aggregate Cost $118,790,955
============
Gross unrealized appreciation 38,563,023
Gross unrealized depreciation (11,158,274)
------------
Net unrealized appreciation $ 27,404,749
============
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these instruments are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Fund's exposure to the underlying instrument. Buying puts
and writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and
written by the Fund, are reflected in the accompanying Statement of Assets
and Liabilities at market value. The underlying face amount at value of
any open purchased options is shown in the Schedule of Investments. This
amount reflects each 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.
The Fund entered into no such transactions for the year ended September
30, 2000.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts.
The Fund held the following open financial futures contracts at September
30, 2000:
<TABLE>
<CAPTION>
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED LOSS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P Mid Cap 400 (1 contract) Long 12/15/2000 $11,723,950 $(271,330)
Nasdaq 100 (2 contracts) Long 12/16/2000 4,345,200 (432,670)
---------
$(704,000)
=========
</TABLE>
At September 30, 2000, the Fund had segregated sufficient cash and/or
securities to cover margin requirements on open financial futures
contracts.
(7) LINE OF CREDIT:
The Fund, and other funds in the Trust and subtrusts in the Standish Ayer
& Wood Portfolio Trust (the "Portfolio Trust") are parties to a committed
line of credit facility, which enables each portfolio/fund to borrow, in
the aggregate, up to $35 million. Interest is charged to each
participating portfolio/fund based on its borrowings at a rate equal to
the Federal Funds effective rate 1/2 plus 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 year ended September
30, 2000, the expense related to the commitment fee was $3,416 for the
Fund.
During the year ended September 30, 2000, the Fund had no borrowings under
the credit facility.
--------------------------------------------------------------------------------
TAX INFORMATION -- UNAUDITED
Pursuant to section 852 of the Internal Revenue Code, the Fund designated
$8,920,133 as capital gain dividends for the year ended September 30, 2000.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Small Capitalization Equity 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 Small Capitalization Equity Fund (the "Fund") at September 30,
2000, and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. 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 of America, 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 include confirmation
of securities at September 30, 2000, by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
16
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.221.4795
00-360
<PAGE>
[LOGO] STANDISH FUNDS(R)
Financial Report Standish Small Cap Growth
-----------------------------------------------------------------
Year Ended
September 30, 2000 (Institutional and Service Classes)
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND--INSTITUTIONAL AND SERVICE CLASSES
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND--INSTITUTIONAL AND SERVICE CLASSES
MANAGEMENT DISCUSSION AND ANALYSIS
The Standish Small Cap Growth Fund-Institutional Class produced a return of
71.60% for the fiscal year ended September 30, 2000. The benchmark Russell 2000
Growth index returned 29.66%. This mark's the second consecutive year of
exceptionally strong returns on both an absolute and relative basis. Since its
inception on May 5, 2000, the Small Cap Growth Fund-Service Class produced a
return of 3.07% against a benchmark return of (2.75)%.
The net returns for the year have obviously been quite rewarding, but the path
to that end result has not been smooth. Our superior relative performance has
generally come from above market returns in the up markets and essentially
in-line performance when the market is in a downdraft. Our focus on these
fastest growing segments and excellent stock selection within those segments has
allowed the fund to again outperform the benchmark.The fiscal year began with a
tremendous surge of investor enthusiasm for small cap growth
companies--especially in the technology, biotechnology and business service
areas on which the Fund has historically focused. The wave of enthusiasm crested
in early March of 2000, and the market for small cap growth companies has been
very turbulent since that crest. March, April and May were very difficult months
for the market, and the Fund was not immune from the difficulty. However, the
Fund bounced back along with the market in June. Since June performance has
fluctuated greatly from month to month.
Throughout these turbulent times, we have maintained our focus on investing in
the highest growth areas of the economy--technology, health care and services.
We have continued to invest in companies with excellent business positions,
solid management teams, strong balance sheets, and the potential to grow 20% or
more on an annualized basis. The environment for these companies is extremely
competitive and the landscape changes dramatically in a short period of time.
Therefore, we are continually on the alert to re-position the Fund in the best
areas for growth. This strategy has proven to be very successful over the long
term, but can be highly volatile. The Fund experienced both the success and the
volatility of this strategy during the fiscal year.
Looking ahead, we expect positive returns for the Fund, albeit with continued
substantial volatility. Not surprisingly, we do not anticipate the same type of
extraordinary returns that we witnessed in the last two fiscal years. The small
cap growth market has produced outstanding performance over the past few years,
and it is probable, if not inevitable, that the market will cool off at some
point in the future. We will continue to invest in the high growth sectors of
the economy, and in companies within those sectors that we believe will provide
the best performance for the Fund.
Sincerely,
/s/ Edward R. Walter
Edward R. Walter
Note: In August of 2000, Ed Walter assumed portfolio management responsibilities
for the Fund. Ed is an associate director of Standish and has been with the Firm
since 1989. Ed spent four years early in his career on the small cap team and
was instrumental in starting our international small cap product. Ed's
additional responsibilities include analyzing technology stocks for our mid and
large cap portfolios. He is a Chartered Financial Analyst.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND--INSTITUTIONAL CLASS
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SMALL CAPITALIZATION GROWTH FUND
AND THE RUSSELL 2000 GROWTH INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish
Small Cap
Growth Russell
Institutional 2000
Class Growth
Fund Index
--------- -------
100000 100000
101900 102396
106850 104954
98950 98616
93000 91656
93900 90593
110800 104209
118850 107742
125600 113258
131550 116656
145651 125965
135297 118400
1 Year 133647 115577
133301 115642
134163 114099
149189 124173
154791 129382
158399 130175
147035 120718
147250 121952
137771 111769
108149 85973
119675 94690
124253 99633
2 Year 135725 107365
152421 117081
172295 122350
158076 111155
178758 115112
187052 125276
184467 125474
203802 132087
200840 128005
203264 123218
206010 125596
222761 128811
3 Year 266656 142426
347013 167536
352821 165978
480766 204601
405788 183098
342019 164605
303339 155012
376923 168529
343,993 154,086
381,395 170,295
353,518 162,832
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 12/23/1996
------ ------ ----------
71.60% 34.39% 39.01%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND--SERVICE CLASS
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SMALL CAPITALIZATION GROWTH SERVICE CLASS FUND
AND THE RUSSELL 2000 GROWTH INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish
Small Cap
Growth Russell
Service 2000
Class Growth
Fund Index
----------- -----------
5/8/2000 100,000 100,000
May-00 88,450 89,684
Jun-00 109,877 101,271
Jul-00 100,256 92,592
Aug-00 111,130 102,333
Sep-00 103,034 97,247
--------------------------------------------------------------------------------
Total Return
(for periods ended 9/30/00)
Since
Inception
1 Month 3 Month 05/08/2000
------- ------- ----------
(7.29)% (6.23)% 3.07%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investment in Standish Small Cap Growth Portfolio
("Portfolio"), at value (Note 1A) $91,113,476
Receivable for Fund shares sold 161,388
Prepaid expenses 8,186
-----------
Total assets 91,283,050
LIABILITIES
Payable for Fund shares redeemed $380,782
Accrued accounting, custody and transfer agent fees 7,519
Accrued trustees' fees and expenses (Note 2) 1,000
Accrued expenses and other liabilities 22,667
--------
Total liabilities 411,968
-----------
NET ASSETS $90,871,082
===========
NET ASSETS CONSIST OF:
Paid-in capital $73,283,930
Accumulated net realized gain 6,889,840
Net unrealized appreciation 10,697,312
-----------
TOTAL NET ASSETS $90,871,082
===========
NET ASSETS ATTRIBUTABLE TO:
Institutional Class $82,839,619
===========
Service Class $ 8,031,463
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING
Institutional Class 1,360,952
===========
Service Class 132,039
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding)
Institutional Class $ 60.87
===========
Service Class $ 60.83
===========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $ 351,919
Dividend income allocated from Portfolio 21,238
Expenses allocated from Portfolio (1,198,676)
-----------
Net investment loss allocated from Portfolio (825,519)
EXPENSES
Legal and audit services $ 26,255
Accounting and custody fees 22,525
Registration fees 19,820
Transfer agent fees - Institutional Class 12,628
Transfer agent fees - Service Class 3,256
Service fee - Service Class (Note 3) 6,085
Trustees' fees and expenses (Note 2) 4,000
Insurance expense 340
Miscellaneous 6,815
----------
Total expenses 101,724
Deduct:
Reimbursement of operating expenses -
Service Class (Note 2) (3,227)
----------
Total expense deductions (3,227)
----------
Net expenses 98,497
-----------
Net investment loss (924,016)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain allocated from Portfolio on:
Investment security transactions 22,186,519
Financial futures contracts 1,051,120
----------
Net realized gain 23,237,639
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities 4,868,045
Financial futures contracts (737,352)
----------
Net change in unrealized appreciation
(depreciation) 4,130,693
-----------
Net realized and unrealized gain 27,368,332
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $26,444,316
===========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (924,016) $ (211,094)
Net realized gain 23,237,639 5,339,363
Change in unrealized appreciation (depreciation) 4,130,693 7,689,250
------------- -----------
Net increase in net assets from investment operations 26,444,316 12,817,519
------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net realized gains on investments
Institutional Class (5,354,756) --
------------- -----------
Total distributions to shareholders (5,354,756) --
------------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5)
Net proceeds from sale of shares
Institutional Class 164,155,390 25,975,745
Service Class 8,960,151 --
Value of shares issued to shareholders in payment of
distributions declared
Institutional Class 5,227,939 --
Cost of shares redeemed
Institutional Class (151,749,914) (6,706,525)
Service Class (842,766) --
------------- -----------
Net increase in net assets from Fund share
transactions 25,750,800 19,269,220
------------- -----------
TOTAL INCREASE IN NET ASSETS 46,840,360 32,086,739
NET ASSETS
At beginning of year 44,030,722 11,943,983
------------- -----------
At end of year $ 90,871,082 $44,030,722
============= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
NINE MONTHS DECEMBER 23, 1996
YEAR ENDED SEPTEMBER 30, ENDED (COMMENCEMENT OF
-------------------------------------------- SEPTEMBER 30, OPERATIONS) TO
2000 1999 1998 1997 DECEMBER 31, 1996
---------- ---------- ---------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 38.28 $ 22.22 $ 29.12 $ 20.39 $ 20.00
---------- ---------- ---------- ---------- ----------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* (0.43)(1) (0.24)(1) (0.07)(1) 0.03 --
Net realized and unrealized gain
(loss) on investments 26.82 16.30 (5.01) 8.71 0.39
---------- ---------- ---------- ---------- ----------
Total from investment operations 26.39 16.06 (5.08) 8.74 0.39
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (0.04) (0.01) --
From net realized gain on investments (3.80) -- (0.54) -- --
In excess of net realized gain on
investments -- -- (1.24) -- --
---------- ---------- ---------- ---------- ----------
Total distributions to shareholders (3.80) -- (1.82) (0.01) --
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR $ 60.87 $ 38.28 $ 22.22 $ 29.12 $ 20.39
========== ========== ========== ========== ==========
TOTAL RETURN+++ 71.60% 72.14% (17.84)% 42.94%++ --(2)
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)(*,(3)) 0.98% 1.00% 0.58% 0.00%+ --(2)
Net Investment Income (Loss) (to
average daily net assets)* (0.70)% (0.73)% (0.25)% 0.49%+ --(2)
Net Assets, End of Year (000's
omitted) $ 82,840 $ 44,031 $ 11,944 $ 6,314 $ 484
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion 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 loss per share and ratios would have been:
</FN>
Net investment loss per share N/A $(0.30)(1) $(0.42)(1) $(0.25) --(2)
Ratios (to average daily net assets):
Expenses(3) N/A 1.18% 1.94% 3.56%+ --(2)
Net investment loss N/A (0.91)% (1.61)% (3.07)%+ --(2)
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waiver.
(1) Calculated based on average shares outstanding.
(2) Amounts are not meaningful due to the short period of operations.
(3) Includes the Fund's share of the Standish Small Cap Growth Portfolio's
(formerly the Standish Small Capitalization Equity Portfolio II) allocated
expenses.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS - SERVICE CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 8, 2000
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 2000
----------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $59.04
------
FROM INVESTMENT OPERATIONS:
Net investment loss (0.21)(1)
Net realized and unrealized gain on investments 2.00
------
Total from investment operations 1.79
------
NET ASSET VALUE, END OF PERIOD $60.83
======
TOTAL RETURN+++ 3.03%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)*(2) 1.23%+
Net Investment Loss (to average daily net assets)* (0.84)%+
Net Assets, End of Year (000's omitted) $8,031
<FN>
----------
* For the period indicated, the investment adviser voluntarily agreed to
reimburse the Class for a portion of its operating expenses. If this
voluntary action had not been taken, the investment loss per share and
ratios would have been:
</FN>
Net investment loss per share $(0.24)(1)
Ratios (to average daily net assets):
Expenses(2) 1.36%+
Net investment loss (0.97)%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Standish Small Cap Growth Portfolio's
(formerly the Standish Small Capitalization Equity Portfolio II) allocated
expenses.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH 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 Small Cap Growth Fund (formerly, Standish Small
Capitalization Equity Fund II) (the "Fund") is a separate diversified
investment series of the Trust.
The Fund invests all of its investable assets in an interest in Standish
Small Cap Growth Portfolio (formerly, Standish Small Capitalization Equity
Portfolio II) (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
September 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 Fund currently offers two classes of shares: Institutional Class and
Service Class. Expenses of the Fund are borne pro-rata by the holders of
each class of shares, except for transfer agent fees and an account
service fee of 0.25% of the average daily net assets of the Service Class
of shares. Each class votes separately as a class only with respect to its
own distribution plan or other matters that relate only to that class.
Shares of each class would receive their pro-rata share of the net assets
of the Fund (after satisfaction of any class-specific expenses) if the
Fund were liquidated. In addition, the Trustees declare separate dividends
on each class of shares.
Shares of the Service Class may be purchased by entities ("Account
Administrators") that provide omnibus accounting services for groups of
individuals who beneficially own Service Class shares ("Omnibus
Accounts"). Omnibus Accounts include pension and retirement plans (such as
401(k) plans, 457 plans and 403(b) plans), and programs through which
personal and or account maintenance services are provided to groups of
individuals whether or not such individuals invest on a tax-deferred
basis. Individual investors may only purchase Service Class shares through
their Omnibus Account Administrators.
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 accounting principles generally
accepted in the United States of America 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 qualified regulated investment company 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.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
D. 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.
E. DISTRIBUTIONS TO SHAREHOLDERS
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. 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. Distributions to shareholders are
recorded on ex-dividend date. Dividends from net investment income and
distributions from capital gains, 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 net
operating losses, losses deferred due to wash sales and the tax practice
known as equalization.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated undistributed
net realized gain (loss) on investments 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.
F. ALLOCATION OF OPERATING ACTIVITY
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds. Investment
income, common expenses and realized and unrealized gains and losses are
allocated among the share classes of the Fund based on the relative net
assets of each class. Transfer agent fees, which are directly attributable
to a class of shares, are charged to that class' operations. Service fees,
which are directly attributable to the Service Class Shares, are charged
to the Service Class operations.
(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, Ayer, & Wood, Inc. ("SA&W") for such services. See
Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. SA&W voluntarily agreed to limit the Service
Class operating expenses (excluding brokerage commissions, taxes and
extraordinary expenses) for the period ended September 30, 2000, so that
the Service Class annual operating expenses do not exceed the total
operating expenses of the Institutional Class (net of any expense
limitation) for the comparable period plus 0.25% (the maximum Service
Fee). Pursuant to this agreement, for the period ended September 30, 2000,
SA&W reimbursed the Service Class $3,227 for class specific operating
expenses. This agreement is voluntary and temporary and may be
discontinued or revised by SA&W at any time. No director, officer or
employee of SA&W or its affiliates receives any compensation from the
Trust or the Fund for serving as an officer or Trustee of the Trust. The
Trust pays each Trustee who is not a director, officer or employee of SA&W
or its affiliates an annual fee and a per meeting fee as well as
reimbursement for travel and out of pocket expenses. In addition, the
Trust pays the legal fees for the independent counsel of the Trustees.
(3) 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
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
(4) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended September 30, 2000 aggregated $173,066,544 and $152,427,811,
respectively.
(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
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Institutional Class:
Shares sold 2,544,770 801,425
Shares issued to shareholders in payment of
distributions declared 107,882 --
Shares redeemed (2,441,864) (188,863)
---------- --------
Net increase 210,788 612,562
========== ========
</TABLE>
PERIOD FROM MAY 8, 2000
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 2000
----------------------------
Shares sold 146,431
Shares redeemed (14,392)
--------
Net increase 132,039
========
At September 30, 2000, two shareholders held of record approximately 32%
and 11% of the total outstanding shares of the Fund. Investment activity
of this shareholder could have a material impact on the Fund.
