STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1999
[LOGO]
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
January 27, 2000
Dear Standish, Ayer & Wood Investment Trust Shareholder:
We are writing to provide you with a review of developments at Standish, Ayer &
Wood as they relate to the activities of the Investment Trust.
THE 1999 MARKETS
The past year has been as tumultuous as 1998, although in different ways. World
stock markets have been euphoric. The S&P 500 advanced about 21% but the
technology-driven Nasdaq composite soared 86%. For the second year in a row,
larger capitalization growth stocks have performed brilliantly, and small or
middle capitalization value stocks have been left far behind. In striking
contrast to some of the equity markets, the bond market suffered one of its
worst years in history, with prices of ten-year Treasuries dropping 13%. Yield
spreads, which had widened sharply during the crisis in the fall of 1998,
narrowed during the early months of 1999 but then widened again as the year
progressed, with distressingly poor liquidity in the secondary bond market.
Securities that suffered even a slight short-term tarnishing in their attributes
often dropped dramatically in price - investors displayed very little appetite
for any bond or stock that had evidenced any degree of adversity.
STANDISH INVESTMENT DISCIPLINES
Many of Standish's investment disciplines are directed to applying fundamental
research to uncover relatively cheap securities where the fundamentals are
improving. This methodology has generally been quite successful over long
periods of time in the past. However, the investment environment of the last two
years has produced significant headwinds for some of our disciplines. While
there has been enormous pressure on Standish and other value investors to
capitulate and to become momentum investors, we have not wavered in our focus on
fundamentals and value. Of course, we and other investors make misjudgments
along the way, and we are doing our best to learn the correct lessons from the
inevitable mistakes. We have applied new investment tools and made modest
alterations to the investment process. We have added investment talent and
quantitative resources. We believe that our approach is correct, that our
portfolios are attractively priced relative to the benchmarks, and that it is
our obligation to adhere to the philosophy we have consistently represented to
you.
MAJOR DEVELOPMENTS AT STANDISH DURING 1999
We are pleased that Standish is able to report continued stability of both our
clients and our professional team. Assets under management for our clients are
approximately $45 billion, a slight decline during 1999 but up from $39 billion
at the beginning of 1998. These statistics include $3.3 billion of assets
managed through Standish International Management Company, LLC, or SIMCO. The
Standish Funds returned to 1997's level of $5.8 billion of assets from $6.5
billion in 1998. While we had some client turnover, a substantial portion of the
assets lost related to corporate events or restructuring as opposed to
terminations because of investment performance. We have also added a substantial
number of distinguished new clients.
We continue to build our professional resources both by adding new people and
through our long-term commitment to education and professional training. The
Standish team has grown to 292 members from 232 at the beginning of 1998. Our
109 investment officers average experience of 16 years. Sixty-seven of those
officers have advanced degrees (typically an MBA) and 72 have some advanced
professional accreditation.
1
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At the end of the year, the Standish board of directors elected two new
directors: Lavinia Chase and Cathy Powers. During the last year, we were sorry
to lose the services of Mark Flaherty, Director, who accepted a position of
great responsibility at a very large investment management organization. In
addition, we anticipate the retirement of both Arthur Parker and Barr Clayson
from their positions as stockholders and directors of Standish in June 2000. In
line with other professional service firms, Standish is attempting to maintain
the best balance between retaining the wisdom of senior investment managers and
assuring generational change.
STANDISH'S STRATEGIES FOR THE FUTURE
Standish's top priorities include:
o meeting the needs of our clients and working closely with them to
assure that their investment expectations are realistic;
o developing new investment products that add value in today's
environment; and
o investigating strategic business alliances to augment our research
and penetrate foreign markets as well as expand our domestic
distribution channels.
We believe that all investors and investment management firms are facing very
challenging times. However, the characteristics that have served Standish and
our clients well for sixty-seven years are still intact. We remain dedicated to
fulfilling your needs.
Sincerely,
/s/ Ted Ladd /s/ George Noyes
Edward H. Ladd, Chairman George W. Noyes, President
2
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
MANAGEMENT DISCUSSION AND ANALYSIS
1999 was a difficult year for global bonds. The J.P. Morgan Hedged Global
Government Bond Index returned 0.73% in 1999 while the Standish Global Fixed
Income Fund returned (0.64%) in 1999. The Fund's negative performance relative
to the Index was primarily due to the underweight position in Japan. Japanese
bonds far and away outperformed other markets with a currency-hedged 10.59%
return. The next best performing market was Denmark with a return of 1.30%.
Bond yields followed a one way trend higher in 1999. The year began with the
10-year U.S. Treasury yield at 4.65%, but finished at a yield of 6.43%. The view
at the start of the year was that developing Asia was facing years of sluggish
growth or a "U" shaped recovery and the Japanese economy was facing another year
of recession. Europe was challenged with the prospect of outright deflation as
consumer prices increased only 0.5% and it seemed like the U.S. economy would be
dragged down with the rest of the world.
The dramatic turnaround in yields was a direct result of concerted central bank
interest rate cuts of 1998 that were directed at avoiding the risk of a global
recession. The power of monetary policy can not be denied now that there is talk
of a "long boom" for the world economy.
The swing in sentiment from doom to boom helped produce poor returns for all
bond markets in the Index, except Japan. The surge in Japanese yields in
December 1998 from less than 1% to over 2.2% had the potential to crush any hope
for a recovery just as fiscal policy was starting to bear fruit. The Japanese
"administrators" reacted in early 1999 and fought the rise in yields by
effectively cutting overnight interest rates to 0%, flooding the money market
with excess liquidity and announcing that the Trust Fund Bureau would resume its
outright purchases of bonds for the rest of 1999. Ten-year bond yields dropped
and stayed in a 1.6% to 1.9% range throughout the year.
The bear market phenomenon of Japanese outperformance took over when Japanese
Government Bonds ("JGB") yields stayed in a tight 30 basis point range during
the year while most other markets saw yields rise by over 150 basis points. JGB
outperformance was also helped by collecting 600 basis points in carry when
hedged to U.S. dollars.
The Fund was overweight in the next best performing markets in Scandinavia and
Europe. However, the Fund's position in the U.S. was a drag on performance
because the U.S. market produced the worst relative returns of (2.87%). During
the year the Fund managed to reduce duration which was prudent in a rising
interest rate environment.
