STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost,
$38,845,252) $38,999,748
Cash 692,085
Foreign currency, at value (cost $66,948) 66,912
Receivable for investments sold 761,284
Interest receivable 777,583
Unrealized appreciation on forward foreign currency
exchange contracts (Note 6) 22,451
Prepaid expenses 2,585
-----------
Total assets 41,322,648
LIABILITIES
Payable for investments purchased $1,039,225
Unrealized depreciation on forward foreign currency
exchange contracts (Note 6) 62,908
Options written, at value (Note 6) (premiums
received, $83,355) 67,638
Accrued accounting, custody and transfer agent fees 13,142
Accrued trustees' fees and expenses (Note 2) 1,697
Accrued expenses and other liabilities 13,557
---------
Total liabilities 1,198,167
-----------
NET ASSETS $40,124,481
===========
NET ASSETS CONSIST OF:
Paid-in capital $40,485,999
Accumulated net realized loss (1,132,543)
Undistributed net investment income 641,369
Net unrealized appreciation 129,656
-----------
TOTAL NET ASSETS $40,124,481
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,111,547
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (Net Assets/Shares outstanding) $ 19.00
===========
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 808,991
---------
Total investment income 808,991
EXPENSES
Investment advisory fee (Note 2) $ 55,253
Accounting, custody, and transfer agent fees 63,915
Legal and audit services 13,090
Registration fees 2,785
Trustees' fees and expenses (Note 2) 2,233
Insurance expense 1,571
Miscellaneous 1,484
-----------
Total expenses 140,331
Deduct:
Waiver of investment advisory fee (Note 2) (55,253)
Reimbursement of Fund operating expenses (Note 2) (85,078)
-----------
Total expense deductions (140,331)
-----------
Net expenses 0
---------
Net investment income 808,991
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions (1,071,471)
Written options transactions 20,005
Foreign currency transactions and forward foreign
currency exchange contracts 102,049
-----------
Net realized loss (949,417)
Change in unrealized appreciation (depreciation)
Investment securities 556,111
Written options 28,212
Foreign currency and forward foreign currency
exchange contracts (193,617)
-----------
Net change in unrealized appreciation
(depreciation) 390,706
---------
Net realized and unrealized loss (558,711)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 250,280
=========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS ENDED JUNE 30, 1999
JUNE 30, 2000 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1999
---------------- ----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 808,991 $ 837,544
Net realized gain (loss) (949,417) 318,799
Change in unrealized appreciation (depreciation) 390,706 (261,050)
----------- -----------
Net increase in net assets from investment operations 250,280 895,293
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (123,554) (837,544)
In excess of net investment income -- (545,993)
----------- -----------
Total distributions to shareholders (123,554) (1,383,537)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 15,875,000 30,574,577
Value of shares issued to shareholders in payment of
distributions declared 123,513 1,383,537
Cost of shares redeemed -- (7,470,628)
----------- -----------
Net increase in net assets from Fund share
transactions 15,998,513 24,487,486
----------- -----------
TOTAL INCREASE IN NET ASSETS 16,125,239 23,999,242
NET ASSETS
At beginning of period 23,999,242 --
----------- -----------
At end of period (including undistributed net
investment income of $641,369 and distributions in
excess of net investment income of $44,068,
respectively) $40,124,481 $23,999,242
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1999
JUNE 30, 2000 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED)(1) TO DECEMBER 31, 1999(1)
------------------ ----------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.47 $ 20.00
------- -------
FROM INVESTMENT OPERATIONS:
Net investment income 0.55 0.61
Net realized and unrealized loss on investments (0.94) (0.04)
------- -------
Total from investment operations (0.39) 0.57
------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.08) (0.67)
In excess of net investment income -- (0.43)
------- -------
Total distributions to shareholders (0.08) (1.10)
------- -------
NET ASSET VALUE, END OF PERIOD $ 19.00 $ 19.47
======= =======
TOTAL RETURN++ (2.00)%+++ 2.84%+++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets) 0.00%+ 0.00%+
Net Investment Income (to average daily net assets) 5.84%+ 5.93%+
Portfolio Turnover 140%+++ 91%+++
Net Assets, End of Period (000's omitted) $40,124 $23,999
</TABLE>
-----------------
* For the period indicated, the investment adviser voluntarily agreed not to
impose any of its investment advisory fee and reimbursed the Fund for all
of its operating expenses. If this voluntary action had not been taken,
the investment income per share and ratios would have been:
<TABLE>
<S> <C> <C>
Net investment income per share $ 0.45 $ 0.51
Ratios (to average daily net assets):
Expenses 1.01%+ 1.02%+
Net investment income 4.83%+ 4.91%+
</TABLE>
+ Computed on an annualized basis.