--------------------------------------------------------------------------------
TAX INFORMATION -- UNAUDITED:
Pursuant to section 852 of the Internal Revenue Code, the Fund designated
$38,090 as a capital gain dividend for the year ended September 30, 2000.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Small Cap Growth Fund (formerly, Small Capitalization Equity Fund
II):
In our opinion the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and financial
highlights present fairly, in all material respects, the financial position of
Standish, Ayer & Wood Investment Trust: Standish Small Cap Growth Fund (the
"Fund") (formerly, Small Capitalization Equity Fund II), at September 30, 2000,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. 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 in the United States of America, 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
with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
14
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
EQUITIES -- 87.5%
CAPITAL GOODS -- 6.6%
Dycom Industries, Inc.* 20,500 $ 853,312
EGL, Inc.* 93,100 2,816,275
Expeditors International Wash, Inc. 30,900 1,392,431
Mastec, Inc.* 15,700 490,625
SatCon Technology Corp.* 13,800 493,350
-----------
6,045,993
-----------
CONSUMER STABLE -- 0.6%
Hain Celestial Group, Inc.* 16,300 572,537
-----------
EARLY CYCLICAL -- 1.9%
Atlantic Coast Airlines, Inc.* 22,500 724,219
Ryanair Holdings PLC ADR* 12,300 473,550
Skywest, Inc. 9,400 481,750
-----------
1,679,519
-----------
ENERGY -- 8.7%
Cal Dive International, Inc.* 32,800 1,875,750
Core Laboratories, Inc.* 38,700 950,569
Dril-Quip* 12,500 498,437
Global Industries Ltd.* 45,000 562,500
National-Oilwell, Inc.* 31,500 984,375
Newfield Exploration Co.* 23,600 1,101,825
Newpark Resources, Inc.* 145,000 1,341,250
Proton Energy Systems* 10,400 297,700
Stone Energy Corp.* 6,200 341,000
-----------
7,953,406
-----------
FINANCIAL -- 3.5%
Costar Group, Inc.* 60,800 2,249,600
London Pacific Group Ltd. ADR 46,300 920,212
-----------
3,169,812
-----------
GROWTH CYCLICAL -- 1.2%
Buca, Inc.* 64,500 685,312
THQ, Inc.* 16,600 385,950
-----------
1,071,262
-----------
HEALTH CARE -- 15.5%
Accredo Health, Inc.* 23,400 1,143,675
Alexion Pharmaceuticals, Inc.* 18,700 2,131,800
Alkermes, Inc.* 23,700 915,412
Antigenics, Inc.* 33,100 488,225
Arena Pharmaceuticals, Inc.* 17,500 752,500
CV Therapeutics, Inc.* 10,500 816,704
Dendreon Corp.* 82,600 1,947,551
Enzon, Inc.* 11,000 726,000
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
Genaissance Pharmaceuticals, Inc.* 47,200 $ 976,450
ImClone Systems, Inc.* 5,200 608,725
Inhale Therapeutic Systems, Inc.* 16,700 941,462
Pain Therapeutics, Inc.* 35,300 699,381
Protein Design Labs, Inc.* 11,800 1,421,900
Transkaryotic Therapies, Inc.* 12,800 551,200
-----------
14,120,985
-----------
OTHER -- 0.2%
Technology Select Sector SPDR Fund 3,500 162,312
-----------
SERVICES -- 13.5%
Career Education Corp.* 43,200 1,922,400
Catalina Marketing Corp.* 18,500 696,062
Corporate Executive Board Co.* 26,000 1,046,500
Devry, Inc.* 26,100 982,012
Diamond Technology Partners, Inc.* 7,400 549,450
Digex, Inc.* 12,900 604,688
Edison Schools, Inc.* 26,100 828,675
Getty Images, Inc.* 11,900 362,206
Internet Security Systems* 7,600 570,950
Pinnacle Holdings, Inc.* 10,100 268,913
Quanta Services, Inc.* 8,100 222,750
Radio One, Inc., Class D * 24,300 171,619
SBA Communications Corp.* 14,100 591,319
SBS Broadcasting SA* 28,000 1,114,750
SmartForce PLC ADR* 22,300 1,056,463
Westwood One, Inc.* 37,500 803,906
eMerge Interactive, Inc., Class A* 30,200 479,425
-----------
12,272,088
-----------
TECHNOLOGY -- 35.8%
3DO Company (The)* 96,400 644,675
ATMI, Inc.* 78,900 1,844,288
Aspen Technologies, Inc.* 24,100 1,087,513
AvantGo, Inc.* 6,400 128,000
Avocent Corp.* 17,600 970,200
Benchmark Electronics, Inc.* 11,100 577,200
Computer Network Technology Corp.* 12,800 440,000
Cree Research, Inc.* 4,300 499,875
Dupont Photomasks, Inc.* 13,300 781,375
Elantec Semiconductor, Inc.* 9,900 986,288
Emulex Corp.* 7,900 967,750
Exar Corp.* 21,600 2,613,600
GSI Lumonics, Inc.* 23,800 392,700
International Rectifier Corp.* 24,400 1,233,725
Kopin Corp.* 15,100 271,800
Manufacturers Services Ltd.* 29,700 352,688
MatrixOne, Inc.* 22,700 908,000
McData Corp., Class B* 4,100 503,851
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
Merix Corp.* 31,100 $ 2,015,669
Omnivision Technologies, Inc.* 22,200 803,363
Pericom Semiconductor Corp.* 50,400 1,864,800
Photronics, Inc.* 25,800 562,763
Qlogic Corp.* 27,300 2,402,400
Quicklogic Corp.* 69,000 1,138,500
Sanchez Computer Associates, Inc.* 28,300 438,650
Semtech Corp.* 44,200 1,906,125
SignalSoft Corp.* 13,000 528,125
Silicon Image, Inc.* 39,600 982,575
SonicWall, Inc.* 26,100 743,850
Spectra-Physics Lasers, Inc.* 7,100 380,294
Tricord Systems, Inc.* 65,600 979,900
Tut Systems, Inc.* 14,400 1,242,900
Vastera, Inc.* 15,400 338,800
Veeco Instruments, Inc.* 10,500 1,115,789
-----------
32,648,031
-----------
TOTAL EQUITIES (COST $68,259,815) 79,695,945
-----------
PAR
RATE MATURITY VALUE
------ ---------- ---------
SHORT-TERM INVESTMENTS -- 6.1%
U.S. GOVERNMENT AGENCY -- 1.1%
FNMA Discount Note#+ 7.116% 12/14/2000 $1,000,000 985,400
-----------
REPURCHASE AGREEMENTS -- 5.0%
Tri-party repurchase agreement dated 09/29/00 with
Bank of New York and Investors Bank and Trust
Company, due 10/02/00, with a maturity value of
$4,611,122 and an effective yield of 5.60%,
collateralized by a U.S. Government Obligation with
a rate of 6.50%, a maturity date of 06/01/29 and an
aggregate market value of $4,701,602. 4,608,971
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $5,595,721) 5,594,371
-----------
TOTAL INVESTMENTS -- 93.6% (COST $73,855,536) $85,290,316
OTHER ASSETS, LESS LIABILITIES -- 6.4% 5,823,477
-----------
NET ASSETS -- 100.0% $91,113,793
===========
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
FNMA - Federal National Mortgage Association
SPDR - Standard and Poor's Depositary Receipt
* Non-income producing security.
# Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$73,855,536) $85,290,316
Cash 6,889,013
Receivable for investments sold 117,763
Receivable from investment adviser (Note 2) 20
Interest and dividends receivable 6,324
Deferred organization costs (Note 1E) 5,838
Prepaid expenses 5,495
-----------
Total assets 92,314,769
LIABILITIES
Payable for investments purchased $799,544
Payable for variation margin on open financial
futures contracts (Note 5) 336,100
Accrued accounting and custody fees 38,482
Accrued trustees' fees and expenses (Note 2) 3,042
Accrued expenses and other liabilities 23,808
--------
Total liabilities 1,200,976
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS) $91,113,793
===========
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income $ 351,919
Dividend income 21,238
-----------
Total income 373,157
EXPENSES
Investment advisory fee (Note 2) $1,008,451
Accounting and custody fees 145,929
Legal and audit services 24,766
Trustees' fees and expenses (Note 2) 10,475
Amortization of organizational expenses (Note 1E) 4,748
Insurance expense 3,074
Miscellaneous 1,236
----------
Total expenses 1,198,679
-----------
Net investment loss (825,522)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 22,186,587
Financial futures contracts 1,051,122
----------
Net realized gain 23,237,709
Change in unrealized appreciation (depreciation)
Investment securities 4,868,113
Financial futures contracts (737,355)
----------
Net change in unrealized appreciation
(depreciation) 4,130,758
-----------
Net realized and unrealized gain 27,368,467
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $26,542,945
===========
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (825,522) $ (195,382)
Net realized gain 23,237,709 5,339,392
Change in net unrealized appreciation (depreciation) 4,130,758 7,689,299
------------- -----------
Net increase in net assets from investment operations 26,542,945 12,833,309
------------- -----------
CAPITAL TRANSACTIONS
Contributions 173,066,544 25,892,217
Withdrawals (152,427,811) (6,716,319)
------------- -----------
Net increase in net assets from capital transactions 20,638,733 19,175,898
------------- -----------
TOTAL INCREASE IN NET ASSETS 47,181,678 32,009,207
NET ASSETS
At beginning of year 43,932,115 11,922,908
------------- -----------
At end of year $ 91,113,793 $43,932,115
============= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 23, 1996
YEAR ENDED SEPTEMBER 30, NINE MONTHS (COMMENCEMENT OF
---------------------------------------- ENDED OPERATIONS) TO
2000 1999 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1996
---------- ---------- ---------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
RATIOS:
Expenses (to average daily net
assets)* 0.91% 0.95% 0.58% 0.00%+ --(1)
Net Investment Income (Loss) (to
average daily net assets)* (0.63)% (0.67)% (0.25)% 0.50%+ --(1)
Portfolio Turnover 305% 242% 147% 122%++ --
Net Assets, End of Year (000's
omitted) $ 91,114 $ 43,932 $ 11,923 $ 6,296 $ 484
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion 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:
</FN>
Ratios (to average daily net assets):
Expenses N/A N/A 1.39% 4.33%+ --(1)
Net investment loss N/A N/A (1.06)% (3.84)%+ --(1)
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
(1) Amounts are not meaningful due to the short period of operations.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(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
Small Cap Growth Portfolio (formerly Standish Small Capitalization Equity
Portfolio II) (the "Portfolio") is a separate diversified investment
series of the Portfolio Trust.
At September 30, 2000, there was one Fund, Standish Small Cap Growth Fund
(formerly Standish Small Capitalization Equity Fund II) (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 September 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 accounting
principles generally accepted in the United States of America 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 of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. 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
22
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 December 2001.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services is paid
monthly at the annual rate of 0.80% of the Portfolio's average daily net
assets. Prior to January 28, 2000, the Fund paid an investment advisory
fee monthly at an annual rate of 0.60% of the Portfolio's average net
assets. The Portfolio Trust pays no compensation directly to its trustees
who are affiliated with SA&W or to its officers, all of whom receive
remuneration for their services to the Portfolio Trust from SA&W. Certain
of the trustees and officers of the Portfolio Trust are directors or
officers of SA&W.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations for the year ended September 30, 2000 were $367,760,738 and
$358,500,412, respectively. For the year ended September 30, 2000, the
Fund did not purchase or sell any U.S. Government securities.
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000, as computed on a
federal income tax basis, were as follows:
Aggregate Cost $75,563,848
===========
Gross unrealized appreciation 16,847,554
Gross unrealized depreciation (7,121,086)
-----------
Net unrealized appreciation $ 9,726,468
===========
(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.
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
23
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
The Portfolio entered into no such transactions during the year ended
September 30, 2000.
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.
At September 30, 2000, the Portfolio had the following open financial
futures contracts:
<TABLE>
<CAPTION>
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED LOSS
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P Mid Cap 400 (10 contracts) Long 12/15/2000 $ 2,726,500 $ (53,600)
NASDAQ 100 (23 contracts) Long 12/16/2000 8,328,300 (683,755)
---------
$(737,355)
=========
</TABLE>
At September 30, 2000, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
(6) 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 $35 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 year ended September
30, 2000, expense related to the commitment fee was $1,424 for the
Portfolio.
During the year ended September 30, 2000, the Portfolio had no borrowings
under the credit facility.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Master Portfolio and the Investors of
Standish Small Cap Growth Portfolio (formerly, Standish Small Capitalization
Equity Portfolio II):
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 supplemental data present fairly, in all material
respects, the financial position of Standish Small Cap Growth Portfolio
(formerly, Standish Small Capitalization Equity Portfolio II) (the "Portfolio"),
at September 30, 2000, and the results of its operations, the changes in its net
assets and the supplemental data for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and supplemental data (hereafter referred to
as "financial statements") are the responsibility of the Portfolio'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 of
America, 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 by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2000, by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
25
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.221.4795
00-361
<PAGE>
[LOGO] STANDISH FUNDS(R)
Standish Small Cap
Financial Report Value Fund
-----------------------------------------------------
Period Ended
September 30, 2000
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
FINANCIAL STATEMENTS FOR THE PERIOD ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted H. Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
MANAGEMENT DISCUSSION AND ANALYSIS
From inception on February 1, 2000 through the end of September, the Standish
Small Cap Value Fund produced a 26.98% total return. This compares very
favorably to the benchmark Russell 2000 Value Index's 16.66% over the same time.
The strong returns for the Fund are the result of our focus on undervalued
stocks that have begun to experience an upswing in business momentum. We begin
our stock selection process by using computer models to screen the universe of
candidates for those stocks with the best combination of lower valuation and
better business momentum (e.g., earnings surprise and estimate trend). Using
this list of ranked candidates our analysts work to find those stocks that have
the best chance to maintain the business momentum. When we are successful, the
stock's price goes up for two reasons: earnings grow and the multiple investors
are willing to pay for those earnings expands. The process has worked very well
this year.
Especially important to the Fund's performance were stocks that benefited in a
derivative manner from the exciting growth areas of the economy. These
"derivative plays" allow the Fund to participate in the important transitions
taking place in the economy without paying exorbitant valuations that "pure
play" investments require. For example, it is no secret that one of the
revolutionary changes in the economy has been the Internet. With this phenomenon
has come a sharply increased demand for electricity as consumers and companies
are on-line all the time. One of the Fund's better performing investments has
been in a company that supplies pipes to the power generation industry. This
stock, even though its business was a beneficiary of the Internet trend, sold at
a fraction of the p/e multiple of most e-commerce and Internet companies.
During the year we witnessed a significant shift in small cap investors'
sentiment away from growth toward value. Investors have been increasingly wary
of the very high growth rates needed to justify the high p/e ratios that many
growth stocks command. This has benefited the Fund as investors have turned
their focus to the under-appreciated small cap value sector of the market. This
shift in sentiment has been accompanied by substantial volatility in both the
overall market and between the growth and value components of the market. In the
latter stages of the year, the spread between small cap growth and value returns
averaged 8% per month and fluctuated month by month between growth and value.
Looking ahead, we expect the volatility to continue. We do expect that
performance will continue to be positive, but probably not as exciting as it has
been in the Fund's first year. In addition, we anticipate that the relationship
between growth and value will stabilize and that value will provide superior
returns over the intermediate term. We will continue to focus on identifying
undervalued companies with improving businesses. We will continue to utilize
both quantitative and traditional types of analysis to uncover the most
promising investments. We believe that this will prove to be a winning strategy,
not only in the near term, but over the entire market cycle.