Currency markets were dominated in 1999 by Japanese yen strength and euro
weakness with the U.S. dollar in the middle. The yen was strong as the economy
surprised to the upside by mid-1999 and capital flowed into Japan to chase
undervalued equities. Japanese banks also repatriated billions of dollars in
foreign capital to comply with new bank regulations. The euro dropped steadily
throughout the year as European capital flowed into U.S. equities and
high-yielding corporate bonds. The fund had a short yen position on at the start
of the year but reversed the position by mid-year because the yen was poised to
strengthen. By the end of 1999, the Fund had no major currency positions.
U.S. credit spreads started 1999 at historically cheap levels, rallied into the
summer, but then widened as a result of substantial corporate bond issuance
ahead of Y2K and deteriorating liquidity conditions as year-end approached. For
the year, credit spreads basically collected the yield premium over Treasuries.
European credit spreads performed better but became relatively rich by the end
of 1999. The Fund is now neutral on "Euroland" credit because of valuations and
increased supply.
The Fund is well positioned to outperform in 2000. The U.S. and European bond
markets should outperform because they offer high yields on an absolute and
currency-hedged basis. Bond yields are relatively cheap, especially compared to
early 1999. Global growth should moderate and inflation will stay low because
central banks are now hiking interest rates. In addition, corporate credit
spreads are cheap and offer a higher yield advantage over government bonds which
gives the portfolio a distinct yield advantage. We believe that the yield
advantage and potential for spread contraction will add to relative value in the
next few years.
We appreciate your support during the year and we look forward to working on
your behalf towards superior, risk-adjusted returns in 2000.
/s/ William C. Cook II /s/ Richard S. Wood
W. Charles Cook Richard S. Wood
3
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
COMPARISON OF CHANGE IN VALUE OF $100,000 INVESTMENT IN
STANDISH GLOBAL FIXED INCOME FUND AND THE J.P. MORGAN HEDGED GLOBAL INDEX
[The following table was originally depicted as a line graph in the printed
material.]
Standish Global Fixed Income J.P. Morgan Global
Fund Hedged Index
100000 100000
101350 100330
97950 98203
95200 96828
94237 96112
92971 95487
91805 94895
93228 95929
92313 95459
91602 95001
92212 95181
92822 95829
1 Year 92923 95953
93801 97268
94731 98863
95661 100297
97598 101741
101263 105251
100635 105377
102014 106083
103447 107080
104454 108472
106013 109807
108323 111904
2 Year 109774 113124
111348 114266
109718 112632
109830 112869
111026 113478
111197 113898
112677 114980
113023 115624
114465 116549
118270 118764
120839 120889
124166 123150
3 Year 124076 122854
125681 123899
126793 124456
125307 123585
127058 125093
128433 125931
130309 122783
133031 130517
132398 130060
135246 132245
135886 133700
136847 134555
4 Year 138574 136210
140205 138145
140137 138711
141636 139613
142117 140297
143631 142050
144158 143073
145207 143989
144928 147272
147527 151027
144979 150695
148306 151765
5 Year 148244 151765
150656 153298
148463 151243
150222 152634
151924 154070
150518 153145
YTD 149043 151415
147170 151097
146346 151263
147094 152034
147299 152872
----------------------------------------------------
Average Annual Total Return
(for periods ended 12/31/99)
Since
1 Year 3 Year 5 Year 1/3/1994
------- ------- ------ --------------
(0.64)% 5.89% 9.65% 6.67%
----------------------------------------------------
Past performance is not predictive of future performance.
4
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investment in Standish Global Fixed Income Portfolio
("Portfolio"), at value (Note 1A) $379,603,922
Prepaid expenses 1,584
------------
Total assets 379,605,506
LIABILITIES
Payable for Fund shares redeemed $343,935
Accrued accounting, custody and transfer agent fees 3,898
Accrued trustees' fees and expenses (Note 2) 1,000
Accrued expenses and other liabilities 10,355
-------
Total liabilities 359,188
------------
NET ASSETS $379,246,318
============
NET ASSETS CONSIST OF:
Paid-in capital $412,013,479
Accumulated net realized loss (21,830,425)
Undistributed net investment income 912,242
Net unrealized depreciation (11,848,978)
------------
TOTAL NET ASSETS $379,246,318
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 20,217,269
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
(Net Assets/Shares outstanding) $ 18.76
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $30,602,346
Dividend income allocated from Portfolio (net of
foreign withholding taxes of $358) 82,908
Expenses allocated from Portfolio (2,327,730)
-----------
Net investment income allocated from Portfolio 28,357,524
EXPENSES
Accounting, custody, and transfer agent fees $ 43,640
Legal and audit services 25,909
Registration fees 19,291
Trustees' fees and expenses (Note 2) 4,000
Insurance expense 1,290
Miscellaneous 14,391
-----------
Total expenses 108,521
-----------
Net investment income 28,249,003
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions (34,197,926)
Financial futures contracts (1,613,853)
Written options transactions 1,777,502
Foreign currency transactions and forward foreign
currency exchange contracts 12,384,238
-----------
Net realized loss (21,650,039)
Change in unrealized appreciation (depreciation)
allocated from Portfolio on:
Investment securities (17,583,590)
Financial futures contracts 186,510
Written options (649,069)
Foreign currency and forward foreign currency
exchange contracts 8,303,109
-----------
Change in net unrealized appreciation
(depreciation) (9,743,040)
-----------
Net realized and unrealized loss on investments (31,393,079)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(3,144,076)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 28,249,003 $ 23,410,641
Net realized gain (loss) (21,650,039) 8,805,534
Change in net unrealized appreciation (depreciation) (9,743,040) (7,075,746)
------------ ------------
Net increase (decrease) in net assets from investment
operations (3,144,076) 25,140,429
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income (30,568,392) (23,734,875)
From net realized gains on investments -- (6,298,437)
------------ ------------
Total distributions to shareholders (30,568,392) (30,033,312)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 22,530,903 195,822,857
Value of shares issued to shareholders in payment of
distributions declared 21,666,312 22,737,669
Cost of shares redeemed (89,763,963) (10,904,532)
------------ ------------
Net increase (decrease) in net assets from Fund share
transactions (45,566,748) 207,655,994
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (79,279,216) 202,763,111
NET ASSETS
At beginning of year 458,525,534 255,762,423
------------ ------------
At end of year (including undistributed net
investment income of $912,242 and $3,132,422,
respectively) $379,246,318 $458,525,534
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1999(1) 1998(1) 1997(1) 1996(1) 1995
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 20.28 $ 20.39 $ 20.09 $ 19.53 $ 17.99
-------- -------- -------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment income* 1.26 1.28 1.34 1.42 1.59
Net realized and unrealized gain
(loss) on investments (1.38) 0.12 0.96 1.05 1.60
-------- -------- -------- -------- --------
Total from investment operations (0.12) 1.40 2.30 2.47 3.19
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.40) (1.21) (1.98) (1.91) (1.65)
From net realized gain on investments -- (0.30) (0.02) -- --
-------- -------- -------- -------- --------
Total distributions to shareholders (1.40) (1.51) (2.00) (1.91) (1.65)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 18.76 $ 20.28 $ 20.39 $ 20.09 $ 19.53
======== ======== ======== ======== ========
TOTAL RETURN+ (0.64)% 6.98% 11.68% 13.03% 18.13%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)*(2) 0.54% 0.56% 0.65% 0.65% 0.62%
Net Investment Income (to average
daily net assets)* 6.31% 6.18% 6.42% 7.11% 7.69%
Portfolio Turnover (3) -- -- -- 73% 163%
Net Assets, End of Year (000's omitted) $379,246 $458,526 $255,762 $155,731 $137,889
</TABLE>
- -----------------
* For the periods indicated, the investment adviser did not 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income per share N/A N/A $ 1.33 N/A N/A
Ratios (to average daily net assets):
Expenses (2) N/A N/A 0.66% N/A N/A
Net investment income N/A N/A 6.41% N/A N/A
</TABLE>
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of Standish Global Fixed Income Portfolio's
allocated expenses for the periods since May 3, 1996.
