[LOGO] STANDISH FUNDS(R)
Standish Small Cap
Financial Report Growth Fund
--------------------------------------------------------------------------------
Six Months Ended
March 31, 2000
(Unaudited)
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investment in Standish Small Cap Growth Portfolio
("Portfolio"), at value (Note 1A) $183,019,073
Receivable for Fund shares sold 324,923
Prepaid expenses 12,990
------------
Total assets 183,356,986
LIABILITIES
Payable for Fund shares redeemed $ 1,411,729
Accrued accounting, custody and transfer agent fees 5,895
Accrued trustees' fees and expenses (Note 2) 1,000
Accrued expenses and other liabilities 12,527
-----------
Total liabilities 1,431,151
------------
NET ASSETS $181,925,835
============
NET ASSETS CONSIST OF:
Paid-in capital $127,266,444
Accumulated net realized gain 44,681,974
Accumulated net investment loss (356,396)
Net unrealized appreciation 10,333,813
------------
TOTAL NET ASSETS $181,925,835
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,602,581
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 69.90
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $ 134,864
Dividend income allocated from Portfolio 9,673
Expenses allocated from Portfolio (459,220)
-----------
Net investment income allocated from Portfolio (314,683)
EXPENSES
Accounting, custody, and transfer agent fees $ 15,301
Registration fees 11,945
Legal and audit services 9,315
Trustees' fees and expenses (Note 2) 2,000
Insurance expense 170
Miscellaneous 2,982
----------
Total expenses 41,713
-----------
Net investment loss (356,396)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain allocated from Portfolio on:
Investment security transactions 44,818,821
Financial futures contracts 474,268
----------
Net realized gain 45,293,089
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities 3,767,194
----------
Net change in unrealized appreciation
(depreciation) 3,767,194
-----------
Net realized and unrealized gain on investments 49,060,283
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $48,703,887
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (356,396) $ (211,094)
Net realized gain 45,293,089 5,339,363
Net change in unrealized appreciation (depreciation) 3,767,194 7,689,250
------------ -----------
Net increase in net assets from investment operations 48,703,887 12,817,519
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net realized gains on investments (5,354,756) --
------------ -----------
Total distributions to shareholders (5,354,756) --
------------ -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 105,169,275 25,975,745
Value of shares issued to shareholders in payment of
distributions declared 5,227,939 --
Cost of shares redeemed (15,851,232) (6,706,525)
------------ -----------
Net increase in net assets from Fund share
transactions 94,545,982 19,269,220
------------ -----------
TOTAL INCREASE IN NET ASSETS 137,895,113 32,086,739
NET ASSETS
At beginning of period 44,030,722 11,943,983
------------ -----------
At end of period (including accumulated net
investment loss of $356,396 and $0, respectively) $181,925,835 $44,030,722
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED NINE MONTHS DECEMBER 23, 1996
MARCH 31, SEPTEMBER 30, ENDED (COMMENCEMENT OF
2000 -------------------- SEPTEMBER 30, OPERATIONS) TO
(UNAUDITED)(1) 1999(1) 1998(1) 1997 DECEMBER 31, 1996
-------------- --------- --------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 38.28 $ 22.22 $ 29.12 $20.39 $20.00
-------- ------- ------- ------ ------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* (0.21) (0.24) (0.07) 0.03 --
Net realized and unrealized gain
(loss) on investments 35.63 16.30 (5.01) 8.71 0.39
-------- ------- ------- ------ ------
Total from investment operations 35.42 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 PERIOD $ 69.90 $ 38.28 $ 22.22 $29.12 $20.39
======== ======= ======= ====== ======
TOTAL RETURN+++ 96.97%++ 72.14% (17.84)% 42.94%++ --(2)
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)*(3) 0.91%+ 1.00% 0.58% -- + --(2)
Net Investment Income (loss) (to
average daily net assets)* (0.65)%+ (0.73)% (0.25)% 0.49%+ --(2)
Net Assets, End of Period (000's
omitted) $181,926 $44,031 $11,944 $6,314 $ 484
</TABLE>
-----------------
* 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income per share $ -- $ (0.30) $ (0.42) $(0.25) --(2)
Ratios (to average daily net assets):
Expenses(3) -- 1.18% 1.94% 3.56%+ --(2)
Net investment loss -- (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.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Standish, Ayer & Wood Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Small 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 March
31, 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 different classes of shares: Institutional
Class and Service Class. The Service Class of shares are subject to a
service fee of up to 0.25% of the average daily net assets of that class
of shares. At March 31, 2000, there were no Service Class of shares
outstanding.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
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.