Sincerely,
/s/ Joseph R. Corrado /s/ Stephanie K. Scherer
Joseph R. Corrado Stephanie K. Scherer
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SMALL CAPITALIZATION VALUE FUND
AND THE RUSSELL 2000 VALUE INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish Russell
Small Cap 2000
Value Value
Fund Index
------- -------
Jan-00 100,000 100,000
Feb-00 110,045 106,110
Mar-00 117,919 106,609
Apr-00 118,643 107,238
May-00 113,484 105,597
Jun-00 118,912 108,680
Jul-00 118,731 112,302
Aug-00 126,072 117,323
Sep-00 126,979 116,654
--------------------------------------------------------------------------------
Total Return
(for periods ended 9/30/00)
Since Inception
3 Month 6 Month 02/01/00
----------- --------- -----------------
6.78% 7.68% 26.98%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$3,146,869) $3,746,268
Cash 102,805
Interest and dividends receivable 6,114
Prepaid expenses 3,098
----------
Total assets 3,858,285
LIABILITIES
Payable for investments purchased $62,146
Accrued accounting, custody and transfer agent fees 10,257
Accrued trustees' fees and expenses (Note 2) 1,097
Accrued expenses and other liabilities 20,976
-------
Total liabilities 94,476
----------
NET ASSETS $3,763,809
==========
NET ASSETS CONSIST OF:
Paid-in capital $2,871,776
Accumulated net realized gain 287,624
Undistributed net investment income 5,010
Net unrealized appreciation 599,399
----------
TOTAL NET ASSETS $3,763,809
==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 268,733
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 14.01
==========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 1, 2000 (COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income $ 26,672
Interest income 2,252
--------
Total investment income 28,924
EXPENSES
Investment advisory fee (Note 2) $15,451
Accounting, custody, and transfer agent fees 38,050
Legal and audit services 24,250
Registration fees 4,575
Trustees' fees and expenses (Note 2) 2,250
Insurance expense 953
Miscellaneous 1,725
-------
Total expenses 87,254
Deduct:
Waiver of investment advisory fee (Note 2) (15,451)
Reimbursement of Fund operating expenses (Note 2) (52,490)
-------
Total expense deductions (67,941)
-------
Net expenses 19,313
--------
Net investment income 9,611
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 287,624
-------
Net realized gain 287,624
Change in unrealized appreciation (depreciation)
Investment securities 363,247
-------
Net change in unrealized appreciation
(depreciation) 363,247
--------
Net realized and unrealized gain 650,871
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS $660,482
========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 1, 2000
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 2000
------------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 9,611
Net realized gain 287,624
Net change in unrealized appreciation (depreciation) 363,247
----------
Net increase in net assets from investment operations 660,482
----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income (4,601)
----------
Total distributions to shareholders (4,601)
----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Proceeds from shares issued in reorganization of Standish
U.S. Small Cap Value Fund L.P. 1,936,087
Net proceeds from sale of shares 1,257,916
Value of shares issued to shareholders in payment of
distributions declared 3,941
Cost of shares redeemed (90,016)
----------
Net increase in net assets from Fund share transactions 3,107,928
----------
TOTAL INCREASE IN NET ASSETS 3,763,809
NET ASSETS
At beginning of period --
----------
At end of period (including undistributed net investment
income of $5,010) $3,763,809
==========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 1, 2000
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 2000
----------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.05
------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.04(1)
Net realized and unrealized gain on investments 2.94
------
Total from investment operations 2.98
------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.02)
------
Total distributions to shareholders (0.02)
------
NET ASSET VALUE, END OF PERIOD $14.01
======
TOTAL RETURN+++ 26.98%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.00%+
Net Investment Income (to average daily net assets)* 0.50%+
Portfolio Turnover 71%++
Net Assets, End of Period (000's omitted) $3,764
<FN>
----------
* 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 net investment loss per share and ratios would have been:
</FN>
Net investment loss per share $(0.26)(1)
Ratios (to average daily net assets):
Expenses 4.51%+
Net investment loss (3.01)%+
</TABLE>
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-------------------------------------------------------------------------------
EQUITIES -- 99.5%
BASIC INDUSTRY -- 5.4%
Centec Construction Products 900 $ 22,331
Cytec Industries, Inc.* 1,300 43,469
Georgia Gulf Corp. 1,100 12,581
Hexcel Corp.* 2,700 36,112
OM Group, Inc. 1,000 43,625
Steel Dynamics* 1,300 11,944
Westvaco Corp. 1,300 34,694
----------
204,756
----------
CAPITAL GOODS -- 10.2%
C&D Technology, Inc. 1,100 62,425
Cable Design Technologies Corp.* 1,350 32,822
Dycom Industries, Inc.* 1,000 41,625
Landstar System, Inc.* 400 17,850
Littelfuse, Inc.* 1,100 32,656
OMI Corp.* 4,800 40,200
Peco II, Inc.* 1,200 56,175
Shaw Group, Inc.* 800 56,400
Ultimate Electronics, Inc.* 1,100 45,237
----------
385,390
----------
CONSUMER STABLE -- 5.4%
Adolph Coors Co. 1,000 63,187
Constellation Brands, Inc., Class A* 600 32,587
Flowers Industries, Inc. 1,600 31,200
Hain Celestial Group, Inc.* 800 28,100
McCormick & Co., Inc. 600 17,850
Universal Foods Corp. 1,400 28,525
----------
201,449
----------
EARLY CYCLICAL -- 1.7%
Crossmann Communities, Inc.* 900 17,775
NVR, Inc.* 400 32,400
Salton, Inc.* 400 12,925
----------
63,100
----------
ENERGY -- 4.4%
Cabot Oil & Gas Corp., Class A 1,500 30,562
Cascade Natural Gas 1,400 24,500
Devon Energy Corp. 600 36,090
Equitable Resources, Inc. 600 38,025
Vintage Petroleum, Inc. 1,600 36,400
----------
165,577
----------
FINANCIAL -- 15.4%
Affiliated Managers Group, Inc.* 1,100 62,631
Americredit* 1,300 37,456
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Andover Bancorp, Inc. 1,000 $ 30,500
Blackrock, Inc.* 1,300 41,600
Commonwealth Bancorp, Inc. 1,500 21,750
Dime Bancorp, Inc. 1,600 34,500
Federated Investors, Inc., Class B 1,300 32,175
FirstFed Financial Corp.* 1,300 29,900
Hudson United Bancorp 1,300 35,913
Investment Technology Group* 1,000 39,937
Northfork Bancorp 1,800 38,925
Pacific Century Financial Corp. 2,300 39,387
Renaissance Re Holdings Ltd. 600 38,362
Texas Regional Bancshares, Class A 900 25,537
The PMI Group, Inc. 700 47,425
Webster Financial Corp. 900 24,244
----------
580,242
----------
GROWTH CYCLICAL -- 10.2%
BJ's Wholesale Club, Inc.* 600 20,475
Barnes & Noble, Inc.* 1,900 37,406
Cost Plus, Inc.* 900 27,112
Linens 'N Things, Inc.* 3,100 79,050
MGM Grand, Inc. 900 34,369
Neiman Marcus Group Inc., Class A* 1,300 42,169
Rare Hospitality International, Inc.* 2,250 45,844
Saks, Inc.* 2,400 23,700
THQ, Inc.* 1,100 25,575
Talbots, Inc. 500 33,125
Zale Corp.* 500 16,219
----------
385,044
----------
HEALTH CARE -- 9.4%
Alpharma, Inc. 900 55,013
Bindley Western Industries, Inc. 1,366 43,712
C.R. Bard, Inc. 900 38,025
Lincare Holdings, Inc.* 1,200 34,425
Quest Diagnostics, Inc.* 500 57,375
Rehabcare Corp.* 1,800 76,500
Zoll Medical Corp.* 1,000 48,750
----------
353,800
----------
OTHER -- 3.9%
S&P 400 Mid-Cap Depositary Receipts 1,500 147,375
----------
REAL ESTATE -- 8.2%
CBL & Associates Properties, REIT 1,600 40,100
General Growth Properties, REIT 1,100 35,406
Glimcher Realty Trust, REIT 2,300 34,356
Liberty Property Trust, REIT 1,500 41,250
Mack-Cali Realty Corp., REIT 1,600 45,100
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-------------------------------------------------------------------------------
REAL ESTATE (CONTINUED)
Parkway Properties, Inc., REIT 900 $ 27,450
Prentiss Properties Trust, REIT 1,600 41,800
Rouse Co., REIT 1,700 42,394
----------
307,856
----------
SERVICES -- 8.7%
ACNielsen Corp.* 1,500 35,719
Advo Systems* 900 29,700
Copart, Inc.* 2,700 37,463
Hall Kinion & Associates, Inc.* 1,300 36,969
Quanta Services, Inc.* 800 22,000
Readers Digest Association, Inc. 1,000 35,313
SEI Investment Co. 1,000 70,750
United Stationers* 1,500 40,313
Valassis Communications, Inc.* 900 20,025
----------
328,252
----------
TECHNOLOGY -- 11.3%
Amphenol Corp., Class A* 900 51,244
Black Box Corp.* 700 32,638
Brooktrout, Inc.* 900 29,644
Cyberoptics Corp.* 1,000 18,313
Diebold, Inc. 1,200 31,875
Electro Scientific Industries* 600 21,075
Infocus Systems, Inc.* 1,300 68,900
NetScout Systems, Inc.* 2,500 59,375
Plantronics, Inc.* 800 30,400
Plexus Corp.* 800 56,400
Westell Technologies, Inc., Class A* 1,900 24,463
----------
424,327
----------
UTILITIES -- 5.3%
Cleco Corp. 1,000 46,750
Energy East Corp. 1,600 36,200
NRG Energy, Inc.* 2,300 83,950
NSTAR 800 32,200
----------
199,100
----------
TOTAL EQUITIES (COST $3,146,869) 3,746,268
TOTAL INVESTMENTS -- 99.5% (COST $3,146,869) $3,746,268
OTHER ASSETS, LESS LIABILITIES -- 0.5% 17,541
----------
NET ASSETS -- 100.0% $3,763,809
==========
NOTES TO SCHEDULE OF INVESTMENTS:
REIT - Real Estate Investment Trust
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE 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 Small Cap Value Fund (the "Fund") is a separate
diversified investment series of the Trust. The Fund commenced operations
on February 1, 2000.
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 accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Securities
(including illiquid securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for amortization
of premium or accretion of discount on long-term debt securities when
required for federal income tax purposes. Dividend income is recorded on
the ex-dividend date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividends representing a return of
capital are reflected as a reduction of cost, when the amount of return of
capital is conclusively determined.
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.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and capital gains distributions, if
any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital,
undistributed net investment income and accumulated net realized gain.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services, and general
office facilities, is paid monthly at the annual rate of 0.80% of the
Fund's average daily net assets. SA&W voluntarily agreed to limit the
Fund's total operating expenses (excluding brokerage commissions, taxes
and extraordinary expenses) to 1.00% of the Fund's average daily net
assets for the period ended September 30, 2000. Pursuant to this
agreement, for the period ended September 30, 2000, SA&W voluntarily did
not impose $15,451 of its investment advisory fee and reimbursed the Fund
for $52,490 of its operating expenses. This agreement is voluntary and
temporary and may be discontinued or revised by SA&W at any time. No
director, officer or employee of SA&W or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of SA&W or its affiliates an annual fee and a per
meeting fee as well as reimbursement for travel and out of pocket
expenses. In addition, the Trust pays the legal fees for the independent
counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended September 30, 2000 were $3,291,823 and
$2,086,467, respectively. For the period ended September 30, 2000, the
Fund did not purchase or sell any U.S. Government securities.
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(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>
FOR THE PERIOD
FEBRUARY 1, 2000
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 2000
------------------
<S> <C>
Shares issued in reorganization of Standish U.S. Small Cap
Value Fund L.P. 175,148
Shares sold 100,428
Shares issued to shareholders in payment of distributions
declared 297
Shares redeemed (7,140)
--------
Net increase 268,733
========
</TABLE>
The Fund commenced operations with an initial tax-free contribution of
assets and liabilities, including securities-in-kind from Standish U.S.
Small Cap Value Fund L.P. (the "Partnership"). On the date of
contribution, the Partnership had net assets of $1,936,087 including
unrealized appreciation of $236,152.
At September 30, 2000, two shareholders held of record approximately 18%
and 11% of the total outstanding shares of the Fund, respectively. In
addition, two officers of SA&W held of record approximately 11% and 7% of
the total outstanding shares of the Fund at September 30, 2000. Investment
activity of these shareholders could have a material impact on the Fund.
A significant portion of the Fund's shares represent investments by
fiduciary accounts over which SA&W and its affiliates have either sole or
joint investment discretion.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000, as computed on a
federal income tax basis, were as follows:
Aggregate Cost $3,146,869
==========
Gross unrealized appreciation 748,741
Gross unrealized depreciation (149,342)
----------
Net unrealized appreciation $ 599,399
==========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these instruments are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Fund's exposure to the underlying instrument. Buying puts
and writing calls tend to decrease the Fund's
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
exposure to the underlying instrument, or hedge other Fund investments.
Options, both held and written by the Fund, are reflected in the
accompanying Statement of Assets and Liabilities at market value. The
underlying face amount at value of any open purchased options is shown in
the Schedule of Investments. This amount reflects each contract's exposure
to the underlying instrument at period end. Losses may arise from changes
in the value of the underlying instruments if there is an illiquid
secondary market for the contract or if the counterparty does not perform
under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
The Fund entered into no such transactions for the period ended September
30, 2000.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts.
At September 30, 2000, the Fund held no open futures contracts.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Small Cap Value 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 Small Cap Value Fund (the "Fund") at September 30, 2000, and the
results of its operations, the changes in its net assets and the financial
highlights for the period from February 1, 2000 (commencement of operations) to
September 30, 2000, in conformity with accounting principles generally accepted
in the United States of America. 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 audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, 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 audit, which include confirmation of securities at September
30, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
16
<PAGE>
[This page intentionally left blank]
<PAGE>
[LOGO] STANDISH FUNDS(R)
One Financial Center
Boston, MA 02111-2662
www.standishonline.com
800.729.0066
00-358
<PAGE>
[LOGO] STANDISH FUNDS(R)
Financial Report
--------------------------------------------------------------------
Year Ended Standish Massachusetts Intermediate
September 30, 2000 Tax Exempt Bond Fund
Standish Intermediate Tax Exempt
Bond Fund
Standish Small Cap Tax-Sensitive
Equity Fund
Standish Tax-Sensitive Equity Fund
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND,
STANDISK INTERMEDIATE TAX EXEMPT BOND FUND,
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND,
STANDISH TAX-SENSITIVE EQUITY FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2000
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
Chairman's Message.............................................2
Selected Financial Information.................................3
Performance Highlights.........................................4
Management Discussion and Analysis:
Standish Massachusetts Intermediate Tax Exempt Bond Fund...5
Standish Intermediate Tax Exempt Bond Fund.................5
Standish Small Cap Tax-Sensitive Equity Fund...............7
Standish Tax-Sensitive Equity Fund.........................9
Statements of Assets and Liabilities..........................11
Statements of Operations......................................12
Statements of Changes in Net Assets:
Standish Massachusetts Intermediate Tax Exempt Bond Fund..13
Standish Intermediate Tax Exempt Bond Fund................14
Standish Small Cap Tax-Sensitive Equity Fund..............15
Standish Tax-Sensitive Equity Fund........................16
Financial Highlights:
Standish Massachusetts Intermediate Tax Exempt Bond Fund..17
Standish Intermediate Tax Exempt Bond Fund................18
Standish Small Cap Tax-Sensitive Equity Fund..............19
Standish Tax-Sensitive Equity Fund........................20
Schedule of Investments:
Standish Massachusetts Intermediate Tax Exempt Bond Fund..21
Standish Intermediate Tax Exempt Bond Fund................25
Standish Small Cap Tax-Sensitive Equity Fund..............29
Standish Tax-Sensitive Equity Fund........................32
Notes to Financial Statements.................................35
Report of Independent Accountants.............................41
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
November 27, 2000
Dear Standish Funds Shareholder:
Enclosed you will find the annual report for your Standish Fund(s) for the
fiscal year ended September 30, 2000.
A superficial glance at the net returns from major financial assets this past
year would suggest that markets have been fairly tranquil. On balance, U.S.
equities as represented by the Standard & Poor's 500 index had a small negative
return, and international equities dropped more sharply, largely because of
currency depreciation relative to the dollar. Most categories of U.S. bonds
(such as those included in the Lehman Aggregate) registered positive returns in
the mid single digits. However, net returns during the last twelve months do not
reveal the extensive gyrations that have occurred during the period. In the
equity markets, strong price advances during late 1999 and early 2000
(especially among technology stocks) gave way to pervasive weakness starting in
early March. The technology sector has suffered the most. In the bond markets,
Treasury yields have been fairly stable, but medium- and low-grade corporate
bond markets have retreated and become illiquid.
As backdrop, economic growth has remained positive, corporate profits have,
until recently, been quite strong, core inflation has been subdued, and the
dollar has gained at the expense of the euro and yen. What could account for
equity market turbulence? We attribute the volatility partly to evidence of
decelerating economic growth induced by a tighter Federal Reserve policy, the
diminished benefit to consumers of the "wealth effect" and the erosion of real
purchasing power due to rising energy prices. This slowing of economic growth
has also raised concerns about corporate profit margins. Lastly and most
importantly, the equity markets had become quite frothy and momentum driven with
relatively little attention being paid to earnings and investment fundamentals.
We believe the deceleration in economic growth is quite healthy--the U.S.
economy was running too hot. However, it would be unhealthy for the weakness to
develop into a recession. The primary risks of a "hard landing" would appear to
be a further material unwinding of the wealth effect and/or additional gridlock
in the capital markets and constrictions on the availability of risk credit.
The last twelve months prove once again that markets often overdiscount events,
that trend-following investors can get whipsawed, and that, in the long run,
fundamentals and valuation do matter. We at Standish are dedicated to
disciplined investment philosophies and are proud of our consistent focus on
fundamental investment research and valuation.
We appreciate the opportunity to serve you and hope you will find the attached
helpful.