(3) Portfolio turnover represents the rate of portfolio activity for the period
while the Fund invested directly in securities, including the period from
January 1, 1996 through May 2, 1996. The portfolio turnover rates for the
period since the Fund transferred substantially all of its investable
assets to the Portfolio are shown in the Portfolio's financial statements
which are included elsewhere in this report.
+ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Standish, Ayer & Wood Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Global Fixed Income Fund (the "Fund") is a separate
non-diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of Standish
Global Fixed Income Portfolio (the "Portfolio"), a subtrust of Standish,
Ayer & Wood Master Portfolio (the "Portfolio Trust"), which is organized
as a New York trust, and has the same investment objective as the Fund.
The value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (approximately
100% at December 31, 1999). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of
the Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted
accounting principles. 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.
C. FEDERAL TAXES
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes all of its taxable income for its fiscal year.
At December 31, 1999, the Fund, for federal income tax purposes, had a
capital loss carryover which will reduce the Fund's taxable income arising
from net realized gain on investments, if any, to the extent permitted by
the Internal 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
$13,800,135 which expires on December 31, 2007. The Fund elected to defer
to its fiscal year ending December 31, 2000, $7,655,831 of losses
recognized during the period November 1, 1999 to December 31, 1999.
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.
9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
STANDISH GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
E. DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income will be declared and distributed
quarterly. 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. Dividends
from net investment income and capital gains distributions, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
for foreign currency transactions, passive foreign investment companies
(PFIC), litigation proceeds, market discount, non-taxable dividends,
capital loss carryforwards, losses deferred due to wash sales and excise
tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
(2) INVESTMENT ADVISORY FEE:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish International Management Company, L.L.C. ("SIMCO")
for investment advisory 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 SIMCO or to its officers, all of whom receive remuneration for their
services to the Trust from the SIMCO. Certain of the trustees and officers
of the Trust are directors or officers of Standish, Ayer & Wood, Inc., the
parent company of SIMCO.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended December 31, 1999, aggregated $22,529,776 and $101,477,881,
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
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Shares sold 1,142,101 9,481,481
Shares issued to shareholders in payment of
distributions declared 1,119,756 1,113,065
Shares redeemed (4,655,225) (524,367)
----------- -----------
Net increase (decrease) (2,393,368) 10,070,179
=========== ===========
</TABLE>
At December 31, 1999, three shareholders were record owners of
approximately 20%, 14% and 11% of the total outstanding shares of the
Fund, respectively.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Investment Trust and the
Shareholders of Standish Global Fixed Income 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 Global Fixed
Income Fund (the "Fund") at December 31, 1999, the results of its operations,
the changes in its net assets and the financial highlights for the periods
indicated therein, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which include
confirmation of securities at December 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2000
11
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE{.} (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BONDS AND NOTES -- 97.3%
ASSET BACKED -- 3.3%
Advanta Home Equity Loan Trust 1999-2 A3 6.440% 05/25/2029 $ 350,000 $ 342,891
Advanta Mortgage Trust 1997-4 M1 7.040% 01/25/2029 1,300,000 1,266,891
BankBoston Home Equity 1998-2 A7 6.140% 06/25/2013 5,000,000 4,654,102
Delta Funding Home Equity Line 1998-4 A7 6.190% 02/15/2031 2,750,000 2,506,797
IMC Home Equity 1997-7 A8 6.650% 02/20/2029 925,000 895,227
Residential Funding 1997-HS5 M1 7.010% 05/25/2027 900,000 870,609
Vanderbilt Mortgage Financial 1996-C B2 8.000% 11/07/2026 1,200,000 1,054,125
World Omni Auto Lease 1997-A B Non-ERISA 144A 7.300% 06/25/2003 732,368 732,368
------------
Total Asset Backed (Cost $13,175,845) 12,323,010