++ Total return would have been lower in the absence of expense waivers.
+++ Not annualized.
(1) Calculated based on average shares outstanding.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 96.3%
CORPORATE -- 0.9%
INDUSTRIAL BONDS -- 0.9%
Clear Channel Communications 6.500% 07/07/2005 $ 225,000 $ 214,651
Flextronics International 9.750% 07/01/2010 50,000 48,933
Level 3 Communications Inc.+ 10.750% 03/15/2008 70,000 62,826
Level 3 Communications Inc. 11.250% 03/15/2010 30,000 26,925
Winstar Communications 144A 12.750% 04/15/2010 30,000 27,212
-----------
Total Corporate (Cost $386,896) 380,547
-----------
GOVERNMENT/OTHER -- 91.3%
BELGIUM -- 0.6%
Kingdom of Belgium 5.750% 09/28/2010 250,000 241,182
-----------
CANADA -- 6.6%
Canada Government 5.500% 06/01/2009 1,100,000 724,544
Canada Government 6.000% 06/01/2008 855,000 580,199
Canada Government 6.000% 09/01/2005 1,970,000 1,335,370
-----------
2,640,113
-----------
EURODOLLAR -- 4.5%
American Standard Global+ 7.125% 06/01/2006 275,000 253,380
Enron Corp. 4.375% 04/08/2005 135,000 119,331
Ford Motor Credit Co. 3.750% 07/12/2004 225,000 198,784
Fort James Corp. Notes 4.750% 06/29/2004 150,000 134,540
General Motors Acceptance Corp. 5.500% 02/02/2005 225,000 210,763
Italian Government BTPS Notes NCL 6.500% 11/01/2027 390,000 399,741
Lehman Brothers Holdings PLC Medium Term
Notes(a) 4.739% 08/25/2003 300,000 284,132
Metromedia Fiber Network+ 10.000% 12/15/2009 230,000 210,820
-----------
1,811,491
-----------
FRANCE -- 6.7%
France O.A.T. 6.000% 10/25/2025 450,000 445,901
French Treasury Bill 4.750% 03/12/2002 2,380,000 2,261,971
-----------
2,707,872
-----------
GERMANY -- 25.0%
BKO 3.250% 09/15/2000 1,065,000 1,013,913
Bundes Obligation+ 4.500% 08/19/2002 2,060,000 1,947,613
Bundes Obligation Ser 116 Notes+ 5.750% 08/22/2000 1,140,000 1,089,887
Colt Telecom Group PLC 144A Notes 7.625% 07/31/2008 500,000 222,123
Deutschland Republic+ 5.375% 01/04/2010 1,260,000 1,211,710
Deutschland Republic+ 5.625% 01/04/2028 1,955,000 1,877,087
Deutschland Republic+ 6.250% 01/04/2024 260,000 267,611
Deutschland Republic+ 6.500% 07/04/2027 1,025,000 1,096,502
Deutschland Republic+ 8.375% 05/21/2001 590,000 579,669
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GERMANY (CONTINUED)
Exide Holding Europe 144A Notes 9.125% 04/15/2004 $ 275,000 $ 126,195
Federal Republic of Germany+ 4.750% 11/20/2001 630,000 599,599
-----------
10,031,909
-----------
IRELAND -- 0.1%
Esat Telecom Group PLC 11.875% 11/01/2009 25,000 29,838
-----------
JAPAN -- 18.2%
Deutsche Telekom 1.500% 06/15/2005 70,000,000 659,125
Ford Motor Credit Corp.+ 1.200% 02/07/2005 50,000,000 467,289
IBM Corp. Notes 0.900% 04/14/2003 24,000,000 225,758
Italy Euroyen Notes+ 1.800% 02/23/2010 70,000,000 664,625
Italy Euroyen Notes NCL+ 3.750% 06/08/2005 5,000,000 53,198
KFW International Finance 1.750% 03/23/2010 31,000,000 292,529