Sincerely yours,
/s/ Ted H. Ladd
Edward H. Ladd
Chairman, Standish, Ayer & Wood, Inc.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
SELECTED FINANCIAL INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDISH
MASSACHUSETTS STANDISH STANDISH
INTERMEDIATE INTERMEDIATE SMALL CAP STANDISH
TAX EXEMPT TAX EXEMPT TAX-SENSITIVE TAX-SENSITIVE
BOND FUND BOND FUND EQUITY FUND EQUITY FUND
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 20.85 $ 21.11 $ 40.70 $ 36.99
------- ------- -------- -------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* 0.92 0.95 (0.39) 0.31
Net realized and unrealized gain on
investments 0.04 0.06 33.65 4.12
------- ------- -------- -------
Total income from investment operations 0.96 1.01 33.26 4.43
------- ------- -------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.92) (0.95) -- (0.24)
From net realized gain on investments -- (0.06) (10.64) --
------- ------- -------- -------
Total distributions to shareholders (0.92) (1.01) (10.64) (0.24)
------- ------- -------- -------
NET ASSET VALUE, END OF YEAR $ 20.89 $ 21.11 $ 63.32 $ 41.18
======= ======= ======== =======
TOTAL RETURN+++ 4.72% 4.91% 86.20% 12.00%
RATIOS:
Expenses (to average daily net assets)* 0.65% 0.64% 0.87% 0.54%
Net investment income (loss) (to average
daily net assets)* 4.43% 4.54% (0.60)% 0.79%
Portfolio Turnover 23% 28% 182% 50%
Net Assets, End of Year (000's omitted) $64,340 $79,329 $215,201 $31,682
</TABLE>
-----------------
* The investment adviser voluntarily did not impose a portion of its fee.
Please refer to the Financial Highlights for additional disclosure
regarding these ratios.
+++ Total return would have been lower in absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
PERFORMANCE HIGHLIGHTS
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 2000
TOTAL RETURN
--------------------------------------------------------------------------------
TAX EXEMPT FUNDS
Standish Mass. Intermediate Tax Exempt Bond Fund 4.72%
Standish Intermediate Tax Exempt Bond Fund 4.91%
Lehman Muni 3-5-7-10 Index 5.27%
Lipper Intermediate Muni Debt Index 4.82%
TAX-SENSITIVE FUNDS
Standish Small Capitalization Tax-Sensitive Equity Fund 86.20%
Russell 2000 Growth Index 29.66%
Standish Tax-Sensitive Equity Fund 12.00%
S&P 500 Index 13.29%
The S&P 500 Index is generally considered to be representative of the
performance of unmanaged common stocks publicly traded on the U.S. markets.
The Russell 2000 Index is generally considered to be representative of unmanaged
small capitalization stocks in the U.S. markets. The Russell 2000 Growth Index
contains those Russell 2000 securities with a greater-than-average growth
orientation. Securities in this index tend to exhibit higher price-to-book and
price-earnings ratios, lower dividend yields and higher forecasted growth value.
The Lehman Brothers Municipal Bond 3, 5, 7 and 10 Year Index is actually a
subset of a broader index--the Lehman Brothers Municipal Bond Index. The
Municipal Bond Index is unmanaged and designed to be a composite measure of the
total return performance of the municipal bond market, and includes over 33,000
bond issues (rated BBB or better, including bonds in the following sectors:
general obligations, prerefunded, electrics, hospital, state housing, industrial
development/pollution control, and transportation).
The Lipper Intermediate Muni Debt Index consists of the 30 largest intermediate
municipal debt funds, which invest in municipal debt issues with dollar-weighted
average maturities of five to ten years.
Past performance is not predictive of future performance.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
MANAGEMENT DISCUSSION AND ANALYSIS
Over the 12 months ended September 30, 2000, most domestic bond market results
reverted to positive territory. Municipal bonds produced good returns in the
period, and on an after-tax basis outpaced all of the major fixed income
sectors. The Standish Intermediate Tax Exempt Bond Fund generated a total return
for the period of 4.91%, after all expenses. This result slightly trailed the
benchmark performance index (Lehman Muni 3, 5, 7 and 10 Year Index) return of
5.27%. The Fund's return was higher than its peer group of mutual funds: as
measured by the Lipper Intermediate Muni Bond Fund Index, the composite of
competing funds had a total return of 4.82%. The Standish Massachusetts
Intermediate Tax Exempt Bond Fund produced a total return for the 12 months of
4.72%, after all expenses. Please note that the Massachusetts Fund invests only
in bonds that are exempt from Massachusetts and federal income taxes, while the
benchmark index is national in scope.
In the first half of the period, the nation's economy seemed in danger of
overheating, and bond prices generally fell. Bond investors responded negatively
to a stream of data showing rapid expansion of employment, booming retail sales
and explosive manufacturing growth. The Federal Reserve appeared to confirm
these fears by continuing a series of tightenings that ultimately hiked
short-term rates by 175 basis points (bp) to 6.50%. With the final aggressive
rate increase in mid-May, investors were convinced that the central bank was
indeed vigilant in guarding against inflation, and bond prices began an ascent
that lasted through August. Some gains were lost in September as spiking oil
prices triggered a moderate sell-off. Another favorable factor for the bond
markets was the announcement in February that burgeoning federal surpluses would
be used to buy back Treasury bonds. The prospect for the first ever decline in
Treasury bond supply caused long-dated government securities to rally. Municipal
bonds benefited in 2000 from the rally in Treasury securities, and from strong
retail demand and light volume.
INTERMEDIATE TAX EXEMPT BOND FUND
The Fund slightly lagged the Index throughout most of the period. In 2000, bonds
of high tax states with substantial wealth creation, such as California,
performed particularly well. Our underweight position in California bonds was a
modest negative. Perhaps the most significant trend in the municipal bond market
this year is the emergence of individual investors as the dominant source of
demand. More conservative strategies favored by individuals and households were
generally rewarded this year. The portfolio's high average credit quality and
its heavy concentration in intermediate bonds were both positive factors. In
addition, the Fund's investment in housing bonds provided excess yield which
boosted returns.
MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
Heavy financing requirements for the Central Artery project (the Big Dig) and
the Massachusetts Bay Transportation Authority (MBTA) exerted downward pressure
on the Massachusetts market this year. As a result, returns in the Massachusetts
portfolio were below those in the national portfolio. As in the Intermediate Tax
Exempt Bond Fund, the conservative risk profile was positive for performance. An
overweight position in health care bonds hurt performance, as the health care
industry remained difficult.
Our outlook for both portfolios is positive. At current yields, we believe
municipal bonds offer the potential for attractive taxable-equivalent returns
with much less volatility than equity investments. The Funds will continue to
emphasize a relatively conservative strategy emphasizing high-grade bonds and a
duration target close to that of the benchmark. Rising federal and state tax
burdens, especially for higher-income taxpayers, makes tax-exempt income an
increasingly valuable investment goal. Our strategy for the portfolios seeks
higher tax-exempt income by focusing on the careful selection of securities and
sectors.
It has been our privilege to manage the Funds for the past eight years. We thank
you for your continued support of the Standish Tax Exempt Bond Funds.
Sincerely,
/s/ Maria D. Furman /s/ Raymond J. Kubiak
Maria D. Furman Raymond J. Kubiak
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND,
THE LEHMAN MUNI 3-5-7-10 INDEX, AND THE LIPPER INTERMEDIATE MUNI DEBT INDEX
[The following information was represented by a line chart in the printed
material.]
Standish
Massachusetts Lipper
Intermediate Lehman Muni Intermediate
Tax Exempt 3-5-7-10 Muni Debt
Fund Index Index
------------- ----------- ------------
100000 100000 100000
101305 101290 101680
102271 102141 102575
103357 103448 103754
106612 106241 106867
105229 105147 105649
106229 105873 106504
106517 106201 106856
108089 107762 108309
108333 107870 108266
110126 109552 110193
111047 110517 111449
1 Year 111453 110760 111628
110850 110106 110947
112755 111901 112766
114008 113020 113928
111819 110906 111512
108020 108189 108390
108815 109011 108845
109620 109633 109705
109114 109457 109387
110452 110848 110754
110814 111335 111175
109664 110433 110030
2 Year 108348 109506 108820
106924 108290 107198
108420 109611 108796
110702 111398 110906
112714 113593 113213
113693 114819 114209
113792 115141 114461
116267 117870 117150
115984 117781 116787
117232 119260 117850
118537 120521 119005
119107 120988 119600
3 Year 120378 121928 120736
121656 123148 122016
122127 123788 122797
122871 124952 123755
122408 124636 123371
121361 123655 122125
121021 123525 121905
121211 123407 121881
122293 124305 122624
123029 125259 123691
123036 125350 123703
124205 126403 124755
4 Year 125492 127639 125915
127445 129528 127741
127093 129239 127345
127352 129734 127651
128291 130704 128582
126833 129318 127232
127649 130004 127868
129137 131538 129352
130328 132656 130516
133077 135335 133322
132137 134523 132242
133584 135855 133591
5 Year 134337 136561 134179
134970 137043 134674
136490 138533 136353
137821 139825 137499
137821 139982 137540
137937 140045 137567
137409 139454 136893
139331 141301 138728
139641 141771 139149
139949 142197 139466
141891 144138 141474
143530 145737 142974
6 Year 143569 146087 142977
143943 146449 143291
144377 146855 143750
146207 148676 145360
145380 148137 144589
145272 148171 144561
145568 148585 144951
144918 147939 144096
142714 146075 142136
143559 146973 142797
142900 146782 142154
YTD 143269 147314 142240
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 5 Year 11/02/1992
------ ------ ------ ----------
4.72% 3.95% 4.73% 5.26%
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND,
THE LEHMAN MUNI 3-5-7-10 INDEX, AND THE LIPPER INTERMEDIATE MUNI DEBT INDEX
[The following information was represented by a line chart in the printed
material.]
Standish Lipper
Intermediate Lehman Muni Intermediate
Tax Exempt 3-5-7-10 Muni Debt
Fund Index Index
------------- ----------- ------------
100000 100000 100000
101801 101290 101680
102793 102141 102575
104194 103448 103754
107837 106241 106867
106346 105147 105649
107351 105873 106504
107657 106201 106856
109142 107762 108309
109502 107870 108266
111260 109552 110193
112344 110517 111449
1 Year 112618 110760 111628
112004 110106 110947
113872 111901 112766
114967 113020 113928
112863 110906 111512
109373 108189 108390
110287 109011 108845
111348 109633 109705
111196 109457 109387
112496 110848 110754
112980 111335 111175
112274 110433 110030
2 Year 111216 109506 108820
109615 108290 107198
110830 109611 108796
112944 111398 110906
114912 113593 113213
115946 114819 114209
116141 115141 114461
118555 117870 117150
118214 117781 116787
119290 119260 117850
120782 120521 119005
121480 120988 119600
3 Year 122643 121928 120736
124158 123148 122016
124848 123788 122797
125763 124952 123755
125219 124636 123371
124321 123655 122125
124238 123525 121905
124341 123407 121881
125453 124305 122624
126454 125259 123691
126558 125350 123703
127879 126403 124755
4 Year 129190 127639 125915
131226 129528 127741
130795 129239 127345
131197 129734 127651
132209 130704 128582
130777 129318 127232
131799 130004 127868
133387 131538 129352
134662 132656 130516
137839 135335 133322
136979 134523 132242
138456 135855 133591
5 Year 139106 136561 134179
139753 137043 134674
141349 138533 136353
142706 139825 137499
142711 139982 137540
142681 140045 137567
142290 139454 136893
143984 141301 138728
144514 141771 139149
144846 142197 139466
146761 144138 141474
148481 145737 142974
6 Year 148477 146087 142977
148666 146449 143291
148992 146855 143750
150798 148676 145360
149890 148137 144589
150002 148171 144561
150312 148585 144951
149526 147939 144096
147429 146074 142136
148097 142797 142797
147515 142154 142154
YTD 147988 142240 142240
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 5 Year 11/02/1992
------ ------ ------ ----------
4.91% 3.89% 5.03% 5.71%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICITIVE OF FUTURE PERFORMANCE.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
The Standish Small Cap Tax Sensitive Fund produced an 86.20% return during the
fiscal year ended September 30, 2000. This strong showing easily surpassed the
benchmark Russell 2000 Growth Index's return of 29.66%. This mark's the second
consecutive year of exceptionally strong returns on both an absolute and
relative basis.
The net returns for the year have obviously been quite rewarding, but the path
to that end result has not been smooth. Our superior relative performance has
generally come from above market returns in the up markets and essentially
in-line performance when the market is in a downdraft. The fiscal year began
with a tremendous surge of investor enthusiasm for small cap growth
companies--especially in the technology, biotechnology and business service
areas on which the Fund has historically focused. Our focus on these fastest
growing segments and excellent stock selection within those segments has allowed
the fund to again outperform the benchmark. The wave of enthusiasm crested in
early March of 2000, and the market for small cap growth companies has been very
turbulent since that crest. March, April and May were very difficult months for
the market, and the Fund was not immune from the difficulty. However, the Fund
bounced back along with the market in June. Since June performance has
fluctuated greatly from month to month.
Throughout these turbulent times, we have maintained our focus on investing in
the highest growth areas of the economy--technology, health care and services.
We have continued to invest in companies with excellent business positions,
solid management teams, strong balance sheets, and the potential to grow 20% or
more on an annualized basis. The environment for these companies is extremely
competitive and the landscape changes dramatically in a short period of time.
Therefore, we are continually on the alert to re-position the Fund in the best
areas for growth. This strategy has proven to be very successful over the long
term, but can be highly volatile. The Fund experienced both the success and the
volatility of this strategy during the fiscal year.
Looking ahead, we expect positive returns for the Fund, albeit with continued
substantial volatility. Not surprisingly, we do not anticipate the same type of
extraordinary absolute returns that we witnessed in the last two fiscal years.
The small cap growth market has produced outstanding performance over the past
few years, and it is probable, if not inevitable, that the market will cool off
at some point in the future. We will continue to invest in the high growth
sectors of the economy, and in companies within those sectors that we believe
will provide the best performance for the Fund.
Sincerely,
/s/ Nevin B. Markwart
Nevin B. Markwart
Note: In August of 2000, Nevin Markwart assumed portfolio management
responsibilities for the Fund. Nevin is an associate director of Standish and
has been a member of our tax-sensitive equity group since 1994. Nevin received
his MBA from Northeastern University and is a Chartered Financial Analyst.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH SMALL CAPITALIZATION TAX-SENSITIVE EQUITY FUND
AND THE RUSSELL 2000 GROWTH INDEX
[The following information was represented by a line chart in the printed
material.]
Standish
Small Russell
Capitalization 2000
Tax-Sensitive Growth
Equity Fund Index
-------------- --------
100000 100000
99750 99172
102750 103694
107550 105744
120900 113862
128800 119701
120750 111923
104386 98259
113194 105534
117948 110969
111292 106181
112994 109134
1 Year 121231 111262
126141 114042
117174 107155
108557 99593
108407 98438
125990 113233
135058 117071
142221 123065
146880 126757
163362 136873
151990 128652
152491 125585
2 Year 149858 125655
147189 123979
161188 134925
168288 140585
174432 141447
161188 131171
163756 132511
151671 121447
117127 93417
130421 102889
137269 108260
148549 116661
3 Year 165821 127219
181532 132944
165116 120779
186769 125079
189488 136124
189186 136339
206861 143524
200365 139089
201271 133887
204796 136471
217184 139965
256713 154759
4 Year 332765 182043
217184 139965
256713 154759
332765 182043
347597 180350
490956 222317
409302 198952
348113 178858
299121 163190
377054 184274
342635 168482
394645 186206
5 Year 381323 176951
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 01/02/1996
------ ------ ----------
86.20% 32.65% 32.55%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICITIVE OF FUTURE PERFORMANCE.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
The Standish Tax-Sensitive Equity Fund narrowly trailed the Standard & Poor 500
Index over the past 12 months, returning 12.00% vs. 13.29% for the broader
market. This entire shortfall was attributable to the fourth quarter, 1999. Our
investment style, which focuses on both growth and the valuation paid for
companies in our portfolio, returned to favor among investors and the Fund
outperformed the Index during the year 2000.
The U.S. economy has been extremely supportive to equity investments over the
past 12 months. GDP growth and corporate profits were stronger than anticipated
and there is no recession in sight. The dollar is strong, inflation is tame and
consumer optimism remains near all-time highs. The main concerns are whether the
Federal Reserve Bank can slow the economy before inflation begins to take hold
and whether this slowing can result in a soft landing for the economy, without
triggering a recession. The odds are long, but the limited evidence to date
supports that the Fed is succeeding.
Good returns during the past 12 months came from several sectors of the
portfolio including healthcare, financial services and real estate companies.
Good returns from financial services and real estate were driven by both good
earnings growth and low valuations. Healthcare stocks managed to shrug off
election year rhetoric, as investors focused on the reliable earnings growth
provided by this sector, even in the event of an economic downturn. Amgen,
Medtronic and Elan--a Dublin-based pharmaceutical--returned 71%, 47% and 45%,
respectively. Surprisingly, the portfolio's two best performances came in the
technology sector. Although this segment weakened as the year progressed, the
fourth quarter of 1999 was so strong that Sun Microsystems and SCI Systems
returned 137% and 87% over the past 12 months.