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
5
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences, which may result in distribution reclassifications, are
primarily due to differing treatments for foreign currency transactions,
passive foreign investment companies (PFIC), litigation proceeds, market
discount, non-taxable dividends, capital loss carryforwards, losses
deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
(2) INVESTMENT ADVISORY FEE:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish, 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. The Trust pays no compensation directly to its
trustees who are affiliated with the SA&W or to its officers, all of whom
receive remuneration for their services to the Trust from SA&W. Certain of
the trustees and officers of the Trust are directors or officers of SA&W.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended March 31, 2000 aggregated $104,956,743 and $14,615,202,
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>
SIX MONTHS ENDED
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
Shares sold 1,563,038 801,425
Shares issued to shareholders in payment of
distributions declared 107,882 --
Shares redeemed (218,503) (188,863)
--------- --------
Net increase 1,452,417 612,562
========= ========
</TABLE>
At March 31, 2000, two shareholders held of record approximately 39% and
11% of the total outstanding shares of the Fund.
6
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
<S> <C> <C>
EQUITIES -- 95.5%
CAPITAL GOODS -- 4.0%
EGL, Inc.* 203,500 $ 4,756,812
Expeditors International Wash, Inc. 64,300 2,555,925
------------
7,312,737
------------
EARLY CYCLICAL -- 0.6%
Ryanair Holdings PLC ADR* 25,800 1,183,575
------------
ENERGY -- 2.0%
Cal Dive International, Inc.* 48,500 2,461,375
Dril-Quip* 24,400 1,149,850
------------
3,611,225
------------
FINANCIAL -- 1.7%
Costar Group, Inc.* 84,500 3,115,937
------------
GROWTH CYCLICAL -- 1.9%
Cinar Corp.* 24,100 168,700
Williams-Sonoma, Inc.* 109,100 3,382,100
------------
3,550,800
------------
HEALTH CARE -- 13.7%
Aclara Biosciences, Inc. 60,200 2,374,137
Alexion Pharmaceuticals, Inc.* 38,800 2,706,300
Alkermes, Inc.* 16,300 1,507,750
Antigenics, Inc.* 60,600 1,234,725
CV Therapeutics, Inc. 40,900 2,052,669
Cephalon, Inc.* 59,800 2,242,500
Genzyme-Molecular Oncology 78,200 1,182,775
Inhale Therapeutic Systems, Inc.* 34,500 2,570,250
Neose Technologies, Inc. 45,400 1,461,312
Transkaryotic Therapies, Inc.* 26,800 1,490,750
Triangle Pharmaceuticals, Inc.* 40,500 637,875
United Therapeutics* 24,100 1,873,775
Vical, Inc.* 57,500 1,926,250
ViroPharma, Inc. 29,600 1,814,850
------------
25,075,918
------------
SERVICES -- 31.8%
Breakaway Solutions, Inc.* 19,200 873,600
C-Net, Inc. 36,100 1,829,819
Complete Business Solutions, Inc. 58,200 1,302,225
Corporate Executive Board Co.* 27,300 1,385,475
Data Return Corp.* 25,100 923,994
Devry, Inc.* 90,800 2,769,400
Diamond Tech Partners, Inc. 18,600 1,222,950
Digex, Inc.* 15,700 1,741,719
Digital River, Inc.* 73,400 1,578,100
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY SHARES (NOTE 1A)
------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (CONTINUED)
Entercom Communications Corp.* 43,600 $ 2,223,600
Futurelink Corp.* 54,200 1,361,775
Getty Images, Inc.* 46,000 1,653,125