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4%
Bear Stearns Mtg. 1998-2 B 6.750% 04/30/2030 1,568,806 1,449,185
------------
Total Collateralized Mortgage Obligations (Cost $1,558,143) 1,449,185
------------
CORPORATE -- 9.7%
BANK BONDS -- 1.1%
Bank United Corp. Notes+ 8.875% 05/01/2007 775,000 711,062
City National Bank Corp. Notes+ 6.375% 01/15/2008 900,000 808,191
First Security Bank Sub. Notes+ 5.875% 11/01/2003 1,250,000 1,181,675
GS Escrow Corp. 144A Notes 7.125% 08/01/2005 730,000 652,236
GS Escrow Corp. 144A Senior Notes 7.000% 08/01/2003 620,000 573,089
Imperial Credit Capital Trust Notes+ 9.980% 12/31/2026 375,000 339,492
------------
4,265,745
------------
FINANCIAL -- 2.9%
Advanta Capital Trust I+ 8.990% 12/17/2026 750,000 517,500
Amresco Inc. Corp. Senior Sub Notes+ 9.875% 03/15/2005 525,000 336,000
Conseco Finance Trust Cap. Notes+ 8.796% 04/01/2027 250,000 226,430
Conseco Finance Trust II+ 8.700% 11/15/2026 2,225,000 1,995,820
Conseco Finance Trust Notes+ 6.800% 06/15/2005 1,150,000 1,071,299
Crescent Real Estate Notes+ 7.125% 09/15/2007 900,000 712,390
Florida Windstorm 144A Notes+ 7.125% 02/25/2019 2,225,000 2,062,139
Liberty Mutual Insurance Co. 144A Notes 7.697% 10/15/2097 850,000 711,297
MMI Capital Trust Notes+ 7.625% 12/15/2027 1,300,000 1,001,000
Simon Debartolo Group LP Notes+ 6.750% 07/15/2004 925,000 870,610
Simon Debartolo Group LP Notes NCL+ 6.875% 10/27/2005 425,000 396,121
Wellsford REIT Senior Notes+ 9.375% 02/01/2002 1,000,000 1,031,960
------------
10,932,566
------------
INDUSTRIAL BONDS -- 5.7%
American Standard Corp. Notes+ 7.375% 04/15/2005 1,000,000 940,000
Aramark Services Notes+ 6.750% 08/01/2004 2,000,000 1,879,400
Conmed Corp. Notes+ 9.000% 03/15/2008 700,000 647,500
Enterprise Corp. Notes+ 6.375% 05/15/2003 950,000 912,655
Enterprise Corp. Notes+ 7.000% 06/15/2000 500,000 501,065
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE{.} (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL BONDS (continued)
Horseshoe Gaming Holdings 8.625% 05/15/2009 $ 1,000,000 $ 955,000
Horseshoe Gaming LLC Notes+ 9.375% 06/15/2007 450,000 454,500
Kaufman & Broad Home Corp. Senior Notes+ 7.750% 10/15/2004 300,000 279,000
Lilly Industries Inc. Notes 7.750% 12/01/2007 300,000 274,753
McLeod USA Inc. 8.125% 02/15/2009 1,025,000 955,812
McLeod USA Inc. 144A Senior Notes 9.500% 11/01/2008 300,000 300,750
McLeod USA Senior Notes+ 8.375% 03/15/2008 2,075,000 1,971,250
Panamsat Notes+ 6.000% 01/15/2003 1,550,000 1,448,769
Panamsat Notes+ 6.125% 01/15/2005 1,500,000 1,345,080
Panavision Inc. Step Up Sub Notes(a) 0.000% 02/01/2006 500,000 240,000
Revlon Consumer Products+ 8.125% 02/01/2006 2,225,000 1,613,125
Revlon Worldwide Senior Notes+ 0.000% 03/15/2001 350,000 68,250
Southland Corp. Senior Sub Notes+ 5.000% 12/15/2003 400,000 344,000
Tenet Healthcare Corp. Notes+ 8.625% 12/01/2003 525,000 518,437
Time Warner Inc. Notes+ 6.625% 05/15/2029 1,875,000 1,598,775
USA Waste Services Inc. Senior Notes+ 6.500% 12/15/2002 1,200,000 1,108,721
WMX Technologies+ 6.375% 12/01/2003 950,000 855,845
WMX Technologies 144A+ 6.875% 05/15/2009 2,500,000 2,108,141
Westinghouse Credit Corp. Deb. Notes+ 8.875% 06/14/2014 275,000 291,822
------------
21,612,650
------------
Total Corporate (Cost $40,944,590) 36,810,961
------------
GOVERNMENT/OTHER -- 67.6%
AUSTRALIA -- 1.0%
St. Georges Bank 5.750% 10/15/2002 6,000,000 3,790,357
------------
DENMARK -- 5.2%
Danske Kredit 5.000% 10/01/2029 7,052,000 828,692
Denmark Bullet 7.000% 11/15/2007 6,000,000 887,024
Denmark Nykredit 5.000% 10/01/2029 8,602,000 1,010,835
Denmark Nykredit 7.000% 10/01/2026 3,991,000 538,797
Denmark Realkredit 7.000% 10/01/2026 1,514,000 204,395
Denmark Realkredit 8.000% 10/01/2026 1,000 141
Denmark Realkredit Notes NCL 6.000% 10/01/2029 109,648,000 13,797,850
Kingdom of Denmark 6.000% 11/15/2002 19,475,000 2,706,172
------------
19,973,906
------------
EURODOLLAR -- 16.7%
American Standard Global+ 7.125% 06/01/2006 4,000,000 4,031,600
Enron Corp.+ 4.375% 04/08/2005 3,860,000 3,640,258
Ford Motor Credit Co.+ 3.750% 07/12/2004 4,245,000 4,012,969
Fort James Corp. Notes+ 4.750% 06/29/2004 4,320,000 4,159,911
Huntsman ICI 144A NC'04+ 10.125% 07/01/2009 2,000,000 2,126,669
Italian Government BTPS Notes NCL 3.250% 02/01/2004 13,800,000 13,007,716
Italian Government BTPS Notes NCL+ 3.250% 04/15/2004 16,000,000 15,018,516
Italian Government BTPS Notes NCL 4.000% 10/01/2003 4,700,000 4,604,490
Italian Government BTPS Notes NCL 5.000% 02/15/2003 3,750,000 3,805,326
Lehman Brothers Holdings PLC Medium Term
Notes+ 4.750% 07/12/2004 2,100,000 2,024,853
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE{.} (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EURODOLLAR (continued)
Metromedia Fiber Network 10.000% 12/15/2009 $ 700,000 $ 731,987
Remy Cointreau 144A+ 10.000% 07/30/2005 1,450,000 1,600,293
Republic of Brazil(b) 6.500% 01/01/2001 1,808,100 1,787,759
UPM-Kymmene Corp. Notes 6.350% 10/01/2009 2,550,000 2,541,446