Future returns will be decided by the course of the economy, but also by which
stocks are favored by most investors, who have recently turned away from the
narrow group of technology and telecom stocks which have dominated market
returns for the past several years. It is our conviction that these segments of
the market remain overvalued. Our strategy is to emphasize companies with solid
current earnings and we believe that this means that the outlook for our Fund
remains excellent.
Sincerely,
/s/ Laurence A. Manchester /s/ Richard R. Davis /s/ Susan B. Coan
Laurence A. Manchester Richard R. Davis Susan B. Coan
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH TAX-SENSITIVE EQUITY FUND AND THE S&P 500 INDEX
[The following information was represented by a line chart in the printed
materials.]
Standish
Tax-Sensitive S&P 500
Equity Fund Index
----------- -----
100000 100000
103400 103404
105950 104363
106600 105368
109050 106921
110950 109678
110250 110096
105763 105232
111813 107451
118971 113499
120836 116629
129608 125445
1 Year 130612 122960
138785 130642
138227 131667
134369 126257
140511 133781
151425 141929
157671 148287
173188 160091
169870 151126
179875 159407
174362 154083
178547 161217
2 Year 180077 163986
180231 165799
195446 177758
208100 186861
207230 188741
202209 185496
204522 193031
199690 190976
161191 163365
167051 173830
182728 187962
194550 199353
3 Year 207743 210836
208568 219649
193103 212817
193000 221330
201403 229896
204960 224475
211780 236933
204388 229543
198030 228345
191207 222135
195859 236192
203406 240994
4 Year 210827 255188
195859 236192
203406 240994
210827 255188
199414 242367
196042 237787
216689 261049
209478 253194
210620 247999
213580 254112
208588 250140
224605 265676
5 Year 214152 251651
--------------------------------------------------------------------------------
Average Annual Total Return
(for periods ended 9/30/00)
Since
Inception
1 Year 3 Year 01/02/1996
------ ------ ----------
12.00% 5.99% 17.39%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICITIVE OF FUTURE PERFORMANCE.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MASSACHUSETTS
INTERMEDIATE INTERMEDIATE SMALL CAP
TAX EXEMPT TAX EXEMPT TAX-SENSITIVE TAX-SENSITIVE
BOND FUND BOND FUND EQUITY FUND EQUITY FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (Note 1A)* $ 63,190,568 $ 78,787,575 $ 216,711,283 $ 31,682,119
Cash -- 228,049 3,030,103 330,294
Receivable for investments sold -- 100,000 13,337,020 --
Receivable for Fund shares sold 300,000 -- 56,770 --
Receivable from investment adviser (Note 2) -- -- 152 --
Interest and dividends receivable 1,012,899 1,354,747 5,718 35,717
Receivable for variation margin on open
financial futures contracts (Note 6) -- -- -- 13,890
Deferred organization costs (Note 1E) -- -- 977 986
Prepaid expenses 4,959 10,428 17,626 7,597
--------------- --------------- --------------- ---------------
Total assets 64,508,426 80,480,799 233,159,649 32,070,603
LIABILITIES
Payable for investments purchased -- 228,049 8,675,319 348,975
Payable for Fund shares redeemed -- 160,071 8,907,126 --
Payable for variation margin on open
financial futures contracts (Note 6) -- -- 302,200 --
Distributions payable 123,653 152,626 -- --
Payable for delayed delivery transactions
(Note 7) -- 560,605 -- --
Accrued accounting, custody and transfer
agent fees 17,278 19,702 38,413 11,823
Accrued trustees' fees and expenses (Note
2) 1,590 1,990 3,486 1,215
Payable to investment adviser (Note 2) -- -- -- 71
Accrued expenses and other liabilities 26,264 28,321 32,492 26,377
--------------- --------------- --------------- ---------------
Total liabilities 168,785 1,151,364 17,959,036 388,461
--------------- --------------- --------------- ---------------
NET ASSETS $ 64,339,641 $ 79,329,435 $ 215,200,613 $ 31,682,142
=============== =============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital $ 64,889,740 $ 80,180,394 $ 110,889,858 $ 25,295,461
Accumulated net realized gain (loss) (531,294) (759,905) 25,703,547 (1,081,097)
Undistributed net investment income 1,180 8,246 -- 97,829
Net unrealized appreciation (depreciation) (19,985) (99,300) 78,607,208 7,369,949
--------------- --------------- --------------- ---------------
TOTAL NET ASSETS $ 64,339,641 $ 79,329,435 $ 215,200,613 $ 31,682,142
=============== =============== =============== ===============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,079,879 3,758,180 3,398,594 769,300
=============== =============== =============== ===============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 20.89 $ 21.11 $ 63.32 $ 41.18
=============== =============== =============== ===============
*Identified cost of investments $ 63,210,553 $ 78,886,875 $ 137,263,274 $ 24,265,492
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MASSACHUSETTS
INTERMEDIATE INTERMEDIATE SMALL CAP
TAX EXEMPT TAX EXEMPT TAX-SENSITIVE TAX-SENSITIVE
BOND FUND BOND FUND EQUITY FUND EQUITY FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income $ 3,130,350 $ 4,112,069 $ 688,172 $ 58,608
Dividend income (net of foreign withholding
taxes of $557 for the Tax-Sensitive
Equity Fund) -- -- 11,829 320,753
--------------- --------------- --------------- ---------------
Total investment income 3,130,350 4,112,069 700,001 379,361
EXPENSES
Investment advisory fee (Note 2) 246,382 317,593 1,898,441 142,657
Accounting, custody and transfer agent fees 105,125 114,304 198,096 66,420
Legal and audit services 28,626 29,223 47,798 28,073
Amortization of organizational expenses
(Note 1E) -- -- 3,774 3,774
Registration fees 1,453 18,750 26,450 16,779
Insurance expense 5,735 7,500 5,215 3,510
Trustees' fees and expenses (Note 2) 6,997 6,467 15,356 4,709
Miscellaneous 7,643 13,199 18,607 5,825
--------------- --------------- --------------- ---------------
Total expenses 401,961 507,036 2,213,737 271,747
Deduct:
Waiver of investment advisory fee (Note 2) -- -- -- (116,253)
--------------- --------------- --------------- ---------------
Total expense deductions -- -- -- (116,253)
--------------- --------------- --------------- ---------------
Net expenses 401,961 507,036 2,213,737 155,494
--------------- --------------- --------------- ---------------
Net investment income (loss) 2,728,389 3,605,033 (1,513,736) 223,867
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions (427,170) (759,905) 81,452,658 893,768
Financial futures contracts -- -- 2,037,139 (41,392)
--------------- --------------- --------------- ---------------
Net realized gain (loss) (427,170) (759,905) 83,489,797 852,376
Change in unrealized appreciation
(depreciation)
Investment securities 539,760 967,186 40,528,530 2,005,949
Financial futures contracts -- -- (718,121) (46,678)
--------------- --------------- --------------- ---------------
Net change in unrealized appreciation
(depreciation) 539,760 967,186 39,810,409 1,959,271
--------------- --------------- --------------- ---------------
Net realized and unrealized gain 112,590 207,281 123,300,206 2,811,647
--------------- --------------- --------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,840,979 $ 3,812,314 $ 121,786,470 $ 3,035,514
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 2,728,389 $ 2,436,564
Net realized gain (loss) (427,170) 172,363
Net change in unrealized appreciation (depreciation) 539,760 (2,765,327)
------------ -----------
Net increase (decrease) in net assets from investment
operations 2,840,979 (156,400)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (2,728,389) (2,436,564)
------------ -----------
Total distributions to shareholders (2,728,389) (2,436,564)
------------ -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 17,811,920 19,533,943
Value of shares issued to shareholders in payment of
distributions declared 1,240,724 1,085,435
Cost of shares redeemed (17,830,975) (8,621,088)
------------ -----------
Net increase in net assets from Fund share
transactions 1,221,669 11,998,290
------------ -----------
TOTAL INCREASE IN NET ASSETS 1,334,259 9,405,326
NET ASSETS
At beginning of year 63,005,382 53,600,056
------------ -----------
At end of year (including undistributed net
investment income of $1,180 and $1,180,
respectively) $ 64,339,641 $63,005,382
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 3,605,033 $ 3,527,125
Net realized gain (loss) (759,905) 361,582
Net change in unrealized appreciation (depreciation) 967,186 (4,200,130)
------------ ------------
Net increase (decrease) in net assets from investment
operations 3,812,314 (311,423)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (3,605,033) (3,527,125)
From net realized gains on investments (218,599) (723,687)
------------ ------------
Total distributions to shareholders (3,823,632) (4,250,812)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 29,612,734 36,937,409
Value of shares issued to shareholders in payment of
distributions declared 1,920,539 2,316,211
Cost of shares redeemed (34,110,965) (31,352,116)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions (2,577,692) 7,901,504
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,589,010) 3,339,269
NET ASSETS
At beginning of year 81,918,445 78,579,176
------------ ------------
At end of year (including undistributed net
investment income of $8,246 and $8,266,
respectively) $ 79,329,435 $ 81,918,445
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (1,513,736) $ (668,847)
Net realized gain 83,489,797 6,278,877
Net change in unrealized appreciation (depreciation) 39,810,409 39,513,446
------------- ------------
Net increase in net assets from investment operations 121,786,470 45,123,476
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net realized gains on investments (39,853,251) --
------------- ------------
Total distributions to shareholders (39,853,251) --
------------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 112,057,941 43,866,832
Value of shares issued to shareholders in payment of
distributions declared 27,036,725 --
Cost of shares redeemed (148,901,907) (12,373,955)
------------- ------------
Net increase (decrease) in net assets from Fund share
transactions (9,807,241) 31,492,877
------------- ------------
TOTAL INCREASE IN NET ASSETS 72,125,978 76,616,353
NET ASSETS
At beginning of year 143,074,635 66,458,282
------------- ------------
At end of year $ 215,200,613 $143,074,635
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 223,867 $ 224,282
Net realized gain (loss) 852,376 (1,097,849)
Net change in unrealized appreciation (depreciation) 1,959,271 5,465,603
------------ ------------
Net increase in net assets from investment operations 3,035,514 4,592,036
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (179,274) (221,630)
------------ ------------
Total distributions to shareholders (179,274) (221,630)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 10,437,250 15,452,943
Value of shares issued to shareholders in payment of
distributions declared 135,633 181,126
Cost of shares redeemed (11,315,541) (22,094,521)
------------ ------------
Net decrease in net assets from Fund share
transactions (742,658) (6,460,452)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,113,582 (2,090,046)
NET ASSETS
At beginning of year 29,568,560 31,658,606
------------ ------------
At end of year (including undistributed net
investment income of $97,829 and $60,096,
respectively) $ 31,682,142 $ 29,568,560
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED
---------------------------------------------------- SEPTEMBER 30, DECEMBER 31,
2000 1999 1998 1997 1996 1995
------- ------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 20.85 $ 21.78 $ 21.18 $ 20.63 $ 21.02 $ 19.55
------- ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.92(1) 0.90(1) 0.94 0.97 0.74 0.94
Net realized and unrealized gain
(loss) on investments 0.04 (0.93) 0.60 0.55 (0.39) 1.47
------- ------- ------- ------- ------- -------
Total from investment operations 0.96 (0.03) 1.54 1.52 0.35 2.41
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.92) (0.90) (0.94) (0.97) (0.74) (0.94)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (0.92) (0.90) (0.94) (0.97) (0.74) (0.94)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 20.89 $ 20.85 $ 21.78 $ 21.18 $ 20.63 $ 21.02
======= ======= ======= ======= ======= =======
TOTAL RETURN+++ 4.72% (0.18)% 7.45% 7.55% 1.70%++ 12.64%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily
net assets)* 0.65% 0.65% 0.65% 0.65% 0.65%+ 0.65%
Net Investment Income (to average
daily net assets)* 4.43% 4.19% 4.40% 4.67% 4.78%+ 4.71%
Portfolio Turnover 23% 22% 19% 25% 35%++ 77%
Net Assets, End of Year
(000's omitted) $64,340 $63,005 $53,600 $38,401 $32,136 $32,565
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion 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 the ratios would have been:
</FN>
Net investment income per share N/A N/A $ 0.92 $ 0.95 $ 0.72 $ 0.95
Ratios (to average daily net assets):
Expenses N/A N/A 0.77% 0.75% 0.73%+ 0.72%
Net investment income N/A N/A 4.28% 4.57% 4.70%+ 4.64%
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
(1) Calculated based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED
---------------------------------------------------- SEPTEMBER 30, DECEMBER 31,
2000 1999 1998 1997 1996 1995
------- ------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 21.11 $ 22.30 $ 21.78 $ 21.12 $ 21.40 $ 19.91
------- ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.95(1) 0.92(1) 0.96 1.01 0.79 0.98
Net realized and unrealized gain
(loss) on investments 0.06 (0.99) 0.58 0.74 (0.28) 1.49
------- ------- ------- ------- ------- -------
Total from investment operations 1.01 (0.07) 1.54 1.75 0.51 2.47
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.95) (0.92) (0.96) (1.01) (0.79) (0.98)
From net realized gain on investments (0.06) (0.20) (0.06) (0.08) -- --
------- ------- ------- ------- ------- -------
Total distributions to shareholders (1.01) (1.12) (1.02) (1.09) (0.79) (0.98)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 21.11 $ 21.11 $ 22.30 $ 21.78 $ 21.12 $ 21.40
======= ======= ======= ======= ======= =======
TOTAL RETURN+++ 4.91% (0.33)% 7.24% 8.27% 2.43%++ 12.65%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily
net assets)* 0.64% 0.63% 0.65% 0.65% 0.65%+ 0.65%
Net Investment Income (to average
daily net assets)* 4.54% 4.24% 4.37% 4.74% 4.99%+ 4.75%
Portfolio Turnover 28% 43% 29% 23% 43%++ 140%
Net Assets, End of Year
(000's omitted) $79,329 $81,918 $78,579 $52,723 $34,843 $32,865
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion 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:
</FN>
Net investment income per share N/A N/A $ 0.95 $ 0.99 $ 0.76 $ 0.95
Ratios (to average daily net assets):
Expenses N/A N/A 0.69% 0.74% 0.82%+ 0.79%
Net investment income N/A N/A 4.33% 4.65% 4.82%+ 4.61%
</TABLE>
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
(1) Calculated based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996(2)
-------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 40.70 $ 25.89 $ 32.61 $ 23.57 $20.00
-------- -------- ------- ------- ------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* (0.39)(1) (0.21)(1) (0.15)(1) 0.02 0.04
Net realized and unrealized gain
(loss) on investments 33.65 15.02 (6.42) 9.05 3.55
-------- -------- ------- ------- ------
Total from investment operations 33.26 14.81 (6.57) 9.07 3.59
-------- -------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (0.01) (0.03) (0.02)
From net realized gain on investments (10.64) -- (0.14) -- --
-------- -------- ------- ------- ------
Total distributions to shareholders (10.64) -- (0.15) (0.03) (0.02)
-------- -------- ------- ------- ------
NET ASSET VALUE, END OF YEAR $ 63.32 $ 40.70 $ 25.89 $ 32.61 $23.57
======== ======== ======= ======= ======
TOTAL RETURN+++ 86.20% 57.03% (20.16)% 38.50% 17.95%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily
net assets)* 0.87% 0.78% 0.75% 0.21% 0.00%+
Net Investment Income (Loss) (to
average daily net assets)* (0.60)% (0.60)% (0.51)% 0.08% 0.41%+
Portfolio Turnover 182% 168% 102% 102% 57%++
Net Assets, End of Year
(000's omitted) $215,201 $143,075 $66,458 $32,761 $6,896
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion 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:
</FN>
Net investment loss per share N/A $ (0.22)(1) $ (0.22)(1) $ (0.16) $(0.28)
Ratios (to average daily net assets):
Expenses N/A 0.79% 0.97% 1.24% 3.45%+
Net investment loss N/A (0.61)% (0.73)% (0.95)% (3.04)%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) For the period January 2, 1996, commencement of operations, to September
30, 1996.
+ Computed on an annualized basis.
++ Not anualized.