Globix Corp.* 42,200 1,608,875
ISS Group, Inc. 27,900 3,250,350
Inforte Corp. 34,600 1,695,400
Interliant, Inc.* 40,900 1,155,425
Internet Commerce Corp., Class A* 22,700 1,072,575
Media Metrix, Inc.* 40,300 1,692,600
Pinnacle Holdings, Inc.* 61,300 3,386,825
Proxicom, Inc. 57,600 2,552,400
QRS Corp. 17,400 1,309,350
Radio One, Inc.* 25,600 1,705,600
Radio Unica Corp. 42,300 499,669
Rare Medium Group, Inc.* 31,800 1,403,175
S1 Corp. 15,300 1,311,019
SBS Broadcasting SA* 21,900 1,346,850
SmartForce PLC ADR* 61,700 2,830,487
Sportsline USA, Inc.* 75,100 2,210,756
Stamps.com, Inc.* 61,700 1,191,581
USinternetworking, Inc. 35,400 1,371,750
Westwood One, Inc.* 83,600 3,030,500
Xcelera.com, Inc. 11,900 1,904,000
eMerge Interactive, Inc., Class A* 52,000 1,566,500
iGATE Capital Corp.* 27,800 1,254,475
------------
58,215,944
------------
TECHNOLOGY -- 39.8%
ATMI, Inc.* 110,700 5,285,925
Adaptive Broadband Corp.* 22,000 1,177,000
Aspen Technologies, Inc.* 45,600 1,841,100
Bottomline Technologies, Inc.* 45,000 1,639,687
Burr - Brown Corp.* 82,300 4,475,063
Clarus Corp.* 13,800 974,625
Cree Research, Inc.* 9,500 1,072,313
Datastream Systems, Inc.* 47,000 1,363,000
Digimarc Corp. 26,000 1,144,000
Diversenet Corp. 64,800 1,158,300
Emulex Corp.* 12,400 1,353,150
Entrust Technologies, Inc.* 19,400 1,650,515
Exar Corp.* 55,400 3,964,563
GSI Lumonics, Inc.* 78,000 1,335,750
Gadzoox Networks, Inc.* 55,700 2,670,119
Globespan, Inc.* 26,800 2,731,925
Great Plains Software, Inc.* 35,000 1,868,125
HNC Software, Inc.* 25,100 1,808,769
McAfee.com Corp.* 39,300 2,031,319
PRI Automation, Inc.* 42,600 2,603,925
Pericom Semiconductor Corp.* 56,400 2,012,775
Photronics, Inc.* 133,700 4,721,281
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY SHARES (NOTE 1A)
--------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Quicklogic Corp.* 53,500 $ 1,812,313
Sanchez Computer Associates, Inc. 59,400 2,086,425
Semtech Corp.* 65,800 4,215,313
SmartDisk Corp.* 22,200 588,300
TSI International Software Ltd.* 38,000 3,156,375
TenFold Corp. 31,300 1,893,650
Tricord Systems, Inc. 104,900 1,003,106
Varian Semiconductor Equipment Associates, Inc.* 29,600 1,883,300
Veeco Instruments, Inc.* 47,200 3,492,800
Visual Networks, Inc.* 34,900 1,980,575
Watchguard Technologies, Inc.* 20,400 1,836,000
-------------
72,831,386
-------------
TOTAL EQUITIES (COST $164,563,257) 174,897,522
-------------
<CAPTION>
PAR
RATE MATURITY VALUE
------- ----------- --------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 5.0%
U.S. GOVERNMENT AGENCY -- 0.1%
FNMA Discount Note=/= 6.698% 06/08/2000 $250,000 246,882
--------------
REPURCHASE AGREEMENTS -- 4.9%
Morgan Stanley Repurchase Agreement, dated 3/31/00,
due 4/03/00, with a maturity value of $8,880,884 and
effective yield of 5.30%, collateralized by a U.S.
Government Agency Obligation with a rate of 8.00%, a
maturity date of 03/01/30 and aggregate market value
of $9,054,503. 8,876,964
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $9,124,192) 9,123,846
-------------
TOTAL INVESTMENTS -- 100.5% (COST $173,687,449) $ 184,021,368
OTHER ASSETS, LESS LIABILITIES -- (0.5%) (1,001,940)
-------------
NET ASSETS -- 100.0% $ 183,019,428
=============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
ADR - American Depositary Receipt
* Non-income producing security.