------------
63,093,793
------------
GERMANY -- 9.8%
Baden Nurttemberg+ 6.200% 11/22/2013 1,022,583 1,102,808
Banco Comercial 8.250% 10/04/2000 545,000 275,024
Bundes Obligation Ser 127 Notes+ 4.500% 05/19/2003 7,570,000 7,590,128
Colt Telecom Group PLC 144A Notes 7.625% 07/31/2008 8,625,000 4,444,731
Depfa Pfandbriefbank Notes NCL 5.500% 01/15/2010 3,500,000 3,475,140
Deutschland Republic+ 5.625% 01/04/2028 3,300,000 3,162,427
Deutschland Republic+ 6.000% 01/04/2007 1,245,000 1,312,307
Deutschland Republic+ 6.250% 01/04/2024 3,500,000 3,651,118
Deutschland Republic+ 6.500% 07/04/2027 4,665,000 5,014,997
Deutschland Republic+ 6.750% 04/22/2003 3,100,000 3,289,463
Exide Holding Europe 144A Notes+ 9.125% 04/15/2004 1,700,000 849,781
Fresenius Med Global+ 7.375% 02/01/2008 620,000 321,103
RSL Communications PLC Reg(a) 0.000% 03/15/2008 5,790,000 1,879,773
Texon International PLC 144A Senior Notes+ 10.000% 02/01/2008 1,700,000 762,175
------------
37,130,975
------------
IRELAND -- 0.1%
Esat Telecom Group PLC 11.875% 11/01/2009 400,000 467,666
------------
JAPAN -- 10.3%
Austria Republic 4.500% 09/28/2005 90,000,000 1,047,768
Austria Republic+ 6.250% 10/16/2003 370,000,000 4,375,370
General Motors+ 1.250% 12/20/2004 400,000,000 3,924,185
Italy Euroyen Notes+ 5.125% 07/29/2003 1,244,000,000 14,126,680
Italy Euroyen Notes NCL 3.750% 06/08/2005 320,000,000 3,575,652
Mexican Notes NCL 3.100% 04/24/2002 490,000,000 4,847,005
South Africa 3.350% 06/17/2004 175,000,000 1,735,924
Spanish Government 4.750% 03/14/2005 480,000,000 5,591,899
------------
39,224,483
------------
NETHERLANDS -- 2.5%
KPN-Qwest B.V. 144A Private Placement 7.125% 06/01/2009 4,000,000 3,930,810
Netherlands Government Notes 5.750% 09/15/2002 3,600,000 3,734,753
PTC International Finance II SA 144A 11.250% 12/01/2009 2,000,000 2,086,353
------------
9,751,916
------------
NEW ZEALAND -- 2.6%
Fernz Capital+ 9.800% 04/15/2002 4,100,000 2,194,915
Fletcher Challenge+ 11.250% 12/15/2002 1,900,000 1,082,230
Fletcher Challenge 14.500% 09/30/2000 500,000 278,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE{.} (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW ZEALAND (continued)
Fletcher Challenge CVT 10.000% 04/30/2005 $ 1,000,000 $ 533,515
New Zealand Government 8.000% 04/15/2004 11,175,000 6,042,083
------------
10,130,743
------------
NORWAY -- 0.2%
Vital Forsikring 7.850% 09/22/2003 6,000,000 753,746
------------
SINGAPORE -- 1.8%
Singapore Government 3.500% 02/01/2004 7,250,000 4,318,686
Singapore Government 5.125% 11/15/2004 3,850,000 2,429,634
------------
6,748,320
------------
SWEDEN -- 4.6%
Sweden Government Bond #1030 13.000% 06/15/2001 18,700,000 2,448,122
Sweden Government Bond #1033 10.250% 05/05/2003 10,000,000 1,350,406
Sweden Government Bond #1038 6.500% 10/25/2006 20,000,000 2,469,648
Sweden Government Bond #1039+ 5.500% 04/12/2002 37,000,000 4,392,536
Sweden Government Bond #1042+ 5.000% 01/15/2004 58,400,000 6,779,197
------------
17,439,909
------------
UNITED KINGDOM -- 10.0%
Abbey National Treasury 7.750% 12/31/2003 1,200,000 1,983,836
Alliance and Leicester Building Society+ 8.750% 12/07/2006 2,100,000 3,659,627
European Investment Bank 7.625% 12/07/2006 2,400,000 4,123,909
FNMA Global Bond 6.875% 06/07/2002 1,910,000 3,085,132
IPC Magazine Group PLC 9.625% 03/15/2008 1,617,000 1,540,949
IPC Magazines 144A(a) 0.000% 03/15/2008 295,000 152,475
Inco Ltd.+ 15.750% 07/15/2006 200,000 441,801
Lehman Brothers Holdings PLC 6.950% 06/22/2004 450,000 694,332
Merrill Lynch Notes 7.375% 12/17/2007 2,730,000 4,503,849
National Westminister Bank+ 5.125% 06/30/2011 1,705,000 1,537,002
Stagecoach Holdings PLC 7.625% 10/31/2007 1,725,000 2,747,297
UK Treasury Gilt 9.000% 10/13/2008 1,985,000 3,903,835
UK Treasury Gilt Stock+ 6.000% 12/07/2028 1,600,000 3,161,140
UK Treasury Gilt Stock 6.500% 12/07/2003 2,150,000 3,505,670
UK Treasury Gilt Stock 8.000% 06/10/2003 300,000 509,224
William Hill Finance 10.625% 04/30/2008 1,175,000 1,954,796
------------
37,504,874
------------
YANKEE BONDS -- 2.8%
Cominco Ltd. Notes+ 6.875% 02/15/2006 525,000 459,002
Edperbrascan Ltd. Notes+ 7.375% 10/01/2002 500,000 490,820
Fuji JGB Inv. L.L.C. Pfd 144A FLIRB(a) 9.870% 12/31/2049 1,050,000 1,042,125
Merita Bank FLIRB 144A Notes+ 7.150% 12/29/2049 650,000 628,134
Merita Bank Perpetual FLIRB 144A 7.500% 12/29/2049 250,000 237,145
Republic of Panama Notes 8.875% 09/30/2027 3,975,000 3,329,062
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
SECURITY RATE MATURITY VALUE{.} (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YANKEE BONDS (continued)
Se Banken Perpetual 10 Yr. Step Up 144A(a) 8.125% 09/06/2049 $ 1,500,000 $ 1,422,045
Tyco International Ltd. 144A+ 6.875% 09/05/2002 3,275,000 3,218,141
------------
10,826,474
------------
Total Government/Other (Cost $262,655,356) 256,837,162
------------
NON-AGENCY -- 0.7%
PASS THRU SECURITIES -- 0.7%
Chase Commercial Mortgage Sec 6.6 1997-2D