+++ Total return would have been lower in absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996(2)
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 36.99 $ 32.50 $ 35.24 $ 23.60 $20.00
------- ------- ------- ------- ------
FROM INVESTMENT OPERATIONS:
Net investment income* 0.31(1) 0.22(1) 0.29(1) 0.39(1) 0.28
Net realized and unrealized gain
(loss) on investments 4.12 4.49 (2.77) 11.58 3.50
------- ------- ------- ------- ------
Total from investment operations 4.43 4.71 (2.48) 11.97 3.78
------- ------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.24) (0.22) (0.26) (0.33) (0.18)
------- ------- ------- ------- ------
Total distributions to shareholders (0.24) (0.22) (0.26) (0.33) (0.18)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF YEAR $ 41.18 $ 36.99 $ 32.50 $ 35.24 $23.60
======= ======= ======= ======= ======
TOTAL RETURN+++ 12.00% 14.46% (7.13)% 51.19% 18.97%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily
net assets)* 0.54% 0.50% 0.50% 0.20% 0.00%+
Net Investment Income (to average
daily net assets)* 0.79% 0.59% 0.78% 1.31% 2.27%+
Portfolio Turnover 50% 50% 33% 25% 17%++
Net Assets, End of Year
(000's omitted) $31,682 $29,569 $31,659 $12,819 $2,843
<FN>
----------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion of its advisory fee and/or reimbursed a portion of the
Fund's operating expenses. If this voluntary reduction had not been taken,
the investment income per share and the ratios would have been:
</FN>
Net investment income (loss) per share $ 0.15(1) $ 0.09(1) $ 0.09(1) $ (0.07)(1) $(0.36)
Ratios (to average daily net assets):
Expenses 0.95% 0.85% 1.05% 1.73% 5.15%+
Net investment income (loss) 0.38% 0.24% 0.23% (0.22)% (2.88)%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) For the period January 2, 1996, commencement of operations, to September
30, 1996.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS -- 96.3%
GENERAL OBLIGATIONS -- 19.1%
Amesbury MA State Qualified 5.300% 06/01/2003 $ 750,000 $ 757,500
Brockton MA State Qualified 5.550% 12/15/2003 270,000 274,387
Brockton MA State Qualified 5.650% 12/15/2004 300,000 306,375
Brockton MA State Qualified 5.700% 06/15/2002 160,000 161,800
Brockton MA State Qualified 6.125% 06/15/2018 250,000 257,812
Commonwealth of Massachusetts 5.000% 11/01/2009 1,000,000 1,010,000
Commonwealth of Massachusetts 7.500% 06/01/2004 700,000 752,500
Foxborough MA Stadium 5.750% 06/01/2011 1,050,000 1,115,625
Lawrence MA State Qualified 5.000% 09/15/2002 250,000 251,562
Lawrence MA State Qualified 5.125% 09/15/2003 1,500,000 1,520,625
Mass Bay Transportation Authority 6.000% 03/01/2005 350,000 369,687
Mass Bay Transportation Authority 7.000% 03/01/2011 1,000,000 1,163,750
Mass St College Bldg Authority Project 7.500% 05/01/2006 500,000 568,125
Mass St College Bldg Authority Project 7.500% 05/01/2007 450,000 519,750
Mass St College Bldg Authority Project 7.500% 05/01/2008 250,000 292,187
Mass State Conservation Loan 5.250% 08/01/2009 900,000 925,875
Massachusetts NCL 6.000% 11/01/2011 850,000 925,437
University of Mass Building Authority State
Guarantee 6.625% 05/01/2007 1,000,000 1,105,000
-----------
Total General Obligations (Cost $12,132,145) 12,277,997
-----------
GOVERNMENT BACKED -- 4.0%
Mass HEFA Carney Hospital Prerefunded-Series D 6.100% 07/01/2014 700,000 751,625
Mass HEFA Melrose Wakefield Hospital 6.350% 07/01/2006 310,000 331,700
Massachusetts Water Resource Authority
Prerefunded-Series A 6.000% 08/01/2020 500,000 531,875
Plymouth County COP 7.000% 04/01/2022 500,000 533,750
Puerto Rico Commonwealth Aqueduct 9.000% 07/01/2009 400,000 460,500
-----------
Total Government Backed (Cost $2,555,772) 2,609,450
-----------
HOUSING REVENUE -- 8.4%
Mass HFA Residential Development FNMA 5.600% 05/15/2004 250,000 257,500
Mass HFA Residential Development FNMA 6.250% 11/15/2012 1,000,000 1,041,250
Mass HFA Residential Development FNMA 6.875% 11/15/2011 2,000,000 2,097,500
Massachusetts St Housing Finance Agency 6.300% 10/01/2013 950,000 980,875
Massachusetts St Housing Finance Agency MFU
FNMA 6.250% 11/15/2012 1,000,000 1,041,250
-----------
Total Housing Revenue (Cost $5,410,493) 5,418,375
-----------
INDUSTRIAL DEVELOPMENT -- 2.9%
City of Boston Industrial Development Finance
Authority 5.875% 04/01/2030 450,000 456,187
City of Boston Industrial Development Finance
Authority AMT 7.375% 05/15/2015 865,000 889,722
Mass DFA Resource Recovery 6.900% 12/01/2029 500,000 509,375
-----------
Total Industrial Development (Cost $1,846,534) 1,855,284
-----------
INSURED BOND -- 33.2%
Attleboro MA MBIA NCL 6.000% 10/01/2004 600,000 630,000
Brockton MA MBIA 6.000% 04/01/2007 1,010,000 1,083,225
Chelsea MA School District AMBAC 6.000% 06/15/2004 750,000 786,563
Chelsea MA School District AMBAC 7.000% 06/15/2003 265,000 280,900
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED BOND (CONTINUED)
Holyoke MA FSA 6.000% 06/15/2006 $ 600,000 $ 640,500
Holyoke MA FSA 6.000% 06/15/2007 800,000 860,000
Mass Bay Transportation Authority FGIC 5.500% 03/01/2011 300,000 313,500
Mass Bay Transportation Authority FGIC 7.000% 03/01/2011 1,055,000 1,227,756
Mass Bay Transportation Authority FSA 5.250% 03/01/2012 500,000 518,750
Mass DFA Curry College 4.100% 03/01/2004 165,000 158,606
Mass DFA Northern Berkshire Retirement
Development 5.750% 08/15/2009 425,000 431,906
Mass DFA Northern Berkshire Retirement
Development 5.750% 08/15/2010 450,000 455,625
Mass HEFA Harvard Pilgrim FSA 5.250% 07/01/2006 1,100,000 1,108,250
Mass HEFA Mass Eye and Ear ACA 5.000% 07/01/2005 660,000 657,525
Mass HEFA NE Medical FGIC 6.000% 07/01/2003 400,000 413,500
Mass HEFA Partners FSA 5.500% 07/01/2007 635,000 656,431
Mass State Development Finance Agency Revenue 5.500% 09/01/2002 175,000 177,406
Mass State Development Finance Agency Revenue 5.500% 09/01/2003 265,000 270,300
Mass State Development Finance Agency Revenue 5.500% 09/01/2004 280,000 287,000
Mass State Development Finance Agency Revenue 5.500% 09/01/2005 175,000 180,031
Mass State General Obligation MBIA 4.750% 04/01/2018 500,000 448,750
Mass State Revenue AMBAC 5.750% 08/01/2010 1,500,000 1,601,250
Mass Water Resource Authority FGIC NCL 6.000% 11/01/2006 800,000 855,000
Massachusetts AMBAC NCL AMT 5.750% 08/01/2010 1,000,000 1,067,500
Massachusetts Port Authority MBIA 5.750% 07/01/2007 500,000 524,375
Nantucket MA MBIA 6.000% 07/15/2007 500,000 537,500
New Bedford MA AMBAC 6.000% 10/15/2005 575,000 610,938
Puerto Rico Commonwealth FSA 5.500% 07/01/2012 1,400,000 1,496,250
Puerto Rico Commonwealth Highway &
Transportation Authority MBIA 5.500% 07/01/2013 1,140,000 1,211,250
Route 3 Mass Transportation Improvement
Authority MBIA NCL 5.500% 06/15/2009 725,000 759,438
Upper Blackstone Water AMBAC 6.500% 08/01/2005 430,000 464,938
Worcester MA FSA NCL 5.500% 04/01/2010 600,000 630,000
-----------
Total Insured Bond (Cost $21,292,711) 21,344,963
-----------
LEASE REVENUE -- 1.2%
Puerto Rico Housing Bank Appropriation 5.125% 12/01/2005 750,000 768,750
-----------
Total Lease Revenue (Cost $744,052) 768,750
-----------
LOC GIC -- 1.0%
Mass IFA Amesbury LOC: State Street AMT 5.350% 09/01/2005 275,000 275,000
Mass IFA Orchard Cove Project LOC: Fleet
National Bank 5.000% 05/01/2026 415,000 415,000
-----------
Total LOC GIC (Cost $690,000) 690,000
-----------
REVENUE BONDS -- 23.3%
Mass DFA Massachusetts College of Pharmacy 5.750% 07/01/2006 280,000 281,400
Mass DFA Williston School AMT 6.000% 10/01/2013 500,000 467,500
Mass HEFA Cape Cod Healthcare 5.125% 11/15/2009 600,000 549,750
Mass HEFA Central New England Health Systems 5.750% 08/01/2003 275,000 267,781
Mass HEFA Childrens Hospital 6.125% 10/01/2012 550,000 564,438
Mass HEFA Dana Farber Notes NCL 6.500% 12/01/2006 650,000 683,313
Mass HEFA Milford Hospital 5.250% 07/15/2007 600,000 559,500
Mass HEFA No. Adams Regional Hospital 6.750% 07/01/2009 600,000 597,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE BONDS (CONTINUED)
Mass HEFA Partners HealthCare 5.000% 07/01/2009 $ 500,000 $ 480,000
Mass HEFA Youville Hospital FHA Secured 6.125% 02/15/2015 585,000 594,506
Mass IFA Berkshire Retirement Development(a) 5.125% 07/01/2018 530,000 530,090
Mass IFA Brooks School 5.600% 07/01/2005 245,000 256,025
Mass IFA Brooks School 5.900% 07/01/2013 410,000 431,525
Mass IFA Clark University 6.450% 07/01/2001 300,000 304,296
Mass IFA Resource Recovery 6.150% 07/01/2002 1,000,000 1,012,500
Mass IFA Resource Recovery Ogden 4.800% 12/01/2004 1,150,000 1,118,375
Mass IFA Springfield College 5.625% 09/15/2010 750,000 752,813
Mass IFA Wentworth Institute 5.050% 10/01/2005 290,000 288,913
Mass State Development Finance Agency 6.000% 08/01/2011 550,000 563,063
Mass Water Resource Authority 5.250% 03/01/2013 500,000 498,750
Mass Water Resource Authority NCL 6.500% 07/15/2009 1,000,000 1,111,250
Massachusetts Port Authority 5.750% 07/01/2012 700,000 739,375
Massachusetts Port Authority 6.000% 07/01/2011 1,000,000 1,077,500
Massachusetts Water Trust New Bedford NCL 5.250% 02/01/2011 330,000 335,775
Puerto Rico Industrial Tour Ed Anamendez Univ 5.000% 02/01/2005 250,000 252,813
Puerto Rico Industrial Tour Ed Anamendez Univ 5.000% 02/01/2006 650,000 656,500
-----------
Total Revenue Bonds (Cost $15,239,574) 14,975,501
-----------
SPECIAL REVENUES -- 3.2%
Massachusetts St Special Obligation 5.500% 06/01/2013 1,000,000 1,031,250
Virgin Islands Public Finance Authority 5.625% 10/01/2010 1,000,000 1,013,750
-----------
Total Special Revenues (Cost $2,094,024) 2,045,000
-----------
TOTAL BONDS (COST $62,005,305) 61,985,320
-----------
SHORT-TERM INVESTMENTS -- 1.9%
SHORT TERM BONDS -- 1.9%
Mass HEFA Berklee College of Music(a) 5.400% 10/01/2027 300,000 300,000
Mass HEFA Harvard University(a) 5.500% 02/01/2016 100,000 100,000
Mass HEFA Harvard University(a) 5.500% 08/01/2017 100,000 100,000
Mass HEFA Harvard University(a) 5.550% 11/01/2049 500,000 500,000
Mass HEFA Harvard University(a) 5.600% 07/01/2035 100,000 100,000
Mass HEFA Newton Wellesley Hospital MBIA(a) 3.750% 07/01/2025 100,000 100,000
-----------
1,200,000
-----------
REPURCHASE AGREEMENTS -- 0.0%
Tri-party repurchase agreement dated 09/29/00
with Bank of New York and Investors Bank and
Trust Company, due 10/02/00, with a maturity
value of $5,250 and an effective yield of
5.60%, collateralized by a U.S. Government
Obligation with a rate of 6.50%, a maturity
date of 06/01/29 and an aggregate market
value of $5,417. 5,248
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,205,248) 1,205,248
-----------
TOTAL INVESTMENTS -- 98.2% (COST $63,210,553) $63,190,568
OTHER ASSETS, LESS LIABILITIES -- 1.8% 1,149,073
-----------
NET ASSETS -- 100.0% $64,339,641
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
ACA - American Capital Access Corp.
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Tax
COP - Certification of Participation
DFA - Development Financial Agency
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FNMA - Federal National Mortgage Association
FSA - Financial Security Association
GIC - Guaranteed Investment Contract
HEFA - Health & Educational Facilities Authority
HFA - Housing Finance Authority
IFA - Industrial Finance Authority
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
MFU - Multi-Family Unit
NCL - Non-callable
(a) Variable Rate Security; rate indicated is as of 9/30/00.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS -- 98.9%
GENERAL OBLIGATIONS -- 8.1%
Alpine Utah School District 5.000% 03/15/2011 $ 25,000 $ 24,906
Commonwealth of Massachusetts 7.500% 06/01/2004 500,000 537,500
Conroe Texas Independant School District 5.500% 02/15/2013 700,000 715,750
District of Columbia 5.800% 06/01/2004 250,000 254,375
Goose Creek TX Independent School District 7.000% 08/15/2009 600,000 690,000
Grand Central NY District Management 5.000% 01/01/2006 25,000 25,219
Honolulu HI City & County 5.400% 09/27/2007 500,000 515,000
Hudson County NJ Import Authority 7.600% 08/01/2025 865,000 889,030
Massachusetts NCL 6.000% 11/01/2011 500,000 544,375
McKinney TX Independent School District Asset
Guarentee NCL 6.000% 02/15/2007 500,000 533,125
New York State NCL 5.000% 03/01/2005 15,000 15,206
Northeast TX Independent School District NCL 7.000% 02/01/2009 1,000,000 1,142,500
Washington State 4.750% 07/01/2020 600,000 519,000
-----------
Total General Obligations (Cost $6,424,978) 6,405,986
-----------
GOVERNMENT BACKED -- 3.6%
Cincinnati OH Public Schools 6.150% 06/15/2002 600,000 611,250
District of Columbia Medlantic Hospital
Prerefunded 7.000% 08/15/2005 400,000 417,000
Mashantucket CT Western Pequot 6.500% 09/01/2005 995,000 1,078,331
Met Peoria IL Prerefunded 6.250% 07/01/2017 300,000 327,750
Texas State Turnpike Prerefunded 12.625% 01/01/2020 395,000 454,744
-----------
Total Government Backed (Cost $2,802,997) 2,889,075
-----------
HOUSING REVENUE -- 11.3%
California Housing Authority 5.050% 02/01/2017 360,000 359,100
California Housing Authority MBIA 5.650% 08/01/2025 190,000 191,187
Colorado HFA Multi Family Insured Mortgage 7.900% 10/01/2000 225,000 225,000
Colorado HFA Single Family Insured Mortgage 5.250% 10/01/2007 500,000 508,125
Florida Housing Finance Agency 0.000% 07/15/2016 65,000 10,237
Florida Housing Finance Corp. 5.750% 01/01/2017 535,000 536,337
Hawaii Housing Finance and Development Corp. 7.000% 07/01/2031 505,000 520,483
Mass HFA Residential Development FNMA 6.875% 11/15/2011 400,000 419,500
Michigan Housing Development Authority AMBAC 6.400% 04/01/2005 250,000 260,937
Mississippi Home Corp. SFM Amt 5.450% 06/01/2024 500,000 498,750
New Mexico Mortgage Finance Authority 5.750% 07/01/2014 260,000 262,925
New Mexico Mortgage Finance Authority 6.250% 07/01/2029 990,000 1,024,650
New York Mortgage Agency 5.750% 04/01/2004 650,000 671,125
North Carolina Housing Finance Agency 7.600% 03/01/2021 540,000 554,051
Ohio HFA SFM Amt NCL 4.300% 09/01/2002 500,000 495,625
Pennsylvania Housing Finance Agency 5.350% 10/01/2008 270,000 274,387
Rhode Island Housing & Mortgage 4.950% 10/01/2016 295,000 293,894
Texas Dept Housing & Community 6.950% 07/01/2023 450,000 465,750
Virginia Housing Development Authority 0.000% 11/01/2017 180,000 36,958
Virginia Housing Development Authority
Commission 6.100% 07/01/2001 1,300,000 1,315,327
Washington Housing Finance Agency 7.100% 07/01/2022 50,000 51,750
-----------
Total Housing Revenue (Cost $9,055,940) 8,976,098
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT -- 9.1%
Alaska Industrial Development and Export
Authority 5.500% 04/01/2001 $ 500,000 $ 502,605
Alaska Industrial Development and Export
Authority 6.200% 04/01/2003 150,000 154,686
California Statewide Equity Residential(a) 5.200% 12/01/2029 1,000,000 991,250
Dayton OH Special Facilities Emery 6.050% 10/01/2009 500,000 503,750
Dayton OH Special Facilities Emery 6.050% 10/01/2009 1,000,000 1,007,500
Eddyville IA Pollution Control Revenue
Cargill 5.400% 10/01/2006 500,000 505,625
Gloucester NJ Resource Recovery 6.850% 12/01/2029 500,000 516,250
Hendersonville TN Kroger 5.950% 12/15/2008 395,000 389,075
Mass DFA Resource Recovery 6.900% 12/01/2029 500,000 509,375
Matagorda County TX Pollution Control Revenue 4.900% 05/01/2030 500,000 500,345
Murray KY Industrial Development Kroger 7.250% 09/01/2012 350,000 365,750
New York NY Tsasc Inc. 6.000% 07/15/2019 1,000,000 998,750
Weld County CO Industrial Development Conagra 6.750% 12/15/2001 275,000 279,469
-----------
Total Industrial Development (Cost $7,260,773) 7,224,430
-----------
INSURED BOND -- 40.7%
Charleston SC COP MBIA 6.000% 12/01/2008 1,000,000 1,076,250
Chicago IL FGIC 5.250% 01/01/2012 1,000,000 1,005,000
Chicago IL Park District Parking Facility ACA 5.750% 01/01/2010 1,000,000 1,025,000
Cook County IL Community College FGIC 8.750% 01/01/2006 1,000,000 1,178,750
Cook County IL FGIC 6.000% 11/15/2006 1,000,000 1,063,750
Cook County IL High School FGIC 7.875% 12/01/2014 750,000 936,562
Cook County IL School District FSA NCL 6.750% 05/01/2010 1,750,000 1,981,875
Cow Creek Band Umpqua OR AMBAC 4.250% 07/01/2003 600,000 594,000
Denver CO Airport MBIA 7.500% 11/15/2006 500,000 556,875
District of Columbia MBIA 5.750% 06/01/2010 25,000 26,312
District of Columbia MBIA 6.000% 06/01/2011 1,275,000 1,367,437
District of Columbia Medlantic Hospital MBIA 7.000% 08/15/2005 400,000 413,000
Douglas County Colorado School District MBIA 7.000% 12/15/2012 625,000 733,594
Florida Educational Facilities Authority
Revenues University Tampa Asset Guarentee 5.750% 04/01/2018 1,000,000 1,012,500
Georgia Municipal Electric Authority AMBAC 6.000% 01/01/2006 1,300,000 1,378,000
Georgia Municipal Electric Authority Power
FGIC 6.250% 01/01/2012 1,150,000 1,262,125
Grand River Dam Authority Oklahoma AMBAC 5.500% 06/01/2013 385,000 401,844
Greater Detroit MI Resource Recovery AMBAC 6.250% 12/13/2007 400,000 433,500
Henderson NV FGIC 5.000% 09/01/2016 1,000,000 937,500
Hot Springs AK Sales & Use Tax FSA 4.950% 12/01/2008 30,000 29,999
Illinois Health Facilities Authority Revenue
Asset Guaranty 6.250% 05/01/2011 1,300,000 1,339,000
Intercommunity HFA ACA 5.000% 11/01/2005 2,020,000 2,042,725
Jefferson County OH Asset Guaranty 6.625% 12/01/2005 250,000 261,562
Maine Government Facility Authority FSA 5.750% 10/01/2010 1,000,000 1,061,250
Michigan Strategic Fund Ltd. FGIC 6.950% 09/01/2021 1,000,000 1,034,450
NC Eastern Municipal Power Agency ACA 6.000% 01/01/2006 1,000,000 1,025,000
Nassau County NY FGIC 6.000% 07/01/2010 25,000 26,938
New York Dormitory Authority AMBAC 4.400% 08/01/2013 500,000 490,625
New York Dormitory Authority AMBAC 5.250% 07/01/2008 800,000 820,000
New York Dormitory Authority Asset Guaranty 5.250% 07/01/2005 1,000,000 1,031,250
Oklahoma IDA Baptist Med Center AMBAC 7.000% 08/15/2006 500,000 553,750
Orange County CA Recovery MBIA 5.800% 07/01/2016 400,000 418,000
Palm Beach County FL Solid Waste AMBAC 6.000% 10/01/2009 60,000 65,175
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED BOND (CONTINUED)
Palm Beach County FL Solid Waste AMBAC 6.000% 10/01/2009 $ 440,000 $ 475,200
Pasco County FL Solid Waste AMBAC NCL 6.000% 04/01/2010 1,000,000 1,067,500
Stafford Texas Economic Development Corp.