Kingdom of Spain+ 3.100% 09/20/2006 50,000,000 523,160
McDonald's Corp. 2.000% 03/09/2010 16,000,000 150,944
Mexican Notes NCL+ 3.100% 04/24/2002 35,000,000 337,411
Oesterreich KontrollBank 1.800% 03/22/2010 45,000,000 427,187
Procter & Gamble+ 1.500% 12/07/2005 20,000,000 188,552
Province of Ontario 1.875% 01/25/2010 255,000,000 2,408,401
Spanish Government+ 4.750% 03/14/2005 60,000,000 661,848
Westpac Banking+ 0.875% 09/22/2003 27,000,000 253,670
-----------
7,313,697
-----------
LUXEMBOURG -- 0.3%
PTC International Finance II SA 11.250% 12/01/2009 140,000 138,685
-----------
NETHERLANDS -- 6.7%
Deutsche Telekom 6.125% 07/06/2005 125,000 119,827
KPN-Qwest B.V. 144A Private Placement 7.125% 06/01/2009 275,000 242,221
Koninklijke Ahold NV 4.000% 05/19/2005 60,000 62,444
Mannesmann Finance(a) 4.073% 07/15/2002 150,000 142,523
Netherland Government Notes 5.500% 07/15/2010 2,100,000 2,018,514
Versatel Telecom 4.000% 03/30/2005 80,000 71,610
Versatel Telecom 4.000% 12/17/2004 20,000 22,151
-----------
2,679,290
-----------
SLOVAKIA -- 0.2%
Slovak Wireless 11.250% 03/30/2007 75,000 73,758
-----------
SWEDEN -- 5.2%
Sweden Government Bond #1038 6.500% 10/25/2006 2,500,000 301,902
Sweden Government Bond #1042 5.000% 01/15/2004 11,100,000 1,250,642
Sweden Government Bond #1044 NCL 3.500% 04/20/2006 5,000,000 518,273
-----------
2,070,817
-----------
TURKEY -- 0.3%
Turkish Treasury Bill 0.000% 08/22/2001 88,000,000,000 101,262
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE* (NOTE 1A)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED KINGDOM -- 16.2%
Abbey National Treasury 7.750% 12/31/2003 $ 150,000 $ 234,637
FHLB+ 6.875% 06/07/2002 400,000 609,692
FNMA Global Bond+ 6.875% 06/07/2002 700,000 1,067,350
IPC Magazines 144A(b) 0.000% 03/15/2008 175,000 156,630
Inco Ltd. 15.750% 07/15/2006 200,000 421,571
Lehman Brothers Holdings PLC 6.950% 06/22/2004 230,000 343,801
OTE PLC 6.125% 02/07/2007 175,000 164,288
Royal Bank of Scotland 144A 6.770% 03/31/2049 175,000 168,761
Tate & Lyle International Finance+ 5.750% 10/06/2006 125,000 114,626
UK Treasury Gilt+ 7.750% 09/08/2006 155,000 261,023
UK Treasury Gilt+ 9.000% 10/13/2008 180,000 336,847
UK Treasury Gilt+ 9.500% 04/18/2005 855,000 1,501,448
UK Treasury Gilt Stock 5.750% 12/07/2009 635,000 1,003,175
UK Treasury Gilt Stock+ 6.000% 12/07/2028 55,000 103,184
-----------
6,487,033
-----------
YANKEE BONDS -- 0.7%
Mexico Global Bond+ 11.375% 09/15/2016 120,000 135,600
Republic of Panama 144A Notes+ 7.875% 02/13/2002 150,000 147,375
-----------
282,975
-----------
Total Government/Other (Cost $36,470,620) 36,609,922
-----------
U.S. TREASURY OBLIGATIONS -- 4.1%
TREASURY BONDS -- 1.5%
U.S. Treasury Bond+ 6.250% 05/15/2030 430,000 451,165
U.S. Treasury Bond+ 9.250% 02/15/2016 105,000 136,254
-----------
587,419
-----------