Non-ERISA 6.600% 12/25/2007 500,000 447,969
GMAC Mortgage Corp. 1996-C1 F Non-ERISA 7.860% 11/15/2006 1,000,000 803,750
GMAC Mortgage Corp. 1997-C1 E Non-ERISA 7.085% 11/15/2010 900,000 812,812
Mortgage Capital Funding 1997-MC2 D Non-ERISA 7.117% 11/20/2007 725,000 662,072
------------
Total Non-Agency (Cost $3,024,910) 2,726,603
------------
U.S. GOVERNMENT AGENCY -- 8.2%
PASS THRU SECURITIES -- 8.2%
FHLMC+ 5.750% 03/15/2009 8,100,000 7,398,864
FNMA+ 5.125% 02/13/2004 825,000 775,632
FNMA+ 5.625% 05/14/2004 17,100,000 16,341,102
GNMA 8.000% 05/15/2026 - 07/15/2029 5,697,292 5,752,993
GNMA 9.000% 12/15/2017 701,538 738,807
------------
Total U.S. Government Agency (Cost $31,574,595) 31,007,398
------------
U.S. TREASURY OBLIGATIONS -- 7.4%
TREASURY BONDS -- 1.8%
U.S. Treasury Bond+ 8.125% 05/15/2021 5,875,000 6,734,219
------------
TREASURY NOTES -- 5.6%
U.S. Treasury Inflation Index Note 3.967% 01/15/2009 3,025,000 2,997,394
U.S. Treasury Note+ 6.000% 08/15/2009 1,950,000 1,889,063
U.S. Treasury Note+ 6.625% 06/30/2001 575,000 578,232
U.S. Treasury Note+ 7.875% 11/15/2004 15,025,000 15,886,534
------------
21,351,223
------------
Total U.S. Treasury Obligations (Cost $28,765,465) 28,085,442
------------
TOTAL BONDS AND NOTES (COST $381,698,904) 369,239,761
------------
<CAPTION>
SHARES
-------------
PREFERRED STOCKS -- 0.3%
Equity Office Properties Trust 144A CVT 6,000 231,000
Equity Residential Properties Pfd 9.65 3,000 66,188
Pinto Totta Intl Pfd 144A 550 520,575
Texaco Capital LLC FLT Ser B(b) 14,000 245,000
------------
TOTAL PREFERRED STOCKS (COST $1,275,087) 1,062,763
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT VALUE
SECURITY SIZE (NOTE 1A)
- ---------------------------------------------------------------------------------------------
PURCHASED OPTIONS -- 1.2%
<S> <C> <C>
AUD Put/USD Call, Strike Price 0.64, 07/20/2000 7,000,000 $ 78,127
BTPS 6.75% Put, Strike Price 105.29, 4,545,000,000 4,545
BTPS 6.75% Put, Strike Price 105.49, 4,545,000,000 4,545
BTPS 6.75% Put, Strike Price 107.69, 9,085,000,000 54,510
DBR 4.75% Call, Strike Price 106.99, 02/08/2000 4,200,000 0
DBR 4.75% Call, Strike Price 95.78, 03/13/2000 4,220,000 426
DBR 5.25% Call, Strike Price 112.07, 01/25/2000 5,925,000 0
DBR 5.25% Call, Strike Price 112.08, 01/26/2000 7,900,000 0
DEM 3.75% Call, Strike Price 90.20, 09/13/2000 8,250,000 77,327
DEM 3.75% Call, Strike Price 91.05, 09/29/2000 4,500,000 36,648
DEM 3.75% Call, Strike Price 99.15, 04/17/2000 4,300,000 0
DEM 4% Call, Strike Price 93.99, 07/07/2000 8,900,000 30,678
DEM 4% Call, Strike Price 95.43, 07/21/2000 4,250,000 6,426
DEM 4% Call, Strike Price 96.26, 06/23/2000 4,350,000 4,167
DEM 4% Call, Strike Price 99.01, 08/03/2000 4,175,000 7,953
DEM 4.5% Call, Strike Price 101.20, 08/14/2000 4,300,000 3,943
DEM 4.5% Call, Strike Price 94.76, 10/06/2000 3,800,000 43,662
DEM 4.5% Call, Strike Price 95.42, 11/02/2000 3,900,000 34,983
DEM 4.5% Call, Strike Price 95.54, 10/13/2000 3,775,000 35,006
DEM 4.75% Call, Strike Price 85.93, 09/11/2000 4,092,000 65,578
DEM 4.75% Call, Strike Price 99.39, 04/27/2000 6,325,000 639
DEM 5.25% Call, Strike Price 111.26, 01/10/2000 7,050,000 0
EUR Put/JPY Call, Strike Price 146.70, 04/13/2000 8,142,325 3,528,859
EUR Put/USD Call, Strike Price 0.89, 07/10/2001 8,875,000 66,563
EUR Put/USD Call, Strike Price 0.95, 08/16/2000 4,350,000 41,325
JPY 1.8% Call, Strike Price 104.67, 05/08/2000 1,060,000,000 30,740
JPY 3% Call, Strike Price 110.43, 06/30/2000 1,075,000,000 47,300
JPY Put, Strike Price 121.50, 04/06/2000 4,700,000 470
JPY Put, Strike Price 150.00, 02/08/2001 4,500,000 450
JPY Put/EUR Call, Strike Price 110.25, 12/06/2001 3,850,000 106,710
JPY Put/EUR Call, Strike Price 125.00, 08/29/2000 8,300,000 20,916
JPY Put/USD Call, Strike Price 115.00, 09/01/2000 4,325,000 18,165
JPY Put/USD Call, Strike Price 115.80, 08/14/2000 4,300,000 15,910
JPY Put/USD Call, Strike Price 120.00, 11/07/2001 4,000,000 41,592
JPY Put/USD Call, Strike Price 122.00, 03/08/2000 4,425,000 443
JPY Put/USD Call, Strike Price 125.00, 02/09/2000 4,300,000 0
USD Put/CAD Call, Strike Price 1.42, 10/19/2000 4,100,000 47,970
UST 5.25% Call, Strike Price 94.38, 02/29/2000 45,000 292
UST 6.00% Call, Strike Price 100.00, 09/29/2000 10,750 10,137
UST 6.00% Call, Strike Price 100.75, 09/29/2000 43,390 26,610
UST 6.00% Call, Strike Price 98.25, 12/14/2000 40,000 56,094
UST 6.00% Call, Strike Price 98.78, 12/04/2000 58,500 71,297
UST 6.00% Call, Strike Price 99.81, 09/29/2000 41,200 40,788
UST 6.00% Call, Strike Price 99.88, 10/27/2000 80,000 69,688
------------
TOTAL PURCHASED OPTIONS (COST $5,377,987) 4,731,482
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SECURITY (NOTE 1A)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.0%
<S> <C>
REPURCHASE AGREEMENTS -- 0.0%
Prudential-Bache Repurchase
Agreement, dated 12/31/99, due
01/03/00, with a maturity value of
$156,298 and an effective yield of
2.00%, collateralized by a U.S.