FGIC# 6.000% 09/01/2015 525,000 560,438
Teton County WY St John Hospital ACA 5.000% 12/01/2004 535,000 531,656
Tucson AZ COP Asset Guaranty 6.000% 07/01/2004 415,000 422,263
Washington DC Convent Center Authority AMBAC 5.250% 10/01/2014 1,000,000 987,500
Washington HCFA MBIA 5.000% 08/15/2018 700,000 639,625
-----------
Total Insured Bond (Cost $32,448,251) 32,267,780
-----------
LEASE REVENUE -- 4.5%
Battery Park NY Authority Junior Lien 5.200% 11/01/2023 215,000 213,426
Kentucky Property & Buildings Commission 6.000% 02/01/2005 1,000,000 1,053,750
NY Metropolitan Transportation Authority 5.750% 07/01/2015 500,000 504,375
New York Dormitory Authority 5.500% 02/15/2005 1,000,000 1,020,000
New York Dormitory Authority 6.000% 07/01/2006 500,000 528,125
New York State Urban Development Corp. 6.000% 01/01/2004 250,000 259,375
-----------
Total Lease Revenue (Cost $3,531,227) 3,579,051
-----------
LOC GIC -- 0.6%
New York Dormitory Authority LOC: Fleet Bank 5.500% 07/01/2003 500,000 506,250
-----------
Total LOC GIC (Cost $505,017) 506,250
-----------
REVENUE BONDS -- 18.4%
California HFA Odd Fellows Home 5.700% 08/15/2014 1,000,000 1,047,500
Camden NJ Cooper Hospitals 5.600% 02/15/2007 240,000 186,600
Florida State Mid-Bay Bridge Authority 4.000% 10/01/2022 1,000,000 1,018,610
Foothills CA Transportation Agency 0.000% 01/01/2007 500,000 427,500
Illinois Health Facility Authority Revenue 6.000% 05/15/2010 500,000 503,750
Illinois HEFA Northwestern University 5.050% 11/01/2032 725,000 729,531
Maricopa County AR Industrial Development 6.650% 04/01/2026 500,000 504,900
Mass DFA Williston School AMT 6.000% 10/01/2013 300,000 280,500
Mass IFA Berkshire Retirement Development(a) 5.125% 07/01/2018 500,000 500,085
Mass IFA Resource Recovery 6.150% 07/01/2002 700,000 708,750
Med Univ SC Hospital Facility Revenue 5.625% 07/01/2010 1,000,000 983,750
Met Govt Nashville & Davidson TN Vanderbilt 6.000% 05/01/2008 610,000 656,513
Montana Student Assistance Corp. 5.950% 12/01/2012 210,000 209,738
New Hampshire Education Authority Brewster
Academy 5.400% 06/01/2001 105,000 105,391
New Hampshire HEFA Monadnock Hospital 5.250% 10/01/2007 475,000 435,219
New Hampshire HEFA Nashua Hospital 6.250% 10/01/2008 750,000 755,625
New York Med Center Mt. Sinai FHA 5.950% 08/15/2009 130,000 131,463
New York Med Center St. Luke's FHA 5.600% 08/15/2013 435,000 436,088
North Texas Higher Education and Student Loan
Authority 6.100% 04/01/2008 750,000 765,000
Port Jervis NY IDA 5.250% 11/01/2006 100,000 102,250
Puerto Rico Industrial Tour Ed Anamendez
University 5.000% 02/01/2008 700,000 705,250
Scranton PA Allied Rehabilitation 7.125% 07/15/2005 1,075,000 1,089,781
Tyler TX Health Facilities Development Corp. 5.250% 07/01/2001 835,000 835,777
Utah Student Loan AMBAC 7.450% 11/01/2008 1,200,000 1,226,112
Volusia FL HEFA Embry Riddle University 5.500% 10/15/2004 220,000 223,575
Wisconsin State Transportation 5.500% 07/01/2010 15,000 15,656
-----------
Total Revenue Bonds (Cost $14,564,944) 14,584,914
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPECIAL REVENUES -- 2.6%
District of Columbia Redevelopment Agency 5.625% 11/01/2010 $ 475,000 $ 477,709
Long Beach CA Aquarium 5.750% 07/01/2005 200,000 205,750
Los Angeles CA Community Redevelopment 5.000% 11/15/2000 500,000 500,235
New York Transitional Finance Authority 4.750% 11/15/2023 1,000,000 858,750
-----------
Total Special Revenues (Cost $1,981,201) 2,042,444
-----------
TOTAL BONDS (COST $78,575,328) 78,476,028
-----------
SHORT-TERM INVESTMENTS -- 0.4%
SHORT TERM BONDS -- 0.4%
Los Angeles CA International Airport(a) 3.700% 12/01/2025 100,000 100,000
Los Angeles CA Regional Airport(a) 4.000% 12/01/2024 200,000 200,000
-----------
300,000
-----------
REPURCHASE AGREEMENTS -- 0.0%
Tri-party repurchase agreement dated 09/29/00
with Bank of New York and Investors Bank and
Trust Company, due 10/02/00, with a maturity
value of $11,552 and an effective yield of
5.60%, collateralized by a U.S. Government
Obligation with a rate of 6.50%, a maturity
date of 06/01/29 and an aggregate market
value of $12,640. 11,547
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $311,547) 311,547
-----------
TOTAL INVESTMENTS -- 99.3% (COST $78,886,875) $78,787,575
OTHER ASSETS, LESS LIABILITIES -- 0.7% 541,860
-----------
NET ASSETS -- 100.0% $79,329,435
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
ACA - American Capital Access Corp.
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Tax
COP - Certification of Participation
DFA - Development Financial Agency
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FNMA - Federal National Mortgage Association
FSA - Financial Security Association
GIC - Guaranteed Investment Contract
HCFA - Health Care Facilities Authority
HEFA - Health & Educational Facilities Authority
HFA - Housing Finance Authority
IDA - Industrial Development Authority
IFA - Industrial Finance Authority
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
NCL - Non-callable
SFM - Single Family Mortgage
(a) Variable Rate Security; rate indicated is as of 9/30/00.
# Delayed delivery contract (Note 7).
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
EQUITIES -- 94.5%
BASIC INDUSTRY -- 0.9%
Symyx Technologies* 43,200 $ 1,873,800
------------
CAPITAL GOODS -- 11.0%
Capstone Turbine Corp.* 56,700 3,926,475
Dycom Industries, Inc.* 19,300 803,362
EGL, Inc.* 169,650 5,131,912
Expeditors International Wash, Inc. 58,000 2,613,625
Forward Air Corp.* 124,200 4,370,288
Peco II, Inc.* 50,200 2,349,987
SatCon Technology Corp.* 35,800 1,279,850
Universal Compression Holdings* 106,900 3,307,219
------------
23,782,718
------------
EARLY CYCLICAL -- 2.4%
Atlantic Coast Airlines, Inc.* 106,300 3,421,531
Skywest, Inc. 32,200 1,650,250
------------
5,071,781
------------
ENERGY -- 5.6%
Cal Dive International, Inc.* 74,200 4,243,312
Dril-Quip* 46,400 1,850,200
National-Oilwell, Inc.* 127,400 3,981,250
Newfield Exploration Co.* 24,400 1,139,175
Newpark Resources, Inc.* 99,500 920,375
------------
12,134,312
------------
FINANCIAL -- 2.6%
Boston Private Financial Holdings, Inc. 34,500 569,250
Costar Group, Inc.* 137,900 5,102,300
------------
5,671,550
------------
GROWTH CYCLICAL -- 0.9%
Cost Plus, Inc.* 64,300 1,937,037
------------
HEALTH CARE -- 20.2%
ADAC Laboratories* 276,000 5,744,250
Accredo Health, Inc.* 113,900 5,566,862
Alexion Pharmaceuticals, Inc.* 47,500 5,415,000
Alkermes, Inc.* 69,100 2,668,987
Angiotech Pharmaceuticals, Inc.* 38,200 1,508,900
COR Therapeutics, Inc.* 99,100 6,175,169
Ciphergen Biosystems Inc.* 43,000 1,376,000
Cubist Pharmaceuticals, Inc.* 19,300 1,004,806
Ilex Oncology, Inc.* 91,400 2,753,425
ImmunoGen, Inc.* 2,300 78,631
Inhale Therapeutic Systems, Inc.* 121,100 6,827,012
North American Scientific, Inc.* 41,900 1,330,325
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
Rita Medical Products* 52,000 $ 580,128
Vical, Inc.* 27,100 701,212
XOMA Ltd.* 127,500 1,840,781
------------
43,571,488
------------
SERVICES -- 12.2%
Career Education Corp.* 148,400 6,603,800
Corporate Executive Board Co.* 114,000 4,588,500
Diamond Technology Partners, Inc.* 27,000 2,004,750
Digex, Inc.* 37,000 1,734,375
Pinnacle Holdings, Inc.* 28,000 745,500
SBA Communications Corp.* 50,000 2,096,875
SBS Broadcasting SA* 69,000 2,747,063
SmartForce PLC ADR* 77,700 3,681,038
Westwood One, Inc.* 93,000 1,993,688
------------
26,195,589
------------
TECHNOLOGY -- 38.7%
Aspen Technologies, Inc.* 102,200 4,611,775
Avocent Corp.* 116,250 6,408,281
Benchmark Electronics, Inc.* 29,800 1,549,600
Computer Network Technology Corp.* 41,700 1,433,438
Cree Research, Inc.* 34,000 3,952,500
Daleen Technologies, Inc.* 41,700 617,681
Emulex Corp.* 36,100 4,422,250
Exar Corp.* 54,600 6,606,600
GSI Lumonics, Inc.* 73,700 1,216,050
International Rectifier Corp.* 119,000 6,016,938
Kopin Corp.* 62,700 1,128,600
Lexent, Inc.* 35,300 1,050,175
Manufacturers Services Ltd.* 55,100 654,313
MatrixOne, Inc.* 60,300 2,412,000
Mercury Interactive Corp.* 41,500 6,505,125
Merix Corp.* 99,750 6,465,047
Qlogic Corp.* 47,400 4,171,200
Quicklogic Corp.* 166,300 2,743,950
Semtech Corp.* 125,800 5,425,125
SignalSoft Corp.* 26,900 1,092,813
Silicon Image, Inc.* 108,600 2,694,638
Stanford Microdevices, Inc.* 121,100 6,478,850
Vastera, Inc.* 40,900 899,800
Veeco Instruments, Inc.* 26,900 2,858,545
Watchguard Technologies, Inc.* 30,000 1,800,000
------------
83,215,294
------------
TOTAL EQUITIES (COST $124,002,507) 203,453,569
------------
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 6.2%
U.S. GOVERNMENT AGENCY -- 0.9%
FNMA Discount Note+# 7.116% 12/14/2000 $2,000,000 $ 1,970,800
------------
REPURCHASE AGREEMENTS -- 5.3%
Tri-party repurchase agreement dated 09/29/00
with Bank of New York and Investors Bank and
Trust Company, due 10/02/00, with a maturity
value of $11,292,181 and an effective yield
of 5.60%, collateralized by a U.S. Government
Obligation with a rate of 6.50%, a maturity
date of 06/01/29 and an aggregate market
value of $11,513,356. 11,286,914
------------
TOTAL SHORT-TERM INVESTMENTS (COST $13,260,767) 13,257,714
------------
TOTAL INVESTMENTS -- 100.7% (COST $137,263,274) $216,711,283
OTHER ASSETS, LESS LIABILITIES -- (0.7%) (1,510,670)
------------
NET ASSETS -- 100.0% $215,200,613
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
FNMA - Federal National Mortgage Association
* Non-income producing security.
+ Denotes all or part of security pledged as collateral.
# Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-----------------------------------------------------------------------------
EQUITIES -- 94.5%
BASIC INDUSTRY -- 2.2%
Westvaco Corp. 26,000 $ 693,875
-----------
CAPITAL GOODS -- 7.5%
Ingersoll Rand Co. 19,000 643,625
Tyco International Ltd. 17,000 881,875
United Technologies Corp. 12,200 844,850
-----------
2,370,350
-----------
CONSUMER STABLE -- 8.9%
CVS Corp. 22,000 1,018,875
Flowers Industries, Inc. 10,000 195,000
Kroger Co.* 31,000 699,438
Procter & Gamble Co. 8,000 536,000
Sealed Air Corp.* 8,000 362,000
-----------
2,811,313
-----------
EARLY CYCLICAL -- 1.6%
Leggett & Platt, Inc. 33,200 524,975
-----------
ENERGY -- 7.6%
BP Amoco PLC ADR 16,726 886,478
El Paso Energy Corp. 9,000 554,625
Exxon Mobil Corp. 10,937 974,760
-----------
2,415,863
-----------
FINANCIAL -- 14.4%
AMBAC Inc. 9,000 659,250
American General Corp. 5,000 390,000
Chase Manhattan Corp. 12,000 554,250
Citigroup, Inc. 11,500 621,719
Delphi Financial Group, Inc., Class A* 18,788 760,914
Federal National Mortgage Association 6,500 464,750
Fleet Financial Group, Inc. 15,500 604,500
Morgan Stanley Dean Witter 5,500 502,906
-----------
4,558,289
-----------
GROWTH CYCLICAL -- 6.3%
BJ's Wholesale Club, Inc.* 7,000 238,875
Carnival Corp. 28,000 689,500
Costco Wholesale Corp.* 8,000 279,500
Jones Apparel Group, Inc.* 15,400 408,100
Target Corp. 15,000 384,375
-----------
2,000,350
-----------
HEALTH CARE -- 15.1%
Abbott Laboratories 16,000 761,001
Amgen, Inc.* 14,000 977,593
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
-----------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
Biomet, Inc. 20,000 $ 700,000
Bristol-Myers Squibb, Inc. 11,100 634,088
Elan Corp., PLC ADR* 14,000 766,500
Medtronics, Inc. 8,910 461,649
Schering-Plough Corp. 10,600 492,900
-----------
4,793,731
-----------
REAL ESTATE -- 4.8%
Boston Properties Inc., REIT 12,700 545,306
General Growth Properties, REIT 14,900 479,594
Liberty Property Trust, REIT 17,800 489,500
-----------
1,514,400
-----------
SERVICES -- 6.3%
AT&T Corp. 10,000 293,750
General Motors Corp., Class H* 27,000 1,003,860
SBC Communications, Inc. 8,000 400,000
Verizon Communications 6,000 290,625
-----------
1,988,235
-----------
TECHNOLOGY -- 19.8%
American Power Conversion Corp.* 34,000 652,375
Hewlett-Packard Co. 7,200 698,400
Intel Corp. 16,000 666,000
International Business Machine 8,000 900,000
Motorola, Inc. 16,000 452,000
Sci Sys, Inc.* 22,000 902,000
Sun Microsystems, Inc.* 11,000 1,284,250
Symantec Corp.* 5,000 220,000
Tycom Ltd.* 13,000 498,875
-----------
6,273,900
-----------
TOTAL EQUITIES (COST $22,528,424) 29,945,281
-----------
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 5.5%
U.S. GOVERNMENT AGENCY -- 0.5%
FNMA Discount Note+# 7.116% 12/14/2000 $150,000 $ 147,810
-----------
REPURCHASE AGREEMENTS -- 5.0%
Tri-party repurchase agreement dated 09/29/00
with Bank of New York and Investors Bank and
Trust Company, due 10/02/00, with a maturity
value of $1,589,770 and an effective yield of
5.60%, collateralized by a U.S. Government
Obligation with a rate of 6.50%, a maturity
date of 07/01/29 and an aggregate market
value of $1,621,488. 1,589,028
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,737,068) 1,736,838
-----------
TOTAL INVESTMENTS -- 100.0% (COST $24,265,492) $31,682,119
OTHER ASSETS, LESS LIABILITIES -- 0.0% 23
-----------
NET ASSETS -- 100.0% $31,682,142
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
FNMA - Federal National Mortgage Association
REIT - Real Estate Investment Trust
* Non-income producing security.
# Rate noted is yield to maturity.
+ Denotes all or part of security pledged as collateral.
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
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 Massachusetts Intermediate Tax Exempt Bond Fund
(Massachusetts Intermediate Tax Exempt Bond Fund) is a separate
non-diversified investment series of the Trust. Standish Intermediate Tax
Exempt Bond Fund (Intermediate Tax Exempt Bond Fund), Standish Small Cap
Tax-Sensitive Equity Fund (Small Cap Tax-Sensitive Equity Fund) and
Standish Tax-Sensitive Equity Fund (Tax-Sensitive Equity Fund) are
separate diversified investment series of the Trust (together with the
Massachusetts Intermediate Tax Exempt Bond Fund, individually a "Fund" and
collectively, the "Funds").
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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
Municipal bonds are normally valued on the basis of valuations furnished
by a pricing service. Taxable fixed income obligations, if any, for which
price quotations are readily available are normally valued at the last
sales prices on the exchange or market on which they are primarily traded,
or if not listed or no sale, at the last quoted bid prices. Equity
securities for which quotations are readily available are valued at the
last sale price or if no sale, at the closing bid prices in the principal
market in which such securities are normally traded. Securities (including
restricted securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Funds are valued at amortized cost. If a Fund
acquires a short-term instrument with more than sixty days remaining to
its maturity, it is valued at current market value until the sixtieth day
prior to maturity and will then be valued at amortized value based upon
the value on such date unless the trustees determine during such sixty-day
period that amortized value does not represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of each 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. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Funds
and counterparty. Additionally, procedures have been established by the
Fund to monitor on a daily basis, the market value of the repurchase
agreement's underlying investments to ensure the existence of a proper
level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or discount on long-term debt securities when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities sold are recorded on the
identified cost basis.
D. FEDERAL TAXES
As qualified regulated investment companies under Subchapter M of the
Internal Revenue Code, the Funds are not subject to income taxes to the
extent that each Fund distributes all of its taxable income for its fiscal
year. Dividends paid by the Massachusetts Intermediate Tax Exempt Bond
Fund and the Intermediate Tax Exempt Bond Fund (together the "Bond Funds")
from net interest earned on tax-exempt municipal bonds are not includable
by shareholders as gross
35
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
income for Federal income tax purposes because the Bond Funds intend to
meet certain requirements of the Internal Revenue Code applicable to
regulated investment companies which will enable the Bond Funds to pay
exempt-interest dividends. At September 30, 2000, the following Funds, for
federal income tax purposes, had capital loss carryovers:
<TABLE>
<CAPTION>
EXPIRATION DATE SEPTEMBER 30,
-----------------------------------------------------------
2003 2004 2005 2007 2008 TOTAL
-------- ------ ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Intermediate Tax Exempt
Bond Fund $104,125 -- -- -- $135,927 $ 240,052
Intermediate Tax Exempt Bond Fund -- -- -- -- $ 88,247 $ 88,247
Tax-Sensitive Equity Fund -- $1,162 $95,353 $1,001,921 $ 29,311 $1,127,747
</TABLE>
Such carryovers will reduce each Fund's taxable income arising from future
net realized 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 Funds of
any liability for federal income tax.
The Massachusetts Intermediate Tax Exempt Bond Fund and Intermediate Tax
Exempt Bond Fund elected to defer to its fiscal year ending September 30,
2001 losses of $291,243 and $671,657, respectively, recognized during the
period from November 1, 1999 to December 31, 1999.
E. DEFERRED ORGANIZATION EXPENSE
Costs associated with the organization and initial registration of the
Small Cap Tax-Sensitive Equity Fund and Tax-Sensitive Equity Fund are
being amortized, on a straight-line basis, through December 2000.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions on shares of the Bond Funds are declared daily from net
investment income and distributed monthly. Dividends from net investment
income, if any, will be distributed at least annually for the Small Cap
Tax-Sensitive Equity Fund and the Tax-Sensitive Equity Fund. Distributions
on capital gains, if any, will be distributed annually by all of the
Funds. Distributions from net investment income and capital gains, if any,
are automatically reinvested in additional shares of the applicable Fund
unless the shareholder elects to receive them in cash. Distributions 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
non-taxable dividends, capital loss carryforwards, losses deferred due to
wash sales, net operating losses and the tax practice known as
equalization.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated undistributed
net realized gain (loss) on investments 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.
G. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
36
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish, Ayer & Wood, Inc. ("SA&W")
for overall investment advisory and administrative services, and general
office facilities, is paid at the following annual rates of each Fund's
average daily net assets: 0.40% for the Massachusetts Intermediate Tax
Exempt Bond Fund and the Intermediate Tax Exempt Bond Fund, 0.80% for the
Small Cap Tax-Sensitive Equity Fund and 0.50% for the Tax-Sensitive Equity
Fund. Prior to January 28, 2000, the Small Cap Tax-Sensitive Equity Fund
paid an investment advisory fee monthly at an annual rate of 0.60% of the
Funds average daily net assets. For the Tax-Sensitive Equity Fund, SA&W
voluntarily agreed to limit the total Fund operating expenses (excluding
litigation, indemnification and other extraordinary expenses) to 0.75% of
average daily net assets for the period from August 1, 2000 to September
30, 2000. Prior to August 1, 2000, SA&W voluntarily agreed to limit the
total Fund operating expenses to 0.50% of average daily net assets.
Pursuant to these agreements, for the year ended September 30, 2000, SA&W
voluntarily waived a portion of its advisory fee to the Tax-Sensitive
Equity Fund in the amount of $116,253. This agreement is voluntary and
temporary and may be discontinued or revised by SA&W at any time. No
director, officer or employee of SA&W or its affiliates receives any
compensation from the Trust or the Funds for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of SA&W or its affiliates an annual fee and a per
meeting fee as well as reimbursement for travel and out of pocket
expenses. In addition, the Trust pays the legal fees for the independent
counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Cost of purchases and proceeds from sales of investments, other than
short-term obligations, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 2000
--------------------------
PURCHASES SALES
------------ ------------
<S> <C> <C>
Massachusetts Intermediate Tax Exempt Bond Fund $ 15,076,540 $ 14,118,531
============ ============
Intermediate Tax Exempt Bond Fund $ 21,856,466 $ 27,090,783
============ ============
Small Cap Tax-Sensitive Equity Fund $423,009,679 $479,625,368
============ ============
Tax-Sensitive Equity Fund $ 13,734,243 $ 15,011,210
============ ============
</TABLE>
There were no purchases or sales of government securities during the year
ended September 30, 2000.
37
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trust to issue an unlimited number of
full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in each Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
Shares sold 863,084 754,858
Shares issued to shareholders in payment of
distributions declared 60,094 40,334
Shares redeemed (865,559) (365,904)
-------------- --------------
Net increase 57,619 429,288
============== ==============
INTERMEDIATE TAX EXEMPT BOND FUND
Shares sold 1,421,670 1,550,662
Shares issued to shareholders in payment of
distributions declared 91,915 92,432
Shares redeemed (1,635,733) (1,339,693)
-------------- --------------
Net increase (decrease) (122,148) 303,401
============== ==============
SMALL CAP TAX-SENSITIVE EQUITY FUND
Shares sold 1,612,012 1,188,251
Shares issued to shareholders in payment of
distributions declared 490,782 --
Shares redeemed (2,219,911) (287,283)
-------------- --------------
Net increase (decrease) (117,117) 900,968
============== ==============
TAX-SENSITIVE EQUITY FUND
Shares sold 257,734 394,885
Shares issued to shareholders in payment of
distributions declared 3,350 4,581
Shares redeemed (291,113) (415,674)
-------------- --------------
Net decrease (30,029) (16,208)
============== ==============
</TABLE>
At September 30, 2000, the Massachusetts Intermediate Tax Exempt Bond Fund
had two shareholders of record owning approximately 18% and 11% of the
Fund's outstanding shares, respectively. The Intermediate Tax Exempt Bond
Fund had one shareholder of record owning approximately 12% of the Fund's
outstanding shares. The Small Cap Tax-Sensitive Equity Fund had two
shareholders of record owning approximately 16% and 12% of the Fund's
outstanding shares, respectively. The Tax-Sensitive Equity Fund had one
shareholder of record owning approximately 16% of the Fund's outstanding
shares. Investment activity of these shareholders could have a material
impact on the applicable Fund.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at September 30, 2000, as computed on a
federal income tax basis, were as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
AGGREGATE COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Massachusetts Intermediate Tax Exempt Bond
Fund $ 63,210,553 $ 684,588 $ (704,573) $ (19,985)
Intermediate Tax Exempt Bond Fund $ 78,886,875 $ 865,282 $ (964,582) $ (99,300)
Small Cap Tax-Sensitive Equity Fund $137,816,109 $82,173,674 $(3,278,500) $78,895,174
Tax-Sensitive Equity Fund $ 24,261,653 $ 8,205,972 $ (785,506) $ 7,420,466
</TABLE>
38
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(6) 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 investments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
Since the Massachusetts Intermediate Tax Exempt Bond Fund may invest a
substantial portion of its assets in issuers located in one state, it will
be more susceptible to factors adversely affecting issuers of that state
than would be a comparable general tax-exempt mutual fund.
The Funds may trade the following financial instruments with off-balance
sheet risk:
FUTURES CONTRACTS
The Funds 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 Funds
deposit either in cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Funds each day, dependent on the daily fluctuations in the
value of the underlying security or index, and are recorded for financial
statement purposes as unrealized gains or losses by each 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 a Fund's exposure to the underlying instrument, while
selling futures tends to decrease a Fund's exposure to the underlying
instrument or hedge other Fund investments. In addition, there is the risk
that a Fund may not be able to enter into a closing transaction because of
an illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contracts terms. The Funds enter into financial futures transactions
primarily to manage their exposure to certain markets and to changes in
securities prices and, with respect to the Small Cap Tax-Sensitive Equity
Fund and the Tax-Sensitive Equity Fund, to changes in foreign currencies.
Gains and losses are realized upon the expiration or closing of the
futures contracts.
At September 30, 2000, the Small Cap Tax-Sensitive Equity Fund had the
following open financial futures contracts:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE NET UNREALIZED
CONTRACT POSITION DATE AMOUNT AT VALUE DEPRECIATION
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P Mid Cap 400 (33 contracts) Long 12/15/2000 $8,997,450 $(208,231)
NASDAQ 100 (17 Contracts) Long 12/16/2000 6,155,700 (632,570)
---------
$(840,801)
=========
</TABLE>
At September 30, 2000, the Tax-Sensitive Equity Fund had the following
open financial futures contracts:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE NET UNREALIZED
CONTRACT POSITION DATE AMOUNT AT VALUE DEPRECIATION
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Futures (4 contracts) Long 12/15/2000 $1,453,700 $(46,678)
</TABLE>
At September 30, 2000 the Funds segregated sufficient cash and/or
securities to cover margin requirements on open financial futures
contacts.
(7) DELAYED DELIVERY TRANSACTIONS:
The Bond Funds may purchase securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more
after the date of the transactions. The price of the underlying securities
and the date when
39
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
the securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds either segregate on their records, or
instruct the custodian to segregate, securities having a value at least
equal to the amount of the purchase commitment.
At September 30, 2000, the Intermediate Tax Exempt Bond Fund had entered
into the following delayed delivery transactions:
<TABLE>
<CAPTION>
TYPE SECURITY SETTLEMENT DATE PAYABLE AMOUNT
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Buy Stafford Texas Economic Development Corp. FGIC 10/25/2000 $560,605
</TABLE>
At September 30, 2000, the Massachusetts Intermediate Tax Exempt Bond
Fund, the Small Cap Tax-Sensitive Equity Fund and the Tax-Sensitive Equity
Fund were not parties to any delayed delivery transactions.
(8) LINE OF CREDIT
The Funds, other funds in the Trust and subtrusts in the Standish Ayer and
Wood Master Portfolio (the "Portfolio Trust") are parties to a committed
line of credit facility, which enables each portfolio/fund to borrow, in
the aggregate, up to $35 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 year ended September
30, 2000, the expense related to the commitment fee was $1,087, $1,463,
$3,930 and $534 for the Massachusetts Intermediate Tax Exempt Bond Fund,
the Intermediate Tax Exempt Bond Fund, the Small Cap Tax-Sensitive Equity
Fund and the Tax-Sensitive Equity Fund, respectively.
During the year ended September 30, 2000 the funds had no borrowings under
the credit facility.
--------------------------------------------------------------------------------
TAX INFORMATION -- UNAUDITED
Pursuant to section 852 of the Internal Revenue Code, the Standish
Intermediate Tax Exempt Bond Fund and the Standish Small Cap Tax Sensitive
Fund designated $218,599 and $39,853,251, respectively, as capital gain
dividends for the year ended September 30, 2000. All of this amount
represents a 20% tax rate gain distribution. Of the distributions paid by
the Bond Funds from net investment income for the year ended September 30,
2000, amounts that were tax exempt for federal income tax purposes are as
follows:
Massachusetts Intermediate Tax Exempt Bond Fund $2,722,906
Intermediate Tax Exempt Bond Fund $3,596,075
40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the Shareholders
of Standish Massachusetts Intermediate Tax Exempt Bond Fund, Standish
Intermediate Tax Exempt Bond Fund, Standish Small Cap Tax-Sensitive Equity Fund,
and Standish Tax-Sensitive Equity Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 Massachusetts Intermediate Tax Exempt Bond Fund, Standish
Intermediate Tax Exempt Bond Fund, Standish Small Cap Tax-Sensitive Equity Fund
and Standish Tax-Sensitive Equity Fund (the "Funds"), at September 30, 2000, and
the results of operations, the changes in net assets and the financial
highlights for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. 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 of America, 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 September 30, 2000, by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2000
41
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