=/= Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Note 1A) (identified cost,
$173,687,449) $184,021,368
Cash 4,406,088
Receivable for investments sold 7,473,787
Interest and dividends receivable 17,049
Deferred organization costs (Note 1E) 8,212
Prepaid expenses 419
------------
Total assets 195,926,923
LIABILITIES
Payable for investments purchased $ 12,873,077
Accrued accounting and custody fees 19,057
Accrued trustees' fees and expenses (Note 2) 1,950
Accrued expenses and other liabilities 13,411
-------------
Total liabilities 12,907,495
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS) $183,019,428
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1C)
Interest income $ 134,865
Dividend income 9,673
-----------
Total income 144,538
EXPENSES
Investment advisory fee (Note 2) $ 390,671
Accounting and custody fees 49,337
Legal and audit services 11,825
Trustees' fees and expenses (Note 2) 2,775
Amortization of organization expenses (Note 1E) 2,374
Insurance expense 1,537
Miscellaneous 702
----------
Total expenses 459,221
-----------
Net investment loss (314,683)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 44,818,934
Financial futures contracts 474,269
----------
Net realized gain 45,293,203
Change in unrealized appreciation (depreciation)
Investment securities 3,767,252
----------
Net change in unrealized appreciation
(depreciation) 3,767,252
-----------
Net realized and unrealized gain 49,060,455
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $48,745,772
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 2000 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (314,683) $ (195,382)
Net realized gain 45,293,203 5,339,392
Net change in unrealized appreciation (depreciation) 3,767,252 7,689,299
------------ -----------
Net increase in net assets from investment operations 48,745,772 12,833,309
------------ -----------
CAPITAL TRANSACTIONS
Contributions 104,956,743 25,892,217
Withdrawals (14,615,202) (6,716,319)
------------ -----------
Net increase in net assets from capital transactions 90,341,541 19,175,898
------------ -----------
TOTAL INCREASE IN NET ASSETS 139,087,313 32,009,207
NET ASSETS
At beginning of period 43,932,115 11,922,908
------------ -----------
At end of period $183,019,428 $43,932,115
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS YEAR ENDED NINE MONTHS DECEMBER 23, 1996
ENDED SEPTEMBER 30, ENDED (COMMENCEMENT OF
MARCH 31, 2000 -------------------- SEPTEMBER 30, OPERATIONS) TO
(UNAUDITED) 1999 1998 1997 DECEMBER 31, 1996
-------------- --------- --------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
RATIOS:
Expenses (to average daily net
assets)* 0.84%+ 0.95% 0.58% --+ --(1)
Net Investment Income (Loss) (to
average daily net assets)* (0.57)%+ (0.67)% (0.25)% 0.50%+ --(1)
Portfolio Turnover 135% 242% 147% 122% --
Net Assets, End of Period (000's
omitted) $183,019 $43,932 $11,923 $6,296 $484
</TABLE>
-----------------
* 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratios (to average daily net assets):
Expenses -- -- 1.39% 4.33%+ --(1)
Net investment loss -- -- (1.06)% (3.84)%+ --(1)
</TABLE>
+ Computed on an annualized basis.
(1) Amounts are not meaningful due to the short period of operations.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Small Cap Growth Portfolio (formerly Standish Small Capitalization Equity
Portfolio II) (the "Portfolio") is a separate diversified investment
series of the Portfolio Trust.
At March 31, 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 March 31, 2000 was
approximately 100%.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Securities
(including illiquid securities) for which quotations are not readily
available are valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized value based upon the value on such
date unless the trustees determine during such sixty-day period that
amortized value does not represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Portfolio to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the
Portfolio to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued. Dividend income is
recorded on the ex-dividend date. Realized gains and losses from
securities sold are recorded on the identified cost basis.
D. INCOME TAXES
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors
14
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
to satisfy them. The Portfolio allocates at least annually among its
investors each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of
income, gain, loss deduction or credit.
E. DEFERRED ORGANIZATIONAL EXPENSES
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized, on a straight-line basis,
through 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 Portfolios 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 six months ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Securities $ -- $ --
============ ============
Investments (non-U.S.Government Securities) $215,920,790 $136,672,986
============ ============
</TABLE>
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2000, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost $ 173,687,449
=============
Gross unrealized appreciation 26,757,989
Gross unrealized depreciation (16,424,070)
-------------
Net unrealized appreciation $ 10,333,919
=============
</TABLE>
(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
15
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
changes in security prices and foreign currencies, as well as to seek to
enhance returns. Writing puts and buying calls tend to increase the
Portfolio's exposure to the underlying instrument. Buying puts and writing
calls tend to decrease the Portfolio's exposure to the underlying
instrument, or hedge other Portfolio investments. Options, both held and
written by the Portfolio, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face amount at
value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract, or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option.
The Portfolio entered into no such transactions during the six months
ended March 31, 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 no open financial futures contracts at March 31, 2000.
(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 $25 million. Interest is charged to each
participating portfolio/fund based on its borrowings at a rate equal to
the Federal Funds effective rate plus 1/2 of 1%. In addition, a commitment
fee, computed at an annual rate of .065 of 1% on the daily unused portion
of the facility, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the six months ended
March 31, 2000 expense related to the commitment fee was $714 for the
Portfolio.
During the six months ended March 31, 2000, the Portfolio had no
borrowings under the credit facility.
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