Government Agency Obligation with
a rate of 6.00%, a maturity date
of 03/01/14 and a market value of
$160,198. $ 156,272
------------
TOTAL SHORT-TERM INVESTMENTS (COST $156,272) 156,272
------------
TOTAL INVESTMENTS -- 98.8% (COST $388,508,250) $375,190,278
OTHER ASSETS, LESS LIABILITIES -- 1.2% 4,413,776
-------------
NET ASSETS -- 100.0% $379,604,054
=============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration.
CVT - Convertible
FHLMC - Federal Home Loan Mortgage Corporation
FLIRB - Front Loaded Interest Reduction Bond
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
NCL - Non-callable
REIT - Real Estate Investment Trust
UST - United States Treasury
AUD - Australian Dollar
DBR - Deutsche Bundes Republik
DEM - German Deutsche Mark
EUR - Euro
JPY - Japanese Yen
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 5).
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(b) Variable Rate Security; rate indicated is as of 12/31/99.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (Note 1A) (identified cost,
$388,508,250) $375,190,278
Receivable for investments sold 73,694
Interest and dividends receivable 6,747,219
Receivable for variation margin on open financial
futures contracts (Note 5) 31,953
Unrealized appreciation on forward foreign currency
exchange contracts (Note 5) 11,884,223
Deferred organization costs (Note 1F) 19,959
Prepaid expenses 2,694
------------
Total assets 393,950,020
LIABILITIES
Unrealized depreciation on forward foreign currency
exchange contracts (Note 5) $6,986,614
Options written, at value (Note 5) (premiums
received, $3,809,312) 7,281,895
Accrued accounting and custody fees 34,021
Accrued trustees' fees and expenses (Note 2) 7,166
Accrued expenses and other liabilities 36,270
---------
Total liabilities 14,345,966
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS) $379,604,054
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (NOTE 1C)
Interest income $30,602,354
Dividend income (net of foreign withholding taxes of
$358) 82,908
-----------
Total income 30,685,262
EXPENSES
Investment advisory fee (Note 2) $ 1,793,905
Accounting and custody fees 429,282
Legal and audit services 39,125
Trustees' fees and expenses (Note 2) 23,745
Licensing fees 15,514
Amortization of organization expenses (Note 1F) 14,936
Insurance expense 11,223
-----------
Total expenses 2,327,730
-----------
Net investment income 28,357,532
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions (34,197,936)
Financial futures contracts (1,613,854)
Written options transactions 1,777,503
Foreign currency transactions and forward foreign
currency exchange contracts 12,384,242
-----------
Net realized loss (21,650,045)
Change in unrealized appreciation (depreciation)
Investment securities (17,583,595)
Financial futures contracts 186,510
Written options (649,069)
Foreign currency and forward foreign currency
exchange contracts 8,303,110
-----------
Change in net unrealized depreciation (9,743,044)
-----------
Net realized and unrealized loss (31,393,089)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(3,035,557)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------- -----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 28,357,532 $ 23,583,542
Net realized gain (loss) (21,650,045) 8,805,536
Change in net unrealized depreciation (9,743,044) (7,075,748)
------------- ------------
Net increase (decrease) in net assets from investment
operations (3,035,557) 25,313,330
------------- ------------
CAPITAL TRANSACTIONS
Contributions 22,529,776 195,976,864
Withdrawals (101,477,881) (22,255,635)
------------- ------------
Net increase (decrease) in net assets from capital
transactions (78,948,105) 173,721,229
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (81,983,662) 199,034,559
NET ASSETS
At beginning of year 461,587,716 262,553,157
------------- ------------
At end of year $ 379,604,054 $461,587,716
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997 1996(1)
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
RATIOS:
Expenses (to average daily net assets) 0.52% 0.51% 0.61% 0.62%+
Net Investment Income (to average daily net
assets) 6.33% 6.22% 6.47% 7.17%+
Portfolio Turnover 172% 162% 176% 111%
Net Assets, End of Year (000's omitted) $379,604 $461,588 $262,553 $159,814
</TABLE>
- -----------------
(1) For the period May 3, 1996 (commencement of operations) through December
31, 1996.
+ Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME 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
Global Fixed Income Portfolio (the "Portfolio") is a separate
non-diversified investment series of the Portfolio Trust.
At December 31, 1999 there was one Fund, Global Fixed Income Fund (the
"Fund"), invested in the Portfolio. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets
of the Portfolio. The Fund's proportionate interest at December 31, 1999
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 cost 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 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. Realized gains and losses from securities sold are
recorded on the identified cost basis. The Portfolio 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. 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
23
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors 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. 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. DEFERRED ORGANIZATION EXPENSE
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 International Management
Company, L.L.C. ("SIMCO") for overall investment advisory services is paid
monthly at the annual rate of 0.40% of the Portfolio's average daily net
assets. The advisory agreement provides that if the total annual operating
expenses of the Portfolio (excluding brokerage commissions, taxes and
extraordinary expenses) in any fiscal year exceed 0.65% of the Portfolio's
average daily net assets, the compensation due the adviser shall be
reduced by the amount of the excess. The Portfolio Trust pays no
compensation directly to its trustees who are affiliated with SIMCO or to
its officers, all of whom receive remuneration for their services to the
Portfolio Trust from SIMCO. Certain of the trustees and officers of the
Portfolio Trust are directors or officers of Standish, Ayer & Wood, Inc.,
the parent company of SIMCO.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Securities $278,751,707 $261,330,126
============ ============
Investments (non-U.S.Government Securities) $468,169,989 $517,628,535
============ ============
</TABLE>
24
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at December 31, 1999, as computed on a federal
income tax basis, were as follows:
<TABLE>
<S> <C>
Aggregate Cost $389,070,221
===========
Gross unrealized appreciation 8,604,989
Gross unrealized depreciation (22,484,932)
-----------
Net unrealized depreciation $(13,879,943)
===========
</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 changes in security prices and foreign currencies,
as well as to seek to enhance returns. Writing puts and buying calls tend
to increase the Portfolio's exposure to the underlying instrument. Buying
puts and writing calls tend to decrease the Portfolio's exposure to the
underlying instrument, or hedge other Portfolio investments. Options, both
held and written by the Portfolio, are reflected in the accompanying
Statement of Assets and Liabilities at market value. The underlying face
amount at value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract, or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option.