TREASURY NOTES -- 2.6%
U.S. Treasury Note+ 6.000% 08/15/2009 250,000 248,008
U.S. Treasury Note+ 6.500% 02/15/2010 765,000 791,178
-----------
1,039,186
-----------
Total U.S. Treasury Obligations
(Cost $1,583,227) 1,626,605
-----------
TOTAL BONDS AND NOTES (COST $38,440,743) 38,617,074
-----------
<CAPTION>
CONTRACT
SIZE
--------------
<S> <C> <C>
PURCHASED OPTIONS -- 0.3%
DEM 3.75% Call, Strike Price 90.20, 09/13/2000 550,000 3,886
DEM 3.75% Call, Strike Price 91.05, 09/29/2000 320,000 1,482
DEM 4% Call, Strike Price 93.99, 07/07/2000 850,000 0
DEM 4% Call, Strike Price 95.43, 07/21/2000 275,000 0
DEM 4% Call, Strike Price 99.01, 08/03/2000 275,000 3
DEM 4.5% Call, Strike Price 101.20, 08/14/2000 300,000 0
DEM 4.5% Call, Strike Price 95.42, 11/02/2000 225,000 1,740
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT VALUE
SECURITY SIZE (NOTE 1A)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED OPTIONS (CONTINUED)
DEM 4.5% Call, Strike Price 95.54, 10/13/2000 285,000 $ 1,796
DEM 4.75% Call, Strike Price 85.93, 09/11/2000 275,500 9,488
DEM 5.38% Call, Strike Price 99.12, 02/01/2001 225,000 5,113
DEM 5.38% Call, Strike Price 99.21, 01/03/2001 450,000 9,758
JPY Put/AUD Call, Strike Price 68.75, 01/09/2001 350,000 2,617
JPY Put/EUR Call, Strike Price 105.00, 11/09/2000 250,000 3,461
JPY Put/EUR Call, Strike Price 110.25, 12/06/2001 225,000 4,511
JPY Put/EUR Call, Strike Price 125.00, 08/29/2000 550,000 0
JPY Put/USD Call, Strike Price 115.00, 09/01/2000 300,000 210
JPY Put/USD Call, Strike Price 115.80, 08/14/2000 300,000 60
JPY Put/USD Call, Strike Price 120.00, 11/07/2001 225,000 1,800
USD Put/CAD Call, Strike Price 1.42, 10/19/2000 300,000 480
USD Put/EUR Call, Strike Price 0.97, 11/09/2000 225,000 5,715
USD Put/EUR Call, Strike Price 0.97, 11/01/2000 225,000 6,300
USD Put/MXP Call, Strike Price 10.00, 4/12/2001 70,000 1,434
USD Put/MXP Call, Strike Price 8.25, 04/12/2001 140,000 18
UST 6.00% Call, Strike Price 95.59, 02/01/2001 2,200 9,195
UST 6.00% Call, Strike Price 95.98, 01/05/2001 2,250 9,979
UST 6.00% Call, Strike Price 99.88, 10/27/2000 4,750 6,067
UST 6.50% Call, Strike Price 100.88, 02/22/2001 4,500 15,855
UST 6.50% Call, Strike Price 100.88, 03/05/2001 4,500 15,961
UST 6.50% Call, Strike Price 99.53, 02/16/2001 4,000 17,760
-----------
TOTAL PURCHASED OPTIONS (COST $156,635) 134,689
-----------
<CAPTION>
PAR
RATE MATURITY VALUE
------- ---------- --------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 0.6%
U.S. GOVERNMENT AGENCY -- 0.6%
FHLMC Discount Note@ + 6.196% 08/17/2000 250,000 247,985
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $247,874) 247,985
-----------
TOTAL INVESTMENTS -- 97.2% (COST $38,845,252) $38,999,748
OTHER ASSETS, LESS LIABILITIES -- 2.8% 1,124,733
-----------
NET ASSETS -- 100.0% $40,124,481
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration.