A summary of written option transactions for the year ended December 31,
1999 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS PREMIUMS
------------------- ------------------
<S> <C> <C>
Outstanding, beginning of period 14 $ 1,289,493
Options written 20 1,932,415
Options expired (3) (296,708)
Options closed (20) (1,885,140)
---- -----------
Outstanding, end of period 11 $ 1,040,060
==== ===========
</TABLE>
25
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WRITTEN CALL OPTION TRANSACTIONS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS PREMIUMS
------------------- -----------------
<S> <C> <C>
Outstanding, beginning of period 13 $1,048,866
Options written 25 1,798,564
Options exercised (1) (141,312)
Options expired (8) (434,943)
Options closed (18) (2,209,146)
---- ----------
Outstanding, end of period 11 $ 62,029
==== ==========
</TABLE>
WRITTEN CROSS CURRENCY OPTION TRANSACTIONS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS PREMIUMS
------------------- ------------------
<S> <C> <C>
Outstanding, beginning of period 15 $ 3,992,115
Options written 29 6,898,792
Options exercised (2) (2,405,550)
Options expired (7) (537,031)
Options closed (25) (5,241,103)
---- -----------
Outstanding, end of period 10 $ 2,707,223
==== ===========
</TABLE>
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency at a
fixed price on a future date. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar and other foreign currencies. The forward foreign currency and
cross currency exchange contracts are marked to market using the forward foreign
currency rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the contract settlement
date or upon the closing of the contract. Forward currency exchange contracts
are used by the Portfolio primarily to protect the value of the Portfolio's
foreign securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the Statement
of Assets and Liabilities.
At December 31, 1999, the Portfolio held the following forward foreign currency
and cross currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Argentinian Peso 11,722,958 01/19-03/09/2000 $ 11,674,714 $ 11,636,460 $ 38,254
British Pound Sterling 10,960,772 01/18-01/24/2000 17,697,620 17,994,380 (296,760)
Canadian Dollar 5,600,000 03/16/2000 3,884,600 3,795,066 89,534
Euro 28,510,532 01/14-01/19/2000 28,760,597 29,976,187 (1,215,590)
Hong Kong Dollar 17,633,420 01/14/2000 2,268,120 2,259,883 8,237
Japanese Yen 4,252,000,000 01/18/2000-05/17/2001 43,711,625 42,964,216 747,409
New Zealand Dollar 22,692,885 01/14-01/18/2000 11,859,572 11,510,252 349,320
Polish Zloty 4,212,648 07/24/2000 960,713 1,025,000 (64,287)
Swedish Krona 77,100,000 01/18/2000 9,084,825 9,040,277 44,548
Thai Baht 81,657,000 09/11/2000 2,169,805 2,150,000 19,805
--------------- --------------- -------------
TOTAL $ 132,072,191 $ 132,351,721 $ (279,530)
=============== ================ ============
</TABLE>
26
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Australian Dollar 5,890,000 03/15/2000 $ 3,864,458 $ 3,755,052 $ (109,406)
British Pound Sterling 35,021,617 01/18-03/15/2000 56,542,074 57,545,166 1,003,092
Danish Krone 157,397,966 01/18-02/07/2000 21,348,422 22,346,408 997,986
Euro 134,061,918 01/14-03/15/2000 135,258,705 142,569,597 7,310,892
Hong Kong Dollar 108,822,777 01/14/2000-08/13/2001 13,884,364 13,774,355 (110,009)
Japanese Yen 6,329,964,196 01/18/2000-08/17/2001 66,696,701 61,877,839 (4,818,862)
New Zealand Dollar 45,441,835 01/14-01/18/2000 23,748,403 23,807,986 59,583
Norwegian Krone 6,700,000 01/18/2000 836,663 873,215 36,552
Polish Zloty 4,212,648 07/24/2000 960,713 999,679 38,966
Singapore Dollar 11,582,484 01/14/2000 6,951,993 6,916,980 (35,013)
Swedish Krona 229,941,319 01/18-02/28/2000 27,105,771 28,245,816 1,140,045
Thai Baht 174,494,000 09/11/2000 4,636,687 4,300,000 (336,687)
-------------- ---------------- --------------
TOTAL $ 361,834,954 $ 367,012,093 $ 5,177,139
============== ================ ==============
</TABLE>
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 December 31, 1999, the Portfolio held the following financials futures
contracts:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE
CONTRACT POSITION DATE AMOUNT AT VALUE UNREALIZED GAIN
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
U.S. 10 Year Note (75 contracts) Short 03/31/2000 $7,189,453 $22,690
Euro Bond Future (80 contracts) Short 03/10/2000 8,331,200 39,510
-------
$62,200
=======
</TABLE>
At December 31, 1999 the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
INTEREST RATE SWAP CONTRACTS
Interest rate swaps involve the exchange by the Portfolio 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
27
<PAGE>
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
factors are incorrect, investment performance will be diminished 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 Portfolio 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,
managing duration or protecting against an increase in the price of
securities the Portfolio anticipates purchasing at a later date. Gains and
losses are realized upon the expiration or closing of the swap contracts.
At December 31, 1999, the Portfolio held no interest rate swap contracts.
(6) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase securities on a when-issued, delayed delivery or
forward commitment basis. Payment and delivery may take place a month or
more after the date of the transactions. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. The Portfolio
instructs the custodian to segregate securities having a value at least
equal to the amount of the purchase commitment.
At December 31, 1999, the Portfolio held no delayed delivery transactions.
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Standish, Ayer & Wood Master Portfolio and Investors of
Standish Global Fixed Income 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, Ayer &
Wood Master Portfolio: Standish Global Fixed Income Portfolio ("the
Portfolio") at December 31, 1999, the results of its operations, the changes
in its net assets and the supplemental data for the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States. 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, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2000
29
<PAGE>
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30
<PAGE>
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