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
NCL - Non-callable
UST - United States Treasury
AUD - Australian Dollar
CAD - Canadian Dollar
DEM - German Deutsche Mark
EUR - Euro
JPY - Japanese Yen
MXP - Mexican Peso
USD - United States Dollar
* Denominated in United States dollars except for foreign country specific
bonds which are denominated in their respective local currency.
+ Denotes all or part of security pledged as collateral (Note 6).
(a) Variable Rate Security; rate indicated is as of 6/30/00.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
@ Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Standish, Ayer & Wood Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish International Fixed Income Fund II (the "Fund") is a
separate non-diversified investment series of the Trust.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Securities
(including illiquid securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor on a daily basis, the market value and accrued interest of the
repurchase agreement's underlying investments to ensure the existence of a
proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount on long-term debt securities when
required for federal income tax purposes. Realized gains and losses from
securities sold are recorded on the identified cost basis. The Fund does
not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or
loss from investments.
D. FEDERAL TAXES
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal year.
At December 31, 1999, the Fund, for federal income tax purposes, had
capital loss carryovers which will reduce the Fund's taxable income
arising from future net realizable gain on investments, if any, to the
extent permitted by the Internal Revenue Code and thus will reduce the
amount of distributions to shareholders which would otherwise be necessary
to relieve the Fund of any liability for federal income tax. Such capital
loss carryover is $112,440 which expires on December 31, 2007. The Fund
elected to defer to its fiscal year ending December 31, 2000 losses of
$20,070 recognized during the period from November 1, 1999 to
December 31, 1999.
10
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
E. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on 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,
passive foreign investment companies (PFIC), litigation proceeds, market
discount, non-taxable dividends, capital loss carryforwards, losses
deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish International Management
Company, LLC ("SIMCO") for overall investment advisory and administrative
services, and general office facilities, is paid monthly at the annual
rate of 0.40% of the Fund's average daily net assets. SIMCO voluntarily
agreed to limit the Fund's total annual operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.00% of the
Fund's average daily net assets for the six months ended June 30, 2000.
Pursuant to this agreement, for the six months ended June 30, 2000, SIMCO
voluntarily did not impose $55,253 of its investment advisory fee and
reimbursed the Fund for $85,078 of its operating expenses. This agreement
is voluntary and temporary and may be discontinued or revised by SIMCO at
any time. The Trust pays no compensation directly to its trustees who are
affiliated with SIMCO or to its officers, all of whom receive remuneration
for their services to the Trust from SIMCO. Certain of the trustees and
officers of the Trust are directors or officers of Standish Ayer & Wood,
Inc., the parent company of SIMCO.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the six months ended June 30, 2000 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $ 1,955,679 $ 366,789
=========== ===========
Investments (non-U.S.Government Securities) $47,184,491 $34,364,759
=========== ===========
11
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 30, 1999
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 2000 OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1999
---------------- -----------------------
<S> <C> <C>
Shares sold 872,223 1,526,875
Shares issued to shareholders in payment of
distributions declared 6,530 70,162
Shares redeemed -- (364,243)
------------ ----------------
Net increase 878,753 1,232,794
============ ================
</TABLE>
At June 30, 2000, one shareholder, Phelps Dodge Corporation Master Trust,
held of record approximately 97% of the total outstanding shares of the
Fund. Investment activity of this shareholder could have a material impact
on the Fund.
On June 30, 1999, the Fund was formed with an initial contribution of
securities in kind, redeemed from the Standish International Fixed Income
Fund, having a market value of approximately $29,400,000 which includes
interest receivable of approximately $700,000.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2000, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $38,845,252
===========
Gross unrealized appreciation 835,226
Gross unrealized depreciation (680,730)
-----------
Net unrealized appreciation $ 154,496
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to enhance
potential gain in circumstances where hedging is not involved. The nature,
risks and objectives of these instruments are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on or before a
certain date. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Fund's exposure to the underlying instrument. Buying puts
and writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and
written by the Fund, are reflected in the accompanying Statement of Assets
and Liabilities at market value. The underlying face amount at value of
any open purchased options is shown in the Schedule of Investments. This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract, or
if the counterparty does not perform under the contract's terms.
12
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
A summary of such transactions for the six months ended June 30, 2000 is
as follows:
<TABLE>
<CAPTION>
WRITTEN PUT OPTION TRANSACTIONS
------------------------------------------------------------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
<S> <C> <C>
Outstanding, beginning of period 4 $ 16,529
Options written 10 44,227
Options closed (5) (22,610)
--- --------
Outstanding, end of period 9 $ 38,146
=== ========
<CAPTION>
WRITTEN CALL OPTION TRANSACTIONS
------------------------------------------------------------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
<S> <C> <C>
Outstanding, beginning of period 6 $ 15,219
Options written 8 17,031
Options closed (6) (10,294)
--- --------
Outstanding, end of period 8 $ 21,956
=== ========
<CAPTION>
WRITTEN CROSS CURRENCY OPTION TRANSACTIONS
------------------------------------------------------------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
<S> <C> <C>
Outstanding, beginning of period 2 $ 9,122
Options written 14 45,114
Options closed (9) (30,983)
--- --------
Outstanding, end of period 7 $ 23,253
=== ========
</TABLE>
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 June 30, 2000, the Fund held the following forward foreign currency or
cross currency exchange contracts.
13
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 318,161 09/07/2000-04/17/2002 $ 312,391 $ 307,840 $ 4,551
Canadian Dollar 335,000 09/27/2000 226,697 228,253 (1,556)
Euro Dollar 250,000 09/20/2000 239,795 236,988 2,807
Japanese Yen 334,622,500 07/03-09/27/2000 3,201,592 3,221,384 (19,792)
Slovakia Koruna 2,446,075 09/11/2000 54,468 56,340 (1,872)
Thai Baht 5,697,000 09/11/2000 145,528 150,000 (4,472)
--------------- -------------- -------------
TOTAL $ 4,180,471 $ 4,200,805 $ (20,334)
=============== ============== =============
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Argentinian Peso 332,888 07/10/2000-04/17/2002 $ 313,619 $ 310,189 $ (3,430)
Euro Dollar 365,686 07/03/2000-08/22/2001 352,363 357,159 4,796
Hong Kong Dollar 5,424,297 08/13/2001 695,949 690,000 (5,949)
Japanese Yen 1,312,500 07/03/2000 12,385 12,093 (292)
Thai Baht 12,174,000 09/11/2000 310,982 300,000 (10,982)
--------------- -------------- -------------
TOTAL $ 1,685,298 $ 1,669,441 $ (15,857)
=============== ============== =============
</TABLE>
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
MARKET IN EXCHANGE MARKET CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE FOR VALUE VALUE DATE GAIN/(LOSS)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro Dollar $ 64,499 Hungarian Forint $ 64,718 08/08/2000 $ 219
Canadian Dollar 782,567 Euro Dollar 790,943 09/20/2000 8,376
Euro Dollar 599,489 Japanese Yen 601,191 09/20/2000 1,702
British Pound Sterling 2,467,259 Japanese Yen 2,452,696 09/20/2000 (14,563)
---------------- --------------- -----------------
TOTAL $ 3,913,814 $ 3,909,548 $ (4,266)
================ =============== =================
</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
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts.
At June 30, 2000, the Fund held no open futures contracts.
14
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS
Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Credit and market risk exist with respect to
these instruments. If forecasts of interest rates and other market factors
are incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction
may not perform. The Fund expects to enter into these transactions
primarily for hedging purposes including, but not limited to, preserving a
return or spread on a particular investment or portion of its portfolio,
protecting against currency fluctuations, as a duration management
technique or protecting against an increase in the price of securities the
Fund anticipates purchasing at a later date. Gains and losses are realized
upon the expiration or closing of the swap contracts.
At June 30, 2000, the Fund held no open interest rate swap contracts.
15
